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