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What will your hospital be like when it has no more than three days in accounts receivable? That’s the question posed by a revolutionary development in health care reimbursement that promises to eliminate manual billing and collection and change the face of access management forever.
Hospitals only need the simple credit card technology the local dry cleaners and other modern merchants have had for a while, say the principals of a Del Mar, CA-based company called MedCambio, which appears to be at the forefront of the technology.
The company promises its clients a switch from 72 days in accounts receivable to 72 hours. But that may be a conservative estimate. The technology can calculate payments and send them to the hospital’s bank account minutes — even seconds — after a doctor’s exam or X-ray is provided.
MedCambio — with Healthcare Capital Resources of New York City — is a health care payment network positioning itself to be the Visa International of the health care industry. But there are other start-up companies working on the same concept, says Jack Duffy, FHFMA, director and founder of Integrated Revenue Management, Carlsbad, CA.
Access managers should be aware that this technology will be accessible to their hospitals within the next six months or so, says Duffy, who works in a continuing advisory capacity for ScrippsHealth, a multihospital system in San Diego. ScrippsHealth is set to be the West Coast’s early adopter of the MedCambio process, while Crozer-Keystone in Pennsylvania is evaluating the possibility of being the East Coast demonstration site.
When a patient arrives, Duffy explains, hospital staff will be able to immediately code the diagnosis and procedure, submit the claim electronically, and within seconds receive a reply confirming the amount of insurance benefit and give the copay or uncovered amount. For out-of-pocket costs, the patient can choose to use a commercial credit card, write a check, or request a line of credit.
MedCambio, which charges a percentage that varies according to the provider, secures the health care receivables, packages them into large bundles, and sells them on the worldwide market.
"Most people, as consumers, understand this process based on the mortgage industry," explains Deb Hubers, MedCambio’s interim CEO. "That’s how almost all industries move money behind the scenes."
The potential financial benefits for health care providers are staggering, Hubers points out. "Twenty-five cents of every health care dollar is spent on the administration of claims, compared to 2 cents in the hotel industry, 3 cents in the retail industry, and 5 cents for the airline industry. Statistics show that physicians’ cost is anywhere from 25% to 40% of their total charges for administration and back office, while hospitals spend anywhere from 6% to 15%."
The concept has been difficult to translate to health care, she says, because of the quality of the data and the complexity of the transaction. "If a physician bills $100, by the time he gets paid it might be $60, and the bill goes through several contortions. That’s just too confusing and expensive to monitor.
"Health care is a local issue," Hubers says. "Each geographic area has its own unique microcosm, with different payers and different reimbursement relationships. There is managed care and fee-for-service. In one area, one payer has 50% of the market; in another, no one has more than 5% of the market."
Additionally, she says, "there are misaligned incentives because employees purchase health care as patients, but employers pay for it and contract with a health plan and take part of the risk. It’s the most complicated payment system in the world."
The cost-effectiveness of the Internet is one of the reasons the environment is finally right for the health care industry to get up to speed on payment technology, she says. The challenge to making it work, however, has more to do with work flow than technology, Hubers adds.
Also driving the innovation are the financial pressures of the Balanced Budget Act of 1996 and the inefficiencies of the managed care market, she says. "This is forcing everyone to take a look at health care reimbursement. We thought managed care would solve problems, but 10 years later, it’s worse in some areas. The question is, How can we streamline [the process] and make it better?"
A lot of large banks have tried and failed at similar endeavors. MedCambio will succeed, Hubers contends, because it has put together a team that understands banking technology, health care reimbursement, and pure transaction technology. Until now, she adds, "the business case for making that happen has been hard to find because the industries are so segmented."
Companies helping incubate and launch the project include Lehman Brothers, New York City; Superior Consultants, Southfield, MI; Atlantic Medical, New York City; and Dresdner, Kleinwort, Benson, New York City.
"We have the capital markets behind us to help accelerate the cash," Hubers says. "A lot of people have played around with the technology, but without the ability to accelerate the cash, it’s just another way to move data electronically."
Some 28 customers have been using parts of MedCambio’s "HCPX Payment Network," she notes, primarily having to do with cash acceleration. "The capital infusion is based on the billing and receivables they have today," Hubers says. "The next phase is integrating technology and process re-engineering."
Providers will use the Internet to expand connectivity with their existing clearinghouses, payers, and "any organizations they’re using to switch out e-commerce," she notes, as well as to integrate with their existing computer systems, such as SMS or HBOC patient registration systems.
"Hospitals need to leverage those existing investments, so they need to integrate the new reimbursement process into existing infrastructures," Hubers says. "They need to do that so it’s seamless — plug and play.’"
The Internet provides a communication vehicle that is cost-effective, she adds, "but there are other tools that can be used. Database technology is used to analyze the risk. It takes claims data from the existing legacy system and electronically moves them into a risk management system to help us give a better risk profile."
That process, Hubers explains, allows MedCambio to measure a payer’s history of paying against the parameters the health care provider has set up with that payer. "For example, are they within 90% of contractual allowances, are they paying within 30 days, etc.?"
At any moment, she points out, MedCambio needs to understand the provider’s financial situation. "We’re monitoring that all the time because we’re providing cash in 72 hours."
It’s difficult to envision, Duffy says, just how different a patient’s episode of care will be with the new payment system. Gone will be the multiple bills, the statements from three physicians, two of whom you didn’t see, he adds. There will be no more matching up of services with bills that show up five months down the road, he suggests.
"Contrast that with walking into [a hospital or physician’s office], showing a smart card to identify yourself, and within minutes having all the components of the physician and hospital bill displayed on the screen so you can see exactly what the insured and the uncovered parts are," Duffy adds.
There are barriers that providers will have to eliminate to take advantage of the new technology, he emphasizes. "Are your computers compatible? Are your work processes compatible?"
If there are two hospitals, one of which is aware of the possibilities and ready to embrace them, and one that says, "Not in my lifetime will this come to pass," Duffy says, "guess which one will survive?"