By Jeffrey W. Brown
It is rare in healthcare that the needs of its many functions can be served by a single, generic solution, and payments are no exception. There are as many different types of payers as there are providers, and within each group there can be widely varying requirements for managing payables and receivables.
The availability of different payment instruments can ease this and ensure that payers or providers can choose the solution that best suits them. As a number of states consider legislation that would limit the availability of one of these options – virtual card payments – now might be a good time to revisit what this innovative payment instrument has to offer.
Virtual card payments, often referred to as virtual credit cards (VCCs), currently coexist alongside automated clearing house (ACH) transactions and paper checks as a means of making and receiving healthcare payments.
As a newer technology, VCCs suffer from a lack of understanding and an associated degree of prejudice. This is usually focused on a skewed view of the cost of acceptance that fails to take into account the true costs involved in the use of older payment options. In fact, VCCs stack up well alongside paper checks and ACH transactions and offer significant advantages in efficiency and security.
VCCs deliver funds to the provider electronically, leveraging the payment network that the provider uses for consumer card transactions. They function by processing a one-time payment for a predetermined amount to a designated payee, via a unique card number. In this sense, VCCs function like a check or prepaid debit card.
The organization receiving the payment enters the unique card number into either a card terminal or web portal, and the funds are delivered electronically to the provider. The provider also receives remittance advice, electronically or as a hard copy (for example, an 835 remittance advice or explanation of payment [EOP]), which allows the provider to reconcile the claim and determine what, if any, amount must be collected from the patient.
VCCs can also utilize a new and growing virtual card payment method called straight through processing (STP). With STP, the card payment is processed automatically, without a terminal. This eliminates manually keying the card number into the terminal, further simplifying the payment process and reducing the chance for errors.
On top of these efficiencies, the case for VCCs is further bolstered by data security that exceeds those of other payment options. With VCC, providers do not have to provide bank account details, whereas with the ACH, they do.
Also, if fraud is suspected on a card transaction, VCC card network processes offer more efficient, effective and expeditious means of resolving transactions than typically found when addressing suspected ACH and check fraud. Further protection is provided by the fact that VCCs can be restricted to specific merchant category codes, which means those VCCs will only be chargeable by a specific type of merchant, such as doctors or hospitals.
Despite these unique and valuable aspects, VCCs are processed on the same hardware used to process traditional credit cards. This means no additional enrollment or hardware investment is required to accept VCCs. According to a study of its members conducted by Medical Group Management Association, 98 percent of survey respondents already accept payment cards. If the ability to leverage existing infrastructure in order to efficiently process payments is a critical variable to a provider, VCCs are a reasonable consideration.
All of these attributes add up to a modern means of payment worth preserving as an option on its own merits. Limiting providers' access to VCCs also ignores the fact that allowing alternative payment options to ACH is consistent with the Health Insurance Portability and Accountability Act of 1996 (HIPAA). HIPAA recognizes the broad diversity in the healthcare industry and that different standards may be necessary for different segments.
Jeffrey W. Brown is the President of VPay, overseeing business development, legal and governmental affairs for the company. VPay is a leading turnkey B2B payments platform recently closing a $76 million investment led by a growth equity investment firm with a strong track record in the payments industry. VPay's turnkey platform for outsourcing payments (checks, ACH, plastic and virtual cards) offers a compelling replacement to manage inefficient payment processes like paper checks. The company brings together flexible, purpose-built products with integrated service and support, patented technology, multiple funding models and unique expertise to streamline claims payments across a variety of insurance industries including: group health, workers' compensation and auto. Contact him at email@example.com.
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