In beefing up their systems for processing health-care payments, major banking companies are betting they can help move the insurance and hospital industries away from paper record keeping.
Bankers and observers agree that the use of image-enabled lockbox operations could help stimulate increased automation and, eventually, the end-to-end electronification of insurance claims and payments.
Of course, the payments industry has long aspired to that goal, and even though momentum seems to be building in the health-payments market, some experts caution that movement is likely to remain sluggish in a notoriously complex industry.
JPMorgan Chase & Co. of New York became one of the latest financial companies to demonstrate its interest in health payments this month, when it announced it had purchased the assets of FisaCure Inc. of Carrollton, Tex., a specialist in medical remittance processing services.
In September, Bank of America Corp., which calls itself the No. 1 provider of treasury services to the health industry, announced it had purchased HealthLogic Systems Corp., the Norcross, Ga., operator of an online service that hospitals use to manage their insurance claims.
In both cases, the banking companies bought small companies to which they had outsourced work, and the purchases suggested in some quarters that two of the nations biggest cash management banks think the time for a shift in the health-payments business may not be far off.
Its a really forward-looking investment, said David C. Robertson, a partner at Treasury Strategies Inc. of Chicago, a consulting firm that serves banks, corporations, and other large organizations. Youve got the two largest-scale players taking advantage of their scale to make fundamental investments.
Alberto Casas, a vice president at JPMorgan Chase and the leader of its treasury services business-to-business health-care unit, said as much when his company announced the FisaCure purchase. We believe the bank has a role to play throughout the value chain, Mr. Casas said.
The lockbox gives banks a chance to add value for both hospitals and insurers, he said.
Banks are the only player in this reimbursement chain that have both the payment and the information together, Mr. Casas said. Strategically, the value for our clients and the value for the bank is in effecting change and driving automation.
PNC Financial Services Group Inc., a pioneer in the health-payments market, said it welcomed the arrival of high-profile competitors.
Theres a lot of movement taking place now, a lot more awareness in the community, said Paula K. Fryland, a senior vice president at PNC and the managing director of its national health-care group. Im happy to hear that others are recognizing that theres an opportunity for the banking industry to help.
The Pittsburgh company, which operates the third-largest nationwide wholesale lockbox network, introduced its integrated system for health payments in 2001. A year later it won a contract to automate claims processing for the Department of Veterans Affairs, the largest integrated health-care provider in the United States.
The contract earned the department the 2004 ACH Quality Award from Nacha, the electronic payments association, of Herndon, Va.
But uptake has been slow. A survey conducted for PNC last year found that the main barrier to automation for 80% of insurers was the cost of infrastructure. Some observers estimate that up to 95% of medical reimbursements are still paid by check.
Were still working on raising awareness of the possibilities and being able to apply the solutions, Ms. Fryland said.
Evolving standards, like those mandated by the Health Insurance Portability and Accountability Act of 1996 to provide standardized codes for medical procedures, have opened a path toward increased automation, she said.
Banks could help insurers and providers by promoting electronic data interchange and electronic funds transfer, Ms. Fryland said. The real end game for the industry should be to migrate over time to methods that dont rely on the lockbox. Theres even greater promise through the utilization of EDI and EFT.
Mr. Robertson said that transaction services by themselves are only the starting point for banks to play a role in health payments.
The downstream services are real differentiators, he said, citing features such as claim-denial management and secondary billing for claims rejected by the first insurer.
Many banking companies have begun to take notice of the health market, in part motivated by the emergence of health savings accounts, which combine savings and transactional features, but Mr. Robertson said that to compete effectively, the providers need a deep understanding of the clients industry.
The new services have to be more integrated into the corporate segments back office, he said.
This will be true in industries other than health care, he said; for example, U.S. Bancorp has been a leader in serving the transportation and freight-logistics business. Youre going to see a lot more of these segment initiatives under way.
Violet Shaffer, the research vice president for health care at Gartner Inc., cautioned that it still could take a long time for the health market to make the transition from paper to electronic processing.
Both insurers and hospitals are under increasing regulatory and competitive pressure, making it difficult for them to budget for technology initiatives, even though such efforts promise savings in the future, she said. As a result, nothing in health care happens overnight, even if mandated.
