Female secretary in a medical office using a computer to process insurance payments.

Easing Payment Friction Between Healthcare Providers and Insurers


How intelligent data automation can help with reducing costs and streamline processing for healthcare providers.

For most healthcare providers, processing insurance claims is a huge administrative burden. From a payment perspective, once they have submitted a claim for a patient, they must reconcile the insurance payer’s response with the payment arriving separately at their bank and determine whether they need to pay a refund to the patient for excess payments made at the time of service. A 2023 study by research firm CAQH found that a staggering $89 billion is spent by healthcare providers on their administrative tasks.

Complicating matters, the provider and the insurer often have sharply different agendas. "There is an inevitable friction between healthcare providers and insurance companies," says Adam Keck, Director of Managed Services for Fifth Third Bank. "The providers want to accelerate payment from the insurers, while payers often create administrative challenges that slow down the process."

A High-Cost Pain Point

The payment reconciliation process is a major pain point for providers. Matching bank deposits with a remittance advice can be a manual and costly process. Until the payment can be reconciled, it is difficult to post the payment to accounts receivable (A/R) and gain a view into how much revenue has been collected. As a result, A/R at healthcare provider organizations is widely considered the most complicated A/R process of any industry. In fact, according to the CAQH study, medical providers spend $2.46 billion a year just on reconciling those transactions.

Handling refunds can be an additional challenge for providers. Issuing paper checks is expensive and labor intensive. According to an estimate in the ABA Banking Journal, the publication of the American Bankers Association, issuing and processing paper checks costs between $4 and $6 each. Storing patient financial information to make the refund creates an additional burden.

Why Reconciliation Can Be Such a Time-Consuming Effort

The reconciliation process can be daunting. To send a claim to an insurer or an insurance clearinghouse, a healthcare provider transmits an 837 file, which contains details of the patient’s visit and treatment provided using CPT codes created by the American Medical Association and standardized ICD-10 diagnosis codes to identify treatments. The insurer responds by sending an electronic remittance advice called an 835 file as well as a separate payment to the provider’s bank.

The difficulty comes in matching the payment that is received at the financial institution with the remittance advice. "Often the payment and statement come at different times, on different payment rails, or the amount is different from the initial claim," says Keck. "When an exception occurs, there is more work reconciling the two. This can lead to high administrative expenses for the provider."

Unposted Cash Can Be a Big Liability

Failure to reconcile the payment with the remittance advice presents a major problem for the provider. When a payment is not reconciled, it cannot be accurately posted to A/R. This unposted cash makes it difficult for the provider to accurately report revenue, project future earnings, or understand its financial health. Working capital could be affected.

The 2023 CAQH Index Report gave detailed estimates of how much providers can save by adopting digital solutions to accomplish these tasks. It noted, for example, that providers could save $803 million on payments and $1.02 billion on remittance advice by full adoption of technology in the reconciliation process.

While many healthcare organizations have advanced electronic medical record and revenue cycle management systems, they often don’t provide the technology and flexibility to accomplish sophisticated accounting tasks such as splitting reconciled payments by healthcare facility or physician specialty.

The Solution Is Intelligent Data Automation

Thanks to innovations in machine learning and data automation, Fifth Third Bank now offers solutions that can reduce the cost and time of handling payment reconciliation and refund processing. Big Data Healthcare (BDHC), an indirect wholly owned subsidiary of Fifth Third Bank, has a reconciliation solution that can instantly match payments to insurer remittances and auto-post the transaction. At the same time, Fifth Third Bank’s Choice Disbursements for Patient Refunds removes the burden for issuing refunds from the provider and offers digital payment options that streamline the refund process.

Using advanced data analytics, BDHC imports deposit and remittance files directly from your bank and healthcare payer and automatically reconciles the information, significantly reducing manual processing costs. A paper conversion module captures paper explanations of benefits (EOBs), checks, and correspondence, and creates remittance files for auto-posting. It offers detailed functionality that can help providers identify costs, such as an MRI or ambulance service, that are contained in remittance advice documents. It also matches the file back to the bank deposit, whether it is an electronic funds transfer, ACH, or paper check. Automated correspondence analytics use artificial intelligence, machine learning, and robotic process automation to manage administrative tasks such as referrals, prior authorizations, claim resubmissions, and appeals.

One of the benefits of a digital solution is that it provides transparency into all of the healthcare provider’s bank transactions and offers a unified workflow for the organization. It can also arrange the automated allocation of credits and post automatically into multiple general ledgers within the general ledger system.

"Many of our clients who have moved to an automated solution are seeing an incredible amount of cost savings," says Keck. "They are able to reallocate their teams into other, more profitable areas."

The Challenge of Refund Payments

Partly because of the wider adoption of high-deductible health insurance plans, many patients must make an upfront payment at the time of treatment. For example, KFF, a health research firm, says 66% of covered employees with high-deductible plans now have to make a copayment when they see a primary care physician. After a healthcare provider reconciles the insurance payment with the initial claim, they may owe the patient a refund on some of the payment made prior to treatment.

In making reimbursements, paper checks are still the most common way providers send money to their patients. For providers with thousands of payouts annually, the cost of issuing paper checks may be a substantial hit to margins.

While the provider’s revenue cycle team determines the amount of overpayment, it is the accounts payable (A/P) team that must make a refund. At times, A/P teams are able to put the refund back on the credit card the patient used initially. When this is no longer possible, A/P teams tend to issue the refund by paper check because they don’t want to collect and store patient bank account and routing information to make an ACH payment.

"With all of the costs of issuing a paper check—the administration, the print and mail and fraud and security—providers come out well ahead with a digital-first payment option," says Keck.

How Digital Refund Payments Save Costs

When it becomes necessary to make a refund to a patient, a digital-first payment process improves delivery speed, reduces costs and risks, and delivers an improved patient experience. It can offer a variety of payment options, including a digital prepaid card that can be used to shop online or be loaded onto a mobile phone’s digital wallet. Patients can also choose to receive payment by ACH to their bank account or get a paper check if they still wish.

A digital solution can also take over the task of managing and storing the patient’s financial information, using the latest technology and cybersecurity measures.

"Patients are in different places in their digital journeys," Keck says. "A digital solution with payment choice meets the patient where they are."

When a refund payment goes unclaimed, the healthcare provider is required by state law to begin the process of turning the unclaimed funds over to the state. Each state has different rules and regulations for the process, which is called escheatment. It usually requires sending notice to the refund recipient and filing detailed reports with the state authorities on a periodic basis. A digital payment reduces unclaimed property, and the right partner can handle the entire escheatment process for the provider, saving substantially on labor costs.

Healthcare providers of all types and sizes are under increasing pressure to reduce administrative costs. With the 2023 CAQH Index estimating that they could save $18.3 billion annually by fully adopting digital technology, Fifth Third Bank’s Big Data Healthcare and Choice Disbursements for Patient Refunds become logical choices. Within a short processing time, they could be helping your organization save on labor expenses and free up employees to take on more revenue-generating tasks.

To discuss automated solutions and how Fifth Third Bank can help, contact your relationship manager or treasury management officer.