Real-time, point-of-service financial settlement: why health plans will lead the next revolution in healthcare

September 1, 2006

As the nation faces a healthcare "affordability" crisis, market forces are driving changes such as consumer-directed healthcare, which is fueling the next revolution in healthcare: real-time transactions. At the center of this momentous change sits the health plan and its enterprise systems.

As the nation faces a healthcare affordability crisis, market forces are driving changes such as consumer-directed healthcare, which is fueling the next revolution: real-time transactions. At the center of this momentous change sits the health plan and its enterprise systems.

Healthcare is shifting to a "retail" model. In the retail world, you always know how much that new pair of pants cost. You also know that you must pay for them before leaving the store. In the same way, healthcare is moving to real-time transactions, where consumers, responsible for more of the cost of their care, will be asked to settle their bill at the time of service.

Accustomed to little or no additional payments beyond nominal copays, these patients are in for a shock. Complex new benefit plans require members to pay a greater share of the billed charges, and payment will be expected before the member leaves the provider's office. In some cases, patients will be required to pay a percentage of estimated charges before they check in for a planned hospital stay or doctor's visit, as providers strive to limit their exposure for receivables collections.

The surge of consumer-directed healthcare and high-deductible benefit plans are one factor driving this "back to the future" movement in healthcare IT. As patients shoulder more of the actual cost of their healthcare services, providers face an alarming rate of growing accounts receivables and bad debt. If a provider fails to collect full payment prior to the patient's check-out (and very few do), the chance of recovering full payment drops substantially.

But how will the provider's staff know what to collect?

The provider's system will link directly to the health plan's information system via the Internet, where the office staff will submit the patient's procedure or claim information, and receive a real-time response with accurate charges owed by the member. If the patient is enrolled in a consumer-directed benefit plan with financial accounts, this live systems link will also determine from which of the members' healthcare accounts the funds should be withdrawn.

Here's one example of how a typical real-time, point-of-service transaction will work in a physician office setting:

1. A health-plan member goes to the doctor or other medical provider.

2. A staff member at the provider's office enters the claim in the provider's system.

3. The physician's management software submits the claim to the health plan in real time.

4. The health plan's administrative system then performs tasks, including:

5. If the patient is enrolled in a benefit plan with financial accounts, such as a Healthcare Reimbursement Account (HRA) or Healthcare Savings Account (HSA), the system also will check the funds available in the member's account(s). This may involve a real-time link with the financial institution where the account resides.

6. The health plan's system then transmits back to the provider information on what amount the patient owes the doctor, as well as a final, accurate explanation of benefits.

7. The member will then pay the provider, either out of pocket or using a debit card linked to the member's healthcare financial account(s).