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Next-gen provider payment-processing solutions lower cost: those paper-based lockbox solutions are a thing of the past.


The costs of managing day-to-day payment collection through a traditional lockbox service can take a significant piece of the practice's overall revenue. For many practices, it's understood that these costs are substantial, but there is not very much transparency. Studies indicate the average cost of managing a single payment from a payer is nearly $3 for a paper check and $1.48 for an electronic payment. Processing explanation of benefits (EOBs) and reconciliation can result in costs of $6 to $8 dollars per payer payment, with similar costs coming during the collection of patient-owed balances. Even the smallest practice will likely bill thousands of annual encounters every year, so the payment process can add up very quickly.

Traditional lockbox services utilize a post office box for payment receipt, which is then deposited into an account owned by the provider. These services might scan some documents, but many of them send along the paper originals to the provider so they can be manually filed. In either case, the provider still needs to post payments and perform the line-by-line reconciliation. Such services are a decent step toward a fully electronic system, but they do not provide enough efficiency gains for the practice.

There exist significant opportunities to improve upon lockbox services that introduce real automation into the process, so providers no longer face the costs of manually posting and reconciling payments. For payment processing, what are the key ingredients of a "next-generation" solution? It begins with an accurate conversion engine that turns paper-based EOBs into an X12 835 format that is easily accepted by the provider's practice-management and hospital information systems. Then comes the transmission, where the converted file is sent via a clearinghouse to the provider electronically, followed by file importation into the same system and automatic posting of deposits. Reconciliation in a next-gen environment occurs automatically and provides one of the greatest sources of time savings compared to traditional paper solutions.

Electronic-based data does not hold value unless there is a reporting feature. Next-gen solutions should feature an online dashboard that provides real-time analysis to keep providers informed of any trends. Alerts should also be incorporated that flag over- or under-payment issues. Scanning in such a solution should not be relegated to just claims. Payer correspondence, notes and various inquiries should also be scanned, and all of these images should be batched together and electronically sent to the provider. Top-tier payment-management solutions will index all payments and correspondence for future reference. This capability allows the practice to complete many tasks. For example, they can quickly locate a past primary claim if a secondary claim is received. If patients call into the office inquiring why more of their service was not covered, the staff can easily pull up the past EOB to provide answers. For management, indexing allows historical analysis of payer trends to encourage more refinement of processes and to spot any outliers.

Conversion of EOBs and other documentation to an X12 835 format is important because it provides the practice with a truly digital workflow where there are no longer disconnects in the data. In most instances, paper-based EOBs are still being mailed, because payers are not yet producing these transactions in the X12 835 format. With traditional paper EOBs, the payment-processing entity must gather them from the payer and then sort through the EOBs in order to reconcile the payment and manually process the check. This process is a line-by-line ordeal that introduces a massive risk for error and simply requires too much time. With paper EOBs, there is no chance for analysis of the practice as a whole because the data is not electronic, and therefore can't be aggregated into a larger piece of sortable information.

After careful review of next-gen solution providers and implementation, one should be selected that will present several core benefits to the practice. A substantial reduction in staff should be quickly realized, as mail handling and the posting and reconciliation of deposits will all be automated. Various overhead costs will decrease, including physical space to archive EOBs and other correspondence, office supplies and, of course, the salaries and benefits cost savings of fewer employees. More efficient processes will positively change the practice's entire revenue cycle, with faster and more accurate reconciliations. A savings of $2 to $3 per check is reasonable. For a smaller practice with 500 payer checks a month, this translates into upwards of $18,000 per year in direct savings.

There are some caveats for practices that are looking to integrate a next-generation lockbox solution. It's vital to do a thorough review of the software vendor to be sure the system will be a real step forward for the practice and that it actually produces the desired results. Some solution providers have stated they can easily convert paper EOBs and other documentation to electronic versions, but they are buggy and might not offer all of the required functionalities. It's vital to review the solution provider's technology that converts paper to electronic EOBs and how they relate those remittances back to the claims and bank deposits. This needs to be a seamless loop in order for the practice to realize the maximum gains from a next-gen payment collection solution that improves efficiency and boosts the revenue cycle.

Jim Lacy is CFO and counsel for ZirMed. For more on ZirMed:
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Title Annotation:RCM: Financial Info Systems; generation
Author:Lacy, Jim
Publication:Health Management Technology
Geographic Code:1USA
Date:May 1, 2012
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