As pressures mount on the US health
care system to deliver cost-effective services, card payments
mechanisms are being increasingly identified as a way to drive cost
and risk out of the system. Charles Davis reports
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Medical
expenses in the US continue to skyrocket, with out-of-pocket
deductibles for health care insurance plans continuing to rise far
faster than inflation rates.
With last year’s health reform bill
years away from delivering any meaningful change in the way health
care is delivered in the US, the medical sector is more open than
ever to exploring ways to collect payments through credit and debit
cards and squeeze costs from the system.
Long discussed as way for doctors and hospitals to collect
payments up-front rather than through laborious and risky billing
practices, health cards have struggled to gain inertia for years
thanks in large part to the mind-numbing complexity of the US
health care system, in which practitioners must first estimate
contracted insurance payments before settling with consumers for
their share of the bill.
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By GlobalDataHigh-deductable plans
The rise of high-deductible plans –
the latest major trend in the market – may be the catalyst for
health cards. The plans create an opening for systems that allow
health care providers to access a patient’s bankcard information as
well as a host of electronic medical records at the time a medical
service is performed. In this way, they may charge the account when
providers and insurance carriers later determine the patient’s
out-of-pocket costs.
These systems
promise to virtually eliminate billing costs and improve health
care provider’s collection rates, a serious industry-wide headache.
Payments administration accounts for a staggering 15% or more of US
health care costs, according to Overhauling the US Payment
System, a report by McKinsey & Co analysts Nick LeCuyer
and Shubham Singhal.
Billing, payments, and processing
expenditures, coupled with bad debt and other transactions, total
more than $300bn annually. Such expenses are so high in part
because 60% of these transactions are executed using manual
methods, and an estimated 80% of payments remitted to providers in
2008 were paper-based.
The maths is compelling: the cost
to process a manual claim and issue a paper check is almost $9
each, compared with about 80 cents a claim for generating a payment
using an automated process. Sensing the opportunity, a number of
issuers, merchant acquirers and independent sales organisations are
rushing to fill the gap in health cards.
Health payment systems already are
proving to be more effective than traditional billing methods,
especially as health care providers see a growing number of
patients with high-deductible health care plans. As more employers
adopt high-deductible insurance plans for employees, often tied to
health savings accounts attached to a debit card, the need for such
systems grows.
The number of US consumers covered
by high-deductible insurance policies attached to HSAs in January
2010 rose 64% from two years earlier, to 10m from 6.1m, according
to Washington, DC-based America’s Insurance Plans, an association
representing most of the nation’s health insurance providers.
Employers and employees may deposit
funds into HSAs before taxes are deducted, up to a maximum each
year, and consumers may use the funds in the accounts to pay for
medical services, prescription drugs and certain other approved
health care expenses.
Banks typically issue HSA
accountholders debit cards to access the accounts; accountholders
may also authorise direct deductions of funds to pay for health
care expenses or pay by check.
A-Claim is typical of these new
offerings aimed at easing medical payments, marketed by the US-wide
Blue Cross Blue Shield Association.
A-Claim securely verifies patients’ insurance eligibility;
provides real-time copayment and deductible responsibilities for
each patient; adjudicates insurance claims; and accepts credit,
debit or prepaid cards for payment at the time of service, before
the patient leaves the office. It recently landed a major
sponsorship from The American Academy of Urgent Care Medicine
(AAUCM) that includes discounts on for all AAUCM members.
Card schemes
A key component of A-Claim’s system
is Visa’s AuthorizeFirst payment process, which allows patients and
providers to agree to pre-authorise a payment with a Visa card at
the time of service, based on an estimated amount of the patient’s
responsibility.
Once the claim has been processed
and final patient responsibility determined, the patient’s payment
card is billed automatically through A-Claim only for the amount
actually owed by the patient. A-Claim also allows the provider and
patient to set up a payment plan at the time of service,
establishing an automated collection of patient payments on a
prearranged schedule.
By knowing what a patient owes and
securing payment at the time of service, physicians can streamline
billing procedures, lower collection costs and accelerate cash
flow. Patients can authorise payment immediately and avoid sending
checks through the mail. Studies show that health care providers
collect only about 50% of their charges from patients who leave the
office without paying.
Medical offices tend to collect
about 25% of total patient-services revenue directly from patients,
and the%age likely will rise with out-of-pocket costs increasing,
according to research the Medical Group Management Association
conducted with Visa.
Moreover, 41.2% of patients pay for
at least a portion of their expenses, which could include a co-pay
amount paid with a bank card at the time of the service. And no
matter what method patients use to pay for services, health care
providers send an average of 3.3 billing statements to patients for
each medical service before the balance is paid in full, the
association’s research also found.
A-Claim’s patent-pending technology
aims to close that gap by working with all major insurance plans
and any medical office’s practice management or electronic medical
record system. It is available for a low monthly subscription fee
and minimal transaction charges.
“A-Claim allows the office staff to
simply swipe a patient’s insurance card to verify immediately
whether the patient is eligible for insurance benefits and to
determine the amount of any copayment, coinsurance or unmet
deductible the patient will owe,” said Mary Dees Griffith,
president of Preferred Health Technology.
“This is more important than ever
as more patients switch to high-deductible insurance plans and pay
more out of pocket for medical services.”
Total System Services Inc markets a
card-based health care payments service called First Paid through
TSYS Merchant Solutions, and has targeted health care as one of the
payments industry’s most-promising new growth channels. TSYS gained
First Paid when it acquired First National Bank of Omaha’s stake in
First National Merchant Solutions earlier this year.
First Paid Healthcare offers
web-based software designed to enable doctors and other health care
providers to more efficiently collect payments.
When integrated with a doctor’s
office’s or clinic’s systems, the software confirms a patient’s
insurance coverage and benefits, then generates an estimate of the
patient’s out-of-pocket costs at the time service is delivered.
Patients then may pay for services with a credit card, debit card
or check or set up an instalment payment plan before leaving the
office or clinic. TSYS Merchant Solutions acquires, routes and
settles the payments.
Working with Puerto Rico-based
Paytech Corp, TSYS Merchant Solutions is actively marketing First
Paid to doctors, clinics and other healthcare providers in the
territory as well.
There are also a handful of health
care-specific card schemes in the US, although growth in these
single-purpose cards has been sporadic. Among the most common
medical credit cards are GE Money’s CareCredit and Citi’s Citi
Health Card. The cards are accepted by a variety of practitioners,
from primary care physicians to optometrists to even veterinarians.
The cards come with numerous limitations: some doctors may not
accept the cards, the card may not cover certain needed procedures,
and the no-interest plans often require a minimum charge.
The future of medical cards might
well lie with solutions that combine payment functions with
clinical data, health plan coverage/eligibility information and
personal identity details.
A new hybrid personal health
record/credit card from Broomfield, Colorado-based LifeNexus might
just be a hint of the future.
In collaboration with MasterCard,
Visa, VeriFone, Emdeon, and others, LifeNexus launched the first
multi-purpose electronic health card utilising an embedded
microcomputer, the iChip, for securely maintaining an individual’s
personal health record, in concert with a payment card.
The LifeNexus Personal Health Card
stores comprehensive health information for individuals and their
family members, including demographic data, emergency contacts and
insurance information along with medical records, which include
medical history, immunisations, allergies and prescriptions. This
provides for quick and secure digital access to vital information
at the point of care.
An individual’s personal health record is stored on the card’s
embedded microcomputer, and there also is a digital credential on
the card, which assures the protection of identity and privacy as
well as helps to reduce fraud. The individual’s information stays
in their wallet, not a web-based server.
Vital information
Not only does this eliminate
consumer concerns about transferring and storing sensitive data on
a third-party, web-based server, it also supports the adoption of
electronic medical records by their physician, which requires both
a third-party credential and a digital personal health record.
“The card makes vital information
available to healthcare providers in times of an emergency,
enabling rapid admission and improved care,” said Christopher Maus,
CEO of LifeNexus.
“In addition, by helping to improve
outcomes, the card helps improve the physician-patient relationship
and the overall patient experience, and it supports the best
quality of care for each individual and their family members.”
The LifeNexus solution also solves
the dilemma of the single-purpose card. If individuals choose to
have the Personal Health Card on a payment card, they can manage
their health-related information and make general day-to-day
purchases on the same card.
The card can be offered by
financial institutions with either prepaid, debit or credit
functionality. It can also be used to allow access to Health
Savings Accounts, Flexible Spending Accounts and Health
Reimbursement Arrangements.
New York-based Phreesia is
promoting a tablet-like device that records patients’ personal and
insurance information and doubles as a card-payment terminal. The
wireless PhreesiaPad, approximately the size and weight of a tablet
PC, is designed for patients to receive as soon as they check in at
a doctor’s office.
Instead of manually filling out
paperwork with personal information, medical history and insurance
details, the patient provides that data by following commands on
the PhreesiaPad touch-screen, which links to web-based software
systems medical offices often integrate with their electronic
records-management systems.
The PhreesiaPad enables medical
providers to verify whether a prospective patient has insurance
coverage immediately and which payments, such as co-pays, are due
at the time of the service.
Medical offices may request that
patients, upon checking in, swipe payment cards through a magnetic
stripe card reader attached to the side of the device to ensure
payment at the time of service or later, when insurance companies
reconcile the final amount the patient owes.
The PhreesiaPad also offers medical
providers the option to enable patients carrying a balance to set
up plans that would deduct payments monthly from a credit or debit
card or a bank account, the company says. Patients also may opt to
pay the office directly via cash or cheque.
The cost of the devices is included
in the fees medical offices pay to Phreesia. The device wirelessly
transmits data for payment authorisation at the time of the swipe.
US Bancorp’s Elavon unit settles the transactions at the end of
each business day, and medical practices receive the funds within
48 hours.
Phreesia charges physicians a flat
processing fee estimated at $1 for every $25 in patient
medical-payments it processes. This includes interchange and
transaction-processing fees. There is also a monthly service fee
charged to practices based on their scope and size, which covers
the equipment, support and insurance-coverage verification.
Phreesia, which is selling the
device through its own dedicated sales force and through
third-party channels, recently inked a five-year alliance with
Elavon as the firm’s exclusive payment processor. US Bancorp is the
sponsoring bank. The company’s Phreesia Payment Services also is a
registered independent sales organisation of US Bank.
The bottom line is that financial
institutions in the US finally have a real chance to position
themselves closer to the centre of the health care payments market,
as they possess both the retail payment and electronic processing
capabilities the sector needs.
The McKinsey & Co report said
banks should move aggressively to help create the infrastructure
for consumer-to-provider payments, “partnering with providers and
payers to make the payment-assurance and retail-revenue-cycle
approaches successful”.
“With the right business models, credit card spending in the
health care sector could reach $150bn by 2015,” the report
said.
