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By Bill Marvin

In my last article, I talked about the growth of Consumer Directed Healthcare (CDH) and how it (along with the growth of high deductible plans) will impact your practice. I also addressed the question, “Do payers care?”

One point of note is that I have seen significant payer activities over the last two months whereby payers are looking for assistance from banks and processors to automate provider payments for the patient portion of a claim.

In this article, I will write about different approaches that payers are taking across the country and layout the challenges of each approach… but first, let’s talk more about the business problem that CDH creates for healthcare providers. We know that high deductibles mean an increase in patient collections, an increase in A/R and an increase in bad debt. We have also established that payers care because they don’t want to lose their negotiated network discounts with you. While there are already early attempts to address this problem, some valid questions to ask are: “how big is this problem?”; and “how hard will it be to solve?” In fact, the problem is quite complex and will not be easy to solve.

Why is this problem so hard to solve?

You may already see patients with a Debit card that is linked to their HSA, HRA, or FSA account. This is the result of early attempts to allow patients with deductible plans to pay you out of these CDH accounts. But does this really help? How do you know what the patient responsibility is until after you submit the claim?

Negotiated network discounts and deductible accumulators (i.e. how much the patient has accumulated towards their annual deductible / out-of-pocket maximum) are at the heart of the problem. For example, your practice charges $120 for a service, but your negotiated network discount (allowed amount per your fee schedule) is certainly less than that – and you must factor in the patient’s deductible and co-insurance. All of these numbers are impossible to calculate until after a claim has been adjudicated by a payer.

Payers need to maintain their negotiated network discounts with you. In fact, while CDH products can reduce premium costs to an employer, its all for naught if you don’t give the same discounts for CDH members as you do for HMO and PPO members, or even worse if you don’t agree to see CDH members at all and opt out entirely. At the end of the day, the payer’s biggest asset they have is the strength of their networks – and that’s you!

Well, I bet you already have an opinion as to how well most payers treat their biggest assets (you), and you’re right, they are not doing such a good job. I am seeing four types of approaches that payers are taking across the country to prepare for the growth of CDH, but first let’s identify the problem – which is getting you paid with the funds out of these CDH accounts. The HRA and the FSA are a bit easier to deal with, mainly because to move the funds out of those accounts, you only need the authorization of the payer, or the employer. But for HSA funds, which are owned by the patient, you need the authorization of the patient and that’s where things get tricky.

So what are the payers doing about it and are they doing a good job?

I am seeing four types of solution approaches by payers, which include: 1) Member/Patient Opt-In; 2) Real-Time Adjudication; 3) Device Based; and 4) Card Centric.

“Member/Patient Opt-In” means that when a member enrolls with the health plan, they can check a box that indicates that they will allow for the automatic payment of funds from their account to a provider, which may come to you in the form of a check or an Electronic Funds Transfer (EFT). The problem with this approach is that Members can only make this election one time per year and generally don’t elect to allow for the automatic movement of funds out of their account – would you trust the payer to get it right 100% of the time? Additionally, members may not have funds available in their account and the provider has no way of determining that at the time of service. The net effect is that this approach will not satisfy even a small percentage of the CDH encounters that you will see.

“Real-Time Adjudication” means that payers are upgrading their systems to process a claim in real-time so that they can determine the total allowed amount and the portions that are patient and payer. The problems with this approach is that it will take a long time for payers to really deliver this capability and more importantly, real-time adjudication can only add value towards collecting on deductibles if you submit a claim while the patient is present, which implies real-time coding and billing… Obviously real-time coding and billing while a patient is still at the point of service is a major work flow change and not a viable option for the majority of your practice’s encounters, even when the payers manage to offer this capability.

“Device Based” solutions mean that the payers will expect healthcare providers to use a device or terminal to enter and submit claim data. Do I need to go into the challenges with this approach? Actually, I’ve seen it done on a video and its real, but again I believe that this approach will not satisfy the majority of your encounters.

“Card Centric” solutions mean that the payers and their contracted card processors will coordinate their claims systems with their card processing systems to perform logic that will match the claims coming into the health plan with card swipes or card authorization requests coming into the card processor. While this approach can work for simple transactions such as pharmacy transactions, the same approach will have significant challenges in an office or hospital facility. Unfortunately, these solutions generally require you to do something unique and different for certain patients, and only work when the patient desires to pay with a card – how do you convince a patient to give you their special payment card, and if they do, what do you do with it?

Irrespective of all of these solution approaches, the biggest challenge that I believe you will face is the variety of work flow changes that may be presented to you and your staff until payers adopt an industry standard and a uniform front-end process.

What are the best practices?

Next article, I will write about best practices that are emerging among healthcare providers across the county to “survive and thrive” as CDH grows.

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