Health care remittance systems across the country are highly fragmented, and most providers and insurers use multiple formats for remittance. The result is increased frustration for many players in market where reducing costs is becoming increasingly important, especially under mandates under the Affordable Care Act.
Further complicating matters is the fact that only about 10 percent of all health care payments are processed electronically, according to the Centers for Medicare and Medicaid. That represents a huge opportunity for electronic-payments players as they look to fill the gap in an industry with $2.7 trillion in health care spend.
Indeed, there are a variety of efforts underway seeking to rid the health care system of paper-based payments, or at least reduce them greatly. This includes establishing standards key players on both sides of the remittance stream can follow so they’re on the same page, as well as getting solutions out into the marketplace payers and providers can use.
As PYMNTS.com reported last week, NACHA, which oversees the national automated clearinghouse (ACH) system, for example, is working with health care organizations to improve formatting standards for ACH payments, which essentially are electronic versions of check transactions. Its work with the key players in that industry has resulted in the creation of rules to guide how to format the information.
Vendors also are working hard to improve the remittance process. Start-up HealthcarePays’ proprietary technology, for example, similarly is helping to streamline the reconciliation of medical claims. The company joins a growing list of other vendors looking to piece together the highly fragmented health care payments system, including iPatientCare, which is working with Global Payments to create a system that streamlines operations and improve revenues for medical practices, and Wex, which recently acquired Evolution1 to build its own presence in health care payments processing.
HealthcarePays represents the first U.S. health care payment utility infrastructure, having built a standardized network to securely move money and information between payers, employers, healthcare providers, intermediaries and clearinghouses and banks. Its member-owned participants fund the service to ensure the appropriate oversight, and it provides all payers the opportunity to participate.
HealthcarePays automatically re-associates the remittance with the payment, and it systematically distributes the remittance and payments between payers and providers either directly or through existing intermediaries and clearinghouses.
The national network reduces payer-processing costs by eliminating multiple transactions and connections for remittance and payments. When combined with real time reporting and waste and fraud detection, its service creates a secure payment network that meets the needs of payers and their constituents, the company notes on its website.
When former U.S. Secretary of Health and Human Services Tommy G. Thomson joined the Richmond, Va.-based company’s board as its chairman in December, he said the lack of cost transparency and rampant waste and fraud were draining the U.S. health care system of hundreds of billions each year.
Former HHS chairman steps in
“There is little doubt that the future financial well-being of both the federal and state governments depends in, large part, on controlling health care payment inefficiencies,” Thompson said in a statement. “It makes little sense that the U.S. has no overarching health care industry payment network to check for fraud and authorize payments by examining all the payments in the system, similar to what is in place in our financial services sector.”
HealthcarePays does just that, putting ePayments into a common format that doctor’s or dentist’s billing system can receive.“We help companies understand how they are spending money on health care,” Dave Adams, HealthcarePays co-founder and CEO, said in a recent Richmond Times-Dispatch report. “No one is doing the consolidation of data that we are currently doing.”
HealthcarePays has grown to 20 employees from three since it was founded in 2011. The company spent two years developing the technology and selling the service. It recorded revenue for the first time during the fourth quarter of 2013, according to the Richmond Times-Dispatch.
The company complies with the Affordable Care Act and other state and federal laws, is it trying to land contracts with a variety of clients, including employers, hospital systems, health care providers, insurance companies and government payers, such as Medicaid and Medicare, the news source reports.
HealthcarePays thus far has one customer under contract, OneMind Health in Henrico County. However, it either has letters of intent out to other potential clients or is in negotiations with others, Adams said. “Revenue is growing aggressively,” he said. “We have considerable growth in our pipeline.”
Whether HealthcarePays has more success than others remains to be seen. It’s possible companies that specialize in handling electronic payments might have an upper hand. The joint venture iPatientCare struck with Global Payments, for example, involves integrating iPatientCare’s practice-management system with the processor’s payment system.
Vipul Patel, iPatientCare, senior technology officer, said in a statement he sees the potential to offer new payments solutions through the venture. “It is designed to improve practice collections and ensures convenience to patients in making payments,” Patel said. “Physicians’ offices using the new capabilities in the iPatientCare software will benefit from the expedited patient payments, reduced bad debts and lower collection expenses,” he said.
Other B2B payments players also are venturing into the health care payment-processing mix.
Fleet and virtual card specialist Wex, for example, recently branched into health care payments through its acquisition in June of Evolution1, a cloud-based technology and health care payment solutions provider. Wex plans to build on its existing B2B business model, providing payment services to intermediaries such as exchanges and third-party administrators that have direct contact with consumers.
Evolution1 has an addressable market of more than $1 billion in revenue with a meaningful and growing market share position. This market opportunity is expected to double by 2019, the companies said.
Evolution1’s technology and payment solutions are designed to simplify the health care experience for millions of employers and consumers. In 2013, it processed more than 65 million transactions and $5 billion in payment volume. The company serves 90,000 employers and 10 million consumers in the U.S. and Canada.
The market appears wide open as key payments and health care players work to move transactions worth trillions now processed as paper into efficient electronic systems that can move funds faster and with fewer errors. The health care industry is highly complex, however, so it will take years for sufficient numbers of payers and health care providers moving payments electronically smoothly, thus giving innovation in health care the time to grow even more sophisticated – and efficient – as new solutions roll out to compete.