Bad Debt? Blame a Low-Tech Payment System
"Insurance companies are very good at promoting electronic claims submission but often while data goes out electronically from the provider, it comes back as paper. The provider gets a paper explanation of payment along with a check," Reynolds says. "However, from a technology perspective there's no reason why all of this can't be handled electronically through EFT or ACH, or that the insurance company can't produce an ERA [electronic remittance advice]. There doesn't need to be any manual intervention with payments."
Although EFT has been available for years through financial institutions, Reynolds says it hasn't been used by many healthcare providers because people are accustomed to the interest float. During the several days that paper checks are in transit, the payer collects interest on the funds. Essentially, because the healthcare collections system is inefficient, payers found a way to profit from it, at the expense of healthcare providers.
"Using EFT eliminates [float]. It not only increases the speed of the payment but it also improves the accuracy of data," says Reynolds. The latter is accomplished, he explains, because the EFT transaction sends data into the practice management system.
This creates a record in the EHR that includes: the treatment given; what was billed to insurance; what payment was expected from insurance; how much was actually paid by the payer, and how much was collected from the patient—all information which healthcare organizations will need to provide in the future to improve consumer transparency.
"With the growth of consumer-directed healthcare, we expect the use of EFT to take off. Having all this information and putting it into a consumer-facing application that integrates healthcare information and financial information is the key to transparency … and the patient's overall care experience," Reynolds says.
Many healthcare organizations may already use EFT and e-checks for some transactions, such as financial dealings with vendors. However, getting individual payers to complete your payments electronically may require financial leaders to renegotiate contracts and include an electronic payment clause.
With millions of dollars being designated for large technology initiatives, such as meaningful use and ICD-10, upgrading the organization's payment system may seem like a project that can wait. However, upgrading this technology can keep your bad debt to a minimum. And that's money that can be used for other essential projects.
Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.
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