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Commentary: Clearing the way for HIPAA

Direct connections between health care payers and providers promise to cut transaction costs and open up better, real-time communications.

Commentary: Clearing the way for HIPAA
By Forrester Research
Special to CNET News.com
April 26, 2004, 4:30PM PT

By Eric G. Brown, vice president

Direct connections between health care payers and providers promise to cut transaction costs and open up better, real-time communications.

Vendors like CorePolicy Systems, Ivertex and Post-N-Track are offering technologies to take the direct-connect revolution to the most challenging market segment--small physician offices.

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Over the next four years, new options for bypassing clearinghouses will demand built-in support from practice management system (PMS) vendors and drive prices below 10 cents per transaction.

While health plans, PMS vendors and claims clearinghouses navigate the complexities of electronic data interchange (EDI) interfaces and Health Insurance Portability and Accountability Act (HIPAA) "standards," dozens of small companies have been busy building applications that chart a straight line for claims transactions between payers and providers. Companies like Quovadx, SeeBeyond Technology, Vitria Technology and even Microsoft provide payers with the tools to connect their claims platforms to large submitters.

Tools from three start-ups
Here are three companies that are attacking a more frustrating problem--connections with individual small physician practices:

• Post-N-Track combines direct connections with batch management. Post-N-Track lets payers set up a Web-based portal for claims submissions so that participating providers can upload and track claims generated by their in-house practice management system.

The product parses the submitter's local claims batch, extracts claims that can be handled directly by that participating payer, forwards other claims electronically, based on practice-defined rules, and leaves any remaining records to be handled by the provider's existing clearinghouse. Despite the firm's quirky product names, such as Doodad and Doohickey, the Connecticut-based company has attracted some respectable clients, including Cigna.

• CorePolicy's printer hook saves providers a step. Most small practices generate claims by printing them to a file, then running a separate program to upload that file to a clearinghouse. CorePolicy's TxExchange platform includes software that installs as a printer driver, allowing submitters to "print" directly to their payers. For small offices with little or no technical expertise, any simplification helps a payer attract direct submitters. Expect the company to expand its client base from small plans to include a national payer in the near future.

• Ivertex uses open source to boost innovation and slash costs. The company's SolAce Server gives third-party administrators, independent practice associations and small, regional payers a direct-connect gateway to their claims engine--and it's all open source (under the GNU General Public License), available at no charge and enhanced by the community of users.

Ivertex gets revenue from implementation and support services, such as other open-source suppliers, and it also guarantees dramatic reductions in per-transaction expenses. Ample application programming interfaces for security plug-ins, event triggers, Web services and EDI connectivity keep a lid on integration costs.

Transforming the clearinghouse business
Over the next four years, as HIPAA settles down and products for implementing HIPAA connectivity mature, Forrester predicts that:

• PMS vendors will build direct-submission capabilities into their products. Fueled by the prospect of slashing transaction fees, national payers will set up open Web services interfaces for claims submission.

Native support for these interfaces will become a key feature in practice management systems circa 2007, as PMS vendors add client-side connectivity modules for the market-leading technologies. The opportunity for PMS vendors? Work with dominant payers in your market to provide early support for advanced real-time services like electronic funds transfers and case management updates.

• Transaction fees will slip to less than a dime. More sophisticated billing systems for providers, real-time claims adjudication from payers, and increasing clarity around HIPAA's standard transactions all mean less added value from clearinghouses. Ivertex guarantees that its technology will deliver claims at less than 10 cents each.

The more mature world of EDI value-added networks has driven transaction fees for manufacturing orders down to between 5 cents and 7 cents. To compensate for shrinking per-transaction revenue, firms like WebMD, Per-Se Technologies, ProxyMed and The SSI Group will need to greatly expand the number and kinds of transactions they support and extend their offerings more deeply into their clients' internal business processes.

© 2004, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.