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Healthcare Payment TrendsFebruary 17, 2011
Presenters
• Kunal PandyaSenior Analyst, Health Insurance & Payments, Aite Group
• Zahoor ElahiVP/General Manager, FIS Health & Financial Network Solutions
• Tom TorreSVP/General Manager, FIS Consumer Directed Healthcare Solutions
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Actionable, strategic advice on IT, business, and regulatory issues in the financial services industry
Healthcare Payments Trends
February 17,2011
© © 2011 2011 Aite Group, LLC Aite Group, LLC www.aitegroup.comwww.aitegroup.com Page 3
Kunal PandyaChicago, Ill.
About Aite Group
Aite Group (pronounced eye-tay) is an independent research and advisory firm focused on business, technology and regulatory issues and their impact on the financial services industry.
Aite Group was founded by leading industry experts in banking, securities and investments and insurance. It
© © 2011 2011 Aite Group, LLC Aite Group, LLC www.aitegroup.comwww.aitegroup.com Page 4
banking, securities and investments and insurance. It brings together a team of business strategy, technology and regulatory experts to deliver comprehensive, timely and actionable advice to financial institutions and technology vendors.
Aite Group is headquartered in Boston.
www.aitegroup.com
Theme
© © 2011 2011 Aite Group, LLC Aite Group, LLC www.aitegroup.comwww.aitegroup.com Page 5
Payments trends in the healthcare market
Agenda
• What does the current healthcare payments space look like?
• Why healthcare payments are so complicated?
• What are the payments trends in healthcare?
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• What are the emerging healthcare payments initiatives?
What does the current healthcare payments space look like?
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Source: Aite Group
Despite the size of the healthcare payments market, it is a complex environment due to
• Lack of efficiency caused by a number of moving parts
• Major cost implications to implement IT infrastructure
• Lack of automation of the process among different stakeholders
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• Strong reliance on manual processes
Issues that are creating a compelling argument to streamline the healthcare
payments system
• Increase in bad debts at provider offices
• Lack of transparency in pricing
• Rising processing costs
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• Liquidity issues with providers and prioritized A/R functionality
• Increase in the rate of over-treatments
• Rising cost of healthcare premiums
• Lack of best practices
Why are healthcare payments so complicated?
At its core, the payment process is simple, as seen below.
© © 2011 2011 Aite Group, LLC Aite Group, LLC www.aitegroup.comwww.aitegroup.com Page 10
Private Insurer
or
Gov’t.
Provider service
Provider bank
Member receives service
RA
PAYMENT
Source: Aite Group
Actual healthcare payments process
Explanation of benefit (EOB) / Check for manually submitted claims
Customer service
Eligibility, claims status and referrals
Member service
Provider service
UB92, HCFA 1500 -Paper
Member information
Payment information
Claim information
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Source: Aite Group
Provider Service and Practice management
systems (PMS)
Private Insurer and government membership, billing, managed care, medical mgmt and claims adjudication systems
UB92, HCFA 1500 -
lockbox
837i/p/d -
27x *
Paper
ACH payment 835 ERA –
Paper RA and Check –
Member receives service
Makes co-payment only HIPAA EDI / Clearinghouse
Pay by mail (PBM)
Real-time point of service (POS) transaction
National Council for Prescription Drug Program (NCPDP)
HIPAA EDI / Clearinghouse
What are the prominent payments trends in healthcare?
• Payer-to-provider payments
• Patient-to-provider payments
• Consumer-directed healthcare payments
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Payer-to-provider Payment Models
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Source: Aite Group
Pros and cons of a payer-to-provider payments model
Pros• Expedited payments via EFT or ACH• Reduced implementation timeframes since the connections are already established• Reduced manual processes to process a claim• Reduced costs for payers• Reduced payment cycle times and bad debts (improved profitability by 3 − 5 percent)
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•3 − 5 percent)• Increased revenue potential or profitability for all stakeholders• Advocated transparency in pricing and quality of care
Cons• Practically no play for healthcare cards• High level of compliance required to carry financial data• Slow adoption rate among the smaller provider community
What is the market direction and who are the key players involved?
• Total payment solutions to reduce manual paper-based processes
• One-stop shop to cater to both payments and non-payments related transactions
Key players in the payer-to-provider market:
Clearing houses
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• Clearing houses
• Banks via medical lockboxes
• Healthcare vendors
• Card networks toying with the idea of riding their credit rails to facilitate payer-to-provider payments
Patient-to-provider payments models
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Source: Aite Group
Pros and cons of a patient-to-provider payments model
Pros• Expedited payments via automated payments options• Large market reach among the banks, card processors and card networks• Payment estimation capability• Improved tracking mechanisms for all stakeholders• Reduced redundancy in paperwork• Increased revenue potential for all stakeholders
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• Increased revenue potential for all stakeholders• Increased efficiency of payment cycle times and lower bad debts• Advocated transparency in pricing and quality of care• Reduction in bad debt of post adjudication transactions at providers
Cons• Inexperience in undertaking healthcare transactions• Compliance with HIPAA and PCI guidelines• As of 2008, 30 percent of the smaller providers do not have the capability to process a card payment
What is the market direction and who are the key players involved?
• Line of credit and payment plans options
• Refund processing on overpayments
• Value-add or a module directly linked to their practice management systems
Value-add service provided by payers
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• Value-add service provided by payers
Key players in the Payer-to-provider market:
• Banks via partnerships or existing card solutions
• Healthcare vendors and payments processors
CDH payments
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Source: Aite Group Includes estimated percentage of each account type in the CDH market, provider acceptance rates, average annual visits and CDH cards tied to
each account type.
CDH payments estimations
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Source: Aite Group
Includes all card transactions i.e., debit, credit and prepaid
Includes 1% LOC transactions starting in 2011 for HSAs
CDH payments estimations
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Source: Aite Group
Based on the average annual expenditure for CDH accounts (approx. $2,082) in 2008 and average number
of visits
Estimated value of average cost per encounter and total CDH financial
transactions
Pros and cons of a CDH debit card solution and the key stakeholders involved
Pros• Expedited payments• Multi-pursing• Reduced payment cycle times• Tools to track and manage healthcare transactions• Improved healthcare spending decisions through payment estimators• Real-time eligibilityReduced bad debts
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•• Reduced bad debts• Created transparency in pricing and quality of care
Cons• Questioned longevity of accounts with change in administration (esp. FSAs)• Complex guidelines governing debit cards (e.g., IIAS, PCI, Reg E)
Key stakeholders involved in the CDH model: banks, payers, payment processors, third-party administrators, providers, CDH vendors, employers and consumers.
What is the market direction and who are the key players involved?
• Real-time adjudication
• Line of credit options
• Payment plans
Key players in the CDH market:
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• Banks
• Payments processors
• CDH vendors
What are the emerging healthcare payments initiatives?
• Provider accounts receivables and accounts payable solutions
• Healthcare premiums generated by “exchanges”
• Prepaid card initiatives especially for pharmacy payments from solution vendors such as SWIFT, Green Dot etc.
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Key takeaways
• Interest is rising among the provider community to adopt provider revenue cycle management tools provided by banks, healthcare vendors and clearing houses
• CDH market is growing at a steady pace with an anticipated increase in the gross dollar volume of transactions via debit card to be approximately $66 billion by YE-2012
© © 2011 2011 Aite Group, LLC Aite Group, LLC www.aitegroup.comwww.aitegroup.com Page 25
• Greater emphasis on developing new products around provider A/R and A/P solutions
• Increase in curiosity to manage the underpinning premium money movements in “exchanges”
• Prepaid cards are being used primarily for pharmacy transactions
Healthcare Payment TrendsHealthcare Payment TrendsPayer-to-provider Payments
FIS − A Market Leader
30,000+ employees worldwide
More than 40 years of market leadership and $5 billion in 2009 pro forma revenue
Member of the Standard & Poor’s (S&P) 500 index
No. 1 technology provider to the global
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No. 1 technology provider to the global financial industry
More than 14,000 clients in over 100 countries
25 strategic operating centers outside the U.S.
Clients include 9 of the top 10, and 40 of the top 50 global banks
FIS − Strategic Focus in Healthcare
We Are an Industry Leader
• Healthcare Payments Solutions Division created in 2006 to create a seamless consumer healthcare experience
• Leverage core financial institution solutions
• Investing in Strategic Acquisitions
− BenSoft
− Printing for Systems (PSI)
− Medibank (MBI)
− AdminiSource
− CapMed
• Participate in the CAQH / CORE; ABA/ABIA HSA Council
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We Provide Mission Critical Solutions
• Participate in the CAQH / CORE; ABA/ABIA HSA Council
• Leader in SIGIS and IIAS Initiatives
• 60 million healthcare ID cards created in 2010: No. 2 Market Share
• More than 10 million benefit payment cards: No. 1 Market Share
• Over 190 financial institutions utilizing HSA Solution
• Over 550,000 HSAs processed
• Over 1 million CDH accounts administered
• 7 million healthcare authorizations per month
• More than 230 third-party administrator clients
• Over 90 health plan clients
• Over 155 TPAs use BenSoft full flexible benefits platform
Healthcare Reform: H.R. 3590Healthcare Reform: H.R. 3590
News Update….
Press Release dated, Friday, Oct. 8, 2010
The NCVHS recently sent a letter to Secretary Sebelius, Department of Health and Human Services (HHS), advising that CAQH CORE meets the requirements as the authoring entity for operating rules for non-retail pharmacy-related eligibility and claim status transactions
Health spending rose to a record 17.6% of the U.S. economy in 2009 − an increase of 4% from 2008Source: Wall Street Journal, January 7, 2011
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retail pharmacy-related eligibility and claim status transactions outlined in Section 1104 of the ACA.
Health and Human Services Secretary Kathleen Sebelius said she and the president realize the program is "certainly far from perfect.”Source: Wall Street Journal, February 08, 2011
Timeline – Administrative Simplification
Transaction Set Adopted Effective Penalty *
Eligibility (270 / 271) July 1, 2011 Jan. 1, 2013 Jan. 1, 2014
Claims Status (276 / 277)
July 1, 2011 Jan. 1, 2013 Jan. 1, 2014
EFT / ERA (835) July 1, 2012 Jan. 1, 2014 Jan. 1, 2014
Medicare EFT July 1, 2014 Jan. 1, 2015 Unknown
Member Services * July 1, 2014 Jan. 1, 2016 NA
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Emerging Trends:• H.R. 3590 mandates that all payers of healthcare claims, have the ability to
deliver the payment via EFT and remittance via ERA (HIPAA 835).• Payers will need to be certify compliancy by January 2014.
Emerging Trends:• H.R. 3590 mandates that all payers of healthcare claims, have the ability to
deliver the payment via EFT and remittance via ERA (HIPAA 835).• Payers will need to be certify compliancy by January 2014.
Claim Payment EvolutionClaim Payment Evolution
Medical Spend Will Prioritize Change
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Post adjudication claim payments –largely paper today
Post Adjudication Payments − Today
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Emerging Trends:• Movement away from paper checks / remittances – VERY SLOW• Multi-payer enrollment and presentment of EFT and ERA / 835• Growing usage of HIPAA compliant codes and the 835• Pre payment fraud and abuse screening and detection
Post Adjudication Payments − Future
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Emerging Trends:• Single “rail” system for both the EFT / ERA• Vendor agnostic, EFT provider enrollment hub• Calculation and distribution of payer and patient liability – single
payment
Healthcare Payment TrendsHealthcare Payment TrendsConsumer Directed Healthcare
Consumer Technology Platform
AccountsAccounts
PaymentsPaymentsFSAFSA
HRAHRA
Accounts
Card, Bill Pay,
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Consumer Portal and MobileConsumer Portal and Mobile
Wellness and RewardsWellness and Rewards
HRAHRA
HSAHSA
Personal AccountPersonal Account
Card, Bill Pay, ACH, Check
Provider
Consumer-driven Healthcare Payment Trends
• CDH Payment Solutions are relatively mature• Legislative and regulatory environment having greatest impact on CDH payments
since 2003– OTC changes– Impact of Durbin Amendment
• Increases in HSA and HRA accounts continue• Broader utilization of direct to provider payments from a CDH account• Broader utilization of direct to provider payments from a CDH account• Consumer control over method of payment from their accounts
– Card– Opt in for automatic claim payment– Online Bill Pay– Mobile
• More interest in the use of Health Risk Assessment (and related tools) – Linked to cash payments to a CDH account– General use funds
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Questions & AnswersQuestions & Answers
Thank You Kunal Pandya, Senior Analyst – Healthcare, Insurance & Payments, Aite Groupkpandya@aitegroup.com
Zahoor Elahi, VP/General Manager, FIS Health & Financial Network Solutionszahoor.elahi@fisglobal.com
Tom Torre, SVP/General Manager, FIS Consumer Directed Healthcare Solutionstom.torre@fisglobal.com
Thank You