Healthcare Payment TrendsFebruary 17, 2011
Presenters• Kunal Pandya Senior Analyst, Health Insurance & Payments, Aite Group• Zahoor Elahi VP/General Manager, FIS Hea...
Actionable, strategic advice on IT, business, and regulatory issues in the financial services industry          Healthcare...
About Aite GroupAite Group (pronounced eye-tay) is an independentresearch and advisory firm focused on business,technology...
ThemePayments trends in the healthcare market © 2011 Aite Group, LLC    www.aitegroup.com   Page 5
Agenda•   What does the current healthcare payments space look like?•   Why healthcare payments are so complicated?•   Wha...
What does the current healthcare payments             space look like?                 Source: Aite Group    © 2011 Aite G...
Despite the size of the healthcare paymentsmarket, it is a complex environment due to•   Lack of efficiency caused by a nu...
Issues that are creating a compelling     argument to streamline the healthcare                payments system•   Increase...
Why are healthcare payments so                              complicated?               At its core, the payment process is...
Actual healthcare payments process                                                                                        ...
What are the prominent payments trends in               healthcare?• Payer-to-provider payments• Patient-to-provider payme...
Payer-to-provider Payment Models         Source: Aite Group© 2011 Aite Group, LLC        www.aitegroup.com   Page 13
Pros and cons of a payer-to-provider                payments modelPros• Expedited payments via EFT or ACH• Reduced impleme...
What is the market direction and who are          the key players involved?• Total payment solutions to reduce manual pape...
Patient-to-provider payments models         Source: Aite Group© 2011 Aite Group, LLC        www.aitegroup.com   Page 16
Pros and cons of a patient-to-provider               payments modelPros• Expedited payments via automated payments options...
What is the market direction and who are          the key players involved?• Line of credit and payment plans options• Ref...
CDH paymentsSource: Aite Group                                                          Includes estimated percentage of e...
CDH payments estimationsSource: Aite Group         Includes all card transactions i.e.,                                   ...
CDH payments estimationsSource: Aite Group         Based on the average annual                            Estimated value ...
Pros and cons of a CDH debit card solution     and the key stakeholders involvedPros• Expedited payments• Multi-pursing• R...
What is the market direction and who are          the key players involved?• Real-time adjudication• Line of credit option...
What are the emerging healthcare              payments initiatives?• Provider accounts receivables and accounts payable so...
Key takeaways• Interest is rising among the provider community to adopt providerrevenue cycle management tools provided by...
Healthcare Payment TrendsPayer-to-provider Payments
FIS − A Market Leader30,000+ employees worldwideMore than 40 years of market leadershipand $5 billion in 2009 pro forma re...
FIS − Strategic Focus in Healthcare                      • Healthcare Payments Solutions Division created in 2006 to      ...
Healthcare Reform: H.R. 3590
News Update….                                                                        Health spending rose to              ...
Timeline – Administrative Simplification    Transaction Set           Adopted              Effective             Penalty *...
Claim Payment Evolution
Medical Spend Will Prioritize Change                                       Post adjudication                              ...
Post Adjudication Payments − Today     Emerging Trends:         • Movement away from paper checks / remittances – VERY SLO...
Post Adjudication Payments − Future     Emerging Trends:         • Single “rail” system for both the EFT / ERA         • V...
Healthcare Payment TrendsConsumer Directed Healthcare
Consumer Technology Platform     Accounts                             Accounts        FSA                             Paym...
Consumer-driven Healthcare PaymentTrends• CDH Payment Solutions are relatively mature• Legislative and regulatory environm...
Questions & Answers
Thank YouKunal Pandya, Senior Analyst – Healthcare, Insurance & Payments, Aite Groupkpandya@aitegroup.comZahoor Elahi, VP/...
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Healthcare Payment Trends

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What are the latest payment trends impacting the healthcare vertical? From electronic presentment and payment to mobile payments and beyond – what can we expect to see over the coming years?

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Healthcare Payment Trends

  1. 1. Healthcare Payment TrendsFebruary 17, 2011
  2. 2. Presenters• Kunal Pandya Senior Analyst, Health Insurance & Payments, Aite Group• Zahoor Elahi VP/General Manager, FIS Health & Financial Network Solutions• Tom Torre SVP/General Manager, FIS Consumer Directed Healthcare Solutions 2
  3. 3. Actionable, strategic advice on IT, business, and regulatory issues in the financial services industry Healthcare Payments Trends February 17,2011 Kunal Pandya Chicago, Ill.© 2011 Aite Group, LLC www.aitegroup.com Page 3
  4. 4. About Aite GroupAite Group (pronounced eye-tay) is an independentresearch and advisory firm focused on business,technology and regulatory issues and their impact onthe financial services industry.Aite Group was founded by leading industry experts inbanking, securities and investments and insurance. Itbrings together a team of business strategy, technologyand regulatory experts to deliver comprehensive, timelyand actionable advice to financial institutions andtechnology vendors.Aite Group is headquartered in Boston.www.aitegroup.com © 2011 Aite Group, LLC www.aitegroup.com Page 4
  5. 5. ThemePayments trends in the healthcare market © 2011 Aite Group, LLC www.aitegroup.com Page 5
  6. 6. Agenda• What does the current healthcare payments space look like?• Why healthcare payments are so complicated?• What are the payments trends in healthcare?• What are the emerging healthcare payments initiatives? © 2011 Aite Group, LLC www.aitegroup.com Page 6
  7. 7. What does the current healthcare payments space look like? Source: Aite Group © 2011 Aite Group, LLC www.aitegroup.com Page 7
  8. 8. Despite the size of the healthcare paymentsmarket, 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• Strong reliance on manual processes © 2011 Aite Group, LLC www.aitegroup.com Page 8
  9. 9. 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• 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 © 2011 Aite Group, LLC www.aitegroup.com Page 9
  10. 10. Why are healthcare payments so complicated? At its core, the payment process is simple, as seen below. Member receives Provider service RA Private Insurer service or Gov’t. PAYMENT Provider bankSource: Aite Group © 2011 Aite Group, LLC www.aitegroup.com Page 10
  11. 11. Actual healthcare payments process Member information Payment information Explanation of benefit (EOB) / Check for manually submitted Claim information claims Customer service Member service Eligibility, claims status and referrals Provider service Paper UB92, HCFA 1500 - Member receives Private Insurer and service Provider Service and government 837i/p/d - Practice management membership, billing, Makes co-payment only HIPAA EDI / systems (PMS) 27x * managed care, Clearinghouse medical mgmt and ACH payment 835 ERA – claims adjudication systems Paper RA and Check – lockbox National Council for Prescription Drug Program (NCPDP) HIPAA EDI / Clearinghouse Real-time point of service (POS) transaction Pay by mail (PBM)Source: Aite Group © 2011 Aite Group, LLC www.aitegroup.com Page 11
  12. 12. What are the prominent payments trends in healthcare?• Payer-to-provider payments• Patient-to-provider payments• Consumer-directed healthcare payments © 2011 Aite Group, LLC www.aitegroup.com Page 12
  13. 13. Payer-to-provider Payment Models Source: Aite Group© 2011 Aite Group, LLC www.aitegroup.com Page 13
  14. 14. Pros and cons of a payer-to-provider payments modelPros• Expedited payments via EFT or ACH• Reduced implementation timeframes since the connections are alreadyestablished• Reduced manual processes to process a claim• Reduced costs for payers• Reduced payment cycle times and bad debts (improved profitability by3 − 5 percent)• Increased revenue potential or profitability for all stakeholders• Advocated transparency in pricing and quality of careCons• Practically no play for healthcare cards• High level of compliance required to carry financial data• Slow adoption rate among the smaller provider community © 2011 Aite Group, LLC www.aitegroup.com Page 14
  15. 15. 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 relatedtransactionsKey players in the payer-to-provider market:• Clearing houses• Banks via medical lockboxes• Healthcare vendors• Card networks toying with the idea of riding their credit rails to facilitatepayer-to-provider payments © 2011 Aite Group, LLC www.aitegroup.com Page 15
  16. 16. Patient-to-provider payments models Source: Aite Group© 2011 Aite Group, LLC www.aitegroup.com Page 16
  17. 17. Pros and cons of a patient-to-provider payments modelPros• Expedited payments via automated payments options• Large market reach among the banks, card processors and cardnetworks• Payment estimation capability• Improved tracking mechanisms for all stakeholders• Reduced redundancy in paperwork• 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 providersCons• Inexperience in undertaking healthcare transactions• Compliance with HIPAA and PCI guidelines• As of 2008, 30 percent of the smaller providers do not have thecapability to process a card payment © 2011 Aite Group, LLC www.aitegroup.com Page 17
  18. 18. 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 managementsystems• Value-add service provided by payersKey players in the Payer-to-provider market:• Banks via partnerships or existing card solutions• Healthcare vendors and payments processors © 2011 Aite Group, LLC www.aitegroup.com Page 18
  19. 19. CDH paymentsSource: 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. © 2011 Aite Group, LLC www.aitegroup.com Page 19
  20. 20. CDH payments estimationsSource: Aite Group Includes all card transactions i.e., Includes 1% LOC transactions starting debit, credit and prepaid in 2011 for HSAs © 2011 Aite Group, LLC www.aitegroup.com Page 20
  21. 21. CDH payments estimationsSource: Aite Group Based on the average annual Estimated value of average cost per expenditure for CDH accounts (approx. encounter and total CDH financial $2,082) in 2008 and average number transactions of visits © 2011 Aite Group, LLC www.aitegroup.com Page 21
  22. 22. Pros and cons of a CDH debit card solution and the key stakeholders involvedPros• Expedited payments• Multi-pursing• Reduced payment cycle times• Tools to track and manage healthcare transactions• Improved healthcare spending decisions through payment estimators• Real-time eligibility• Reduced bad debts• Created transparency in pricing and quality of careCons• 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, paymentprocessors, third-party administrators, providers, CDH vendors,employers and consumers. © 2011 Aite Group, LLC www.aitegroup.com Page 22
  23. 23. What is the market direction and who are the key players involved?• Real-time adjudication• Line of credit options• Payment plansKey players in the CDH market:• Banks• Payments processors• CDH vendors © 2011 Aite Group, LLC www.aitegroup.com Page 23
  24. 24. 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 solutionvendors such as SWIFT, Green Dot etc. © 2011 Aite Group, LLC www.aitegroup.com Page 24
  25. 25. Key takeaways• Interest is rising among the provider community to adopt providerrevenue cycle management tools provided by banks, healthcare vendorsand clearing houses• CDH market is growing at a steady pace with an anticipated increase inthe gross dollar volume of transactions via debit card to be approximately$66 billion by YE-2012• Greater emphasis on developing new products around provider A/R andA/P solutions• Increase in curiosity to manage the underpinning premium moneymovements in “exchanges”• Prepaid cards are being used primarily for pharmacy transactions © 2011 Aite Group, LLC www.aitegroup.com Page 25
  26. 26. Healthcare Payment TrendsPayer-to-provider Payments
  27. 27. FIS − A Market Leader30,000+ employees worldwideMore than 40 years of market leadershipand $5 billion in 2009 pro forma revenueMember of the Standard & Poor’s (S&P)500 indexNo. 1 technology provider to the globalfinancial industryMore than 14,000 clients in over 100countries25 strategic operating centers outside theU.S.Clients include 9 of the top 10, and 40 ofthe top 50 global banks 27
  28. 28. FIS − Strategic Focus in Healthcare • Healthcare Payments Solutions Division created in 2006 to create a seamless consumer healthcare experience • Leverage core financial institution solutions • Investing in Strategic Acquisitions − BenSoftWe Are an IndustryLeader − Printing for Systems (PSI) − Medibank (MBI) − AdminiSource − CapMed • 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 We Provide Mission • Over 550,000 HSAs processed Critical Solutions • 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 28
  29. 29. Healthcare Reform: H.R. 3590
  30. 30. News Update…. Health spending rose to a record 17.6% of the U.S.Press Release dated, Friday, Oct. 8, 2010 economy in 2009 − an increase of 4% from 2008The NCVHS recently sent a letter to Secretary Sebelius, Department of Source: Wall Street Journal, January 7, 2011Health and Human Services (HHS), advising that CAQH CORE meetsthe requirements as the authoring entity for operating rules for non-retail pharmacy-related eligibility and claim status transactionsoutlined in Section 1104 of the ACA.Health and Human ServicesSecretary Kathleen Sebeliussaid she and the presidentrealize the program is"certainly far from perfect.”Source: Wall Street Journal, February 08, 2011 30
  31. 31. Timeline – Administrative Simplification Transaction Set Adopted Effective Penalty *Eligibility (270 / 271) July 1, 2011 Jan. 1, 2013 Jan. 1, 2014Claims Status (276 / July 1, 2011 Jan. 1, 2013 Jan. 1, 2014277)EFT / ERA (835) July 1, 2012 Jan. 1, 2014 Jan. 1, 2014Medicare EFT July 1, 2014 Jan. 1, 2015 UnknownMember Services * July 1, 2014 Jan. 1, 2016 NA 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. 31
  32. 32. Claim Payment Evolution
  33. 33. Medical Spend Will Prioritize Change Post adjudication claim payments – largely paper today 33
  34. 34. Post Adjudication Payments − Today 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 34
  35. 35. Post Adjudication Payments − Future 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 35
  36. 36. Healthcare Payment TrendsConsumer Directed Healthcare
  37. 37. Consumer Technology Platform Accounts Accounts FSA Payments HRA Card, Bill Pay, ACH, Check HSA Consumer Portal and Mobile Personal Account Provider Wellness and Rewards 37
  38. 38. Consumer-driven Healthcare PaymentTrends• 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• 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 38
  39. 39. Questions & Answers
  40. 40. Thank YouKunal Pandya, Senior Analyst – Healthcare, Insurance & Payments, Aite Groupkpandya@aitegroup.comZahoor Elahi, VP/General Manager, FIS Health & Financial Network Solutionszahoor.elahi@fisglobal.comTom Torre, SVP/General Manager, FIS Consumer Directed Healthcare Solutionstom.torre@fisglobal.com

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