Most of us have a nightmare scenario when it comes to our medical bills. Weeks after a procedure, a notice arrives from our health plan with a complicated explanation of what is and what isn't covered. Then the hospital follows up with a charge that often seems both nonsensical and inconceivably high.
In many cases, these bills gather dust in a drawer. More than 40 million Americans have unpaid medical expenses that are impacting their credit, according to the Consumer Financial Protection Bureau, and much of this debt comes from out-of-network doctors that consumers thought were in network. Many hospitals will hire debt collectors, who go to great lengths to recover this debt.
Medical billing is a particularly thorny and broken part of the U.S. health system that many in Silicon Valley's technology sector won't touch. But Seth Cohen, president and co-founder of the start-up Ooda Health, has a workaround that is so deceptively simple, it might just work.
Cohen, who has worked in health technology for more than a decade, most recently at Castlight Health, thinks that providers — namely hospitals and doctor's offices — shouldn't be responsible for collecting bills from patients.
Instead, he and his team are working to persuade health insurers to take on the burden.
"It's absurd when you think about it," Cohen said by phone. "Can you imagine finishing your meal at a restaurant and then handing over a credit card only to get a bill months later, followed by a collections agency that's hired to chase you up? No, the credit card company takes on the responsibility right then and there."
Here's how it works: Once a patient gets seen by a health provider, the claim gets submitted to the insurance company, which adjudicates it and issues a payment to the hospital or clinic for the insurance portion of the bill. From there, Ooda quickly pays the provider for the patient's portion of the bill, and Ooda and the insurer jointly manage what the patient owes.
Cohen said that Ooda, which is backed by a mix of venture capitalists and health insurers, is working with Anthem, Blue Shield of California and Blue Cross Blue Shield of Arizona on a year-long experiment. If it works, these insurers can opt to work with Ooda more permanently.
Ultimately, Ooda hopes to deliver bills more quickly and with fewer surprises, especially if they can work with some of the companies that staff hospitals with out-of-network doctors. Cohen also hopes that more people will opt to pay, especially as the several plans are offering an option for consumers to pay back bills over time with zero interest.
Thus far, Cohen said 2,000 bills have been paid through Ooda's system and 96 percent of those surveyed said the experience was better. He also said the company is on track to collect more in five months than providers typically do in a year.
Even if it's easier to pay medical bills, some people will still default.
So why would insurers take on the liability when it wasn't previously their problem?
Blue Shield of Arizona's CEO Pam Kehaly says this was a "worry item" for her. But she's willing to test it because the financial exposure for her plan is offset by the improvement in experience for members. And it will potentially mean fewer member grievances, and therefore lower costs to staff call centers.
Kehaly also said there's more competition than ever from venture-backed start-ups in the insurance space, which are looking to differentiate themselves through member experience, and potentially also from nontraditional players like Amazon and Google, which many health executives are keeping a close eye on. So her plan is thinking a lot these days about ways to set itself apart.
"We are banking on higher retention and higher sales through word of mouth," she said.
Blue Shield of California's chief innovation officer Jeff Semenchuk agrees: "What is super clear to us is that one of the big consumer needs is to understand what they pay for and what they owe. The whole process is confusing, opaque and disconnected." (Blue Shield of California is also an investor in Ooda Health.)
Semenchuk also believes that doctors will be freed up to spend more time on members' health care rather than managing administrative burdens. All that could lead to lower costs and better outcomes down the line, which is good for his plan. If the pilot succeeds, Semenchuk could see a future where a patient gets a credit card-like statement every month that's clear and simple.
Companies like Ooda are also benefiting from a wave of consolidation in health care, which is pushing providers and payers to start working together rather than against each other. Moreover, the trend toward high deductible plans and expensive copays is putting more onus on patients to think critically, and potentially even shop, for their health care.
"I was skeptical at the start," said Dignity Health's Steve Scharmann, who runs the health systems' revenue cycle and billing efforts. Dignity, which is now known as CommonSpirit Health after a merger, is one of the largest hospital systems in the U.S.
"But I now think a lot of hospitals will raise their hands to get involved," he said.
Scharmann notes that it's a huge challenge for hospitals to manage billing-related queries from patients, especially as many of the questions are about what's covered by their health plan.
But some hospital execs say it might be too good to be true.
Stephen Klasko, CEO of Jefferson Health, says there could be resistance from groups that have a vested interest in keeping things as they are, including debt-collection agencies. He does not know if the situation will change in his lifetime.
"But this kind of effort is on the right side of history," said Klasko. "I hope that this kind of fragmented billing will be viewed in 100 years like we think about blood-letting or leeches today."