Hard on the heels of a move to set up a health care receivables operation, Bankers Trust New York Corp. has struck an alliance with MedE America Corp., a Mitchell Field, N.Y.-based provider of electronic claims processing services.
Bankers and MedE plan to jointly market their services to hospitals, nursing homes, clinics, and physicians' groups.
Joseph Sevely, vice president and head of Bankers Trust's new health care receivables group, said MedE's technology and relationships would help improve billing efficiency and control over receivables.
"That translates into substantially lower risk for the funding program, and we can pass that benefit back to the provider in the form of more favorable funding terms," he added.
In early June, Bankers Trust announced it was setting up a special section to purchase, collect, and securitize health care receivables. Under current plans, the bank would pay sellers of up to 75% to 80% of the total amount of receivables sold. The balance is paid after the receivables are collected.
Typical receivables programs include arrangements where a provider pledges outstanding receivables as collateral against a loan facility, or sells receivables to a funding source.
The bank estimated that only a fraction of some $100 billion in annual health care payments from unaffiliated hospitals, doctors, and clinics has yet been converted into receivables and sold off.
Lou Nemnom, chief financial officer for MedE, said improved tracking and assessment of health care receivables could permit Bankers Trust to expand its program and advance higher amounts than the 80% currently envisioned.
MedE's major shareholders are two Chicago investors, Welsh Carson and William Blair. The two were also major shareholders in Card Establishment Services, a Melville, N.Y.-based merchant card processing service, but sold their holdings to First Data Corp. in March.
Under Bankers Trust's arrangement with MedE, the two companies will exchange referrals for hospital claims, processing services, and receivable sales.
"This helps facilitate the whole process," Mr. Nemnom pointed out, adding that uncertainty about the extent, flow, and reliability of health care payments has been one of the main drawbacks of converting them into receivables that can be sold off.
"Only 35% of all claims are being submitted electronically, and there's a big effort on the part of many institutions to provide information," Mr. Nemnom said.