Electronic Payments – Obvious efficiencies, so why is adoption still so minimal

fnigers typing on computerTime is money. With escalating costs, competition eating into the bottom line and new regulations affecting profitability, new methods are necessary for creating cost effective needs for payment processing.  Reducing or eliminating paper payments would seem like an easy and natural place to look for cost reductions, but adoption by payees is still very low.  Healthcare is probably the most glaring example, but the issues are certainly real across nearly all B2B markets.  Today, over $2.3 trillion in claim payments are made, but outside of government programs (Medicare and Medicaid), paper checks still make up over 90% of those payments.

ACH Issues

Key to understanding ACH adoption is understanding the business make up of a typical Provider’s office and how they reconcile payments today.

Providers deal with dozens, and in most cases, hundreds of payers.   The 80/20 rule usually applies: 80% of their patients come from 20% of their payers.  So it’s impractical for a provider to enroll in ACH with all their payers, especially the 80% that only make up 20% of their traffic.   Add in the general mis-trust of the Payer by a Provider and it’s even more unlikely they are going to give their banking information to all but their most trusted payers.  So for the 80% of Payers that make up that 20% of the patient traffic, checks were, until recently, the only viable payment method.

What Providers like most about paper checks and Explanation of Payments (EOP) is they are easy to reconcile because they are delivered together – same envelope, same time.  If a provider opts for ACH and Electronic Remittance Advice (835), they are faced with a number of challenges.   The most serious is the disconnection between their money and the remittance data.   First, the money and ERA don’t show up at the same time and are delivered through 2 different channels; money through the banking system and; even the Affordable Care Acts allows for a three day window. Second, it is extremely rare that a bank would provide electronic deposit reports that can be uploaded into the Provider’s billing system.  So the Provider has to check their bank accounts daily to see what ACH deposits have been made.  Then they have to manually reconcile against the ERA’s that have been delivered.

Other factors that discourage the use of ACH/ERA is that Providers generally do not trust the electronic data feed will accurately upload into their billing system, so most will still print the ERA and manually post,   And finally, the cost of setting up to receive ERA’s can range from $500 – $10,000, depending on their system.   Even for the largest hospitals, it is not cost efficient to set up for ERA for all their Payers.

A Payer can’t force a Provider to enroll in ACH and accept an ERA, but they can be proactive and offer an alternative payment – virtual cards.

Imagine your mailing room…empty

The cost savings you realize of virtual cards go far beyond the cost of paper, ink, printing, and postage. There are also significant savings on bank-related costs; stop-pay/re-issues, positive pay charges and item charges are eliminated and reconciliation is greatly simplified.  With no provide or, vendor print, or mailing required, you can refocus your team on other tasks, or pass those savings on to your customers.

Provider Acceptance of Virtual cards

With over 95% of Providers accepting credit/debit cards for payment, there is a significant opportunity to leverage that “card” connectivity.  Provider adoption ranges from 50-70%, as opposed to 10% for ACH.  The reasons for such high adoption are in contrast to the reasons ACH/ERA doesn’t work: no enrollment, easy reconciliation, money and data delivered together, fraud protection, and quicker, more reliable delivery over mail.  While not every Provider recognizes the value of virtual card payments, many do, especially for those payers that represent a small percentage of their patient traffic.

Virtual cards – simple implementation

Virtual cards require no changes or special integration with your claim system. No special payment files are required since most virtual card providers will use your current output file. A simple implementation means minimal IT department involvement and an immediate ROI measured in weeks, not months or years.

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