CLEVELAND - National City Corp. has started offering a specialized electronic payment service for Blue Cross of Western Pennsylvania.

National City, with $31 billion of assets, is processing Medicare payments and related remittance information for the Pittsburgh-based insurer in a new, industry standard electronic interchange format.

"National City is coordinating the electronic funds transfer portion of our services," said Edward Pigan, director of government information systems for Veritus Inc., the corporate parent of the Blue Cross unit.

After receiving and processing a claim, Veritus transmits the payment requests and associated remittance information, usually in the form of an explanation of benefits, to National City. The bank then routes the transactions through the Automated Clearing House, via the Federal Reserve Bank of Cleveland, to the health care provider's bank.

The information is contained in a standard format known as the ANSI 835 Transaction Set. Mr. Pigan said National City had previously used existing National Automated Clearing House Association formats for payment information only.

With this new agreement, National City has the potential to greatly expand its electronic data interchange-based business, according to Mary Ann Francis, vice president and manager of electronic products for the bank.

Large Savings Expected

Ms. Francis said Veritus is only processing several thousand Medicare transactions daily, primarily those transmitted to Blue Cross of Western Pennsylvania by a single hospital in Pittsburgh, which was not identified. That number is expected to grow as other hospitals and health care providers establish electronic links to the insurer.

But Veritus also is a major processor of claims date for other insurers, which could mean more business for National City.

According to Ms. Francis, National City currently processes less than 1 million electronic data interchange transactions annually. It originates data interchange payments for itself and five other clients, and receives payments for more than 2,000 other customers.

The payment processing arrangement between the two companies was prompted by a government-inspired push to implement electronic data interchange services in the health care field. Estimates from the Department of Health and Human Services placed the potential cost savings associated with the using data interchange to process medical claims at between $4 billion and $10 billion annually.

Scramble for Position

Banks involved in the payment services arena have been scrambling to position themselves as data interchange providers in the health care industry since the agency recommended its use in a 1992 report.

That report, produced by the Workgroup for Electronic Data Interchange, called for 95% of all hospitals, major public and private payors, employers, and other large groups to implement electronic data interchange by 1995. The rest of the industry, the report suggested, should be ready by the end of 1996.

The Health Care Financing Administration, part of the Health and Human Services Department, also has mandated that intermediaries, such as Blue Cross of Western Pennsylvania, pay health care providers using electronic data interchange if the providers meet thresholds for filing claims electronically.

A number of other banks, including First Chicago Corp. and Chase Manhattan Corp., have instituted similar plans to initiate and receive data interchange payments.

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