PNC Bank Corp. has signed an agreement to electronically process medical bill payments for the University of Pittsburgh Medical Center.

The bank will act as a receiver of electronic payments and remittance information to the medical center's account from Blue Cross/Blue Shield and other insurance companies that manage health coverage for Medicare recipients.

With the Clinton administration formulating proposals to reform the nation's health care system, processing of medical claims is expected to be one of the fastest growing areas of financial electronic data interchange.

And many banks like PNC are interested in getting in on the ground floor.

"There is a huge opportunity to save administrative costs by converting to electronic transactions," said Joseph McKitrick, electronic data interchange product manager at PNC. "We feel those opportunities are something that health care providers want to take advantage of."

Several Players

A number of financial institutions, including First Chicago Corp., Chase Manhattan Corp., and First Interstate Bancorp, offer extensive electronic data interchange services -- the electronic transmission of payments and related information using standardized computer formats.

According to the EDI Group Inc., Aurora, Colo., 65% of corporations engaging in data interchange rely on banks to provide the service.

Yet despite the banking industry's strong presence in the market, experts said most banks offer the services mainly as a way to induce companies to use other cash management services. As a stand-alone business, financial electronic data interchange has not been very profitable.

But a number of institutions, including PNC. believe this will soon change, as banks grow increasingly willing to handle a range of nonpayment data in addition to a cash management customer's electronic payments and receipts.

The additional information services, which include remittances and other communications, are something that bankers view as a "value-added" service for which they can gather lucrative fees.

And it appears many health care providers, searching for ways to contain skyrocketing costs, are backing bankers' efforts in this area.

"The University of Pittsburgh Medical Center is enthusiastic about improving cash flow and updating patient receivables faster through the use of EDI," said Linda Zang, manager of treasury operations.

Although PNC already has about 500 financial electronic data interchange customers, the Pittsburgh Medical Center is its first customer in the health care industry.

Under the agreement, signed July 19, the bank will receive the hospital's Medicare payments and explanation of benefit information from the government's fiscal intermediary, usually Blue Cross or another insurance company.

PNC then will credit the hospital for the payment, translate the payment information into a standard electronic format, and send the information electronically to the computer housing the hospital's internal accounting files.

Because the information is sent in a standard format, the hospital's accounting files can be automatically updated without human intervention. The hospital said this will speed its internal accounting and reduce the number of errors.

PNC officials said the agreement only encompasses Medicare Part A payments, which are payments to hospitals. The bank is also interested in processing Medicare payments to physicians.

These payments, known as Medicare Part B, offer a huge potential source of revenue.

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