Key Healthcare Banking Technology Components We’re Watching

Key Healthcare Banking Technology Components We’re Watching
In preparation for Celent’s upcoming Innovation & Insight Day (June 3 in NYC — see the previous blog post), fellow analyst Jacob Jegher asked me to think about the key technological components of Healthcare Banking. I was able to very quickly come up with a list of the goals that any such technology will need to support and which we will be watching closely:
  • The ability to move patient collections forward in the care delivery process
  • Seamless enrollment and ease-of-funding to scale out for the growing HSA market
  • Conversion from paper-based to electronic transaction data in the healthcare B2B (payer-to-healthcare provider) space
  • The tying together disparate financial and healthcare data, including account balances, transaction history, EOBs, PFM (personal financial management)-like expense tracking and projection, wellness program completion levels and personal health records (PHRs)
  • Integration with healthcare providers’ incumbent systems and hardware
During the week of May 11, I will be on the road, speaking with quite a number of banks involved in the healthcare banking space — I find that part of being an analyst is being a good listener, and I’m sure I will hear about some things that I will add to this list. And of course, I would welcome any additions contributed by the readers of this blog!

Whither Mobile Healthcare Banking & Payments?

Whither Mobile Healthcare Banking & Payments?
Over the past weeks, I have been increasingly intrigued about the convergence of healthcare and mobile technology. Through various published articles and vendor briefings, it is apparent that it will only be a matter of time before the healthcare space (which is relatively slow to adopt new technology) will present an opportunity for mobile phone-based features. Various applications of mobile technology in healthcare have already been piloted or launched. Of these, two consumer-facing tools have caught my attention (although I’m sure there are many more out there). The beauty of the first mobile tool is its simplicity. Specifically, it is the use of SMS/text messaging to send reminders to patients to do a number of things; take/refill meds, schedule an appointment, check blood glucose levels or even go for a 15-minute walk. Two-way text messaging could be used to ask for self-administered blood pressure readings. Chronic disease and control of it are often behavioral-based, and reminders can be valuable disease management aids. The second mobile tool is access to EMRs (electronic medical records) or PHRs (personal health records). EMRs and PHRs have been in the news quite a bit lately, as they are a core focus area of President Obama’s healthcare reform efforts. Although there has been some debate about EMR/PHR cost effectiveness, reports from healthcare providers are beginning to indicate that such records do indeed increase efficiencies and decrease error. Although medical record access through computer terminals will be the norm, mobile phones would be a natural technological extension, allowing access nearly anytime, anywhere. Such access may mean life or death in some emergency situations. Despite these clear paths to healthcare/mobile convergence, the union of healthcare and mobile banking & payments is still murky. It is likely that mobile healthcare banking will mirror the general mobile banking space — i.e., it will be a mixed bag. In other words, mobile healthcare banking will gain traction or spin its wheels where retail mobile banking has already done so. That is, mobile healthcare banking will likely be adopted for informational purposes, such as looking up balances and transaction histories. However, things will be much different for mobile payments. As is the case in the mobile retail payment space, usage will be anemic given that business models have yet to be defined and that it is not entirely clear how mobile payments would be advantageous to merchants (i.e., healthcare providers) and banks (i.e., HSA custodians/administrators). My view is that mobile healthcare payments will be used far less than any mobile retail payments, given that that low-value transactions and mobile coupons (the oft-cited targets of mobile payments) do not apply.

Better Than A Surly Receptionist

Better Than A Surly Receptionist
While checking in at the airport earlier today, I was reminded of some conversations that once took place at a former employer. While working for a major HMO on the West Coast years ago, I was involved in discussions about how to reduce the number of front-office staff at hospitals and medical centers. At the time, there was some futuristic planning about replacing a portion of the workforce with kiosks. I am now beginning to wonder if the future is beginning to come into view. Last week, NCR published survey results that reported that, “62% of consumers are more likely to choose a healthcare provider that offers the flexbility to interact via online, mobile, and kiosk self-service channels versus a provider that does not.” I found this totally believable; few of us (who are sick and generally unhappy when we visit a provider) relish the interaction with medical support staff (who are often over-worked and deal with annoying patients all day). For patient and receptionist alike, kiosk technology could be a win-win. More importantly, kiosks would be extremely beneficial for providers. As those of you who read Celent’s report “The Retailish Future of Patient Collections” already know, many providers are doing a miserable job at managing the patient revenue cycle management (RCM) process. With a swipe of a healthcare ID and/or payment card, kiosks could automate the RCM process, especially the steps of registration, insurance eligibility verification and collections (including “right-time” adjudication). Sound far-fetched? 1o years ago, airport kiosks seemed far-fetched as well. If healthcare is to become more “retailish” as Celent firmly believes, kiosks will likely be part of the infrastructure.

The “Davids” of the HSA Market

The “Davids” of the HSA Market
I recently attended an credit union roundtable session that focused on the health savings accounts (HSAs). This was my first professional exposure to the credit union industry, which introduced me to an entirely new lingo including “SEGs” (Select Employer Groups), “dividends” (interest) and “CUSOs” (Credit Union Service Organizations). By talking with the roundtable participants, I came to respect their dedication to their communities, something that I often find missing when I talk with bankers. Whereas banks try to “go wide”, credit unions often don’t have that option and instead try to “go deep” by offering more services to their customers (I even heard a story of a credit union that opened a used car lot to sell discounted automobiles to its customers!). The credit unions also won my respect in the healthcare banking context. The number of credit unions that offer HSAs is increasingly rapidly — from 244 in Dec ’06 to 585 in Dec ’08. During the same period, HSA assets grew from $53 million to $139 million. However, in a growing HSA market, the threat of the credit union industry “Davids” would appear to be of little concern to the bank industry “Goliaths”. After all, credit unions only hold about 2% of HSA assets market-wide. Howevever, embedded within the credit unions’ success, there is a cautionary tale for banks. As the HSA market matures and account holders become more aware of their portability options, any rollovers between credit unions and banks will largely flow one way — to the credit unions. The reason for this is the community presence that credit unions hold. All else being equal, account holders looking to rollover a more prone to choose a local financial institution over a remote one. However, all is not always equal, including interest rates, which are often higher at credit unions. Combined, these factors will likely work to credit unions’ advantage. Proof of this is already emerging; one of the roundtable participants announced that it had won a rather significant block of account holders away from one of the largest HSA custodial banks in the country. David’s slingshot is beginning to hurt…

The Premature Reports of HSAs’ Demise

The Premature Reports of HSAs’ Demise
With the election of Barack Obama, there was much discussion about the overhaul of the U.S. healthcare system, a conversation which continues in earnest today and will likely go on for months, if not years. Many policy and industry analysts stated that under the Obama administration, the U.S. would move to a European-style single-payer system and that we would see the end of consumer-directed healthcare (CDH) plans (i.e., higher deductible plans coupled with tax-advantaged medical spending accounts). As a result, some declared, health savings accounts (HSAs) would soon go the way of the dodo bird. As a healthcare banking analyst, I watch healthcare policy from the sidelines, not from the middle of the playing field. However, I must say that in my research of President Obama’s policies as well as of state (e.g., Massachusetts) health care reform, I have never come across any indication that CDH plans are off the table. Furthermore, there does not appear to be any serious discussion about moving to a single-payer system anytime soon. Importantly, there are rumblings in Washington that health care benefits should be taxed to help pay for health care reform. This means that your employer’s health care subsidies (e.g., the portion of your health insurance premium paid by your employer) may begin to be taxed. Such a move would certainly drive more consumers to adopt CDH plans, as such plans have lower premiums and thus would be subject to less tax. More CDH plans = more HSAs, and the dodo bird analogy becomes untenable. However, all is not 100% rosy for HSAs. Many employers contribute to their employees’ HSAs; as health care benefit taxation details are still sketchy, it’s hard to say if such contributions would be taxed too. If so, this would mean very bad news for health reimbursement arrangements (HRAs), which are medical spending accounts that consist solely of employer-provided funds.

Did Anyone Catch The Tail-End of President Obama’s Address?

Did Anyone Catch The Tail-End of President Obama’s Address?
UPDATE: I posted to the Celent blog while eating breakfast this morning on the West Coast. Evidently, great minds think alike, as the NYT also put out a related article today (I swear I didn’t know the NYT piece was out). The NYT provided a much better description of USAs: http://www.nytimes.com/2009/03/07/your-money/07money.html?hp Last week, I’m sure that many of you watched President Obama’s Address to the Joint Session of Congress (i.e., his de facto State of the Union Address). Toward the very end of his speech, the president made the following statement: “To preserve our long-term fiscal health, we must also address the growing costs in Medicare and Social Security. Comprehensive health care reform is the best way to strengthen Medicare for years to come. And we must also begin a conversation on how to do the same for Social Security, while creating tax-free universal savings accounts for all Americans.” Tax-free universal savings accounts? Intrigued, I did some web research. Most details about universal savings accounts (USAs) originate from the early-2000’s and suprisingly come from conservative/libertarian sources (e.g., The Cato Institute). The main components of proposed USAs include the following:
  • Eligibility for all U.S. citizens, regardless of employment status
  • A contribution limit of the greater of $10,000 or 50% of taxable income
  • Distributions can be made tax-free after 3 years
  • Savings can be invested in stocks, bonds, money market accounts, etc.
To put it simplistically, a USA is basically an un-shackled IRA, designed to ease the pain of the impending Social Security crisis. I can’t help but think that President Obama “channeled” the Bush Administration when he mentioned USAs. Nonetheless, banks need to keep their eyes on any USA proposals, as there are certain to be implications and opportunities in terms of deposit growth, investment management, distribution tools (e.g., payment cards), customer service, reporting, etc. Interestingly, the health care policy space has proposals for its version of a USA; a Universal Health Account, or UHA. More on that in a future blog post…

HSA Benchmarking, The Recessionary Version

HSA Benchmarking, The Recessionary Version
As financial institutions in the healthcare banking space know well, Celent launched its semi-annual HSA benchmarking exercise in 2008. We initiated this benchmarking in response to the lack of truly meaningful HSA performance data — i.e., data that would enable banks to assess their own HSA programs vis-a-vis those of their peers. The first benchmarking round took place in the Spring, and was certainly ground-breaking in its scope. As the HSA market began to mature slightly and consumers’ experiences became more of a concern, we improved the benchmarking in the Fall 2008 by gathering data about customer service performance; e.g., calls per account, % of calls directed to live customer service reps, first-call resolution rates, etc. Then came the recession. Just after our last benchmarking questionnaire was sent out in August, the stock market tanked, monthly lay-off numbers began rolling in by the hundreds of thousands, and the U.S. government declared that we were “officially” in a recession. This and the banking sector’s focus on deposit growth/retention has had a definite impact on our HSA benchmarking design. To design our next (Spring 2009) round, we spoke with many benchmarking participants, asking them about changes/additions that they’d like to see, given the current economic environment. Based on these discussions, it became clear that HSA account profiling and retention data are in much higher demand. As such, the next benchmarking round will collect an expanded set of data that will result in the most relevant HSA information yet, including account aging, account closures, spenders vs. savers vs. investors, etc. Once the results are in, it won’t be surprising if we learn that HSA balances have stagnated or dropped, given unemployment and deteriorating investments. For those HSA custodians/banks interested in Celent’s next round of HSA benchmarking, there’s still time to participate — please contact Steve Nawrocki for more information.

The 2009 Big Story In Healthcare Banking?

The 2009 Big Story In Healthcare Banking?
As many of our clients are aware, much focus in the healthcare banking industry has been on the advent of tax-advantaged medical spending accounts, especially HSAs (health savings accounts). The current economic crisis has only intensified this focus, as HSAs are seen as a relatively low-cost approach to building and retaining deposit bases. In fact, later this year, Celent will conduct research about the role of HSAs to grow deposits, so please stay tuned. However, my discussions with industry players are revealing that there might be just as an important (if not more important) “big story” in healthcare banking this year. Specifically, I’m referring to revenue cycle management of patient out-of-pocket expenses and what solutions the industry will offer to help healthcare providers collect from consumers of all economic brackets. A quick, back-of-the-envelope calculation highlights the fact that collections deserve at least as much attention as HSAs from the healthcare banking industry. In early-2008, it’s safe to assume that there was about $4 billion in HSA deposits (just run with me on this one, if you’d like to challenge this assumption, feel free to contact me). On the other hand, the Center for Medicare and Medicaid Services (CMS) estimated that 2008 out-of-pocket expenses totaled $282 billion. Keeping in mind that in general, healthcare providers only collect about 50% of what is owed them by patients, there is a $141 billion market in improving patient collections. Put another way, this is a 35X opportunity over the HSA opportunity. Through my research, I get the sense that many players are waking up to this story — we at Celent are certainly interested in it and will correspondingly publish research. In fact, I just completed a report on this subject, so please be sure to take a look: The “Retailish” Future of Patient Collections