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Independent Health, ECMC adopt transaction system

Network could reduce fraud

"By Jonathan D. Epstein
Updated: 10/01/07 6:57 AM

Independent Health Association and Erie County Medical Center will be the first insurer and hospital to use a new Buffalo-based electronic medical transaction network to verify a patient’s identity and process government insurance claims.

The Williamsville-based health insurer and Western New York’s only public hospital are teaming up with upstart Health Transaction Network to handle transactions for Medicaid, Child Health Plus and Family Health Plus patients.

The goal is to speed up payments, eliminate paper, cut fraud, save money, and increase safety by ensuring that patients are who they say they are.

“This will allow us to identify who the patient is with much more certainty than we do now,” said Michael A. Young, ECMC’s chief executive officer. “It’s a good clinical test that adds some credibility that we’re excited about.”

At the same time, officials hope it will represent the start of a broader program for private health insurance plans as well, encompassing other insurers, hospitals and doctors, to streamline what is now still an outdated, paper-based system that has not kept pace with financial services.

“We can look like heroes in the business, doing things we’ve done for years in financial services,” said Health Transaction Network founder and CEO Joseph E. Wolfson, who previously founded the Metroteller and Cartel ATM networks before selling them. “We’re biting the bullet. Somebody’s got to do it.”

Under the plan, Independent Health will issue special plastic identification cards to more than 26,000 current Medicaid members. The company does not currently offer the other two government safety-net programs, but has applied to do so, and expects to begin enrollment as early as November, said spokesman Frank Sava. New members for all three programs will also get the cards.

The cards will have both a traditional magnetic stripe for routing payments and a microchip, which will hold biometric identification such as the person’s signature and fingerprints.

That information, which will be encoded when the person enrolls, will be matched up when the patient comes to ECMC for treatment. Health Transaction Network will install special payment card readers at the hospital by yearend that can read not only the magnetic stripe, but also the special microchip.

Once identity and eligibility are verified, the patient can get care, while the hospital will get reimbursed by the state under the government programs.

“It’s a nice beginning in terms of a different kind of linkage between provider and payer,” said Dr. Michael Cropp, Independent Health’s chief executive officer. “It’s something you can broaden to the commercial population.”

Although the system has broader uses, officials are starting with government programs instead of commercial plans, because reimbursement rates are standardized, making it easier to work out kinks. It’s also a way to address Medicaid fraud, while avoiding confusion and ensuring patient safety.

New York spends about $50 billion a year on Medicaid, but endures a fraud rate of up to 10 percent by some estimates. Reducing that by even 1 percent by confirming a person’s identity could mean a $500 million savings for the state and for taxpayers, executives noted.

At the same time, both Cropp and Young said their organizations often find Medicaid recipients have inconsistent last names within the same family. That confusion leads to medical errors, as records are not matched up properly and drug interactions are missed.

“Verification is a huge issue in many populations,” Cropp said. “That’s what we’re pushing for, better quality, better safety, and this really pushes it along.”

In fact, Young said ECMC had already been exploring similar ideas when Wolfson “walked in the door speaking about exactly what we were looking for.

“And when you do your background, you see he’s done it before, so that was comforting,” Young said. “He’s not some guy in a garage with an idea. The need is there and he brings a proven track record.”

It also builds on relationships insurers and providers have established through Western New York HealtheNet and HealtheLink, which are collaborative electronic systems for exchanging administrative and clinical information, respectively. Officials are testing electronic prescriptions, and want 500 doctors signed up in three years.

“What Joe is doing is a very nice complement to what is going on there,” Cropp said.

For Wolfson, the partnership between the three entities represents the culmination of several years of efforts to get his new venture going. The banking entrepreneur envisions a system connecting insurers and medical providers, allowing doctors and hospitals to verify identity, eligibility for coverage, and referrals, while also processing copayments and automating insurance claims.

With the first test set to begin, he hopes to get more payers and providers signed on. He’s already in talks with other hospitals and 11 individual physicians practices, including seven pediatrics groups, and has “letters of intent” from others.

“There’s a lot of interest now. It’s really moving forward,” he said.