Banks & Healthcare Payment Automation
Today’s Healthcare Bank Lockbox Climate
A Brief History
Not too long ago a well-known regional bank was surprised to discover that one of their largest healthcare customers, a large county hospital system, was approached by Bank of America with their healthcare lockbox solution, purchased earlier from Health Logic. The surprise was two-fold. First, how long has BOA been in the market going after the customer base; and second, what can be done to offer something similar?
Most banks now recognize that their lockbox revenues related to healthcare are at risk with the advent of ERA and EFT. In an industry that processes more than $1.5 trillion dollars a year - and is as complex as any industry out there - the choices of how a bank participates in this space must be carefully weighed.
More intriguing to banks, the volume of transactions and funds will only increase the stakes as time passes. The annual U.S. healthcare expenditure is estimated by USA Today to reach $4 trillion, or $12,320 per person annually, by 2015.
How Did We Get Here?
The framework for today’s electronic healthcare payments was begun in 1996 with the passing of the federal Health Insurance Portability and Accountability Act or HIPAA. HIPAA defined standards and sanctions for privacy and security. The act also set standards for business-to-business electronic transactions.
Providers Need To See The Details
A further limitation is that HIPAA only applies to electronic transaction files, designed to be read from computer-to-computer. In addition to the transaction files, that may or may not load into their billing software due to the variation in technical formats, providers also require human readable payment notifications. HIPAA standards do not address the human readable notifications, whether on paper or in electronic form such as PDF.
Healthcare is a business where payers are not likely to pay what a provider bills. The provider needs to follow-up on as much as 30-50% of the insurance payments it receives, depending on specialty of the operation. Remittance is based on a very detailed contract between the payer and the provider. The struggle to determine where an adjustment should be made, whether it should be on the billing side vs. the remittance side, is a result of the often relatively simple provider billing software contrasted with the complexities of the payer claim processing system.