By Dave Stair, Director of Insurance Payment Solutions, DataPath
In 1681, a cash-strapped Boston businessman was the first American to issue a check. Desperate for money, the man mortgaged land to a fund and wrote checks against it. More than three centuries later, check writing and related forms of payments, like EFT, have seen major technological changes. While these have been the go-to methods for reconciling workers’ compensation provider payments, 21st century challenges are putting these once tried-and-true methods to the test.
One of the biggest challenges? Increasing claim complexity.
In 2012 alone, workers’ compensation medical payments increased to $30.8 billion. This increase has largely been due to a rise in injury severity, which means more provider payments to manage—a time-consuming, costly and error-prone endeavor. In fact, some payers issue as many as 200 checks to a single provider per week (one check per claim). These challenges, along with increasing administrative costs, make it more difficult for workers’ compensation payers to navigate claim payments.
Checks: Clumsy, time-consuming and expensive
Manual check writing is proving to be a clumsy and time-consuming payment method. As claims become more complex, payers find themselves issuing thousands of payments, each with an Explanation of Benefits (EOBs) attached, to an increasing number of providers. EOBs ensure appropriate application of payments and are a mandatory component of all provider payments. Payers rely on checks because it’s easy for them to attach the EOB, making it simpler for providers to reconcile them. However, without a streamlined audit trail, paper EOBs are hard to track and require payers to go to greater lengths to reduce the opportunity for missed, duplicate or incorrect payments. Manual processing also lacks transparency, making it harder for workers’ compensation payers to track which providers they are paying, what they’re paying them for, and at what frequency and cost.
Check writing is also an expensive payment method. According to an AP Automation Study published by the Institute of Financial Operations in 2013, check processing alone can cost $1.61 to $8 per transaction. On top of processing and postage fees, the potential for lost or late checks adds to claim costs. Even if a payment is received on time, increasingly complex claims mean more time spent depositing and processing payments—a waste of valuable resources.
Even more concerning, check writing makes sensitive deposit account data information vulnerable to fraud. According to the 2015 AFP Payment Fraud Survey, checks remain the most-often targeted payment method by those committing fraud attacks. As data breaches and corporate fraud continue to rise, it’s essential to put more stringent controls on provider payments.
EFT: Potential for payment duplication and hidden fees
While it’s more cost-effective to use EFT, challenges still exist with this form of payment. In addition to many of the downsides of check writing, other hurdles with EFT payments include incorrect distribution, potential duplication of payments, delays in posting, and hidden processing fees (sometimes per transaction). Though EFT payments do alleviate some of the administrative burdens that come with checks, EOBs still need to be mailed or a portal needs to be created to view them. Additionally, EOBs and EFTs are not integrated, making missing EOBs and duplicate payments all-too-common occurrences.
Since EFT payments require bank information to be collected and relayed, payers need to consider the possibility of internal fraud—an issue that is also on the rise. Payers are putting themselves at risk for employees creating false provider accounts and sending EFTs to their personal bank accounts.
Finding a solution in virtual payments
Moral of the story? Check writing worked for 17th century Bostonians, but hasn’t aged gracefully, especially when it comes to reconciling workers’ compensation payments. Even EFT, the check’s more technologically advanced cousin, is being put to the test.
To combat the challenges posed by check writing and EFT payments, payers are beginning to explore alternative payment solutions. One particularly promising option is a centralized virtual payment solution. Virtual payments systematically streamline the revenue cycle by using a portal to automate payments. This makes it easier to attach and reconcile EOBs.
Registered providers use a unique transaction code to process reimbursements through their existing point-of-service (POS) card terminal, avoiding the cost and time associated with traditional check writing and EFT payments. Payments can be batched – with easy access to all EOBs – through the portal for reconciliation, giving payers more transparency into the specific treatments and services administered. By taking steps to streamline the revenue cycle, payers will eliminate errors, curb administrative expenses and increase transparency.
About Dave Stair
With more than 20 years of experience in the insurance market space, Dave Stair has a long history of successfully providing service and business development in workers’ compensation. Throughout his career, he’s worked in sales management and business development, specializing in providing managed care, claims adjustment and fraud prevention. He has played a vital role in providing payment solutions for insurance carriers, workers’ compensation and group health TPAs, and self-insured/self-administered employers nationwide. Today, he serves as the Director of Insurance Payment Solutions at DataPath, overseeing the development of the RenewCard and Provider Payment solutions.
Little Rock-based DataPath has created flexible financial and administrative solutions since 1984. DataPath’s workers’ compensation solutions include secure, card-based indemnity payment processing and a provider payment offering that makes it easier to distribute and track payments for workers’ compensation medical services. Learn more at www.dpath.com.