With the recent rulings on healthcare, I was prompted to do some updated research on healthcare payments, what is affecting the market and what solutions need to be in our doctor's bag to help providers. As much as we have been exposed to the various changes in healthcare, what healthcare reform means and the rise in deductibles and growth of out-of-pocket expenses, it's simply startling to read about this troubled vertical market segment. What do these changes mean to small physician practices, and what does Gen Y have to look forward to when it comes to healthcare?

From the Millennial perspective, I think the biggest news actually came when United Healthcare (UHC), one of the nation's largest health insurance companies, announced that whatever happens to healthcare reform—it will uphold coverage for dependents up to age 26 under their parent's plan. Aetna and Humana have followed suite. It is great news, but the Affordable Care Act (ACA) has some deep potential effects on small provider practices, and financial institutions and service providers have an opportunity to help.

In 2011, the American Medical Association said that the healthcare industry, at a mind-blowing $2.7 trillion, is the largest GNP segment with the upmost operational inefficiency. With over eight billion healthcare transactions being processed, Healthcare Information and Management Systems Society (HIMSS) says that 40% are still conducted via paper, so I'm not surprised to hear that $65 billion was written off to bad debt in 2010.

The healthcare industry has virtually no standards for processing information, and the workflows are simply confusing and costly for medium and smaller practices without technical resources. These are the same group of medical providers that have to connect with large payers (insurance companies) with large IT staff and budgets to get reimbursed. So it becomes clear why the write-offs are so astronomical. The recently passed Healthcare Reform Act is forcing technology into the industry; one piece of the ACA is to implement the ICD-10-CM code set to help standardize billing codes. These are extensive enhancements, given that when not implemented, it places a provider at risk for losing Medicare funds and blowing IT budgets out of the water. In 2008, Nachimson Advisors estimated the cost of these changes for a small provider practice at nearly $80,000 and large practices at over $2.5 million. These costs, when added to the consistently high amount of write-offs, are a hard hit to small provider practices.

Now add to the mix patients. In these hard economic times, most of us have high deductible healthcare plans that equate to thousands of dollars of out-of-pocket costs. The Millennial generation may not even have a healthcare plan since more and more are finding it cheaper not to have insurance and take a pay-as-you-go approach. Difficult to absorb, yes, but to providers, this adds yet another layer of complexity and more barriers to getting paid. They have to collect from patients as well as payers, and patient payments continue to grow. In 2011, patient payments made up about 26% of the overall billable amount and will no doubt continue to increase. A third prong is secondary insurance. This means that if your first form of insurance does not pay, then you ask your doctor to try another payer to see if they will pay, and when all forms of insurance is exhausted, THEN please invoice me.

Here's the scenario for the provider: During the period between providing services and collecting a patient's portion of the fees due, which could easily stretch out three, six, 12 months or more, the patient is paying their mortgage, auto loan, general bills and day-to-day expenses. Since it's been months since he or she saw the doctor, the patient is hopefully feeling better and has forgotten about the doctor visit. All of a sudden, they receive a bill from the provider, hospital, lab or whomever else they needed care from. Unfortunately, these expenses are now unexpected and become low on the priority list, which either adds to days sales outstanding or becomes a collection situation. This is the typical cycle that providers, especially our smaller providers, must address. This revenue cycle is creating bad debit in excess of 11.3%.

To address these dilemmas, we see trending towards self-help healthcare, a method that our Millennial generation will likely embrace. These are web portals, run by either the insurance company or provider, where patients do self-evaluation that will be reviewed by a certified professional, and a professional assessment is received. These will be charged as a "web" visit versus an in-person visit. Gone may be the days of getting to know your doctor. It's inevitable that social media, especially recommendations and reviews, will come into play and yet another expense that private practices will need to account for in the ever-tightening budget of being a healthcare provider. I sit here torn. I am such a believer in technology and advancement, yet I wonder if we are putting small business at risk. Will the doctors that graduated this year ever get reimbursed for the investment they just made in years of schooling? Will the small provider practice become extinct? Taking responsibility for our care is important; supporting small business is critical to our new generation; helping to improve process and technology is imperative to this paper-ridden market. There are opportunities for improvement, and although seemingly small baby steps, they will make a difference is revenue cycle management.

Payment at point of sale (POS) is crucial to lowering bad debit. Many providers today attempt to get some form of payment up front, but most of these transactions are via credit cards. Credit card transactions come with large merchant service fees and costly PCI. Banks and service provides must get back to the basics in proving mechanisms to accept checks and debit cards, which are not only the most cost-effective form of payment but the choice method of payment for the Millennial. By offering providers tools such as remote remittance capture that enables payment and corresponding claim data to be processed at the point of sale, providers will realize immediate bottom line savings. Remote remittance capture equates to pennies while credit card transactions are dollars. Online ACH will continue to be imperative, especially for recurring payments, when payment plans and collection activities come into play, but PCI and HIPPA compliance mitigation will be imperative. These are just a few ways that financial institutions and service providers can help our new generation of doctors thrive and keep our existing small practices in business for years to come. Until next time, keep healthy and safe.

TRACY A. DALTON is the senior product manager of Outsourcing Solutions at Wausau Financial Systems, a provider of payment and receivables processing solutions. Ms. Dalton is responsible for driving new product and sales through innovation. For more, email tdalton@wausaufs.com.