The Affordable Care Act (ACA), aka Obamacare, is unlikely to bring together Republicans and Democrats. But ACA is bringing innovation to healthcare payments arena. Standards within the law make it easier to reconcile electronic funds transfer (EFT) payments, most commonly Automated Clearing House (ACH) transactions, received by providers with the corresponding electronic remittance advice (ERAs), including EDI 835 or EOBs.
This opens the door for banks to play a larger role in healthcare payments, resulting in new fee income, greater cross-sell opportunities, and stronger customer relationships in a lucrative market. In fact, banks can be “the hero” for some providers based on several interesting factors:
- Nearly $20 billion per year is wasted on health claims, billing, and payments by check to doctors and hospitals finds the National Progress Report on Healthcare Efficiency, U.S. Healthcare Efficiency Index (USHEI).
- Only about 10 percent of payments to providers in the U.S. are made electronically, USHEI reports.
- Healthcare providers still receive paper checks from health plans and insurers, manually reconcile them with remittances, and manually post the transaction.
- Some 19 percent of healthcare providers don’t even try to reconcile their bank deposit, PayStream Advisors reports.
- The healthcare industry writes off 4.88 percent of its total receivables each year, according to ACA International.
ACA, through CAQH CORE, addresses the standards for reassociating ERAs and EFTs. What ACA doesn’t address are ERAs and EFTs sent from health plans to providers through separate (bifurcated) channels. With ERAs and EFTs coming via different paths, there is no automated bridge between the ACH data set and the ERA data set. Payments and remittances must be manually reassociated to determine which items were paid (such as in the case where a provider receives 10 remittances for $100 and eight payments for $100). The process becomes even more complex if the health care provider receives high volumes of payments; in many cases, reconciliation doesn’t get completed.
Banking Solutions in Medical Lockbox
To help providers achieve the full benefits of electronification, banks can use tools such as the one from OrboGraph to link EFTs (ACH transactions) with EOBs and ERAs to automatically reassociate payments and remittances. The solution can even drill down to specific billing information contained on each claim that was paid by specific ACH transactions, enhancing the bank’s receivables services. Banks also enjoy a trusted fiduciary relationship with providers.
A 2010 study by the Institute of Financial Operations found that 27.1 percent of providers were considering banks for managing electronic remittances. This is a great opportunity for banks to both add value and become a stronger player in the healthcare payments flow.
Ultimately, reassociating EFTs and ERAs offers new revenues and stronger customer relationships.
Want to learn more? Click here to read our white paper on reassociating EFTs and ERAs.