Building a Bridge to Healthcare Payments

How Banks & Providers Work Together

NACHA PAYMENTS 2011Austin, TX / April 4, 2011

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Session Information• Session 16B• 11:30 a.m. - 12:30 p.m. / Monday, April 4, 2011• Speakers in this session provide an update on HHS implementation decisions with respect to

healthcare payment & remittance (EFT & ERA) evolution mandated under PPACA, featuring a case study demonstrating how Financial Institutions have begun working closely with healthcare providers to understand, plan for, finance, and transition to payment solutions for 2014 and beyond. Questions answered include: What do changes in healthcare payments and information exchange mean for back office processing in the hospital environment? What challenges are there yet to overcome? What is the future of payments in the healthcare industry in hospital environments? Speakers review the role of banks, the impact of changes in the healthcare payment and remittance process and how leading healthcare providers are making decisions in the short term to prepare for the long term impact of Administrative Simplification.

• Level: Intermediate•• Douglas E. Downey, CTP• AVP, Treasury Management, HCA•• Stuart Hanson• Vice President, Healthcare Solutions, Fifth Third Bank

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Topic Introduction

• Introduction / Background– Industry / Legislative Review– Update on Implementation

• Challenges of STP & Role of Banks• Real Life Examples at HCA

– Current Processing Overview– Challenges – What Did it Take?– Advice for Other Providers– Where Do We Go From Here?

• Q&A

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Background

• Legislative Efforts– HIPAA 1996– ARRA 2009, including HITECH– PPACA 2010, aka Healthcare Reform

• Common Goals of Healthcare Legislation– Improve quality and accessibility of care– Provide protection for private patient information– Drive improved efficiency of the industry

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Healthcare Industry Annual Expenditures

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Healthcare Provider Receivables

Share of Provider Revenues

POS Collections, 5.98%

Patient Bills, 7.27%

Insurance, 33.57%Gov't, 46.41%

Patient Write-offs, 6.77%

© Copyright: Fifth Third Bank, 2010

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Highlights of PPACA:Administrative Simplification• Administrative Simplification, Section 1104 of PPACA –

real teeth to driving cost savings in a number of areas• In fact, this piece of legislation has very aggressive goals

both in terms of automation, timeline and incentives– Drives aggressive adoption of new EDI and procedure code data

standards– Mandates rapid adoption of new operating rules to correct gaps

that emerged as the industry adopted HIPAA over past 10 years– These operating rules are being established quickly and should

dramatically increase availability of electronic healthcare claim payment & remittance transactions

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PPACA – Operating Rule Timelines

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Update on HHS / NCVHS Implementation• Operating Rules & Standards – what do these

mean?• Process of Implementing Operating Rules

– National Committee on Vital Health Statistics (NCVHS) Evaluates and Recommends Operating Rule Authoring Entity � Secretary HHS

– Operating Rule Adoption Date (July 1, 2012 for EFT & ERA)

– Operating Rule Effective Date (January 1, 2014 for EFT & ERA)

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Update on HHS / NCVHS Implementation (continued)• Current Status

– December Hearings, February Draft letter, Pending Authoring Entity Recommendation

– NACHA as Standards Body for EFT, CCD+– Exploring CTX (HTX) Healthcare Payments Pilot– CAQH / CORE with NACHA as likely Operating Rule

Entity for EFT & ERA

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Challenges of Straight Through Processing(STP) for Healthcare Claim Payments• Complexity & Cost of Re-Association

– Migration to electronic has created separation of financial transaction from remittance data

• Need for Provider Bank Account “Registry” / Routing– Payers cannot scale to maintain bank information for all of their

providers slowing EFT payment migration– Likewise, an opportunity exists to dramatically simplify switching

process for Providers

• Variability in Implementations of EDI 835 Standards– Providers cannot scale to support each payer’s EDI 835 slowing

ERA migration

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How Are Banks Involved?• Aggregators of Payments• Treasury Management Functions

– Receivables Management – Lockbox, Electronic Deposit Manager, DDA– Payables Management – Disbursements (Paper & Electronic)

• Bank Service Model for EFT / ERA Payments– Matrix of Payment Formats– Data Conversion Services – Payables / Receivables & Normalization

Function– Re-Association – Payment to EOP– System of Record – Management Reporting, Research, & Archival

• Custodians of PHI• Work with Payer and Provider Clients Providing Bridge to Electronic

Processing

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Q&A

• Pause for Discussion on First Segment

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Current HCA Processing Overview

HCA Bank

Payor / Bank

$$$ACT EFT –820 CTX or CCD+

HCA CashSystem

Posting to G/LHCA G/L

Medicare, Medicaid, Various Managed Care

DATAEDI 835 v4010 A1

Direct or Via Clearinghouse

HCA Translator

HCA Patient A/R

System

Payment Data Re-Association Based UponSequence, or Trace # Contained in 820 & 835

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Challenges to HCA Processing Model

• Lack of True Standards– “Conforming” 820 / 835 re: HIPAA– “One at a Time” Process was Slow & Costly to Setup with

Individual Testing Required

• Developed a Proprietary Re-Association Model– Unique to HCA’s Cash and Patient A/R Systems– Sequence / Trace Numbers Are Not Always Useful– Payors Change Location of Data in 835 Files (Provider # or Tax

ID #’s)

• Shared Tax ID Numbers– NPI Numbers Have Taken a Long Time

• Reconciliation Models / Challenges– ERA with Checks– Paper Remits with EFT Payments

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What Did it Take to Setup?

• Banks– Concentration Bank Sends What They Receive with

NO Modification• Technology

– Developed Internal Process for Exception Reporting– Developed Internal Process for Expeditious Posting– Developed Internal Process for Implementing

Changes Quickly– Ongoing Technology Support Required for Various

Connections / Formats• ERA / EFT Task Force

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Check to EFT Statistics

Paper WLBX EFT ELBX2001 3.30                             ‐                              2002 7.00                             ‐                              2003 9.30                             ‐                              2004 9.90                             9.40                            2005 10.60                          9.70                            2006 10.60                          10.40                         2007 10.10                          11.30                         2008 9.60                             11.90                         2009 9.20                             13.40                         2010 8.50                             14.20                         

$$ in BillionsYear

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Did It Payoff?

• Cash is KING• Efficiency is QUEEN• Found No Acceptable Model to Turn EOB’s into

835’s

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Q&A / Speaker Contact Info

• Open Discussion• Speaker Contact

Douglas E. Downey, CTPAVP, Treasury Management, HCADoug.Downey@HCAHealthcare.com

Stuart HansonVice President, Healthcare Solutions, Fifth Third BankStuart.Hanson@53.com

• THANK YOU