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An Evolutionary Path to Digital Healthcare Payments

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01/25/2018

The Healthcare industry is awash in paper. From billions of paper checks, explanations of benefits or payments (EOBs and EOPs), and mailing envelopes, the paper tsunami has cost both insurance companies and providers billions, which in turn has added to the cost of healthcare.

Every check mailed costs $3.00 to issue (per the Association for Financial Professionals 2015 Payments cost Benchmarking Survey). On an average, if an insurance company (like a small Third-Party Administrator (TPA)) had say, 100,000 members and each patient sees a physician an average of about 8 times in a year, then, on an average, the company has to make about 800,000 payments a year. At $3.00 a payment, it costs this small insurance company about $2,400,000 just to make payments to physicians. In the scheme of the expenses to the insurance company and to its bottom line, $2,400,000 does represent a potential target area for insurance companies to save costs.

Insurance companies have recognized that evolving technologies will allow for them to target Healthcare payments as a key area to gain efficiencies and reduce costs. There has been an additional push in this area by the ACA mandating health plans to make EFT via ACH available upon request from providers. Organizations such as CAQH continue to educate and push providers to accept ACH transactions. However, the resistance to this push from providers has been challenging to health care payers.

That said, the paper check enjoys ubiquity of acceptance, does not require Payer to know more than the FEIN and the address where the check needs to be mailed to (all of which can be obtained from the claim filed with them), and most importantly, the payer does not need to know the Provider’s banking details.

As a result, insurance companies have found a need to come up with alternate payment models to improve their bottom line. As they continue to make changes in this area, the impact to the workflow process of the billing company and the physician does get impacted. Understanding these payment models allows the billing company to re-orient their process focus, while simultaneously allowing them to work with their provider clients in both an advisory as well as a partnership role.

This article will cover some of the different payment models that we have seen so far, and then, explain a new and innovative solution that has the potential to be a game changer in this important world of healthcare payments.

What we have seen so far:

A. The Paper Check, delivered along with a paper explanation of Payment (EOP) (Commonly also referred to as an Explanation of Benefits (EOB)…We will refer to this in this article as the EOB) is something we all are familiar with. These paper EOBs have been the source around which most billing companies have set up their process flows.

The advantage of the paper EOB is the ability to allow for reconciliation of the transaction detail (EOB) against the Physical check. In addition, the paper check does act as a psychological motivator for many a physician.

The disadvantage of this paper EOB includes:

  1. The need to manually go and deposit a paper check in the bank. The cost, time and effort to do this daily adds up for the physician.
  2. Paper Checks could potentially be lost in the mail.
  3. Paper checks could result in having to maintain a lockbox, and the cost for maintaining this lockbox could add up to 1% of the physician revenue.
  4. The possibility of receiving checks meant for someone else and depositing in the physician’s bank account is high – This happens more in many lockboxes, where it is not uncommon for physicians to have to write check to each other once they catch these errors.
  5. The time needed to post a paper check is much more than auto-payment posting an Electronic Remittance Advice (ERA)
  6. There is no clear way to analyze the denials from paper EOBs unless additional processes have been put in place.

In fact, the disadvantage of having to work with paper EOBS has spurred a new business where paper EOBs are converted to ERAs to allow them to get the same advantages as an ERA.

B. The ACH payment directly to the bank account, with either a paper EOB or an electronic ERA.
Motivated by the CAQH as well as the mandate from the ACA in 2014, and potential cost savings, some of the bigger insurance companies have been trying to push the ACH. These efforts have not been as successful as desired, because:

  1. ACH necessitates the capture of bank account information of various providers. This has not always been easy, especially for the smaller self-funded insurance providers as well as any plan that does not need to contract with a Physician.
  2. Providers feel uncomfortable giving out their bank account numbers
  3. The time gap between receiving an EOB and seeing the deposit in a bank account causes reconciliation difficulties.
  4. Providers feel that once a payer has access to their bank information, the payer could potentially take money out of their account
  5. Some providers have the physical satisfaction of “seeing the checks” that come to them, as this motivates them

Organizations such as CAQH have been making attempts to be one source of capturing the bank account of providers. However, providers have been reluctant to sign up for the ACH, and the adoption rate for ACH is still only as high as 20-30% of all providers.

C. The Virtual Credit Card (V Card): As the struggle for cost savings continues, Payers have continued to explore innovative methods of paying providers. One method involves making a virtual credit card available to the provider by either faxing or mailing a credit card number along with the EOB. The provider’s office has to simply run this payment through their credit card terminal, and the payment is deposited into the provider’s bank account. The main challenge in widespread adoption of V Card payments is the resistance to “swipe fees” associated with card payments.

Payers liked this method because they could potentially get paid a percentage of the points paid by the provider to run this transaction through their credit card machine. However, Providers have vigorously pushed back against this method of payment as they strongly believe that they do not need to pay any money to receive payment for services. Despite this pushback, there are still a small number of provider payments that are paid through this method of payment.

We continue to see variations of the above three broad methods. The only process changes for billing companies from these changes means that we need to adapt to various ways to track of the location of where the payments are being delivered to.

What are we about to see?

When we look at the pros and cons of the various methods outlined above, the ideal solution is one that preserves the benefits of the check while eliminating the paper chase.

Would it not be nice to have a check paid faster without getting lost in the mail, allowing for the check to be directly deposited in a bank account controlled by the provider, without getting delivered to the wrong address, and potentially eliminate the cost of a lock box, all while receiving the matched EOB along with the check?

Yes – the solution that is about to be introduced is the eCheck.

Deluxe Corporation, the world’s largest check printing company offers an innovative payment alternative. They are working with some major organizations to start paying providers using an eCheck. Deluxe has a patented approach to deliver the eCheck along with an EOB to the providers without the need to collect and store sensitive provider bank account information. The provider would have the ability to download both the check and the EOB, post the EOB, and print the check which can be deposited in the bank just like a regular check received in the mail. The solution also offers alternatives to automatically deposit funds into the providers account.

This solution can potentially transform healthcare payments, because:

  1. Payers will realize significant cost reduction s in printing, stuffing and mailing thousands, even millions of paper checks and EOBs.
  2. eChecks are checks. They provide both ubiquity and continuity. eChecks enjoy the wide acceptance of paper checks that providers are used to. Because eChecks are checks delivered differently, payors and providers do not have to make drastic changes to existing processes and systems.
  3. Simultaneous delivery of the eCheck and EOBs, allows for better reconciliation. We do not have to waste time running after missed checks or EOBs.
  4. Providers will have the capability to either print out the eCheck and deposit it in their bank, or, use one of the alternate deposit methodologies offered by this platform depending on their funds availability needs. Deposit alternatives are choices, not mandates on the providers.
  5. Providers will be in control of their bank account information – Provision of banking information is a choice, not a mandate.
  6. Payments will not be lost in the mail
  7. There is no more “mail float.” Providers receive payments at the speed of email.

In a fast transforming world, paper checks and EOBs are vestiges of the last century. While many payment alternatives exist, and have enjoyed varied levels of success, eChecks offer a path for both payers and payers to move to digital payments, while still preserving the benefits of their existing check based systems and processes.

For a billing company, this means that we might not have to change our processes to run after missing checks. Reconciliation of information will be easier.

Ramesh Gogineni, CEO, Med-Strategies