Prepaid cards and the online payment gateway run by PayPal Inc. are both examples of alternative payment tools. Because PayPal eats the cost of interchange instead of passing it along to merchants, which makes it an attractive payment option for merchants, it can be construed as a threat to ISOs and merchant level salespeople.
A new service called ePatientPayments.com utilizes PayPal to help health care providers get reimbursed from uninsured patients. The service is an online payment platform that allows providers to set up individual payment plans with patients who may have trouble paying for services and procedures because they are not covered by health insurance plans. The main component of the service is the PayPal gateway.
Pamela Alford, President of EMG Productions Inc., the parent company of ePatientPayments.com, chose PayPal because of its convenience for providers and patients. "Medical offices are low tech," she said, citing statistics claiming that 85 percent of all medical practitioners are in that category. "They barely have computer skills, except for the specific software they use in that practice.
"You've got to make this stupid simple, and PayPal is where it's at. In five minutes they can set up a PayPal account, accept Visa, MasterCard, American Express, Discover, eCheck. It also provides them secure transactions, auto confirmation, and it's inexpensive to set up" because it doesn't require a processor. But Alford insists PayPal is not a threat to other payment providers, just an alternative.
Red Gillen, Senior Analyst at research consultancy Celent LLC, agrees. He said, "The uninsured don't necessarily not have bank accounts, and so a lot of them will have bank debit cards in their wallets already - the incumbent payment method. Also, just as importantly, [most] providers by and large accept payment cards today. ...So it's not fulfilling any payment void."
Gillen also pointed out that the health care market for prepaid cards is largely between health insurers and employers. The three primary types of card programs concern employee-funded flexible spending, employer-funded health reimbursement and employee- or employer-funded health savings accounts. "It really has nothing to do with the doctors," he said. Like PayPal, prepaid health care cards are an alternative offering efficient ways for providers to be reimbursed for their services.
"Doctors aren't really worried about interchange," he said. "They are worried about getting paid. So they'll take anything. They should be taking anything because, right now, people basically receive medical service, walk out the door, get a bill in the mail, days if not weeks later. And bad debt ratios for patients paying hospitals are extraordinarily high. Interchange is the least of their concerns."
The 'Retailish' Future of Patient Collections, a report authored by Gillen, noted that patients were responsible for 12 percent of health care expenditures in 2007; by 2012, Celent estimates patients will pay 30 percent.
Consequently, it will get harder for health care providers to collect on payments. With bad debt levels remaining at between 40 and 50 percent, the total amount of bad debt that providers would be saddled with could reach $170 billion by 2014, Gillen said.
The need to alleviate this burden has given rise to the Consumer Directed Health Care (CDHC) model, which is designed to give consumers more control over their health and well-being. Proponents of CDHC believe that when consumers take greater ownership over their health care choices (and more of a burden in paying costs out of pocket), they will make wiser decisions, which will reduce overall costs.
"But how you get that patient in a consumer directed health care world or an uninsured patient world, how to get that patient to pay upfront or, at minimum, commit to pay up front - that's the issue really," Gillen said. "It's not so much whether you take Visa or MasterCard or PayPal."
Alford said 350 medical offices have signed up for ePatientPayments.com, which launched in July 2009. "It's a service whose time has come," she said. As for CDHC, Alford is unequivocal. "I feel patients should take more of a role in their health care," she said. "And if they're paying for it, they will."
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