Electronic claim payment trends in healthcare all point to one dynamic: faster turnaround. Capabilities exist that allow money to move more quickly between digital endpoints than ever before. This evolution is driving rapid adoption of solutions that can speed payment processing across all industries.
Simply put, businesses and consumers increasingly expect near-immediate access to funds when they have been given notice of transfer. And, the reality is that many experts believe that the era of real-time payments is not that far off for health plans.
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While most payers have implemented electronic payment options, many initial technology deployments were launched to either: check off or simply meet a compliance requirements or quickly respond to market pressures. Choices did not necessarily consider long-term viability or coming advances in digital payment.
Today, multiple factors are converging that place the future of digital payments in a broader context, including the introduction of next-generation payment models and the changing reimbursement landscape in healthcare. Priming for success necessitates that health plans design the right near-term and long-term payment strategy.
Planning for the Near-Term
Most health plans have taken the plunge into electronic payment by implementing automated clearing house (ACH) payments. While this move is a good first step, it should become a springboard for maturing digital payment strategies.
Short-term strategies should focus on incremental steps that lay the right foundation for the evolving world of faster payments. The reality is that ACH typically only covers 80 percent of healthcare transactions, resulting in a reliance on legacy processes—like paper checks—for the remainder of payments. Consequently, health plans must broaden their digital payment portfolio to reflect more comprehensive digitization.
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Virtual cards are a natural next step, and health plans that have implemented these options are already realizing the benefits of streamlined operations and significantly reduced costs. Notably, Juniper Research predicts that the value of virtual cards will grow by 90 percent over the next four years, with the healthcare industry representing the highest-value sector, at $277 billion in transactions.
In terms of providing more immediate payment, virtual cards are much faster, on average, than ACH and definitely outpace paper checks, which can take more than 10 days to receive. Because virtual cards are used the same way as a consumer credit card, payment is processed at the point of transaction and sent directly to a provider’s bank account.
The virtual card option used in tandem with ACH also allows health care payers to reduce the administrative expense of producing and mailing paper checks—processes that can cost between $3 and $20 for each check issued. In addition, virtual cards can be combined with remittance advice and delivered electronically, making it cost effective for payers and easy to reconcile for providers. Providers also find virtual cards to be an appealing alternative because they no longer have to share bank information with each separate health plan to get paid faster.
Forward-Thinking Strategies for Future Positioning
Along with incremental steps toward faster payments, health plans should also develop strategies that consider where both the industry and digital payment market is headed over the next five to ten years. A couple of trends that will impact payment strategies include:
Growth of consumer-directed healthcare, tax savings accounts and high deductible health plans. Both consumer-directed and high-deductible health plans are growing in popularity. This means that patients have increased financial responsibility, and providers are looking to their health plan partners to help collect payments. Notably, most patients are looking for digital payment options. Going forward, health plans will have to consider how to best navigate changing reimbursement models and consider not only how best to work with not only providers, but also consumers.
Emerging payment technologies. In recent years, use of peer-to-peer payments and digital wallets has grown in popularity, especially among younger generations. Venmo was the first of these applications to become mainstream, offering consumers a way to directly transfer money to another person. While it can take a couple of days to get funds from Venmo to a consumer’s bank account, the introduction of Zelle is changing that dynamic. That application, run by a consortium of banks including JPMorgan Chase, Wells Fargo and Bank of America, enables payment transactions to occur within minutes, moving the industry closer to real-time payment options. The evolution of these technologies run in stark contrast to ACH processes, where a payment is posted, yet a provider may only be able to access a percentage of the amount owed the first day. It may take three to four days for a full payout to become available for use.
Looking ahead, payers need to ask: “How does faster movement of money impact the way my organization does business today?” Partners such as FinTech companies recognize current trends and are already preparing for both short-term and long-term needs of health care payers. Payer executives can position for the future by establishing goals and strategies that align with the movements and identifying the right partner.
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