Collections Opportunity Available in Healthcare: Report

By helping healthcare providers improve claim and remittance processes, financial institutions can improve collections and gain more receivables related business, according to Madhavi Mantha, senior analyst for Celent LLC, a Boston-based consultant.

Celent is looking closely at collections, payments and other aspects of healthcare banking as part of a series of three reports, the second of which, Shifting Stakeholders and Change Agents in Healthcare Transaction Processing is scheduled to be published the week of Aug. 19th.

One of the stakeholders that Mantha expects to change is financial services providers. Financial institutions already handle the payments process for the healthcare providers and third-party collectors. They could expand their business and gain additional revenues from receivables funding, cash flow management and related services by helping the providers and third-party collection firms use electronic payment and claims (invoicing) processes and by squeezing as many other inefficiencies out of the process as possible.

The most efficient systems result in receivables being paid in as little as 20 days, while the most inefficient systems result in receivables going unpaid for 100 days or more, according to Mantha.

“The idea of getting paid for other things is much more straight forward,” Mantha says. “You buy a number of units of widgets, receive an invoice with the shipment, validate that the number of units and unit price is correct, then make the payment. The validation of the invoice is a fairly straightforward process.”

In healthcare, the provider gives information regarding treatment to a medical coder or other billing specialist for creation of the claim. The treatment, diagnosis and duration of service combine to determine the procedure code that will be used for the claim. The more common the claim, the less likely there is a problem with these codes. But as healthcare becomes more complex, so do the codes and the chance for error.

If the code is wrong or if there is a question regarding eligibility of coverage, the initial claim is typically rejected, according to Mantha. “Forty percent of claims go back through the payment loop.”

Another problem is that the claims remittance process is still largely paper-based, leading to errors and a high rate of claim denials or delays, meaning slower collections for providers, Mantha says.

According to Celent’s first report in the series, Healthcare Transactions: What’s the Forecast for Financial Institutions, adoption of electronic transactions has been uneven because many legacy payment and claim systems don’t work with electronic transaction systems. Even the electronic systems that do exist use many separate platforms, many of which don’t communicate with one another.

Therefore, any financial institution considering entering the healthcare payments business needs to invest at least $5 million to enable themselves to collect and process transaction data as well as provide value-added services, like denials management, according to Celent. It’s the value-added processes that are the most attractive to the financial institutions.

“Banks have a natural interest in the payments and in the financing of the receivables,” Mantha says. Cash management and short-term funding are other areas where financial institutions could benefit by entering healthcare banking.