According to the Council for Affordable Quality Healthcare, only 10 percent of claim payments are completed electronically. As the deadline to comply with the Patient Protection and Affordable Care Act’s (PPACA) mandate for electronic payments draws near, the healthcare industry will be entering somewhat uncharted territory. Payer organizations that have been reluctant to make the switch should have December 31 circled on their calendars as the date by which they must certify their ability to facilitate a claim reimbursement electronically via automated clearing house (ACH).
We don’t live in a one-size-fits-all world, however, and ACH may not be the right fit for all health plans and providers. For those looking for alternative methods of electronic funds transfer (EFT), virtual payments using existing credit card networks provide added benefits. Not only does this method help move the industry away from costly paper check transactions, but it also possesses some distinct advantages over other EFT strategies. One such distinction is the manner in which the reconciliation process for overpayments is conducted.
A common pain point shared among providers in attendance at July’s 2013 Healthcare Payments Innovations Summit is the difficulty they face in managing overpayments from insurance companies. In fact, the GAO July 2013 report to congress on Medicare Program Integrity pointed out that in fiscal year 2012, CMS overpaid providers $32.4 billion in the Medicare fee-for-service (FFS) program(1). This equates to roughly 8.5 percent of total Medicare payments. Assuming a similar rate of overpayment in commercial payers, there is roughly $69 billion a year in overpayments that is negotiated from providers back to payers when they adjudicate claims(2). Because paper checks and ACH are one-way streets, so to speak, there is no way for a hospital to resolve a payment issue with a health plan submitting its reimbursements using these approaches. Administrators are forced to strategically manage accounts in order to break even with the payer, which often results in future patient balances being unpaid or the health plan short-paying the provider on subsequent transactions.
Virtual payments are unique in that funds are transferred between payer and provider using existing credit card networks. Health plans are issued a one-time use payment card number, which they send to the hospital or practice to whom they owe money. The provider then uses its point-of-service technology to execute the payment, with funds being sent directly to their bank account in accordance with their merchant acquirer agreement. Unlike the one-way nature of other transaction methods, virtual payments allow healthcare providers to simply issue funds back to payers in the case of overpayments, resulting in a quick and easy reconciliation process.
The move to electronic payments will help healthcare catch up with other industries who have long since abandoned the paper check while also reducing costs and increasing efficiency for payers and providers still stuck in a manual world. With the ability to streamline the reconciliation process, virtual payments directly address one of the most common disconnects found in the revenue cycle. Additionally, health plans who take advantage of virtual payments benefit from a robust analytics offering and comprehensive protection from fraud, abuse and misuse, while providers avoid the costs in both time and resources associated with paper checks and the cumbersome ACH enrollment process without the need to implement a single new piece of technology.
(1) GAO – Report on Medicare Program Integrity, “Increasing Consistency of Contractor Requirements May Improve Administrative Efficiency” July 2013. Page 1.
(2) CMS – National Health Expenditure data, “National Health Expenditure Projections 2011-2021” report.
Landon Gordon is the vice president of product marketing for Comdata Health.