What is Tokenization and Why Should Providers Care?

While tokenization has been around for years as a means of securely saving payment information, it wasn’t always widespread within the healthcare industry. It is important for healthcare to understand that tokenization offers benefits beyond adding a layer of security to payment card processing. By using this and other payment technologies to their full potential, providers can streamline the collection process and create a more consumer-friendly payment experience.

What is tokenization?

The PCI Council defines tokenization as “a process by which the primary account number (PAN) is replaced with a surrogate value called a token.”

When tokenization is used in payment card processing, the valuable card information is replaced by an invaluable token, making it unreadable to the applications involved in processing the transaction.

Essentially, tokenization allows you to save payment information – such as a credit card or bank account – online securely, so you can use it to pay for something without re-entering it. We see this everywhere, from an Amazon account to Apple Pay^® and Android Pay™. And in healthcare, it is key to automating the payment process to simplify the consumer experience and help providers achieve payment assurance.

Why is this important in healthcare?

The healthcare industry is in need of a payments revolution, and both providers and consumers stand to benefit.

Healthcare providers need to collect more consumer payment responsibility than ever before, due to the increase in High Deductible Health Plans (HDHPs). The challenge is that consumers have certain payment expectations set by other industries and they are accustomed to new and convenient technologies that let them pay for anything, whenever and however they want. Yet, when consumers visit their providers’ office, they encounter extremely limited payment options. They are confused about what they owe and how they can make a payment. To add to the confusion, their healthcare bills often don’t arrive until weeks or months after the provider visit because of the claim adjudication process.

This confusing process can lead to a poor overall consumer experience, regardless of the quality of experience they had during the initial visit.

Unless providers address consumer confusion and improve the payment experience with new technologies, their businesses will suffer. According to the 2020 Trends in Healthcare Payments Annual Report, 42% of providers said that their primary financial concern was related to consumer payments. If providers struggle to collect from consumers they could see increased days in A/R or more bad debt, as confused and frustrated consumers neglect or do not pay their bills. Providers could also see their costs increase from sending multiple statements and extra staff time spent following up with unpaid consumers.

So how can providers use tokenization to improve the payment process?

When providers use tokenization or other technology to securely save consumer payment methods on file, they also have opportunities to automate the collection of consumer payments, which enables providers to achieve payment assurance while simplifying the consumer payment experience at the same time. When implementing automated payments, providers should keep in mind the following best practices to maximize the benefit potential.

Take a Proactive Approach to Payments

Traditionally, providers have taken a reactive approach to consumer payment collections by mailing paper statements after the claim adjudication process. A proactive approach is to discuss payment options with consumers prior to or during a visit, and provide the opportunity to save a payment method on file to cover any expenses once the responsibility is identified. Make this a consumer-friendly experience by offering flexible payment options. Work with consumers to customize payment plans to collect large balances and schedule recurring payments to automatically collect the amount due. This guarantees payment collection and lets the consumer better understand and manage their healthcare bills.

Put Control in the Hands of the Consumer

Not all consumers may want or need to interact directly with providers to make payments. Providers can offer an online portal where consumers quickly pay their bills or customize their own payment plans, access details about past payments and set up a digital wallet to manage their saved payment methods. The easier the process, the more likely consumers are to pay.

Communicate With Consumers

Consumer-friendly payments require more than just new technology — providers should also consider internal cultural changes with staff in the way they communicate payment options with consumers. Train staff so they are knowledgeable about all consumer payment options and prepared to answer questions.

Keep consumers in the loop about their payments by communicating with them in ways they will be most likely to respond. Use email and text messaging to send notifications about upcoming scheduled payments. Eliminate paper and avoid sending multiple statements by automatically suppressing statement printing after payment has been collected. This way, providers can change the tone of consumer communications from “You owe money — pay now,” to “Thank you for your payment!”

There are plenty of opportunities to use technology to improve the healthcare payments process. By following best practices, providers can create a better consumer experience that ultimately leads to more consumer payments.