Financial Institutions Play Key Role in EFT Adoption and Administrative Simplification Success

BALTIMORE —The U.S. could save billions of dollars annually in healthcare costs due to administrative simplification and EFT (Direct Payment via ACH). In 2010, one-third of the $2.6 trillion the U.S. spent on healthcare covered administrative functions alone.

“Financial institutions are key to the success of administrative simplification initiatives and electronic funds transfer adoption in the healthcare industry,” said Matthew Albright, lead health insurance specialist at the Centers for Medicare and Medicaid Services, at NACHA’s PAYMENTS 2012 annual conference earlier this month.

“The potential savings are substantial.”

According to Albright, the success of EFT adoption and administrative simplification initiatives depend largely on financial institutions learning the “language of healthcare and engaging stakeholders in discussions around industry needs and resources,” he said. For example, a “trace number” could mean one thing to the healthcare industry and something entirely different to financial institutions as it relates to EFT.

Specific requirements of the January 2012 regulation on healthcare EFT standards, requiring health plans to use a standard format and data content to initiate a healthcare claim payment through the ACH Network, will go into effect January 1, 2014. This regulation is one of several rules that were issued or are under development to carry out Administrative Simplification mandates found in the 2010 Affordable Care Act.

“As of January 2014, health plans must use the CCD with Addenda to initiate an EFT through the ACH Network,” Albright said. He also said health plans must include the trace number segment (TRN segment), described in the Accredited Standards Committee (ASC) X12 835 TR3 standard, as the data content to be included in the CCD+ Addenda. If a health plan is transmitting payment information and remittance advice together through the ACH Network, then the ASC X12 835 TR3 is the required standard.

While the CCD+ is the healthcare EFT standard, health plans and providers could agree to use other electronic payment options, including wire transfer or cards. However, since the CCD+ is the healthcare standard, a health plan must send a claims reimbursement payment, if requested by the provider, using the CCD+ format.

Albright said the next step in administrative simplification is developing operating rules. The National Committee on Vital and Health Statistics (NCVHS) charged CAQH CORE — in collaboration with NACHA— to author the healthcare EFT and Electronic Remittance Advice Operating Rules.

“Financial institutions bring expertise in payments processing that can help the healthcare industry not only achieve administrative simplification, but could also result in innovative payments processes that will result in further cost savings,” Albright said.

View related PAYMENTS 2012 session.