Separating Hype From Reality, a Realistic Look at ACH Payments for Healthcare Providers

by Landon Gordon 0

The administrative simplification provisions of the Patient Protection and Affordable Care Act (PPACA) mandate that, which began Jan. 1, 2014, healthcare payers must submit claims reimbursement payments using automated clearing house (ACH) to any provider who requests it. Further, Medicare will be required by law to make 100 percent of claims payments electronically via ACH.

Since the majority of healthcare providers treat some Medicare patients, they will have to be able to accept electronic transactions. As a result, there has been a great deal of hype generated based on the idea that since providers will have to accept Medicare payments electronically, they will want to request electronic payments from all of their payers. Some in the industry believe that having reached this tipping point, hospitals and physician practices will jump on the electronic payment bandwagon without hesitation and the growth of ACH payments will skyrocket. As with many major changes in healthcare, the optimistic expectations are not always aligned with the current reality of most providers’ operations.

Indeed, most will be ready and able to accept electronic Medicare payments by January 1, 2014. One fact often missed in the conversation is that providers are in no way obligated to accept electronic payments from any payer other than Medicare. While ACH may make sense for some providers that have already implemented sophisticated back office IT infrastructure and work with equally sophisticated financial institutions, many others may not have the necessary cash on hand to make the technological investments required to support 100 percent of payments coming in. Additionally, for providers that may be feeling bogged down by paper checks and the manual processes associated with them, there are alternative electronic payment methods that they can explore.

It is worth noting that not all financial institutions have the systems and experience to process healthcare ACH payments efficiently. According to NACHA, during October 2013 approximately $25 billion worth of healthcare billing was processed through ACH (1). While this may seem like a large amount, over the course of a year, it only accounts for roughly 10 percent of the nation’s $2.7 trillion healthcare spend (2). This percentage is poised to grow over time; however there are multiple challenges ahead of which providers need to be aware.

From a technical perspective, many EHR systems do not have the ability to process and reconcile ACH payments, and many smaller providers simply do not have the staff needed to manage and oversee an ACH program. According to the 2013 State of the Revenue Cycle Management industry, Black Book™ survey, IT and technology issues are a major consideration for the majority of physician practices (3). Some of the highlights of the survey indicate that “87% of all physician practices agree their billing and collections systems/processes need upgrading, 42% are considering an upgrade of their RCM software within 6 -12 months and 71% of physician practices are considering a combination of new software and outsourcing services to improve their RCM systems.”

While Medicare payments are more straightforward, providers need to consider their total payer mix. In reviewing that mix, they may want to consider which payers represent the largest percentage of their business, denial rates, overpayments, secondary billing issues, claw-backs and many other issues before committing to electronic billing with a payer. In order to initiate an electronic payment program, providers must sign a contract with a payer that allows a two way flow of funds. Providers may wish to carefully review these contracts as they will all stipulate that payments can be reversed in the case of overpayments or in other very specific circumstances. Providers are understandably concerned that they will need to allow all payers with whom ACH transactions are conducted access to their bank accounts to both deposit and withdraw funds.

This adds an additional administrative set of tasks as accounts must be much more thoroughly monitored for payment reversals and current account balances. Providers will need to work very closely with their banks to obtain the support necessary to manage ACH programs.

According to a white paper published by the Bank of America in May of 2013 addressing the financial side of these challenges, “These difficulties are exacerbated by a number of additional regulations that necessitate system changes and compete for investment resources and attention. For example, the HIPAA-mandated 5010 format for electronic transactions has had a marked impact on the systems managing claims and payments.” (4)

The good news is that all of these challenges will be addressed over time and technology will make managing ACH payments and accounting easier and more efficient in the future. Providers don’t need to rush into ACH adoption right away, especially when other electronic payment methods, such as virtual card payments, are readily available and don’t require such a hefty investment. For those already committing resources to regulatory challenges such as Meaningful Use 2 and others, knowing that ACH can be put on the back burner for now is important to understand. The hype is that all practices need to jump in and start adopting ACH now. The reality is that many providers can, and should, wait until the technical and process issues are ironed out.

Landon Gordon is the vice president of product management for Comdata.

1-“Implementation of the EFT Standard and the ACA-mandated EFT & ERA Operating Rules. ”CAQH CORE and NACHA Joint Webinar, December 2013.
2-“US Health Spending Growth Projected To Average 5.8 Percent Annually Through 2022.” Health Affairs Blog, September 2013.
3-“2013 State of the Revenue Cycle Management.” Black Book Rankings, September 2013.
4-“Healthcare Gets Ready for Electronic Payment of Medical Claims.” Bank of America, May 2013.