It’s no secret that health care in the U.S. is expensive. In 2019, total health care spending was $3.8 trillion, up 4.6% from the year before. While some of that money was spent on the cost of services, much of it was spent on administrative costs, such as payment costs and insurance. One way to reduce health care spending while improving the quality of care and service patients receive is to eliminate or significantly lessen the reliance on paper checks for payments.
Electronic health care payments allow providers to get their money more quickly and at a reduced expenditure. Learn more about how your practice can introduce a virtual health care payment system and the benefits.
The Trend Toward Virtual Payments in Health Care
The health care industry has been surprisingly reluctant to embrace virtual payments, even though the Affordable Care Act (ACA) mandates the offering of electronic funds transfer (EFT) for payments. The American Medical Association (AMA) argued against the use of virtual payments in 2015, noting the interchange fees could be as much as 5%.
Despite the AMA’s initial hesitancy, the use of virtual card payments in health care is on the rise. The use of virtual cards is expected to increase by 90% over the next few years, reaching $1 trillion in spending by 2022, a significant increase from $568 million in spending in 2019.
One survey of over 700 provider practices in 2017 found that about one-quarter of practices used virtual payments to process up to 2% of payments. Another 12% used virtual payments for up to 15% of payments, and 2% of providers processed more than 16% of payments using virtual cards. Slightly less than one-third of providers didn’t use virtual payments at all.
Virtual payments might not be the most appropriate choice for all health care transactions, but they do have their place in the health care billing landscape. If a provider works with a payer or health plan infrequently, it can make more sense for the health plan to pay the provider using a virtual card. That method may be more suitable than setting up a direct deposit or another type of electronic funds transfer payment method.
How Virtual Cards Are Used for Health Care Payments
A virtual payment method is in many ways similar to credit or debit card payments. To make a virtual payment, a payer, such as an insurance company, sends the health care provider a 16-digit code similar to a 16-digit credit or debit card number. Depending on the agreement between the payer and the provider, the payment number can be emailed, faxed, or sent via postal mail.
Once the health care provider receives the code, a person in the office can key it into the payment processer, just as they would process a payment with a physical credit or debit card.
Virtual payments can be processed in two ways. The first is identical to the way a credit or debit card transaction gets processed. The provider inputs the virtual number into a payment processing system — usually the same system it uses to accept physical cards in the office. The payment processor typically charges a percentage of the cost of the transaction in interchange fees and a per-transaction fee, which can be as little as a few cents or several dollars.
Another option, which is usually more affordable for the provider, is to use straight-through processing for the transaction. With straight-through processing, there are no per-transaction fees or interchange fees. Instead, the funds bypass the payment processer entirely and end up directly in the provider’s account.
Benefits of Using Virtual Cards for Health Care Payments
Providers that accept virtual payments can benefit from doing so in several ways. A few of the advantages of virtual, electronic health care payments include:
- Reduces or eliminates paper checks: Although paper checks might be on the decline, they are still relatively common in the health care industry. Accepting virtual payments allows a provider to bypass the use of checks and the disadvantages associated with them. Paper checks can get lost in the mail and are easily stolen. They also cost payers more to produce and mail out than virtual payments. It also takes longer to process a paper check than a virtual payment.
- Offers fraud protection: When a payer makes a virtual payment, they issue a single-use, 16-digit number. Once the provider keys in or accepts the payment, the number is no longer usable. Unlike a physical card, there is no way for a hacker to steal the number and use it to make many charges. Virtual payments also keep the provider’s account information safe. They don’t have to share their bank account information the way they would if they were accepting direct deposits from a payer.
- Streamlines the payment process for providers: Many providers, if they accept card payments in-office, already have the necessary health care payment technology and equipment. They need to run the 16-digit number through as a “card not present” transaction. They don’t need to worry about submitting their bank account information to a payer or deal with the hassle of setting up a separate payment account.
How to Use Hydrogen Virtual Cards for Health Care Payments
Hydrogen’s platform can issue virtual cards that allow health care payers to issue payments quickly and efficiently. You can use our easy, no-code platform to create virtual, one-time-use-only card numbers each time you need to send a payment. The card numbers will also have an expiration date and security code for added fraud protection.
Depending on the relationship you have with your providers, you might use virtual payments from Hydrogen to set up recurring payments. For example, instead of creating a one-time-use number, you can create a number that a single provider can use each time to process payments from you. Should the relationship with that provider end, you can quickly cancel the virtual number to prevent unauthorized use.
Some potential uses of virtual payments from Hydrogen include:
- Reimbursing providers for covered services
- Paying providers for equipment
- Paying providers for medications administered
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Bring your payment processes into the 21st century and stop depending on paper checks to reimburse providers. If you’re a payer in the health care industry looking for a way to simplify payments to multiple providers, sign up to get access to our platform today.