Tomorrow’s Healthcare Payments, Part 1: Understanding Today’s Limitations

Like organizations in nearly every industry, health insurers continue to transition their various administrative processes from manual to automatic. Driven by healthcare reform and evolving compliance requirements—as well as changing provider preferences—insurance companies are under pressure to cut operational costs, deliver higher quality customer/supplier services, and improve their access to and use of data to support organizational goals.

The Healthcare Payments Industry is Unique

Considering the sheer volume of claims payment transactions managed through an insurers’ accounting department, it’s easy to pick out the pain points along the path of traditional manual processes. Health care remittance systems are fragmented. Some insurers are still reconciling payments line by line, while others are working toward a batched approach. They’re using different payment solutions—paper check, ACH, and card payments—and they’re challenged with optimizing their mix to ensure maximum cost-savings and efficiency. Payors are also working within the constraints of their customers’ capabilities—or lack thereof.

What’s more, many insurance companies grapple with the limitations of legacy technology, especially home-grown systems that have been pieced together over the years to accommodate changing needs. These can be both inflexible and expensive and difficult to support. In their white paper Insurance Billing and Payment Transformation – Why Now?, IBM discusses these issues in depth, noting that hard-coded platforms require specialized programming, don’t support electronic billing and payment methods, don’t support end-to-end integration, and require manual workarounds to overcome shortcomings. And these old systems leave their companies vulnerable to expensive errors, fraud, and inefficiencies that ultimately impact customer retention and business profitability.

All Signs Point to Automation

The 2013 U.S. Healthcare Efficiency Index report from the Council for Affordable Quality Healthcare examined how the healthcare industry can save billions by continuing the shift from manual to electronic major administrative transactions. Those related to payments processing include:

• Electronic claim submission, which had the highest rate of adoption (91%) in the study
• Claim payments, of which 44% continue to be paid by paper checks
• Electronic claim remittance advice and posting and receiving of payments, which showed the lowest level of adoption in the study (53%), with more than 10% being transmitted both electronically and via paper

The report said small healthcare providers have been relatively slow to adopt electronic processes, suggesting that the newly mandated EFT standard, ACH CCD+, is making the payment method more attractive, as is its ability to provide more detailed transaction information about payments. Still, like paper checks, EFT can still be a cumbersome from an administrative standpoint, making other forms of electronic payments, like virtual credit cards, viable alternatives deserving a place in the payments mix.

An upcoming post will provide insights into this emerging form payment technology. Stay tuned for Tomorrow’s Healthcare Payments, Part 2: Exploring New Forms of Automation.