The Advantages Of Virtual Payments
For healthcare providers, change has become the constant over the last several years.
While getting paid is paramount to ensuring an organization’s continued ability to function, revenue cycle decision makers take comfort in the fact that their reimbursement processes are down to a science. Yet these tried and true processes will be changing in the near future.
The Affordable Care Act defines operating rules and standards for electronic funds transfer and identifies automated clearing house transactions as the method of choice for the most industry savings. Electronic remittance advice (ERA) also replaces the paper explanation of benefits documents that providers are accustomed to receiving. As of January, 2014, all payments under Medicare must be conducted by ACH, and commercial payer organizations must certify their compliance with the EFT/ERA mandate by confirming their ability to initiate an ACH payment should a provider request it.
While health plans scramble to ensure they are prepared, providers’ ability to receive ACH payments has its own obstacles to overcome. Ensuring their systems are compliant with the ERA standards is another bullet on the technology to-do list. Additionally, in order to receive ACH reimbursements, providers must enroll individually with each payer, provide bank account information, and compel their receiving bank to provide the reassociation addendum information at a reasonable price.
Several options are also available for providers looking to move beyond the traditional paper check process. Image cash letter (ICL) is a platform by which transmission of check data and clearing of the payment occurs electronically, eliminating the manual steps typically required to deposit a check. Providers have also begun utilizing bank lockbox services, a process in which checks are routed directly to a processing center to be scanned and deposited.
For those looking to avoid paper checks in any form or fashion without altering their processes to accommodate ACH, virtual payments using credit card networks could be the perfect fit. Using this method, a one-time-use card number is issued from the payer to the provider, who then keys that number into its point-of-service terminal. The funds are transferred over credit card networks and deposited into the provider’s bank account.
The most obvious benefit of virtual payments for providers is simply how the transaction works. No new technology is required; hospital staff simply process the payments as if they were receiving a credit card from a patient. Any provider that accepts credit cards can process virtual payments.
The difference is that instead of devoting time and resources to depositing the check, a simple credit card transaction is all it takes to transfer funds – essentially turning virtual payments into a mail-based EFT. And unlike ACH, where the transaction is initiated by the payer, providers retain constructive control over when to deposit the money. While paper checks and ACH are one-way lines of communication, virtual payments allow providers to refund the payer over the same card networks that are used to collect the reimbursement, saving future headaches for the finance department.
In addition to the direct cost savings achieved through the elimination of manual processes, virtual payments also offer providers the chance for increased savings through their merchant acquirer agreements. A hospital processing a large number of claims reimbursements over card networks, on top of the existing volume of patient payments made with a credit card, gains a significant amount of leverage in future negotiations with the merchant acquirer.
Some providers have gotten even more creative when it comes to maximizing the savings potential of virtual payments. Rather than subjecting the entire amount of the reimbursement to an interchange fee, providers are using the card number they have been issued to pay their vendors for anything from medical devices to office supplies.
For healthcare providers striving to eliminate manual processes in favor of more efficient, cost-effective strategies, abandoning the paper check in favor of electronic payment methods should be at the top of the list. While ACH is a viable option, it may not be the perfect fit for everyone. Virtual payments simplify the transition to the world of EFT.
Landon Gordon is a vice president with Comdata Health, a firm that advocates the use virtual payments for hospitals and other providers.
