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Healthcare Payments in an Era of Disruption

Finance & Revenue Cycle Strategies in a Shifting Landscape

Healthcare has always faced an array of operational, clinical and regulatory challenges. But industry observers acknowledge that new forces have emerged carrying the potential to disrupt healthcare in fundamental ways, especially in finance. The issue is gaining urgency. As one analyst notes, “Disruptions aren’t just nipping at the fringes of healthcare finance; they are going straight to a balancing point.”1 Health system, hospital and practice leaders alike understand the need to move well beyond business as usual.

This white paper examines the nature of disruption, the implications for healthcare finance – specifically the payments arena – and effective strategies for near-term response.

Sources of Disruption

Five primary industry forces are converging to fuel disruption.

  • Fundamental Business Model Change. The shift to value-based reimbursement continues, creating new economic realities for healthcare organizations. S&P regards the replacement of traditional fee-for-service “gaining traction in 2019,” creating “a major disruption.”2 Reimbursements from value-based models are projected to account for 59% of all payments by 2021.3
  • Consolidation & Partnerships. Heavy M&A and partnership activity in recent years has dramatically changed the landscape, producing large health systems with greater market power and operations diversified across inpatient, outpatient, post-acute and community health.
    All organizations must continually assess the consolidation imperative, reflected in survey results showing 73% anticipate exploring or completing deals over the next 12–18 months.4
  • Major New Market Competitors. New care delivery and wellness options are emerging from two directions:
    • Health offerings from major consumer names such as Walmart and Amazon as well as partnerships among powerful, well-resourced technology, insurance, retail and other firms. Highly visible examples include CVS-Aetna and Optum-DaVita. These “nontraditional” entrants bring new levels of consumer-centricity and technological sophistication to innovations that have been dubbed “convenient care” such as retail primary and urgent care clinics. Current healthcare leaders clearly perceive the disruptive potential: 68% placed CVS-Aetna as likeliest of the recent partnerships to have major impact on the competitive landscape, while Amazon heads the list of technology/ retail competitors. (Figure 1).5

    Circle graph showing which outside entrant into healthcare will have biggest impact

    •  “Bottom up” investment in many digital health startups whose products bypass conventional providers and target the consumer directly. Leaders in a recent poll named direct to consumer telemedicine as the “biggest coming threat to traditional healthcare organizations.”6
  • Rise of Consumerism. The new entrants are both reacting to and fostering an increasingly consumerist relationship between individuals and providers. Patients want more choices, convenience and personalized care. A key driver is greater patient financial obligation. Combined employee premium contributions and deductibles reached almost 12% of median income in 2017.7 Consumerism was ranked by 40% of surveyed leaders as the most disruptive force in healthcare, and pursuing consumer-centric strategies appears consistently in studies as a high priority.8 CMS is responding with new policies to reimburse for certain telehealth services and a mandate that hospitals publish their standard charges for greater transparency. Administrator Verma recently stated, “There will be more to come on price transparency … this is a large problem for the entire healthcare system.”9
  • Rapid Technology Change. A confluence of technologies promises radical change in healthcare. Figure 2 graphically highlights some of the more prominent ones.10 While they pursue opportunities with these advanced technologies, organizations are also investing heavily in two existing disruptors. One is EMR, which is entering a new development phase designed to improve interoperability, minimize cumbersome physician data entry and better support value-based care initiatives. Another is security. Fraud in the form of identity theft, improper billing and other manifestations is estimated by the National Health Care Anti-Fraud Association to cost the industry $68 billion annually.11 Data breaches and ransomware persist as major threats, leading IT executives to forecast an 87% increase in 2019 cybersecurity spending.12

Graphic showing which technologies are reshaping healthcare

Implications for Healthcare Finance

The disruptive trends are leaving their mark on healthcare finance, from payments to profitability to capital management. Significant implications include:

  • Margin pressure. The move to value-based care and the unrelenting industry drive to reduce costs are leading to lower reimbursement rates. Added pressure is likely to come from “more transparent pricing and the discounts we accept off that pricing,” as one CFO put it.13
  • Price competition. Further strain emanates from new competitors aiming their sights on taking share from hospitals’ higher-margin services (outpatient, imaging, etc.). A senior executive explained: “We cross-subsidize a lot of things … to get people in the traditional doors,” but the disruptors “have the perception that if they can get the touch on the patient, they can turn us into price-taking commodity providers.”14 As an example, according to a study, the charges for hospital emergency department visits are nearly 10 times higher on average than at urgent care centers.15
  • Reduced cash flow/increased bad debt. As the progression to “patient as primary payer” accelerates, managing cash flow becomes challenging. Collecting co-pays and other obligations from patients is more difficult and costly than from insurance. Hospital policies and systems are generally not optimized for such collections, and the underinsured and uninsured represent additional risks to bad debt creation. Industry assessments show that “the vast majority of facilities expect to recover less than one-fifth of what patients owe.”16

Response is Challenging

In the face of looming disruption, providers exhibit mixed levels of preparedness for navigating the complex transition to value-based care and consumer-centricity. A HealthLeaders survey found that 62% of organizations rate their “overall preparation for value-based financial changes” to be very or somewhat strong.17 While hospitals and systems have been rapidly expanding investments in innovation, their commitment remains a fraction of what the deep-pocketed new entrants spend. Another survey listed the top three impediments to value-based care as inadequate payer incentives, inadequate risk contracting models and revenue stream uncertainty.18 Clearly, pivoting from fee for service is a challenge that will reward consistent, effective financial and risk management.

Payments/Revenue Cycle Strategies

Achieving success in the emerging environment will require a savvy blend of short- and long-term financial strategies. The good news is that organizations can pursue a set of immediately actionable steps to position themselves well competitively and be leaders rather than followers in disruption. Deployed across Patient Financial Experience, Revenue Cycle Management and Strategic Growth, these initiatives include:

Many healthcare finance operations remain heavily manual. Automation can streamline processes to deliver the kind of frictionless patient experiences offered by “retail” competitors while boosting staff productivity and significantly reducing costs. For example, remittance management is plagued by inefficiencies, errors and patient frustration induced by siloed systems and labor-intensive workflow. System integration and automation of remittance splitting/ posting/reconciliation can mitigate these issues.

Automation can also have a significant impact in accounts payables. Opportunities to improve efficiency exists by placing suppliers on a robust platform that automates many AP functions. Best-in-class optimization necessitates a thorough and scalable approach, actively enrolling all vendors across the enterprise.

Be open to offering a full range of patient financing to maximize patient access to affordable care. With help from a strong financial institution, providers can extend a host of low and no-interest payment plans that meet patient obligations without tying up capital. An expansive strategy would include use of recourse financing programs, which are well suited to non-elective and certain elective procedures. The guidelines for non-recourse bank loans result in many patients either being denied outright or being approved for less than full need. Recourse programs can fill this gap with automatically approved loans and fee protections for the provider in case of default. Patient loyalty, highly desirable in a disruptive environment, is greatly enhanced.
Graphic with a credit card, check, cell phone and wallet

Cost-cutting alone is not sufficient. Modern Healthcare reported that 90% of hospital and health system executives view finding new revenue streams as an urgent priority.19 Another recent analysis concluded that the “business side of healthcare must strive to eke every possible penny out of its revenue streams.”20 Fortunately, there is still considerable opportunity in the financial arena. For instance, extending a virtual payment card to suppliers can generate new earned revenue – some organizations have seen substantial incremental increases. Look beyond the core inpatient vendors. As organizations expand into outpatient and new markets, additional suppliers can be enrolled on the payment card to further augment revenue.

Patient financing is another opportunity. New market entrants are offering patient-friendly pricing and financing. Responding with varied financing options and elimination of financial barriers through frictionless, low or interest free loans is a solid path to volume growth and increased market share.

Healthcare organizations will need the backing of a well-capitalized, flexible financial institution to navigate the capital demands of disruptive change. Based on its research and experience, CommerceHealthcare® has identified five core attributes of an ideal financial firm, shown in Figure 3. Moving from a traditional banking relationship to a collaborative one will reap dividends as knowledgeable and experienced professionals uncover ongoing opportunities to save, adapt, and grow.
Graphic with five circles featuring the five attributes for financial speed and scalability.


A key skill in the Figure 3 list is analytics. Healthcare finance and revenue cycle management have made great strides in tracking and data analysis. But the struggle for consistent effectiveness continues due to paper-based records, non-integrated systems and more. While AI-driven tools are still emerging, near-term opportunities exist to derive important insights through information gathering and analysis such as: 

  • Audits of back-office processes to uncover opportunities for automation and efficiencies.
  • Ongoing “spend file analysis” of the supplier base to estimate additional earned revenue potential.
  • Extensive data dashboards on receivables and payments automation programs.


Pursuing this matrix of strategies establishes a foundation for financial health and ability to compete/partner with disruptors. Healthcare providers can:

  • Strengthen overall financial position to enable growth investment for the long run.
  • Manage the industry business model shift.
  • Improve customer centricity and enhance the overall patient experience.
  • Remove barriers to care.
  • Smooth the patient’s journey through the financial system.
  • Enhance workforce productivity, engagement and customer sensitivity.
  • Contribute to critical digital transformation strategies.


Strategic threats and opportunities abound for healthcare organizations. While outcomes are uncertain, disruptive change is already impacting the healthcare industry. Responding successfully will take clear understanding of the sources of disruption, how finance is likely to be altered and the barriers to fundamental change and innovation. The strategies described in this report offer a clear and immediate action path to promote financial success.


1. J. Molpus, “Three Real Worries Facing Hospital CFOs Today,” HealthLeaders, June 25, 2019.
2. A. Paavola, “S&P: 6 Key Healthcare Trends to Watch in 2019,” Becker’s Hospital Review, November 16, 2018.
3. Aetna, 2018 Health Care Trends.
4. Health Leaders, “Navigating The M&A Landscape: Achieving Clinical And Financial Objectives,” April 2019.
5. Reaction Data, Healthcare Disruption: The Future of the Healthcare Market, 2018.
6. J. Bees, “Survey Snapshot: Mega-Mergers and Telemedicine Accelerate Convenient Care Growth,” NEJM Catalyst, July 25, 2019.
7. Commonwealth Fund, The Cost of Employer Insurance Is a Growing Burden for Middle-Income Families, December 2018.
8. American Hospital Association, 2019 Environmental Scan, December 2018.
9. M. Castellucci, “Verma Vows More Action on Price Transparency,” Modern Healthcare, August 5, 2019.
10. C. Dredge, “Healthcare Sustainability,” presentation at AHA Leadership Summit, July 2019, adapted from McKinsey & Co., The Era of Exponential Improvement in Healthcare, May 2019.
11. T. Beaton, “Preventing Provider Fraud through Health IT, Data Analytics,” HealthPayer Intelligence, May 29,2018.
12. Center for Connected Medicine, Top of Mind for Top Health Systems 2019, November 2018.
13. Molpus, HealthLeaders, June 25, 2019.
14. S. Porter, “2 Pain Points Strategy Leaders are Talking About Right Now,” HealthLeaders, July 11, 2019.
15. Kalorama Research, The Market for U.S. Urgent Care, August 2019.
16. A. Moriarty, “5 Hospital Bad Debt Statistics You Need to Know,” Definitive Healthcare Blog, March 21, 2019.
17. HealthLeaders, Staying the Course on Value, May/June 2018.
18. HealthLeaders, Annual Industry Outlook, January/February 2018.
19. Kacik, “Urgent Need for New Revenue Streams will Shape Providers’ Strategies,” Modern Healthcare, April 15, 2019.
20. S. Morse, “Hospital Revenue Cycle: Ready for Change But Facing Big Challenges,” Healthcare Finance, April 1, 2019.