What are the latest payment trends impacting the healthcare vertical? From electronic presentment and payment to mobile payments and beyond – what can we expect to see over the coming years?

1. Healthcare Payment Trends
February 17, 2011

2. Presenters
• Kunal Pandya
Senior Analyst, Health Insurance & Payments, Aite Group
• Zahoor Elahi
VP/General Manager, FIS Health & Financial Network Solutions
• Tom Torre
SVP/General Manager, FIS Consumer Directed Healthcare Solutions
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3. Actionable, strategic advice on IT, business, and regulatory issues in the financial services industry
Healthcare Payments Trends
February 17,2011
Kunal Pandya
Chicago, Ill.
© 2011 Aite Group, LLC www.aitegroup.com Page 3

4. About Aite Group
Aite Group (pronounced eye-tay) is an independent
research and advisory firm focused on business,
technology and regulatory issues and their impact on
the financial services industry.
Aite Group was founded by leading industry experts in
banking, securities and investments and insurance. It
brings together a team of business strategy, technology
and regulatory experts to deliver comprehensive, timely
and actionable advice to financial institutions and
technology vendors.
Aite Group is headquartered in Boston.
www.aitegroup.com
© 2011 Aite Group, LLC www.aitegroup.com Page 4

5. Theme
Payments trends in the healthcare market
© 2011 Aite Group, LLC www.aitegroup.com Page 5

6. Agenda
• What does the current healthcare payments space look like?
• Why healthcare payments are so complicated?
• What are the payments trends in healthcare?
• What are the emerging healthcare payments initiatives?
© 2011 Aite Group, LLC www.aitegroup.com Page 6

7. What does the current healthcare payments
space look like?
Source: Aite Group
© 2011 Aite Group, LLC www.aitegroup.com Page 7

8. Despite the size of the healthcare payments
market, it is a complex environment due to
• Lack of efficiency caused by a number of moving parts
• Major cost implications to implement IT infrastructure
• Lack of automation of the process among different stakeholders
• Strong reliance on manual processes
© 2011 Aite Group, LLC www.aitegroup.com Page 8

9. Issues that are creating a compelling
argument to streamline the healthcare
payments system
• Increase in bad debts at provider offices
• Lack of transparency in pricing
• Rising processing costs
• Liquidity issues with providers and prioritized A/R functionality
• Increase in the rate of over-treatments
• Rising cost of healthcare premiums
• Lack of best practices
© 2011 Aite Group, LLC www.aitegroup.com Page 9

10. Why are healthcare payments so
complicated?
At its core, the payment process is simple, as seen below.
Member receives Provider service RA Private Insurer
service
or
Gov’t.
PAYMENT
Provider bank
Source: Aite Group
© 2011 Aite Group, LLC www.aitegroup.com Page 10

11. Actual healthcare payments process
Member information
Payment information
Explanation of benefit (EOB) / Check for manually submitted
Claim information
claims
Customer
service
Member service Eligibility, claims status
and referrals
Provider service
Paper UB92, HCFA 1500 -
Member receives Private Insurer and
service Provider Service and government
837i/p/d -
Practice management membership, billing,
Makes co-payment only HIPAA EDI /
systems (PMS) 27x * managed care,
Clearinghouse medical mgmt and
ACH payment 835 ERA – claims adjudication
systems
Paper RA and Check –
lockbox
National Council for
Prescription Drug Program
(NCPDP)
HIPAA EDI /
Clearinghouse
Real-time point of service
(POS) transaction
Pay by mail
(PBM)
Source: Aite Group
© 2011 Aite Group, LLC www.aitegroup.com Page 11

12. What are the prominent payments trends in
healthcare?
• Payer-to-provider payments
• Patient-to-provider payments
• Consumer-directed healthcare payments
© 2011 Aite Group, LLC www.aitegroup.com Page 12

13. Payer-to-provider Payment Models
Source: Aite Group
© 2011 Aite Group, LLC www.aitegroup.com Page 13

14. Pros and cons of a payer-to-provider
payments model
Pros
• Expedited payments via EFT or ACH
• Reduced implementation timeframes since the connections are already
established
• Reduced manual processes to process a claim
• Reduced costs for payers
• Reduced payment cycle times and bad debts (improved profitability by
3 − 5 percent)
• Increased revenue potential or profitability for all stakeholders
• Advocated transparency in pricing and quality of care
Cons
• Practically no play for healthcare cards
• High level of compliance required to carry financial data
• Slow adoption rate among the smaller provider community
© 2011 Aite Group, LLC www.aitegroup.com Page 14

15. What is the market direction and who are
the key players involved?
• Total payment solutions to reduce manual paper-based processes
• One-stop shop to cater to both payments and non-payments related
transactions
Key players in the payer-to-provider market:
• Clearing houses
• Banks via medical lockboxes
• Healthcare vendors
• Card networks toying with the idea of riding their credit rails to facilitate
payer-to-provider payments
© 2011 Aite Group, LLC www.aitegroup.com Page 15

16. Patient-to-provider payments models
Source: Aite Group
© 2011 Aite Group, LLC www.aitegroup.com Page 16

17. Pros and cons of a patient-to-provider
payments model
Pros
• Expedited payments via automated payments options
• Large market reach among the banks, card processors and card
networks
• Payment estimation capability
• Improved tracking mechanisms for all stakeholders
• Reduced redundancy in paperwork
• Increased revenue potential for all stakeholders
• Increased efficiency of payment cycle times and lower bad debts
• Advocated transparency in pricing and quality of care
• Reduction in bad debt of post adjudication transactions at providers
Cons
• Inexperience in undertaking healthcare transactions
• Compliance with HIPAA and PCI guidelines
• As of 2008, 30 percent of the smaller providers do not have the
capability to process a card payment
© 2011 Aite Group, LLC www.aitegroup.com Page 17

18. What is the market direction and who are
the key players involved?
• Line of credit and payment plans options
• Refund processing on overpayments
• Value-add or a module directly linked to their practice management
systems
• Value-add service provided by payers
Key players in the Payer-to-provider market:
• Banks via partnerships or existing card solutions
• Healthcare vendors and payments processors
© 2011 Aite Group, LLC www.aitegroup.com Page 18

19. CDH payments
Source: Aite Group
Includes estimated percentage of each
account type in the CDH market,
provider acceptance rates, average
annual visits and CDH cards tied to
each account type.
© 2011 Aite Group, LLC www.aitegroup.com Page 19

20. CDH payments estimations
Source: Aite Group
Includes all card transactions i.e.,
Includes 1% LOC transactions starting
debit, credit and prepaid
in 2011 for HSAs
© 2011 Aite Group, LLC www.aitegroup.com Page 20

21. CDH payments estimations
Source: Aite Group
Based on the average annual Estimated value of average cost per
expenditure for CDH accounts (approx. encounter and total CDH financial
$2,082) in 2008 and average number transactions
of visits
© 2011 Aite Group, LLC www.aitegroup.com Page 21

22. Pros and cons of a CDH debit card solution
and the key stakeholders involved
Pros
• Expedited payments
• Multi-pursing
• Reduced payment cycle times
• Tools to track and manage healthcare transactions
• Improved healthcare spending decisions through payment estimators
• Real-time eligibility
• Reduced bad debts
• Created transparency in pricing and quality of care
Cons
• Questioned longevity of accounts with change in administration (esp.
FSAs)
• Complex guidelines governing debit cards (e.g., IIAS, PCI, Reg E)
Key stakeholders involved in the CDH model: banks, payers, payment
processors, third-party administrators, providers, CDH vendors,
employers and consumers.
© 2011 Aite Group, LLC www.aitegroup.com Page 22

23. What is the market direction and who are
the key players involved?
• Real-time adjudication
• Line of credit options
• Payment plans
Key players in the CDH market:
• Banks
• Payments processors
• CDH vendors
© 2011 Aite Group, LLC www.aitegroup.com Page 23

24. What are the emerging healthcare
payments initiatives?
• Provider accounts receivables and accounts payable solutions
• Healthcare premiums generated by “exchanges”
• Prepaid card initiatives especially for pharmacy payments from solution
vendors such as SWIFT, Green Dot etc.
© 2011 Aite Group, LLC www.aitegroup.com Page 24

25. Key takeaways
• Interest is rising among the provider community to adopt provider
revenue cycle management tools provided by banks, healthcare vendors
and clearing houses
• CDH market is growing at a steady pace with an anticipated increase in
the gross dollar volume of transactions via debit card to be approximately
$66 billion by YE-2012
• Greater emphasis on developing new products around provider A/R and
A/P solutions
• Increase in curiosity to manage the underpinning premium money
movements in “exchanges”
• Prepaid cards are being used primarily for pharmacy transactions
© 2011 Aite Group, LLC www.aitegroup.com Page 25

26. Healthcare Payment Trends
Payer-to-provider Payments

27. FIS − A Market Leader
30,000+ employees worldwide
More than 40 years of market leadership
and $5 billion in 2009 pro forma revenue
Member of the Standard & Poor’s (S&P)
500 index
No. 1 technology provider to the global
financial industry
More than 14,000 clients in over 100
countries
25 strategic operating centers outside the
U.S.
Clients include 9 of the top 10, and 40 of
the top 50 global banks
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28. FIS − Strategic Focus in Healthcare
• Healthcare Payments Solutions Division created in 2006 to
create a seamless consumer healthcare experience
• Leverage core financial institution solutions
• Investing in Strategic Acquisitions
− BenSoft
We Are an Industry
Leader − Printing for Systems (PSI)
− Medibank (MBI)
− AdminiSource
− CapMed
• Participate in the CAQH / CORE; ABA/ABIA HSA Council
• Leader in SIGIS and IIAS Initiatives
• 60 million healthcare ID cards created in 2010: No. 2 Market Share
• More than 10 million benefit payment cards: No. 1 Market Share
• Over 190 financial institutions utilizing HSA Solution
We Provide Mission • Over 550,000 HSAs processed
Critical Solutions • Over 1 million CDH accounts administered
• 7 million healthcare authorizations per month
• More than 230 third-party administrator clients
• Over 90 health plan clients
• Over 155 TPAs use BenSoft full flexible benefits platform
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29. Healthcare Reform: H.R. 3590

30. News Update….
Health spending rose to
a record 17.6% of the U.S.
Press Release dated, Friday, Oct. 8, 2010
economy in 2009 − an
increase of 4% from 2008
The NCVHS recently sent a letter to Secretary Sebelius, Department of Source: Wall Street Journal, January 7, 2011
Health and Human Services (HHS), advising that CAQH CORE meets
the requirements as the authoring entity for operating rules for non-
retail pharmacy-related eligibility and claim status transactions
outlined in Section 1104 of the ACA.
Health and Human Services
Secretary Kathleen Sebelius
said she and the president
realize the program is
"certainly far from perfect.”
Source: Wall Street Journal, February 08, 2011
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31. Timeline – Administrative Simplification
Transaction Set Adopted Effective Penalty *
Eligibility (270 / 271) July 1, 2011 Jan. 1, 2013 Jan. 1, 2014
Claims Status (276 / July 1, 2011 Jan. 1, 2013 Jan. 1, 2014
277)
EFT / ERA (835) July 1, 2012 Jan. 1, 2014 Jan. 1, 2014
Medicare EFT July 1, 2014 Jan. 1, 2015 Unknown
Member Services * July 1, 2014 Jan. 1, 2016 NA
Emerging Trends:
• H.R. 3590 mandates that all payers of healthcare claims, have the ability to
deliver the payment via EFT and remittance via ERA (HIPAA 835).
• Payers will need to be certify compliancy by January 2014.
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32. Claim Payment Evolution

33. Medical Spend Will Prioritize Change
Post adjudication
claim payments –
largely paper
today
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34. Post Adjudication Payments − Today
Emerging Trends:
• Movement away from paper checks / remittances – VERY SLOW
• Multi-payer enrollment and presentment of EFT and ERA / 835
• Growing usage of HIPAA compliant codes and the 835
• Pre payment fraud and abuse screening and detection
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35. Post Adjudication Payments − Future
Emerging Trends:
• Single “rail” system for both the EFT / ERA
• Vendor agnostic, EFT provider enrollment hub
• Calculation and distribution of payer and patient liability – single
payment
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36. Healthcare Payment Trends
Consumer Directed Healthcare

37. Consumer Technology Platform
Accounts
Accounts
FSA
Payments
HRA Card, Bill Pay,
ACH, Check
HSA Consumer Portal and Mobile
Personal Account
Provider
Wellness and Rewards
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38. Consumer-driven Healthcare Payment
Trends
• CDH Payment Solutions are relatively mature
• Legislative and regulatory environment having greatest impact on CDH payments
since 2003
– OTC changes
– Impact of Durbin Amendment
• Increases in HSA and HRA accounts continue
• Broader utilization of direct to provider payments from a CDH account
• Consumer control over method of payment from their accounts
– Card
– Opt in for automatic claim payment
– Online Bill Pay
– Mobile
• More interest in the use of Health Risk Assessment (and related tools)
– Linked to cash payments to a CDH account
– General use funds
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39. Questions & Answers

40. Thank You
Kunal Pandya, Senior Analyst – Healthcare, Insurance & Payments, Aite Group
kpandya@aitegroup.com
Zahoor Elahi, VP/General Manager, FIS Health & Financial Network Solutions
zahoor.elahi@fisglobal.com
Tom Torre, SVP/General Manager, FIS Consumer Directed Healthcare Solutions
tom.torre@fisglobal.com