Online banking: Making the most of electronic financial services

When the Spokane (Wash.) Surgical Group contacted its banker about setting up direct deposit for employee payroll, it also discovered the practice could -- for a fee -- electronically access detailed account balance information, view images of checks it wrote and set up automatic payments for patients.

"I didn't know the bank had all these options [available]," said Kristy L. Fresh, administrator of the six-surgeon group, which signed up for online services at Washington Trust Bank in Spokane to improve collections and employee productivity and to gain 24-hour access to up-to-date financial information. "I'll be able to access ... information online and have a true snapshot every single week of where [the] practice stands."

But despite the convenience and other benefits online banking can provide, consumers and businesses have been slow to adopt it. Only 18% of consumers pay bills online, according to Harris Interactive.

Although it isn't known exactly how many physician groups bank online, the numbers are small. There are some technological and cultural barriers at both the insurer and physician ends, experts say.

Practice management consultant Rosemarie Nelson often finds that most practices submit claims electronically to Medicare but don't sign up to receive electronic funds transfers and payment remittance advice, even though Medicare makes both transactions available.

"There's just that [mind-set] of I want to see [the paper check] in my hand," said Nelson, who also is a senior consultant for the Medical Group Management Assn. "If groups aren't taking advantage of electronic funds transfers for Medicare, then the commercial payers probably don't see any great advantage of trying to drive [electronic payment to physicians] either."

In January 2004, Medicare received 57,264,747 claims from physicians. Of those, 85% (48,774,494) were filed electronically. But only a fraction of claims are paid electronically, according to the Centers for Medicare & Medicaid Services. And even among the doctors who are paid electronically, most still receive their remittance advice or explanation of benefits on paper, CMS said.

Physicians also have been slow to adopt online banking because few insurers offer electronic funds transfers to physicians, said Lee Barrett, CEO of Medical Banking Exchange LLC. The Oklahoma City start-up next month will begin marketing electronic funds transfer, electronic remittance advice or explanation of benefits, claims reconciliation, claims denial management, and secondary billing services to physicians, hospitals and other parties.

Another reason doctors are not banking online in great numbers is because most health plans are not capable yet of transmitting HIPAA-compliant EOBs. For the past few years, plans have focused on testing and being able to accept HIPAA-compliant claims and have not implemented EOBs or electronic funds transfers on "any type of wide scale," Barrett said.

And even if insurers could transmit electronic EOBs, most of the billing systems that physicians use can't accept the transactions, he said. So while some doctors could arrange for banks to directly deposit payments, it would take their staffs as much or more time to manually post that payment in the practice billing system as it would to post a paper check and paper EOB, Barrett said. Throw in secondary billing and the task of tracking, and the process of posting and reconciling payment becomes even more daunting, he said.

Online services

Still, online banking, which the financial industry calls online cash management or online treasury management, can offer physicians quicker and more convenient access to banking services, reduce costs and provide information they can use to better manage their finances, according to banks.

As recently as a few years ago, online banking meant individuals going online to access balance information and pay bills.

But banks now make most of their services available through secure Web sites. These online services include access to detailed balance account information, direct deposit, the ability to view the front and back images of incoming and outgoing checks, wire transfers of funds, stop payments, and the ability to arrange to debit patients' bank accounts as part of automatic payment plans.

Most banks offer free online banking services to consumers, but charge businesses a fee to accommodate the higher level of service usually needed, said Renne Ditton, a relationship manager at Washington Trust Bank.

These fees depend on what services a practice signs up for. Physicians can incur a one-time set-up fee, a monthly flat fee, a volume- or activity-based fee or a combination of those.

Although banks don't market products specifically for physicians, they will customize available services to meet clients' individual needs, said Steve Hazan, senior vice president with Bank of America Corp.'s office in St. Louis.

"The best way for a practice to approach this is to have a conversation so their bankers can really understand how the money is coming into the practice, where it is coming from and how much" before both sides can determine what online services make sense for the practice, Hazan said. In some cases the service banks provide may not save doctors money, but the bank won't know that until it has had a chance to see how individual practices operate.

"What primarily is going to happen with any bank is there's going to be some type of documentation that needs to be completed and signed [by the practice]," Ditton said. After the bank receives the documentation, the bank will start the process of setting up the service, and a short time later the practice will be able to bank online.

"Each service has different set-up requirements," Hazan added, "but we're going to hold the client's hand all the way through."

Improving cash flow

Spokane Surgical is still early in the conversion to online banking, so was unable to quantify the benefits or drawbacks. The practice expects that, in the long run, the benefits of direct deposit, access to detailed account information and the ability to set up automatic patient payment will more than compensate for the $70 monthly fee.

The ability to arrange for patients' accounts to be debited for automatic payments alone will be worth the cost because the service offers faster, easier and more certain payment, practice administrator Fresh said.

Here's how the practice plans to handle it: When a patient is scheduled for surgery, the practice will contact his or her health plan to learn how much will be covered by insurance and how much the patient will owe. The practice then will call and ask the patient how he/she wants to handle the out-of-pocket share, noting that the patient can authorize Washington Trust to automatically debit a specific amount from his/her bank account on a specific date each month. Washington Trust then will electronically transfer the money into the group's bank account, she said. Patients do not need to have a banking relationship with Washington Trust to sign up for the automatic payment plan.

Automatic debits also will save the practice some money in postage, and save it even more in hassles. "It frustrates me that I might send 20 statements to a patient and never get a response," Fresh said.

Automatic payment, however, isn't a good option for practices whose patients owe small sums and is not intended to be used to collect minimal co-payments, experts say. The option makes the most sense for practices whose patients incur large out-of-pocket expenses, Ditton said.

Banking online in general appeals to Spokane Surgical because the practice believes it enables it to implement better internal financial controls.

Although the group says it has excellent and trusted employees, Fresh said, it knows that experts say it is always prudent for any business to split employees' duties to reduce the risk of embezzlement or employee theft.

Online banking makes it easier for a practice to separate duties by giving employees different levels of access through user-specific IDs and passwords. "If there's a problem, it will also tell me exactly who is doing what to the system," Fresh said.

There is one online service that Spokane Surgical isn't eager to do so far-- paying bills. Nearly all of the group's bills are from different vendors and for different amounts each month, so for now anyway, it's easier to use paper checks, she said.

But Fresh anticipates that eventually she will pay the rent online, and maybe add some other bills, like for vendors that offer discounts for early payment.