Attendees at this week’s Association for Financial Professionals Annual Conference may be worried about the “fiscal cliff,” but at the Systemware booth the questions seemed to be all about medical banking. The conference made clear to us that financial institutions that had been watching and waiting when it comes to offering medical banking services now are feeling some urgency about geting in the game.
The AFP Conference ran Sunday through Wednesday in Miami Beach, and featured sessions with former Defense Secretary Robert Gates and actor Michael J. Fox. An onsite survey of attendees released during the show said that 63 percent of respondents said they want Washington to focus first on resolving the nation’s long-term fiscal issues.
But down on the convention center floor, Alan Beaney and I talked to plenty of treasury and finance professionals with questions about medical banking. For the last several years, many institutions clearly have been waiting to see what other banks will do in this space before getting serious about it themselves. Yes, they were intrigued by the potential revenue, but they were characteristically cautious.
Now it appears that enough institutions have entered the market to create some competitive pressure for others to do the same. Some professionals even expressed concern that if their institutions don’t offer medical banking services, they may lose customers to the ones that do — and those customers may even take their other accounts with them. So medical banking may have turned the corner from not only a revenue generator, but a vehicle for customer retention as well.
Specific opportunities in medical banking
The increased interest is a good thing, as we continue to see significant opportunities for financial institutions in medical banking in three specific areas:
1. Health Care Specific Lockbox Services. Physician groups and hospitals are relying increasingly on their banks to provide generalized lockbox services such as the capture of deposits and imaging of related paperwork. Now health care providers can expect additional processing of items such as Explanation of Benefits (EOBs) that require special handling or sorting (e.g. zero pay EOBs) and increased use of imaging and optical character recognition to lift remittance data from paper EOBs and checks. The resulting data can be transformed into Electronic Data Interchange (EDI) files for automatic posting to the providers’ systems. Correspondence related to claims also can be handled through the lockbox. These combined services can greatly improve the providers’ efficiencies related to posting remittances to their billing systems.
2. Reconciliation Services. Banks are the focal point of all payments in the health care revenue cycle, but they do not receive all the remittance data associated with the payments. In addition to the significant opportunity to aid health-care-provider customers with the conversion of paper EOBs into EDI 835 auto-posting files and the associated check payments that arrive at the lockbox, an increasing percentage of the volume of payments is delivered via electronic funds transfer on the Automated Clearing House (ACH) network. These payments arrive decoupled from the associated electronic remittance advice (ERA), which travels from the insurance companies back to the providers through the health care clearinghouse, through which the claims was originally submitted. By redirecting these ERAs to the banks and having the banks reconcile the payments to these transactions, banks can close a productivity and financial gap for their health-care-provider customers by not only providing an auto-posting file but one that is already reconciled against payments already received and deposited in the providers’ bank account.
3. Patient Payments. An additional service that banks and their lockboxes can provide is the processing of patient payments. Patient payments represent some 14% of all payments to providers and are expected to grow substantially as the new health care law takes effect. With consumers increasingly responsible for a greater share, the volume of individual, manual posting to the providers’ billing systems will, of course, grow. Banks can utilize their lockbox imaging systems, including OCR, to transform the patient pay coupons and check deposit information into a data file for posting against the outstanding patient responsibility.
Competition helps spur innovation
The opportunities in these three areas have been apparent for several years. Now, it appears some competitive pressure among banks has finally entered the picture. In the end, that will be good for all banks and their healthcare customers.