Medical Banking

Medical banking is concerned with the utilization of the banking systems to enhance the efficiency of the healthcare sector. It involves integration of banking process and healthcare value chain to decrease costs, enhance access and streamline the healthcare delivery.

Several processes such as payment of premiums by consumers, claims submission by the provider, and claims checking could take time and involve paperwork. The medical banking method looks at managing processes through electronic means by using the existing banking systems.

Medical banking also protects medical records pertaining to a consumer through electronic means that is in the bank’s custody.

Financial institutions offer services such as lock boxes, ERAs, EFTs which enhance the efficiency of healthcare financial transactions.

ERAs and EFTs facilitate automation of billing and accounts receivable systems. Under scenarios where the payment/remittance cycle relies on a paper-based manual process, financial institutions provide lock boxes, which facilitate check clearance on the day it is received, thereby decreasing the duration that the funds are in receivables.

Several customer-centric financial institutions are providing additional value to providers by developing digital image lock boxes.

The growth of consumerism, the requirement for related consumer-oriented tools, banks, and financial institutions have contributed to the consumer-oriented health care. This played a pivotal role in the development of medical banking.

In the recent past, health care stakeholders have been using the banking sector’s business processes, systems and assets to efficiently manage the increasing health care costs. There is a focus on facilitating improved coordination between payers, financial institutions, and providers.

The expansion of this model would be based on evolving requirements and priorities of the health care sector.

According to experts, in the coming years, the health care consumerism, the structures related to it, and the identification of opportunities to reduce administrative costs & enhance efficiencies would spearhead the model. Financial institutions that comprehend this would become dominant in the sector.

As per a report by the University of California, “Administrative costs accounted for 25% of healthcare spending in the United States – or approximately $230 billion annually”.

Healthcare sector must be more effective to ensure customer retention, and thereby stay in business. A lack of efficiency in the healthcare delivery and financing systems is also adding to the high administrative costs.

According to the healthcare actuarial firm, Milliman and Robertson (M&R), “The average cost to providers to process and collect on a claim is $11, ranging from a low of $8.50 to a high of $18. Also, on the payer side, the typical Medical Loss Ratio can range from 70% to 88%, signifying 12-15% administrative costs”.

Financial institutions have an effective transaction processing system. Over the years, they have constructed secure and highly networked payment systems to manage different types of payments (credit and debit cards through non-card transactions).

Consumerism is a vital upcoming concept in the healthcare sector. For banks and financial institutions, the opportunity is in the progress towards consumer-directed health plans (CDHP), by developing specific healthcare accounts – HRA, FSA and HSA.

CDHP puts the onus on the consumer to comprehend their health care requirements and use their finances appropriately. CDHP accounts financed by employers and/or members are usually supplemented by a normal health plan which has high deductibles from payers.

Consumerism has spread multiple structural needs throughout the payer sector. The members require tools to make informed decisions.

Claims could get reimbursed through various funding sources. The future of the healthcare sector depends on the improved interface between banking systems, infrastructure, and credit with healthcare administrative functions.

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