New research shows patient spending on healthcare spikes during the tax-refund season, especially for ambulatory care. A study reveals that patients immediately seek appointments and services after receiving refunds. Also noteworthy: they use refunds to pay down outstanding balances.
The study by JPMorgan Chase Institute tracked daily spending for healthcare goods and services for 1.2 million checking account-holders between 2014 and 2016. The spike triggered by tax refunds was dramatic, with spending up 60 percent in the week after a refund was received and remaining at 20 percent above typical for the 75 days following the infusion of funds.
The Cash-Sensitive Patient
Of clinical and financial importance is the fact that tax-refund spending represents deferred care, the study showed. Patients are unlikely to have met their deductibles early in the year. Many of those relying on refunds to pay for care appear to operate on a cash basis – some have lower balances in their checking accounts and no credit cards. They don’t undertake treatment with the idea that a refund is on the way, instead waiting until they have the cash in hand to obtain healthcare services.
Sixty-two percent of the spending triggered by refunds was paid in person. Payments most often went to dentists (32 percent), doctors (23 percent), and “other” (39 percent), including nursing services, ambulance services, chiropractors, opticians, ophthalmologists and medical laboratories.
For the 37 percent of spending that went to remote payment (those made online or elsewhere), funds were directed to hospitals (32 percent) doctors (21 percent) dentists (6 percent) and other (41 percent).
Refund Season Kicks Off in February
Armed with this information, healthcare providers can be ready to meet patient demand and tend to their own revenue cycles at the same time. Typically, the refund period stretches from early February through the end of April. Prepared organizations will:
Be fully staffed and consider adding extra hours to accommodate pent-up demand.
Capture as much patient cost-sharing as possible at the time of a visit.
Be ready to accept all forms of payment, including all cards, e-checks and online bill pay. (Debit cards are especially important to cash-driven patients.)
Send strategically timed payment reminders to coincide with refund season.
Throughout the year, providers can help patients manage the financial aspects of their care as well:
Make sure patients understand which screenings and preventive services are offered to them at no charge through their health plans.
Help patients plan a care schedule that lines up with cash flow conditions, so they can prioritize their spending and treatment.
Consider offering cash-strapped patients card-on-file and recurring automated payment options for services that just can’t wait.
The JPMorgan Chase study relied on IRS data that shows 73 percent of tax filers received refunds in 2016, with an average return of $2,860. This is a significant cash influx for most households. Providers rightfully want healthcare to be a priority for their patients, especially when deferred treatment may be harmful to patient health.