How Medical Banking Impacts Healthcare

Medical banking is one of the few options we have today that can usher in reduced healthcare costs and greater access to care. If we were to ramp up the medical complex to the current state of technological readiness exhibited by banks, it would literally take decades. The rate of spending on transaction technologies by banks has far surpassed that of care givers. The reason is obvious: the core mission of care givers is centered on clinical excellence.

Optimizing technology requires much more than installation. Organizational design strategies must coincide with this effort to gain the anticipated ROI. For care givers to attempt to do this when banks already possess superior transactions capability would be to miss a fundamental opportunity for all Americans. No other resource is better positioned to ease providers into digital community frameworks than banks. National healthcare information architecture is being heralded as the next big step for healthcare in this country. Leveraging bank resources to permanently reduce the provider's operating costs, while significantly expanding access to capital, is a critical mission and, perhaps, should be considered a national policy goal.

The Health Insurance Portability & Accountability Act of 1996 or "HIPAA" impacts many, if not all, of the institutional and/or corporate products and services designed by banks for the medical complex. Our first publication examining this issue was mailed to over 1,000 bank holding companies in 1996. Today there is a growing need to specialize banking services that meet privacy, security and transaction standards. Moreover traditional service lines, like wholesale lockbox processing, are so impacted that it is likely some banks will exit medical markets altogether. This obviously creates a niche' commercial opportunity.

The change agent? Some say HIPAA's EDI mandates. We don't think so. We can point to a string of past failures (i.e., CHINs) to illustrate this point. In fact, our research shows that it's the typical community banker who wants to help the care provider bring wide-scale improvements in medical payments efficiency. The motivation is simple: will medical banking and HIPAA help my client? Fortunately, the answer is just as simple - yes - but only if banks who want medical client acquisition and retention strategies rally behind core medical banking principles like coordinated payment and credit management and other fee rich areas.

Technology isn't the sole driver. Another portion of HIPAA, the Privacy Rule, plays a substantial behavioral role. Coupled with the critical mass adoption of cross-industry EDI point solutions, new "inter-organizational systems" are enabling community banks to assist their healthcare customers to ramp onto national digital networks. These systems will fundamentally alter the rules of competition in healthcare markets by dramatically reducing operating costs for care givers in return for recurring fees - a definite win-win for the industry.

We think this is very good for America. Employers need lower healthcare costs. Banks need fee revenues in a chronically low interest rate environment. Providers need to curtail the "paper chase" that so often frustrates the reimbursement process. Finally, consumers benefit when a bank's core competencies are leveraged by care givers.

As we progress in the medical banking areas of promise, care givers will benefit from the integration of a loosely affiliated portfolio of banking solutions that will inevitably support our national information architecture for healthcare. These networks will extend deep into our urban, suburban and rural neighborhoods to support the medical needs of our families.