Gemplus Group, Digital Equipment Corp., and MCI Communications Corp. have signed on as technology suppliers for a smart card-based health-care payment system.
The system, developed by an Indianapolis start-up called RealMed Corp., is designed to make the insurance reimbursement process faster and paper- free. With claims and co-payments handled in "real time," a doctor could get funds from an insurance company before the patient leaves the office.
Promoters say the system could boost acceptance of smart cards by demonstrating an application other than the electronic purse that bankers are most familiar with.
RealMed, which was recently spun-off from Eclipse America Corp., an Indianapolis software development firm, does not envision using the cards to store medical records. It merely hopes to streamline the payment process, "reengineer(ing) how America processes and pays for health care," said Todd J. Morris, RealMed's vice president of marketing.
RealMed has yet to sign contracts with any major health-care payers but says its system will be available in certain areas this spring. The company is courting major financial institutions and says it is on the verge of announcing bank participants.
As the system was described at a press conference last week, a patient would present his health-care provider with a Gemplus-manufactured smart card issued by an insurance company.
The card would contain insurance eligibility information that would be transmitted through a terminal to a Digital Equipment computer running RealMed's software.
After the patient is treated, the health-care provider would submit an insurance document electronically via MCI's network.
If the insurance company accepted the claim, RealMed would order an immediate electronic funds transfer to cover the cost of treatment.
Patients might be able to pay their part of a bill through a line of credit. Participating banks might also add a standard magnetic stripe to the back of the smart card and cobrand it with a health-care company, RealMed officials said.
Although stored-value features are not expected to be available during the initial rollout, RealMed officials left open the possibility that the chip card's multi-application capability could be tapped to include flexible spending, savings, and checking accounts.
"I could have a medical savings account at Charles Schwab or a line of credit for payment of claims through a commercial bank," said Mark A. Morris, vice chairman and chief financial officer of RealMed.
According to a study RealMed commissioned, the average medical claim costs an insurance company $10.95 and six weeks to process. The study, conducted by the Milwaukee actuarial firm Milliman & Robertson, found that health-care providers pay $8 to process each paper claim.
RealMed said its card-based system would cost insurers $2.50 per claim. Health-care providers would benefit by getting paid in five minutes, Todd Morris said. Though providers would have to pay $250 a month to lease a computer and peripheral devices, RealMed would credit them 50 cents for each claim sent electronically.
RealMed officials acknowledged that given the frequency of disputed claims, not all reimbursements would sail effortlessly through their system.
Mark Litow, consulting actuary at Milliman & Robertson, estimated that 45% of claims could be processed right away. At that rate, he said, RealMed could save all parties about 30%. Extrapolated to the entire non-Medicare market for health care, industrywide savings would be $1 billion to $2.5 billion.