Chase Manhattan Corp. plans to announce today that it will play a key role in an alliance to process payments for major health care organizations.
Accelerating what is already one of the banking industry's most aggressive health care processing strategies, Chase is taking a 30% stake in a payment system called Simplicity Payment Association.
With partners that include Tandem Computers Inc. and professional provider organizations - the companies that coordinate managed care programs - Chase and Simplicity said their goal is to "revolutionize payments in the $1 trillion national health care market."
The plan is to be unveiled today at the American Association of Preferred Provider Organizations' convention in San Diego.
Two provider organizations - National Preferred Provider Network Inc., with 1.7 million participants, and InterGroup Services Corp., with more than a million - gave Simplicity an immediate boost by joining as charter members.
The alliance aims to link the various participants in the health care market, automating and streamlining the complex exchanges of information and payments among doctors, insurance companies, employers, and financial institutions.
Chase has been in the forefront of banks seeking a processing role in the medical industry's drive to reform and cut costs. The New York bank began processing payments for a network of dentists in Nevada last year.
Banc One Corp. of Ohio also has its hat in the ring. It acquired a health care payment processor in Colorado, which is now part of a subsidiary focusing on the sector.
Barnett Banks Inc. of Florida and UJB Financial Corp. of New Jersey are offering payment services in conjunction with Equifax Healthcare Information Services, Atlanta.
Edward E. Furash, chairman of Washington, D.C.-based Furash & Co. in Washington, estimated that 30% to 35% of health care costs stem from processing payments and claims. Bankers, he said, see synergies in the health care market with processing and settlement specialties like checks and credit cards.
Mia Shernoff, Chase's vice president for health care services, said Simplicity by December should begin processing "a trickle" of about 20,000 transactions a day. Chase executives hope health care transactions will eventually boost current automated clearing house volume by 50%.
Chase is already No. 1 in the automated clearing house business, having initiated 187 million paperless payments in 1994. It will become even more dominant after its pending merger with Chemical Banking Corp., 10th in automated clearing house volume last year, with 59 million. If fully consolidated, the new Chase would be almost 100 million entries, or 62%, ahead of No. 2 Norwest Corp., according to American Banker statistics.
While health care opportunities appear undeniable, other payment initiatives have stumbled in recent years. The Exchange, a Bellevue, Wash.- based electronic banking network, lost more than $5 million when its system failed to gain support from insurers. American Express Co. is said to have spent 10 times as much on Quattro, a health care card that failed twice to take off.