Medical Payments’ Congenital Ailments
Linda Punch
Perseverance, and a lot of it, is the main antidote to the stubborn resistance of medical bills to electronic processing.
hen Congress in 2003 enacted legislation overhauling the conditions under which employers and employees can set up taxadvantaged health savings accounts (HSAs) to pay for medical care, many financial institutions and processors jumped at
the chance to get a piece of the multibillon-dollar health-care transaction-processing business. Among the provisions:
Employees and their dependents could pay for more forms of health care with a debit card.
Yet, more than four years later, financial institutions have yet to break into the market in a big way. A few—such as
American Express Co.—have tested the waters and pulled back. Others—like HealthTransaction Network Corp. in Buffalo, N.Y.—have
found it a slow, uphill climb.
“The market’s yet to come,” says Nancy Atkinson, senior analyst at Boston-based technology research firm Aite Group LLC.
Payment entrepreneurs and processors looking to break into the paper-dominated world of medical payments confront an insular,
complex market where new ideas get anything but a warm welcome.
“I’ve been in health care for about two and a half years, and I thought financial services moved slowly, and it did,” says John Lettko,
says chief executive of ProxyMed Inc., a Norcoss, Ga.-based transaction processor and business-process outsourcing firm. “But I’ll tell
you what: health care makes financial services look like a downhill skier.”
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‘Culture Problems’
American Express in June pulled out of an HSA-related project—dubbed HealthePass—that it had formed with processor Metavante
Corp. and insurance giant Cigna Corp. (“Can AmEx Relieve the Pain of Medical Payments?” January). AmEx cited slow market growth
in withdrawing less than a year after the program was announced.
“The level of investment that really was needed to take the health-care payments card business to the next phase was significant,”
says an AmEx spokesperson. “Given that this emerging market is moving more slowly than we anticipated, we made the decision to
invest in other business opportunities.”
Under the system, a HealthePass-eligible employee would get a payment card, typically at the start of the year, for presentment
when seeking treatment. After a swipe of the card through the provider’s point-of-sale equipment, the cardholder would get a real-time
estimate of her co-pay through a link to business information provider Thomson Corp.’s Thomson Medstat service. Medstat generates
estimates using data from the insurer as well as information generated by its national database and predictive modeling.
The bill for treatment would go via a payment network to Milwaukee-based Metavante, which would automatically determine
which patient accounts would be tapped for the co-payment. The provider would be paid in full in one transaction with funds from
Cigna and the patient’s accounts.
Under the original plan, AmEx would issue the payment card, which could be linked to the so-called multipurse AmEx card, or to a
major-brand credit or debit card account, or an AmEx line of credit.
Cigna and Metavante are now talking with other card brands to take AmEx’s place, a Cigna spokesperson says. “We planned to start
with American Express, but also planned to team up with other credit card companies for that credit facility,” says the spokesperson for
Cigna’s Bloomfield, Conn.-based Cigna HealthCare Unit.
American Express’s decision to drop out of HealthePass will have no immediate impact on the project, the Cigna spokesperson
adds. HealthePass already has done a soft launch of a key element of the program: the Estimator Tool—which gives a written estimate
of how much the patient will owe and then triggers a hold on funds in the HSA account.
For its part, HealthTransaction Network in September signed an agreement with the Independent Health Association, a
Williamsville, N.Y.-based health insurer, and Erie County Medical Center in Buffalo, N.Y., to verify patients’ identities and process
government insurance claims. HealthTransaction Network will handle transactions for New York State Medicaid, Child Health Plus,
and Family Health Plus patients.
Under the program, Independent Health will issue the cards, register people, and do all the verification and eligibility screening.
HealthTransaction Network will switch the transactions between providers and payers.
But the agreement—the first for HealthTransaction Network—was a long-time coming, says Joseph E. Wolfson, network founder
and chief executive. “Perseverance has been as big a part of this as anything,” he says.
Wolfson, a veteran ATM network executive—he founded both the MetroTeller and Cartel ATM networks—started
HealthTransaction Network in July 2003. He saw similarities between health-care transaction processing and electronic banking, and
believed the national health-care market could support a processing organization that links diverse groups of payers, providers,
employers, and financial institutions.
But Wolfson says he encountered resistance from the players in the medical industry.
“The biggest problem you have in the health-care world is the people who work in the health-care world,” he says. “It isn’t so much
technological stuff—it’s mostly cultural things.”
How Much?
While electronic-banking networks and health-care processing appear to have a great deal in common, the medical business is
“different. It has its own little idiosyncrasies and its own little culture problems,” he says. “Everything has been on a proprietary basis.
All these insurance companies—they don’t want to share terminals, so I’ve had to fight that battle. And that’s been the biggest battle.”
But after four years of building relationships with health-care providers and payers, Wolfson says he’s beginning to make headway.
He is preparing a private offering to raise about $2 million to fund the network.
“Raising capital hasn’t exactly been like falling off a log,” he says. “I’ve put in $1.5 million of my own money.”
The experiences of American Express and the HealthTransaction Network illustrate the obstacles facing financial institutions and
processors trying to capture a piece of the medical-care business.
“The key for financial institutions is working with partners that know how health-care organizations operate and the types of
processing programs they need,” says Christy Corey, president of Dallas-based TransFirst Health Services, a provider of transactionprocessing and payment technologies.
Financial institutions also must be ready to spend time understanding the complexities of the health-care business, according to
Lettko, who before joining ProxyMed was chief executive of Viewpointe Archive Services, a check-image archive and retrievalservices provider. That’s because health-care transactions typically involve not only medical providers and patients, but also insurance
companies and government payers, analysts say. And how much a patient owes depends on the individual’s insurance coverage,
making it difficult to set up a system that covers all possibilities.
“The outstanding item technologically is patient payment responsibility,” says Alenka Grealish, managing director of the banking
group at research firm Celent LLC, Boston. While determining co-payments and deductibles is fairly straightforward, patients’
responsibilities with HSAs are less clear.
“[It’s] mating up exactly how a carrier is going to adjudicate a claim, i.e., how much do I owe if I’m the patient and I’m sitting in a
physician’s office or an emergency room,” Lettko says. “It used to be a pretty simple exercise—you owed a deductible or a co-pay.
Now we’ve introduced an HSA, which really has the end effect of raising the amount the patient is going to pay.”
Until the technology for real-time claim adjudication is developed, the growth of HSAs—and accompanying payment vehicles—
will be slow, according to Lettko.
“The issue today is that the payers aren’t ready to give that information or aren’t able to give that information so that anybody who’s
sitting on the other side of that transaction knows how much to charge to the debit card or the credit card,” he says.
In addition, neither health-care providers nor patients are accustomed to payments at the time of service. “Providers have been
historically hesitant to bill a patient if they don’t know the amount because they don’t have a good refund system,” says Grealish. “If
they overcharge, then they have to refund that consumer.”
What’s more, historically, health-care providers have shied away from billing patients at the time of service in part because,
Grealish says, “it’s considered a bit aggressive.” As a result, physicians’ and dentists’ offices are not set up to make the real-time
decisions necessary to determine how much a patient needs to pay and then get it to the front office in a timely fashion, she says.
Complicating matters is the fact that health-care services often don’t lend themselves to standard pricing, Aite Group’s Atkinson
says.
“Payments are so complex because of all of the other aspects that go around them,” she says. “It’s not a simple matter of, ‘I’m
buying this, here’s the price, I will pay X amount for it.’ Instead, with health care it’s a question of, ‘I’m going in because I have these
symptoms, they’re going to run this test and they think that it’s X, Y, Z and it turns out to be A, B, C instead.’”
While there are some medical-market segments where providers can give advance notice of costs—for example, cosmetic surgery
and dermatology—it’s “when you get to procedures that aren’t purely part of preventive care or ancillary to preventive care, could be an
emergency or urgency, what have you, then it becomes very gray,” Grealish says.
For now, financial institutions and processors looking to enter health-care transaction processing will have to be prepared for a longterm commitment, Atkinson says. “You have to be committed to it over the long haul or don’t get into it,” she says.
Arcane Billing
Despite the barriers to entry, some financial institutions and payments firms are making inroads into the market. Under a recent
agreement between Bank of America Corp., the nation’s largest debit card issuer, and insurer Health Net Inc., Health Net customers
can use a BofA debit card to access HSAs or go online to pay medical bills electronically.
And First Horizon Msaver, a leading HSA administrator, and Columbus, Ga.-based payment processor Total System Services Inc.
(TSYS), in September announced they have teamed up to offer a multipurse health-care and benefits payment card. The program
allows an employee to use a single debit card to access funds in HSAs or other tax-advantaged programs such as health reimbursement
arrangements and flexible spending accounts to pay for health-care costs at medical locations, such as a doctor’s office or pharmacy.
First Horizon works with more than 50 health plans and third-party administrators.
It’s too early to tell which of these latest approaches will succeed in opening the health-care market to financial institutions and
processors, though developing real-time claim adjudication and common standards for payment processing will be key.
“Ultimately, there will be a market, but the question is do you really want to be the absolute innovator in that space,” Atkinson says.
“Or do you want to be a fast follower or do you want the market to evolve and then come in with something that’s a known product?”
Hundreds of millions of potential electronic transactions await the processors that can break the medical world’s
addiction to paper and arcane billing practices. But, as an endless parade of Hollywood stars into drug and
alcohol treatment centers has shown, breaking out of old patterns is a difficult process indeed.
Is the Wind About To Shift?
Health savings accounts—viewed by many as the key to unlocking the health-care market for financial institutions—have yet to
fulfill their promise, but analysts warn that it’s too early to write the concept off as a failure.
“Adoption has been below expectations, and downright disappointing for many (financial institutions),” says Alenka Grealish,
managing director of the banking group at Boston-based Celent LLC. “But that doesn’t mean they’re not going to have their day.”
Health savings accounts allow consumers to put aside tax-advantaged funds from their paychecks for future medial expenses and are
“portable”—consumers can use them even if they change employers. They represent an opportunity for payments-industry players to
benefit from related management fees, monthly fees, closing fees, and lines of credit that could be attached to health-care cards.
While the concept of HSAs is a sound one, employers are not putting enough resources behind promoting them to employees,
Grealish says.
“HSAs have not arrived with a strong wind at their back primarily because employers have not positioned them as effectively as
they could to their employees,” she says. “They have viewed them as a service, and if you’re managing a service, you would think about
things such as how much education does the consumer of that service—in this case, the employee—need? How much backing, how
much subsidization do I need to provide. What ongoing information, what tools do my employees need to feel very comfortable with
their newfound responsibilities?”
However, there continues to be a strong business case for employers to promote HSAs. They lower health-care costs to employers
because consumers must enroll in a qualified high-deductible health plan, which carry lower premiums. “Because employers will
increasingly get motivated to spur HSA adoption, they’re going to come around and fill in the blanks here,” Grealish says. “Once they
do, that’s when transaction volume is going to grow.”
HSAs will “really take off” after 2008, reaching 11.25 million by 2010, says Nancy Atkinson, senior analyst at Aite Group LLC,
Boston. She estimates there will be about 4.8 million health savings accounts by 2008.
But how many debit cards will be tied to HSAs is difficult to predict, because some accounts will have multiple cards attached while
others may be accessed via check or other payment vehicle, she says.