Cut health costs through outsourcing

Nothing seems to raise our national blood pressure faster than ballooning health care costs. We thought managed care, health maintenance organizations and insurers' strict cost-containment policies would stem the increases, but a new Department of Health and Human Services report says those measures have peaked. U.S. health care spending stands to double from about $1 trillion today to $2.1 trillion by 2007. Fifteen to 25 percent of those costs are administrative rather than clinical.

It is time to take action against the claims paperwork, delays and disputes that inflate health care expenses. With the federal government acting as an employer that provides employee health care benefits and as a national health care insurer through Medicare, Medicaid and other entitlement programs, it is the best entity to assume a leadership role in cutting costs. To do that, the federal government should harness the considerable information technology resources in place within the banking and financial industries.

Think about it: When you make an airline reservation or check into a hotel, you know exactly what you are buying and immediately how much it costs. Thanks to your credit card, you know how much you have paid, and you already have completed the payment transaction before your plane lands.

If airlines and hotels can outsource the payment process to banks and financial institutions, why can't the government do it? Federal agencies, including the Federal Aviation Administration and the Department of Housing and Urban Development, have outsourced some administrative functions to private-sector IT infrastructures. The Office of Management and Budget's Circular A-76 has long encouraged federal agencies to outsource when private-sector services offer cost savings of greater than 10 percent compared with similar in-house operations.

The Health Care Financing Administration outsources its payment process to a number of vendors. It would be more cost-effective to streamline the procurement and operation of HCFA's payment systems by using existing, commercial off-the-shelf solutions.

Outsourcing health care administration operations to the nation's extensive - and well-financed - bank payment card network would reinvent the government-sponsored entitlement process, making it more efficient and less expensive.

As Medicare, Medicaid and other health care entitlement programs become more strained - and more precious - as the baby boomers mature, it is increasingly evident that exploiting existing expert IT resources by leveraging off-the-shelf payment systems is one solution to contain the government's burgeoning public health care administrative costs. Similarly, the Federal Employees Health Benefits Program could reduce its administrative costs with this management strategy.

The government could receive significant and tangible bottom-line payoffs from outsourcing its health care administrative services so that federal employees and Medicare and Medicaid recipients could use bank- and financial institution-backed payment cards.

Currently, in only about 40 percent of all patient visits can the amount of insurance coverage be determined in the doctor's office at the time of the visit. The remaining 60 percent of patient visits await insurers' claims determinations for payment - a process that can delay collections for six weeks or more. Health care industry sources estimate that the billing and collection cost for a single co-payment is $10 to $15; the average collection time is 45 days.

By using a patient payment card coded with health care ID information, a health provider could gain instant, on-site access into an eligibility database that would quickly and accurately determine what is covered for that patient. The provider then would receive payment within 48 hours.

Credit cards already are widely accepted by about 95 percent of the nation's hospitals and about 82 percent of multiphysician practices, making the introduction of payment cards easy.

Imagine: A speedy, well-managed, already-capitalized method of slashing health care administrative costs could be as easy as scanning a payment card. Sounds like a prescription to lower our national blood pressure.

-- Stern is vice president of government partnerships for onehealthbank.com, a company formed to bring payment card technology to the health care market.

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