How fintech can transform healthcare payments – United States

Healthcare costs continue soaring, and with an archaic and byzantine billing and payments structure, it’s an issue that remains a constant source of discontent for patients and healthcare providers alike.

To put it in numbers: It’s a major fiscal concern when you consider that in 2023, US healthcare spending reached $4.8 trillion, or $14,423 per person. Those numbers are staggering, but they are expected to continue rising and are already outpacing the projected annual gross domestic product growth rate.

Economists agree that the biggest driver of higher medical spending is the cost of healthcare administration, which accounts for about one-third of costs in the healthcare industry.

The costs of siloed healthcare industry for consumers and business

Instead of the uniformity of payments found in most businesses, Harvard economics professor David Cutler compares the patchwork payments system in US healthcare to shopping at a grocery store where “every health insurer requires a different bar-code-equivalent and payment-systems submission.”

It’s this lack of uniformity that leads even small healthcare providers to hire specialists just to code and file bills as well as deal with health insurance companies, Medicare and Medicaid and track down delinquent patient payments. According to the 2024 Medscape Physician Burnout and Depression Report, nearly two-thirds of doctors pointed to administrative work and manual processes as their top source of burnout.

At this critical intersection of health care and the finance industry, fintech in healthcare can come into play to enhance patient experience, provide value-based care and improve the healthcare ecosystem.

Digital payment solutions and open banking can address these pressing challenges by providing innovative ways to shorten healthcare industry revenue cycles and create a simplified environment to share data and streamline healthcare payments.

Overcoming healthcare payments problems with a paper chase

A study in the US found that about half of respondents receive paper bills through the mail, which doesn’t align with market demand. In a separate survey, 79% of respondents said they would like to pay “all types of medical bills in one digital location.”

Consumers are asking for electronic statements and a single patient payments platform from the healthcare industry. Medical professionals recognize that these two steps will ease the burden of payments on healthcare system consumers and help providers manage costs with a bonus of improved revenue visibility.

Technology for improved business practices

A recent article in the Journal of Patient Experience prescribed several changes, including improving price transparency, using digital health technology for better patient communication and consolidating the billing and payment process along with a resolution timeline. These changes would make accounting for both sides far easier to follow and execute than the current haphazard systems.

Consolidating billing and payments would certainly help patients manage their healthcare services expenses. Similarly, health care organizations would feel more confident that their invoices are not literally lost in the mail or clutter.

Fintech and open banking for modern healthcare payments

In the future, fintech and open banking solutions can help ease many of these pain points.

Digital payments can streamline the process and shorten revenue cycles, allowing patients to understand which healthcare services bills have been partially or fully covered by health insurance and then schedule payments for agreed-upon installments or pay the outstanding balance. On the other hand, healthcare providers and insurance companies can be assured that correct payers receive their invoices promptly.

Fintech can do this through automated invoicing, billing and payment processes that reduce the need for manual inputs and unique, proprietary coding for providers and insurers. Creating a universal coding system may be the Holy Grail for the health industry, but eliminating human input error can alone speed up claims with insurers, helping health providers get paid more quickly.

In turn, automated and streamlined payments can benefit patients, alerting them to the actual amount owed and letting them pay easily.

Interoperable health data and shorter revenue cycle

Open banking — a system where financial data is shared between banks and third-party service providers — accelerates the improvement of financial services and customer, or patient, experiences.

Open banking in general promises to put consumers in deeper control of their data with more choices than ever for a seamless experience. In particular, healthcare data is governed by some of the strictest data privacy laws, such as HIPAA in the US. At the same time, with open banking and the interconnectivity it provides, patients can be assured of privacy and that their health data is being handled properly.

Open banking entails a simplified environment to share information between disparate systems, which means streamlined healthcare payments.

Transparent digital financial services on a global scale

International patients can benefit from platforms offering an array of payment options, including bank transfers, wires, credit and debit cards, e-wallets and alternative payment methods. Advanced platforms can also help international customers navigate foreign languages and FX issues while, importantly, managing regulations that vary widely from country to country and meeting local compliance standards.

As fintech solutions modernize healthcare payments, doctors can spend more time providing the right care for patients, and medical organizations can spend more resources on improving healthcare access, significantly enhancing the likelihood of achieving better health outcomes for more consumers.

Direct payments solve payments problems directly

Fintech platforms creating direct payments between parties can reduce uncertainty over settlement times and even amounts, especially in the case of payments from international patients or possibly transfer fees through various institutions.

The move toward open banking puts the consumer in the driver’s seat with regard to their financial data and control over it. This can help ease friction and may increase adoption of blockchain payment methods, especially across borders.

Digital financial services are crucial in facilitating access to both preventive and curative health services, particularly in countries with high out-of-pocket costs and inadequate healthcare coverage.

Stablecoin transfers are increasingly used for quicker, cheaper cross-border transfers and payments, especially in emerging markets.

The collaboration between fintech and healthcare providers aims to improve healthcare access through innovative digital financial solutions, enhancing financial inclusion and reducing barriers for underserved populations — in the US and around the world.

Cloud-native healthcare ecosystems of the future

Another potential solution lies in cloud-native ecosystems. Cloud ecosystems can enhance payments processing within the health system. They can also accelerate the uptake of new technologies and lay the groundwork for better customer lifecycle management.

As the cloud-native ecosystem develops and expands, that marketplace will drive further change for payments. That’s especially true for real-time payments — instant transactions facilitating FX transfers around the clock, improving their security and lowering costs. The key here is standardization, addressed by the financial industry by moving toward ISO 20022, designed to remove friction, tighten security and create greater transparency.

These measures would help address the issues plaguing healthcare payments.

Fintech in healthcare B2B opportunity in payments

There’s also a great opportunity for technology companies on the B2B side of healthcare payments. The lion’s share of both invoices and healthcare procurement is still conducted using paper checks. This obviously exposes B2B transactions to human error in billing and payments. It is also more costly and time-consuming to complete transactions this way.

There may also be postage costs and processing fees, resulting in a cost of more than $7 per transaction. That compares to an average of just $4 per transaction via electronic payments.

Healthcare organizations can enhance pricing transparency and simplify financial interactions for patients by adopting fintech solutions. The transition to digital records and invoicing would be a critical step and would create an estimated $2.9 trillion opportunity in commercial payments in the healthcare industry for fintechs and other financial institutions. The US wholesale medical supply market, which includes the distribution of dental and medical supplies and equipment, is forecast to exceed $300 billion by 2026.

In addition to creating a promising B2B opportunity, fintech is set to transform healthcare. Health systems and insurance industry stand to benefit from financial technology solutions that help manage the patient financial ecosystem, improve billing effectiveness and enhance user experience — for all patients.

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