Healthcare expenses contribute to a large share of many households’ as well as state budgets. Financing healthcare service needs may be often challenging. However, innovative fintech solutions and artificial intelligence (AI) might make this task a bit easier.
On a global scale, the pandemic of 2020 revealed a number of challenges affecting international healthcare financing instruments in critical times. The failures of the international COVID-19 response included inadequate adaptive capacities due to limited health system investments and insufficient emergency surge funding.
Furthermore, such an unexpected healthcare shock as the Covid pandemic highlighted financing issues in national healthcare and medical insurance systems. Many vulnerable households were left unprotected in the face of a global health threat. Today, as the pandemic is over, numerous families are still struggling to finance adequate healthcare services amidst rising living costs and increased inflation levels.
It is obvious that healthcare financing schemes need and should be improved in many aspects. Modern financial technologies, especially those powered by artificial intelligence, have a potential to disrupt the segment in the near future.
What Is Healthcare Financing?
The notion of healthcare financing refers to the mechanisms and processes by which healthcare services are paid for. The term is broad, encompassing a range of various financing activities, from how individuals pay for their own healthcare expenses to how governments fund healthcare systems.
The main types of healthcare financing are:
- private health insurance either purchased individually or provided by employers as part of the benefits package;
- public health insurance programs offered by the government to compensate healthcare costs for the vulnerable population;
- out-of-pocket medical expenses that are not covered by insurance;
- government funding which supports public hospitals and other healthcare infrastructure;
- social health insurance systems, where a national health insurance fund is used to finance healthcare services for all residents;
- Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs);
- donor funding from international organisations, philanthropic foundations, etc.
Adequate healthcare financing mechanisms are critical for healthcare systems worldwide. Proper funding directly affects access to healthcare, the quality of healthcare services, and even the sustainability of the healthcare system altogether.
Main Issues in Healthcare Financing Systems
Healthcare financing is a complex issue and every country solves it differently. Some countries introduce nationwide health insurance systems, while others rely on taxes to fund public hospitals and make the majority of medical services free for their citizens. Whatever the approach, every public healthcare system has its own issues. Here are the main pain points of healthcare financing:
- low level of state funding that results in an inadequate healthcare infrastructure;
- lack of investing to provide critical healthcare services for the vulnerable population segments who can’t afford them;
- inadequate allocation of funds towards preventive healthcare services, such as immunisation programs;
- increasing healthcare cost that limits the scope of affordable healthcare services;
- high out-of-pocket (OOP) expenditure levels;
- lack of funding to provide universal healthcare access to all regions within the country;
- low value for money when it comes to the quality of healthcare services;
- traditional fee-for-service payment models that prioritise volume over value;
- low accountability of public and private health systems that discourage private financing;
- time-consuming and error-prone claims processing, billing, and reimbursement processes;
- opaque healthcare fees, inability for consumer to compare the service cost at different healthcare providers;
- healthcare fraud, including billing fraud, identity theft, and prescription drug fraud;
- complex management of sensitive patient data that prevents quality analysis of healthcare patterns;
- low consumer engagement in their healthcare financing decisions.
This not-so-short list is still only the tip of an iceberg reflecting major healthcare financing issues. In every country, there are more specific issues that need to be addressed.
How Financial Technology Can Solve Healthcare Financing Issues
The variety of existing fintech solutions makes it easier to improve healthcare access and options to finance healthcare services for more people. The pain points listed above are challenging but they also give fintech providers plenty of opportunities to create truly valuable solutions.
Fintech Tools Simplify Administrative Tasks
Healthcare involves a lot of paperwork, ranging from health records to billing receipts. At the same time, due to the lack of financing, many healthcare providers face problems such as limited staff and resources.
Fintech solutions, especially those empowered by AI, automate and simplify sensitive data management. This way, healthcare sector employees can focus on more important tasks like actual treatment, professional training, and communication with the patients.
Healthcare organisations deal with large information volumes that come from disparate sources. With AI, these aggregate data can be analysed within a single solution. It will help organisations make more effective business decisions, generate better clinical results, and improve the quality of patient care.
Moreover, fintech solutions help healthcare providers streamline complex administrative processes, such as claims processing, billing, and reimbursement. Electronic health records (EHRs), claims processing software, and automated billing systems not only reduce paperwork, but also improve the accuracy of payouts.
Technology Streamlines Health Insurance
Enrolling in health insurance plans, managing coverage options, and accessing insurance benefits is simplified with convenient online platforms and mobile apps. Such tools can also include an educational component, informing customers about available insurance plans, eligibility criteria, and enrollment deadlines. Furthermore, digital tools facilitate communication between insurers, providers, and patients. One can access necessary information or services from any place 24/7, with fewer delays and administrative errors.
In addition, insurance price comparison websites, healthcare cost calculators, and similar mobile apps can provide consumers with real-time information about the cost of healthcare insurance plans, medical procedures, prescription drugs, and other healthcare services at different providers. It enables individuals to get the best value for their money and avoid surprise bills.
Fintech Expands Access to Healthcare Financing Options
Using health savings accounts (HSAs), flexible spending accounts (FSAs), and instalment payment plans is easier via online platforms and financial management apps. Fintech tools help individuals track their healthcare expenses, manage healthcare accounts, and explore various financing alternatives to find one that aligns best with their needs and preferences.
AI-driven chatbots and virtual assistants can also provide personalised financial assistance to patients, helping them better understand their insurance coverage, out-of-pocket costs, and financing options. They are able to inform potential patients by answering specialised questions, providing cost estimates, and offering guidance on financial assistance programs.
Potentially, fintech solutions dealing with crowdfunding can be also applied to the healthcare sector. People without proper medical insurance or those dealing with rare diseases that require expensive treatments often turn to charitable organisations or friends and family to be able to finance their surgery or other treatments. With the rise of digitalisation, this funding search process can be easily facilitated by dedicated online platforms.
Examples of Fintech Joining Efforts With Healthcare Providers
Payment giants, such as JPMorgan have been continuously showing interest in healthcare payments. Brad Garfield, managing director and head of medical solutions at JPMorgan Commercial Banking, has recently highlighted problems in healthcare payments in the US. For instance, many American healthcare providers still do not have websites for accepting online payments. Outdated payment processing mechanisms in the healthcare sector create inconvenience and slow down the reimbursement of funds faced by over 40% of medical service consumers.
Fintech can also address the issue of inadequate medical services by introducing and tracing the performance of so-called value-based payment models, e.g. bundled payments, pay-for-performance, and accountable care organisations (ACOs). In this case, providers are rewarded for delivering high-quality, cost-effective care rather than volume of services irrespective of their quality.
As healthcare costs grow, BNPL providers step in to introduce their instalment plans to the sector. Thus, Klarna has long joined forces with healthcare payment specialist Finance 4 Group to enable patients ‘slice’ their bills into monthly instalments.
The Role of AI in Healthcare Financing
Artificial intelligence can greatly enhance healthcare financing, improving its efficiency, accuracy, decision-making, and cost-effectiveness.
AI Improves Cybersecurity
Healthcare organisations today need to enhance their cybersecurity measures. The number of cyberattacks on healthcare systems is rising as hospitals are shifting to digitalisation and remote patient care.
With the help of AI, healthcare providers can proactively prevent fraud by continuously monitoring transactions, detecting anomalous patterns, and flagging suspicious activities in real-time. Machine learning algorithms analyse large volumes of healthcare data and also adapt to evolving fraud schemes. Therefore, they surpass traditional rule-based approaches in identifying new patterns of fraudulent behaviour.
Predictive Analytics Improve Health Outcomes and Reduce Costs
‘Smart’ technology can assist in population health management initiatives, aggregating and analysing health data from diverse sources (EHRs, wearables, health surveys). Predictive analytics, AI, and remote monitoring tools help identify at-risk populations, predict future healthcare needs and target interventions.
With personalised data obtained from gadgets and wearable technologies, providers have an opportunity to improve patient participation and advance the healthcare system. This personalised approach helps provide preventive care, coaching, and health suggestions that suit patients’ unique ailments, objectives, and lifestyles.
In addition, predictive AI-based analytics can optimise revenue cycle management, predict cash flow, identify billing errors, streamline collections, forecast revenue trends, identify potential bottlenecks, and prioritise follow-up activities to improve revenue capture and accelerate reimbursement.
By better forecasting future healthcare expenses, AI can help both payers and providers manage financial risk, set budget targets, and allocate resources more effectively.
Insurance Providers Benefit From AI Automation
AI algorithms automate claims processing, quickly collecting and analysing relevant information from medical records, invoices, and other documents. It reduces manual data entry and processing errors. Natural language processing (NLP) and machine learning algorithms can also interpret unstructured text and images to validate claims, determine eligibility, and adjudicate payments.
It can also enhance risk adjustment, using patient data to identify individuals with complex medical conditions or higher healthcare needs. Machine learning algorithms can analyse not only clinical data, but also claims history, and socioeconomic factors to predict risk scores more accurately. That can potentially lead to fairer reimbursement practices and better allocation of resources.
AI Can Boost Healthcare Investments
AI-powered analytics can identify high-performing providers, assess network adequacy, and negotiate favourable contracts. Precise AI-powered analysis of provider performance metrics, patient satisfaction scores, and cost-efficiency measures can help deliver high-quality care at competitive prices. For private and public healthcare investors, such insights can become proof of their funding improving patient outcomes, driving innovation, and enhancing operational efficiency.
Summary
There are many aspects of healthcare financing which remain outdated at present. Reliance on the legacy procedures slows down the development of healthcare investment mechanisms, worsens patient experience, and often makes treatment less affordable than it can be. Modern fintech tools and artificial intelligence technology are at the forefront of the healthcare financing evolution. They expand financing choices for both individuals and healthcare providers. In addition, they bring out valuable insights and predictive analytics to boost operational performance in the healthcare sector. Finally, strong cybersecurity measures developed by fintech players are crucial for sensitive data protection as the healthcare segment gets increasingly digitised.
