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12 Big Ideas for 2012

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ONE: THE HEALTH-WEALTH PORTAL 

Banks know health care is a big opportunity. They are spending more than $100 million a year acquiring and building technology to process claims and other transactions for providers of health services, according to the Healthcare Information and Management Systems Society (HIMMS).

But there's a lot more that banks could be doing, especially as more provisions of Obamacare—officially called the Patient Protection and Affordable Care Act of 2010—go into effect over the next two years. Besides serving as the payments vehicle for doctors, hospitals and health care plan administrators, banks could become central to a kind of "health-wealth" portal that many believe will be a major source of the $35 billion in health care savings that the White House projects the act will provide by 2013.

The idea, as imagined by HIMMS, is for banks to adapt their online and mobile banking platforms—which consumers use to transfer their money—to also accommodate the transfer of their electronic medical records from one health care provider to another.

"What we are suggesting is banks move beyond that core payments business to data processing," says John Casillas, senior vice president of the HIMMS Medical Banking Project. "Specifically, health data processing between the health care stakeholders."

Banks already play a role in consumer health care insurance options that require being tethered to health savings accounts and other specialized investment vehicles. So expanding into the medical records business would not be much of a stretch, Casillas says. And it would allow consumers to have their records made accessible to health care providers through HSAs and other accounts.

Privacy worries would be nil, since banks would not have access to the actual medical records; they would only be providing a lockbox that health care providers would access for the easy electronic transfer of records.

Casillas says banks would have minimal heavy lifting to do in terms of the necessary technology, because most of the protocols already are being established in the back offices of medical providers. Under the Affordable Care Act, health plans must adopt electronic processing protocols by July 2013. While health care providers are not required to accept them (a strange quirk in the law), they have been given generous financial incentives to do so.

The federal government is offering the incentives to help Medicare and Medicaid health care operators upgrade their systems for electronic records, provided they complete the work by October of this year. That's partly how the Affordable Care Act aims to cut overall health care expenses in the long run. Besides reducing medical errors, the upgrades for electronic medical records and data remittance are expected to generate tremendous cost savings for providers through reduced paperwork and faster claims settlements.

One goal of the two-year-old Medical Banking Project at HIMMS, Casillas says, is to figure out how to make the exchange of records between providers easier. And he believes banks could provide the solution, offering consumers a quick and secure way to control access to their own records.

He says it's too early to know whether this service might be a fee opportunity for banks. But he foresees a benefit to banks beyond that: online banking is a huge factor in increasing customer interaction and loyalty, and this would give people another reason to sign onto their bank portal, Casillas says.

"The idea of a consumer being able to not only match their financial but also their health care records through a single sign on, could provide basic value—add to the online banking environment," says Casillas. "I think it could be a competitive driver."

TWO: PLAN WISELY FOR THE EVENTUAL COOLDOWN IN HOT DEPOSITS

Checking and savings accounts at U.S. banks hit an all-time high of $10 trillion in September, as consumers remained wary of the stock market and opted to keep their money handy rather than sock it in illiquid certificates of deposits.

Bankers are well aware that sluggish loan demand can turn deposits into a headache. In this environment, it can be hard putting money to work. But a deposit buildup presents an even bigger challenge long-term: what happens after the surplus cash goes away?

Kamal Mustafa, chairman and CEO of Invictus Consulting Group, says banks need to think beyond the current short-term loss of yield. They are sitting on unrecognized amounts of hot deposits, or "refugee funds," as he calls them. Once consumers and business customers regain faith in the economy, they'll redeploy their cash into higher-yielding investments, which will cause major woes in asset/liability management for banks.

"The new deposits are very similar to brokered funds in one characteristic: they will be flying out of the banks when the equity markets come back and the bond markets come back," Mustafa says.

Invictus, which devises stress tests for banks, estimates that the bulging checking and savings accounts across the industry contain $1.28 trillion of hot deposits. If this money disappeared over the course of weeks or months, it would wreak havoc on the assumptions banks have made about capital adequacy, return on investment, and even fee income.

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