Blazing a trail where bigger banks have yet to tread, Liberty National Bancorp has announced plans for an electronic payment program in Kentucky for medical bills.

The program, so far unnamed, is expected to put $4.3 billion-asset Liberty National, based in Louisville, at the forefront of banks trying to profit by helping consumers pay their health care bills.

Many banks see big potential in health care payment, but few programs have taken off.

Tempting Market

Indeed, only a small fraction of the $180 billion that consumers spend on health care is financed by banks - through credit cards, proprietary health care cards, or other means.

Liberty, which is planning to limit start-up costs and establish broad market coverage from the outset, expects to succeed where others have failed, said Steve Colyer, the bank's senior vice president of electronic merchant services.

Observers said the bank's approach seemed sound.

"Its a nice blend of state-of-the-art technologies," said Bert Tobin, a medical payment consultant at Benton International in New York. "I think they are on the right track."

Liberty plans to launch a 90-day test of its program in January.

The bank will team up with Medical Management Resources, a unit of Southeastern Mutual Insurance Co., to offer the service.

In the test, a revolving credit account for health care payments will be provided to between 5,000 and 7,500 people employed by the bank and by Medical Management, Blue Cross/Blue Shield of Kentucky, and - the participants hope - at least one other company.

When employees receive medical service, doctors and hospitals will file insurance claims electronically through Medical Management's claims processing system.

Medical Management's terminals are used by half of the doctors and nearly all of the hospitals in Kentucky to submit insurance claims, said Sheila Schweitzer, the company's president.

Insurers will assess the claims and then notify Medical Management about how much is covered.

Medical Management will then query Liberty's computers to determine if a patient has enough credit to cover the remaining balance.

If funds are available, Medical Management will use the automated clearing house to move money from both the consumer's revolving credit account and the insurance company's bank account to the health care provider's bank account.

Employees will be granted $300 credit lines when they sign up, but they will be free to apply for more credit.

Other Insurers Courted

Blue Cross/Blue Shield is the only insurance company that will make payments in the pilot test.

But Ms. Schweitzer said Medical Management is recruiting other insurers to participate in a full commercial launch.

Health care providers will pay Medical Management 1% to 10% of the amount billed to patients, Ms. Schweitzer said.

Liberty will collect processing fees from Medical Management, but most of the bank's profit will come from the interest charged to consumers.

Mr. Colyer would not disclose the interest rates his bank will charge, but he predicted that the accounts will be at least as profitable as Visa and MasterCard accounts.

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