Leveraging Banking Core Competencies for HealthcareBy Nav Ranajee
Healthcare Industry Healthcare generates approximately 3.4B claims and $1.1B payment transactions per year. The management of these transactions occurs in a process termed the revenue cycle. The revenue cycle encompasses all the activities that happen from the time the patient is scheduled for service to when the claim is submitted and then ultimately to the time when the provider is paid. A combination of factors has created a challenging environment for managing revenue cycle transactions, resulting in nearly 40% of every dollar spent on healthcare going to administrative expenses. Healthcare has evolved over the years into a heavy manual-processing environment standing on legacy mainframe systems that have difficulty integrating with one another. The lack of standards has also added to the inefficiencies in the system. Studies show on average the days in AR are approximately 62 days for hospitals, which contributes to cash flow issues. Another contributing factor is the communication between payers and providers that historically has been an adversarial one leading to denials and costly follow-up processes. The bottom line is that the healthcare industry still shuffles paper and a lot of it. The industry recognizes this issue and as a result they are implementing initiatives such as the upgrading of patient accounting systems, adoption of standard transactions (HIPAA) and the outsourcing of services. Historically, healthcare budgets have been applied to the clinical side of the house but increasingly budgets are being re-allocated to the financial side of the organization. Banking on Healthcare Until the past 2- 3 years the touch points banks basically had with healthcare providers were financing and basic treasury services. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) legislation has enabled banks to utilize their image lockbox technology to move providers from a paper to a digitized processing environment. The ANSI standard code sets governing electronic claims submission (837) and remittance (835) mandated by HIPAA have created an opportunity for banks to broaden the value of its lockbox and EDI services. HIPAA created these ANSI standards to providers and payers in the hope that it would drive the industry away from paper and to electronic processing. However, the movement to these transactions has been slow for several reasons. One both providers and payers have had to upgrade their systems and technology to be able to create, send and receive HIPAA transactions. This can be a costly undertaking and the industry has been reluctant to invest in this. Providers and payers are having difficulty recognizing the ROI. Another factor for the slow adoption is the lack of enforcement by the HIPAA governing bodies. The 837 claims transaction has been the focus of the industry over the past few years and has achieved almost complete adoption resulting in substantial savings for providers and payers. The movement to complete adoption of the 835 or payment/EOB transaction is still several years away with only approximately 43% of payers having the ability to provide electronic 835s today. That’s where banks come in. Healthcare Lockbox Process In the past two years there has been a proliferation of banks offering customized healthcare lockbox services. It has become a required service for those banks wanting to compete and play in the healthcare space. Banks must build, buy or partner to obtain the technology to be able to convert paper Explanation of Benefits (EOB) to HIPAA compliant 835 transaction sets. The process is simple (see diagram). Healthcare payers send paper payments and EOBs to a bank lockbox. The bank will scan and image the EOB and facilitate the settlement of funds. At this point the image must be converted to electronic data by utilizing Optical Character Recognition (OCR) to lift the data off the image to create a HIPAA compliant 835 transaction. Depending upon the robustness of the OCR engine there will be a requirement for manual clean up of some data. The 835 is matched and reconciled which eliminates a typically manually task for healthcare providers. An 837 feed is required to be able to capture the data components that may be missing from the EOB. The provider is then able to take the complete 835 into their system with no manual intervention required thereby automating their posting process. In addition to the core delivery of paper conversion, some banks are offering a web portal for the viewing and research of claims and payments data. Reporting tools can be offered such as denials and contract management. Another EOB capture point that will be offered, as an alternative to lockbox is Remote Deposit. Remote Deposit systems today enable providers to scan checks for electronic deposit. Future enhancements will enable Banks to upgrade these scanners to enable the scanning of the EOB along with the check to enable the creation of the 835. This is potentially a less expensive alternative to lockbox and could create a stronger ROI for smaller provider organizations with lower volumes. 
Benefits to Healthcare Providers In a best practice scenario, a healthcare provider can achieve an above 95% posting rate. Depending upon the amount of paper and the number of posting resources a provider has they can realize up to 60% cost savings from this service. The benefits to a provider can include the following:
Medicare is largely electronic today. Imagine the impact on a provider’s back office if that was turned off? The goal is to turn on the switch for all commercial payers to achieve the same process efficiencies being experienced from Medicare transactions. Healthcare Lockbox services are still early in its lifecycle but maturing quickly as providers see the value and take advantage of these services. Converting paper to electronic transactions is only the beginning of the value chain for banks. As banks begin to capture and manage this complex data, they will be able to develop increasingly sophisticated services such as business intelligence and forward financing based on claims analysis. Conclusion The relationship between banks and their healthcare clients is moving beyond credit and investments to the automation of the revenue cycle. Banks can offer tremendous value to healthcare organizations by facilitating the movement from a paper to an electronic processing environment. Banks are leveraging their expertise in payments, imaging and online technology and providers can reap the benefits. Nav Ranajee is the principle director of NR Consulting Group. He has over 15 years of experience in the healthcare industry, beginning his career in medical administration for the Philadelphia VA Medical Center and then moving onto senior healthcare consulting/project management roles with Siemens Medical Systems, Arthur Andersen and Ernst & Young. Mr. Ranajee has significant experience in the implementation of healthcare financial systems and in the reengineering of the revenue cycle processes of healthcare providers. He joined the banking industry 6 years ago to drive a healthcare vertical strategy for Bank of America and Fifth Third Bank, where he developed specialized banking services for the healthcare industry and drove the launch of their health savings account services.
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If you asked a healthcare provider a few years ago what they thought of banks, the general reply would have been that banks manage my money or finance my operation. This limited view of banks has started to change over the past two years. Today, healthcare providers are starting to evaluate banks to provide services that dive deeper into their revenue cycle operations. Banks are recognizing the vast opportunity in healthcare and the value they can bring to the table starting with their lockbox service. The biggest drivers of this movement can be attributed to two factors: the large number of payments that flow through the system and the manual inefficient nature of healthcare. Healthcare generates over a billion payments per year. As a natural aggregator of payments, the opportunity to capture this payment stream is very attractive to banks. Banks have long been far ahead of the healthcare industry in terms of technology and automation so the conventional wisdom is to apply this experience and technology to automate the back end processes of healthcare organizations. As banks explore how they can streamline revenue cycle processes for their healthcare clients, the first natural place to begin is to leverage their lockbox and imaging capabilities.