healthcare payment trends

Healthcare Payment TrendsFebruary 17, 2011

Presenters

• Kunal PandyaSenior Analyst, Health Insurance & Payments, Aite Group

• Zahoor ElahiVP/General Manager, FIS Health & Financial Network Solutions

• Tom TorreSVP/General Manager, FIS Consumer Directed Healthcare Solutions

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Actionable, strategic advice on IT, business, and regulatory issues in the financial services industry

Healthcare Payments Trends

February 17,2011

© © 2011 2011 Aite Group, LLC Aite Group, LLC www.aitegroup.comwww.aitegroup.com

Kunal PandyaChicago, Ill.

About Aite Group

Aite Group (pronounced eye-tay) is an independent research and advisory firm focused on business, technology and regulatory issues and their impact on the financial services industry.

Aite Group was founded by leading industry experts in banking, securities and investments and insurance. It


banking, securities and investments and insurance. It brings together a team of business strategy, technology and regulatory experts to deliver comprehensive, timely and actionable advice to financial institutions and technology vendors.

Aite Group is headquartered in Boston.

www.aitegroup.com

Theme


Payments trends in the healthcare market

Agenda

• What does the current healthcare payments space look like?

• Why healthcare payments are so complicated?

• What are the payments trends in healthcare?


• What are the emerging healthcare payments initiatives?

What does the current healthcare payments space look like?


Source: Aite Group

Despite the size of the healthcare payments market, it is a complex environment due to

• Lack of efficiency caused by a number of moving parts

• Major cost implications to implement IT infrastructure

• Lack of automation of the process among different stakeholders


• Strong reliance on manual processes

Issues that are creating a compelling argument to streamline the healthcare

payments system

• Increase in bad debts at provider offices

• Lack of transparency in pricing

• Rising processing costs


• Liquidity issues with providers and prioritized A/R functionality

• Increase in the rate of over-treatments

• Rising cost of healthcare premiums

• Lack of best practices

Why are healthcare payments so complicated?

At its core, the payment process is simple, as seen below.


Private Insurer

or

Gov’t.

Provider service

Provider bank

Member receives service

RA

PAYMENT

Source: Aite Group

Actual healthcare payments process

Explanation of benefit (EOB) / Check for manually submitted claims

Customer service

Eligibility, claims status and referrals

Member service

Provider service

UB92, HCFA 1500 -Paper

Member information

Payment information

Claim information


Source: Aite Group

Provider Service and Practice management

systems (PMS)

Private Insurer and government membership, billing, managed care, medical mgmt and claims adjudication systems

UB92, HCFA 1500 -

lockbox

837i/p/d -

27x *

Paper

ACH payment 835 ERA –

Paper RA and Check –

Member receives service

Makes co-payment only HIPAA EDI / Clearinghouse

Pay by mail (PBM)

Real-time point of service (POS) transaction

National Council for Prescription Drug Program (NCPDP)

HIPAA EDI / Clearinghouse

What are the prominent payments trends in healthcare?

• Payer-to-provider payments

• Patient-to-provider payments

• Consumer-directed healthcare payments


Payer-to-provider Payment Models


Source: Aite Group

Pros and cons of a payer-to-provider payments model

Pros• Expedited payments via EFT or ACH• Reduced implementation timeframes since the connections are already established• Reduced manual processes to process a claim• Reduced costs for payers• Reduced payment cycle times and bad debts (improved profitability by 3 − 5 percent)


•3 − 5 percent)• Increased revenue potential or profitability for all stakeholders• Advocated transparency in pricing and quality of care

Cons• Practically no play for healthcare cards• High level of compliance required to carry financial data• Slow adoption rate among the smaller provider community

What is the market direction and who are the key players involved?

• Total payment solutions to reduce manual paper-based processes

• One-stop shop to cater to both payments and non-payments related transactions

Key players in the payer-to-provider market:

Clearing houses


• Clearing houses

• Banks via medical lockboxes

• Healthcare vendors

• Card networks toying with the idea of riding their credit rails to facilitate payer-to-provider payments

Patient-to-provider payments models


Source: Aite Group

Pros and cons of a patient-to-provider payments model

Pros• Expedited payments via automated payments options• Large market reach among the banks, card processors and card networks• Payment estimation capability• Improved tracking mechanisms for all stakeholders• Reduced redundancy in paperwork• Increased revenue potential for all stakeholders


• Increased revenue potential for all stakeholders• Increased efficiency of payment cycle times and lower bad debts• Advocated transparency in pricing and quality of care• Reduction in bad debt of post adjudication transactions at providers

Cons• Inexperience in undertaking healthcare transactions• Compliance with HIPAA and PCI guidelines• As of 2008, 30 percent of the smaller providers do not have the capability to process a card payment


• Line of credit and payment plans options

• Refund processing on overpayments

• Value-add or a module directly linked to their practice management systems

Value-add service provided by payers


• Value-add service provided by payers

Key players in the Payer-to-provider market:

• Banks via partnerships or existing card solutions

• Healthcare vendors and payments processors

CDH payments


Source: Aite Group Includes estimated percentage of each account type in the CDH market, provider acceptance rates, average annual visits and CDH cards tied to

each account type.

CDH payments estimations


Source: Aite Group

Includes all card transactions i.e., debit, credit and prepaid

Includes 1% LOC transactions starting in 2011 for HSAs

CDH payments estimations


Source: Aite Group

Based on the average annual expenditure for CDH accounts (approx. $2,082) in 2008 and average number

of visits

Estimated value of average cost per encounter and total CDH financial

transactions

Pros and cons of a CDH debit card solution and the key stakeholders involved

Pros• Expedited payments• Multi-pursing• Reduced payment cycle times• Tools to track and manage healthcare transactions• Improved healthcare spending decisions through payment estimators• Real-time eligibilityReduced bad debts


•• Reduced bad debts• Created transparency in pricing and quality of care

Cons• Questioned longevity of accounts with change in administration (esp. FSAs)• Complex guidelines governing debit cards (e.g., IIAS, PCI, Reg E)

Key stakeholders involved in the CDH model: banks, payers, payment processors, third-party administrators, providers, CDH vendors, employers and consumers.


• Real-time adjudication

• Line of credit options

• Payment plans

Key players in the CDH market:


• Banks

• Payments processors

• CDH vendors

What are the emerging healthcare payments initiatives?

• Provider accounts receivables and accounts payable solutions

• Healthcare premiums generated by “exchanges”

• Prepaid card initiatives especially for pharmacy payments from solution vendors such as SWIFT, Green Dot etc.


Key takeaways

• Interest is rising among the provider community to adopt provider revenue cycle management tools provided by banks, healthcare vendors and clearing houses

• CDH market is growing at a steady pace with an anticipated increase in the gross dollar volume of transactions via debit card to be approximately $66 billion by YE-2012


• Greater emphasis on developing new products around provider A/R and A/P solutions

• Increase in curiosity to manage the underpinning premium money movements in “exchanges”

• Prepaid cards are being used primarily for pharmacy transactions

Healthcare Payment TrendsHealthcare Payment TrendsPayer-to-provider Payments

FIS − A Market Leader

30,000+ employees worldwide

More than 40 years of market leadership and $5 billion in 2009 pro forma revenue

Member of the Standard & Poor’s (S&P) 500 index

No. 1 technology provider to the global

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No. 1 technology provider to the global financial industry

More than 14,000 clients in over 100 countries

25 strategic operating centers outside the U.S.

Clients include 9 of the top 10, and 40 of the top 50 global banks

FIS − Strategic Focus in Healthcare

We Are an Industry Leader

• Healthcare Payments Solutions Division created in 2006 to create a seamless consumer healthcare experience

• Leverage core financial institution solutions

• Investing in Strategic Acquisitions

− BenSoft

− Printing for Systems (PSI)

− Medibank (MBI)

− AdminiSource

− CapMed

• Participate in the CAQH / CORE; ABA/ABIA HSA Council

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We Provide Mission Critical Solutions

• Participate in the CAQH / CORE; ABA/ABIA HSA Council

• Leader in SIGIS and IIAS Initiatives

• 60 million healthcare ID cards created in 2010: No. 2 Market Share

• More than 10 million benefit payment cards: No. 1 Market Share

• Over 190 financial institutions utilizing HSA Solution

• Over 550,000 HSAs processed

• Over 1 million CDH accounts administered

• 7 million healthcare authorizations per month

• More than 230 third-party administrator clients

• Over 90 health plan clients

• Over 155 TPAs use BenSoft full flexible benefits platform

Healthcare Reform: H.R. 3590Healthcare Reform: H.R. 3590

News Update….

Press Release dated, Friday, Oct. 8, 2010

The NCVHS recently sent a letter to Secretary Sebelius, Department of Health and Human Services (HHS), advising that CAQH CORE meets the requirements as the authoring entity for operating rules for non-retail pharmacy-related eligibility and claim status transactions

Health spending rose to a record 17.6% of the U.S. economy in 2009 − an increase of 4% from 2008Source: Wall Street Journal, January 7, 2011

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retail pharmacy-related eligibility and claim status transactions outlined in Section 1104 of the ACA.

Health and Human Services Secretary Kathleen Sebelius said she and the president realize the program is "certainly far from perfect.”Source: Wall Street Journal, February 08, 2011

Timeline – Administrative Simplification

Transaction Set Adopted Effective Penalty *

Eligibility (270 / 271) July 1, 2011 Jan. 1, 2013 Jan. 1, 2014

Claims Status (276 / 277)

July 1, 2011 Jan. 1, 2013 Jan. 1, 2014

EFT / ERA (835) July 1, 2012 Jan. 1, 2014 Jan. 1, 2014

Medicare EFT July 1, 2014 Jan. 1, 2015 Unknown

Member Services * July 1, 2014 Jan. 1, 2016 NA

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Emerging Trends:• H.R. 3590 mandates that all payers of healthcare claims, have the ability to

deliver the payment via EFT and remittance via ERA (HIPAA 835).• Payers will need to be certify compliancy by January 2014.

Emerging Trends:• H.R. 3590 mandates that all payers of healthcare claims, have the ability to

deliver the payment via EFT and remittance via ERA (HIPAA 835).• Payers will need to be certify compliancy by January 2014.

Claim Payment EvolutionClaim Payment Evolution

Medical Spend Will Prioritize Change

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Post adjudication claim payments –largely paper today

Post Adjudication Payments − Today

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Emerging Trends:• Movement away from paper checks / remittances – VERY SLOW• Multi-payer enrollment and presentment of EFT and ERA / 835• Growing usage of HIPAA compliant codes and the 835• Pre payment fraud and abuse screening and detection

Post Adjudication Payments − Future

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Emerging Trends:• Single “rail” system for both the EFT / ERA• Vendor agnostic, EFT provider enrollment hub• Calculation and distribution of payer and patient liability – single

payment

Healthcare Payment TrendsHealthcare Payment TrendsConsumer Directed Healthcare

Consumer Technology Platform

AccountsAccounts

PaymentsPaymentsFSAFSA

HRAHRA

Accounts

Card, Bill Pay,

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Consumer Portal and MobileConsumer Portal and Mobile

Wellness and RewardsWellness and Rewards

HRAHRA

HSAHSA

Personal AccountPersonal Account

Card, Bill Pay, ACH, Check

Provider

Consumer-driven Healthcare Payment Trends

• CDH Payment Solutions are relatively mature• Legislative and regulatory environment having greatest impact on CDH payments

since 2003– OTC changes– Impact of Durbin Amendment

• Increases in HSA and HRA accounts continue• Broader utilization of direct to provider payments from a CDH account• Broader utilization of direct to provider payments from a CDH account• Consumer control over method of payment from their accounts

– Card– Opt in for automatic claim payment– Online Bill Pay– Mobile

• More interest in the use of Health Risk Assessment (and related tools) – Linked to cash payments to a CDH account– General use funds

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Questions & AnswersQuestions & Answers

Thank You Kunal Pandya, Senior Analyst – Healthcare, Insurance & Payments, Aite [email protected]

Zahoor Elahi, VP/General Manager, FIS Health & Financial Network [email protected]

Tom Torre, SVP/General Manager, FIS Consumer Directed Healthcare [email protected]

Thank You

healthcare payment trends

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