Early in the Clinton administration, when health care reform was hot, providers of smart cards and other payment services salivated at the idea of a national health policy. They didn't necessarily agree with details of the President's plan, but they were sure that advanced card technology could help tame the cost beast. Cards with computer chip memories seemed tailor-made for any plan that included a standardized national identity or payment card. Although the Clinton policy reforms never got off the ground, the proposals did bring attention to smart cards. As medical organizations nationwide have continued to grapple with payment systems, some have launched smart card pilots. Perhaps hundreds of other pilots are under consideration. A national survey of health care professionals this summer by Strategic Resources Group of Winchester, Mass., found that 90% favored the use of smart cards. The health care community has the largest array of potential uses for smart card technology, said Thomas P. Staudt, chief executive officer of MedE America. At the same time, health care is also behind other industries when it comes to using current technology. Mr. Staudt's company, based in Mitchel Field, N.Y., was owned by Card Establishment Services Inc., the credit card transaction processor, until CES was acquired this year by First Data Corp. MedE America offers doctors and insurers an array of electronic data interchange and financial transaction services such as claims processing and all-payer eligibility. In the health care arena, the computer power of smart cards with memory capacity up to 80 times that of magnetic-stripe cards offers the potential to streamline medical administration procedures, reduce paperwork, shorten reimbursement times, and assure greater accuracy of information at points of treatment. For inspiration, smart card proponents point to Germany and France, which are successfully pioneering national health insurance card programs. The German program was launched in 1993 with the objective of eliminating the processing of paper forms at doctors' offices. The card presented to a practitioner contains basic data like insurance company name, address, account number, and type of coverage. The card is inserted into a reader, and information is then printed onto a form, averting the need to fill out preprinted forms each time care is delivered. More than 80 million German citizens use the card. All health care providers and hospitals have the readers. Anyone who has ever filed a benefits claim in the United States knows how time-consuming and paper-intensive the process can be for all involved. Wayne Jones, president of Optimum Inc., a medical technology company in Houston, said more than 400 million dental claims were filed last year, but just 8% electronically, usually via modem into the insurance system. The rest were filed on paper. Insurance companies estimate that it costs $2.50 to $11 to process a paper claim. Electronic processing brings the cost down to as little as 60 cents. Smart cards could make claims processing even cheaper. A lot of the (system) applications that will come into play over the next 18 to 24 months will be driven directly by the cost efficiencies that are demanded by the community, said Mr. Staudt of MedE America. Processing applications quickly and accurately is a good first place to start. The need to reduce fraud is another factor forcing the health care industry to look into card technology. Combined with a range of security techniques from personal codes to data encryption to biometric devices like voice recognition or hand geometry, smart cards can help ensure cardholder identification. The Smart Card Forum, an educational association based in Tampa, has estimated that 10% of claims are fraudulent. Medicaid fraud rates are even higher. Emergency room costs have been a particular bane of hospital managements. Economically strapped patients increasingly use them as a source of primary care, and they present hospitals with their greatest number of fraudulent cases, said Mr. Staudt. On a recent trip to a hospital in Cleveland, he said, administrators indicated that up to 40% of the people who come into emergency rooms have Medicaid cards that, for fraud or other reasons, cannot be used for claims, leaving the hospital to absorb treatment costs. The way it operates now, Medicaid is a massive strain on the system, said Mr. Staudt. Encrypted Medicaid smart cards that identify the individual (can) represent huge cost savings for hospitals. Fraud and inefficiency are runaway problems, said Joseph Aguilar, chairman of Smart-Link Inc. in Jacksonville, Fla. Billions and billions of dollars are lost annually in fraudulent claims. We're estimating that smart technology can cut fraud by at least half, said Mr. Aguilar, whose company markets technology developed by Oklahoma City-based Advanced Data Systems. He said the chips used in Advanced Data System cards contain 16K (kilobytes) of memory and the company plans to introduce a 64K chip card next year. Smart-Link is launching several programs, including one with Blue/Cross Blue Shield of Puerto Rico. A smart card can potentially carry not only insurance data and positive subscriber identification but also emergency medical data such as blood type, locations of medical records, allergies, current drugs being taken, and the names and locations of the patient's health care providers. It won't be long before paramedics will have smart devices in their vehicles greatly facilitating the treatment of emergency patients, said Ivan Jones, vice president at MasterCard International and chairman of the Smart Card Forum's health care working group. People with special needs, such as diabetics, will benefit from smart cards when they travel and need treatment. The U.S. Armed Forces also have a number of smart card programs. In Hawaii, for example, Army personnel carry smart cards with all key medical information on them. Army hospitals have deployed smart readers. Critics of smart cards say the technology is an invasion of privacy and raises the specter of Big Brother. In fact, a recent consumer study commissioned by the Smart Card Forum found that 70% of a national sample were concerned about who might have access to their records. But 66% were interested in using smart cards to store insurance and medical data. Merchants and vendors also have privacy and liability concerns. Early results of a survey by Atlanta-based Global Concepts Inc. indicated that pharmacists are worried they might open themselves up to lawsuits if they have access to too much information. Today, most liability falls on the shoulders of doctors and other health care providers, said Tom Murphy of Global Concepts. If a card system tracks prescriptions across different pharmacy companies, pharmacists are worried that they will be liable. Mr. Jones at MasterCard pointed out that paper medical records are far less secure than most patients think. He added that to ensure security smart cards can be designed with a hierarchy of authorizations to insure that the person using the card is authorized to use it in a given way. A pharmacist might have access to prescription information, not to an entire medical history. There is so much talk about clinical uses for the smart cards, said Mr. Staudt. But how many bytes do you allocate for X-rays? How many for diagnostic information? There are no standards in place for this, whereas the EDI and administrative processing side is more mature, Mr. Staudt added. My expectation is that we will garner the greatest benefit from smart technology on the administrative side. The market will drive these choices.
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