A Better Way for Self-Insured Companies to Pay Providers

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by Gordon Matthews

Healthcare niches, like patient-provider communication, electronic health records, and prescription delivery, have become incredibly efficient in the last couple years, yet healthcare payments between businesses remain trapped in an outdated system that is slow, contextless, and expensive. In addition to these ongoing problems, the free market medical community has to deal with an inordinate amount of control by the big traditional payers, which allows them to protect their higher fees.

If you’ve been keeping tabs on the free market medical movement, you know the movement aims to bring transparency in pricing to all parties, value to patients, value to employers and to lower the overall cost of delivering care.

The fact of the matter is that most free market employers want to pay more quickly for the value received by them and their employees. This cluster of employers acknowledge that they are getting great value, and they want to pay more quickly (which is also what the providers want). This is not easy, and many free market payers are resorting to expensive and antiquated methods—wires and overnight mail—to achieve this goal. Like many things in our economy and life, disruptive technology is providing a solution.

Current Payment B2B Options in Healthcare

If yours is like most companies, payments between your TPA or employer and provider will be made through one of the following methods.

  • Traditional Check: The most traditional of the methods being utilized today. Requires a huge amount of management and racks up printing, mailing and handling costs. Speed of payment is slow and the provider needs to enter, reconcile, manage, and deposit checks too.
  • ACH: The Automated Clearing House (ACH) system was started in 1972 and is the most widely used electronic payments method in the USA. This is relatively fast compared to snail mail but, because of data limitations, payments need to be reconciled to remittance files.
  • Wire Transfer: Invented before the internal combustion engine; it has been around since 1872. There are several kinds of wire, and they are fast and “final” (irrevocable) payment systems that can execute very large transactions domestically and internationally. Because these transactions are bank-to-bank, they are cumbersome for daily use and expensive for smaller transactions. They also have limited data capabilities, which necessitates reconciliation and management on the provider side.
  • Virtual Card: This option has become popular in the last few years as a way to receive payments because it solves the speed issue in a secure way. A virtual credit card is a unique 16-digit computer generated number used to settle a specific payment transaction issued for a specific dollar amount. Designed as a more secure alternative to ACH and check payments, virtual cards are essentially “card-less” credit card payments. However, they come at a cost. The cost ranges from a 3% minimum up to 5%.

Under current protocols, all of the above options are controlled by the banks and/or entrenched processors like credit card companies. So, my bank must speak to your bank and each player along the continuum charges a fee. Wouldn’t it be better if the employer could just make the payment directly to the provider? Quickly, securely, and irrespective of which bank you use? It would be just like what we have grown accustomed to in our personal lives with PayPal, ApplePay, and Zelle.

A Better Way to Pay – the Fintech Disruption

Over the next few years, these four methods will increasingly be displaced by a more modern approach being driven by a Fintech revolution in the broader economy. Beginning early in the next decade, digital financial technologies started to emerge that are able to solve the critical concerns of healthcare payments:

  • Speed: Same day payment.
  • Security: Bank grade and HIPAA level security for the payment and the data (claim).
  • Cost: Flexible payment structures that are lower than the current methods.
  • Data: Payments that include unlimited data (i.e., the full adjudicated claim) with the payments. Because the claims can now come with the payment, the burden of reconciliation, which for some providers is a vexing ongoing issue, is largely solved.
  • Interoperable: Able to interoperate with a wide variety of EMR systems, Patient Accounting Systems and Revenue Cycle management platforms.

Gordon Matthews has an extensive background in healthcare business strategy which includes a history of working with healthcare organizations. He also has experience in Operations Management, Hospitality, Strategic Sourcing, Strategic Planning, and Supply Chain Management. With this knowledge under his belt, Gordon founded Ampla-X consulting at which he is currently a principal. If you would like to inquire about this piece, Gordon is available at gordon@ampla-x.com.