Clean Bill of Health: Preparing Community Banks for New Health Care Provider Payment Rules Starting in 2014

by Viveca Y. Ware, Senior Vice President, Regulatory Policy, Independent Community Bankers of America

There’s been lots of buzz about healthcare payments, so I recently set out to learn as much as I could at about healthcare reform and its impact on the industry. My goal was twofold: first, to uncover the genesis for the buzz; and second, to gauge the impact for community banks.
Healthcare laws in recent years have focused on three areas: improv­ing the quality and accessibility of care, providing protection for private patient information and driving improved industry efficiency. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) contains privacy and security provi­sions (such as the well known privacy notifications that we all toss aside or return to the provider), as well as a framework for streamlining the healthcare industry processes.

The Health Information Technol­ogy for Economic and Clinical Health Act of 2009 (HITECH) promotes the adoption of health informa­tion technology to drive industry efficiency. For example, it authorizes $19 billion in incentives for Medicare and Medicaid providers success­fully deploying new technologies to improve efficiency. HITECH also con­tains provisions aimed at protecting patient information and enhancing penalties and broadening enforce­ment for HIPAA non-compliance.

The Patient Protection and Afford­able Care Act of 2010 (PPACA), also known as healthcare  reform, among other things, mandates a conversion from paper checks to electronic Medicare payments by Jan. 1, 2014. It also authorizes a not-for-profit entity named by the Secretary of Health and Human Services (HHS) to develop operating rules for electronic healthcare claim payments and remittances (information supporting the payment).

These laws—combined with the fact that healthcare  payments are grow­ing at a 9 percent compounded annual growth rate and are projected to reach $4 trillion by 2016—are the genesis for the healthcare  payments buzz.

The Mechanics

The majority of health claims—billing and payments—are in paper form. The healthcare industry is very complex and includes ever-expanding clinical codes, diagnoses, treatments, procedures, patient information and provider information. It’s straightforward (at least from the outside looking in) to associate and process the payment and the remit­tance information when both arrive together in the mail.

In an electronic processing envi­ronment, the electronic payment and the remittance information flow separately to the healthcare  provider (e.g., a physician). The pay­ment flows through the ACH and the remittance information comes from either the health plan or through a healthcare clearinghouse. Note: The dollars and the information may be received by different sections of the provider’s operations or systems. These separate paths make reas­sociation, accomplished through the use of a reassociation trace number, so important.

The ACH transaction, CCD+, is the new standard for electronic healthcare  payments. This transaction sup­ports the reassociation trace number in the payment-related information field that allows the payment to be matched with the electronic remit­tance advice (ERA), which provides specific payment information for individual patients. The payer assigns the reassociation trace number, and the originating bank assigns the ACH trace number.

NACHA Operating Rules govern ACH healthcare payments. Those rules require receiving banks to provide their customers with all of the information contained within the payments-related information field of a CCD+ transaction by the bank’s opening of business on the second banking day following the transaction’s settlement date. Failure to comply with this requirement is a violation of the NACHA Operating Rules and could result in a fine.

Why it Matters

Every community bank has customers who are healthcare providers—physi­cians, clinics, dentists, pharmacies, nursing homes, home health services, hospitals and health centers, and equipment providers. Practically all healthcare providers (the exception likely being boutique providers) receive private-sector healthcare payments, and most receive Medicare payments as well. Community banks should be ready to process electronic Medicare payments for their healthcare provider customers by Jan. 1, 2014.

There is no mandate for private-sector healthcare providers to accept electronic health plan payments, but health plans can contractually require providers to accept electronic payments. Given the benefits of electronic healthcare  payments— faster claims processing and payment cycles, reduced phone calls and no lost or missing checks—community banks will experience significant increases in electronic healthcare  payments as the healthcare  industry moves from paper to electronic trans­actions made via the ACH Network.

Next Steps

First, do not panic. Most receiving community banks probably have the foundation in place to process healthcare payments and comply with applicable NACHA Operating Rules. The key is to have the capability to search ACH files for payments-related information and to provide this infor­mation to your healthcare provider customers.

Generally, community banks provide this information to their corporate customers using a third-party vendor, a correspondent bank, Electronic Payments Network’s ACHREDI service or the Federal Reserve System’s FedPayments Reporter Service (formerly FedEDI Plus). Of course, it never hurts to verify your processing capabilities and compliance.

Second, anticipate and be prepared to answer inquiries about your bank’s ability to process healthcare pay­ments and provide the supporting payments-related information. Be proactive in communicating your capabilities to your customers, and make sure they know they must request delivery of the reassociation trace number from the bank.

Third, expect additional changes to the NACHA Operating Rules to further enhance the ACH network’s capability to process healthcare payments and the payments-related information. Regional payments associations are an excellent resource for staying abreast of developments. Be sure your processing partners incorporate these changes.

Finally, keep in mind that the impact of electronic healthcare pay­ments on your bank depends on the specific services you offer. Although the HHS interim final rule confirms an exemption for banks performing CCD+ transactions, banks providing services that go beyond originating or receiving a healthcare CCD+ transaction should consult with legal counsel to ensure compliance with HIPAA.

About Viveca Ware

Viveca Ware is senior vice president of regulatory policy for ICBA.  Before joining ICBA more than 20 years ago, Ware served in various management positions at Southwestern Virginia Community Bank. She is the recipient of the Department of Treasury’s Certificate of Appreciation for Distinction in Payments Management.