Some people think they’re the bridge to the future; some think they’re a fraud. But whatever your opinion, healthcare savings accounts (HSA) and flexible spending accounts (FSA), and the payments streams they entail, will be a reality in the U.S. healthcare system for the foreseeable future. And since many employers and providers are accepting various cards as payment vehicles, the system needs an integrated information network that includes authorized payments, says Cynthia E. Burghard, a senior analyst at Gartner Inc.

The technological challenges alone to creating such a system are daunting. A workable system would need to, at a minimum:

• Verify the patient’s eligibility
• Identify and complete the transaction for deductibles and co-payments
• Substantiate the payment for permitted goods and services
• Verify the availability of payment, including any line of credit the patient may have (not to mention transmit the payment information to the insurer, HSA/FSA trustee, or lender, and make the necessary adjustments
• Integrate the information arising from the medical encounter to all the patient’s health accounts

Such a system doesn’t exist now, and building it won’t be easy, she says. Full, national integration is years away. But by 2008, she thinks, the company that creates a workable model, at least for a single health care system, will have a significant edge over its competitors as the two sorts of accounts gain traction in the healthcare marketplace.

“It’s about interoperability of existing systems and connecting the parts together,” she says. “We need standard (computer) language, so that when you’re trying to determine the eligibility of an individual, and determine how much is in an HSA account, there’s a common definition of what that request and answer is going to look like anywhere you go.”

A comprehensive, card-based HSA/FSA payments system will be a unique beast, explains Burghard, because it’s not just about the payment: Included in any message will have to be the patient’s medical history, as well as the ability to operate in real time, rather than next-day—the current model.

“The challenges that exist today are that the health care industry is not a real-time industry in terms of payments,” she says. “The bulk of the physician-office market is small offices with less than five physicians (where) the ability to manage real-time transactions doesn’t exist, and the willingness to invest in technology that accepts (real-time treansactions) doesn’t exist.”

This is a handicap, to say the least, since today a patient standing in front of a health care worker is treated first, while the paperwork follows. There’s no way to tell if the patient has the money in their HSA/FSA account to pay for treatment, or is even authorized by their insurance provider to receive certain treatments. As a result, the practice has no way to know if it will receive the insurance and co-pay amounts due it.

And, as things now stand, finding out can take a week to process—all after the expense has been incurred; if there’s no money to pay, the doctor eats the loss. The way to avoid that outcome, thinks Burghard, has to be a real-time system, even if it would be pricey; the alternative will be to persist in the sort of waste—in time, effort, and treasure—that threatens to drive the United States into bankruptcy as the population ages.

This is especially true because about 95 percent of healthcare expenses are incurred in the last 5 years of life, at which point the bills become very large. As a result, an account could be quickly drained, even if the patient has good medical insurance and is merely using their HSA/FSA account for their co-pay deductible. That would limit, to say the least, the ability of the hospital, physician, or pharmacy to actually provide the necessary services. An intelligently constructed, card-based system could avoid these dilemmas, posits Burghard.

“There’s the technology barrier on the physician side, and there’s the complexity of the insurance systems, which are very different from company to company,” she concedes. “In a typical financial transaction, you take your card anywhere and it’ll work, but there’s no similarly simple system in the medical industry, so that the information from the insurance company is readily available” to the provider when the patient is awaiting treatment.

This is a long way from debiting a retail transaction at the point of sale, but health care providers—including the vast insurance infrastructure—need to solve the technical challenges. According to Burghard, medical practitioners have few alternatives to creating such capabilities at the medical point of sale; if they do nothing, the system will continue to careen out of financial control—taking the nation with it.

For all its benefits, choosing to build such a system in this country would create a very large and expensive edifice, financial and otherwise. But such a system is necessary to avoid choices and results that would be even worse.

The solutions carry with them very large political and ideological elements, which tend to shut out reality in favor of arguing for an ideal model for the future, or resurrecting an idealized past. But for payment providers, these political issues are secondary; even if the country shifts to a government-sponsored, single-payer model—perhaps based on the Veterans Health Administration—the same information would need to be provided to a healthcare provider to create maximum efficiency and to minimize the fiscal impact of an aging population.

For Burghard, the interoperability issue is the biggest challenge. And by interoperability, she doesn’t mean one overarching system that subsumes the Kaiser Permanentes and Humanas of the world into a wholistic universe.

“That’s in a perfect world,” she says. “Let’s get it within the Kaiser system or the Humana system first.” “Meanwhile,” she adds, “it would be very nice, in the next 18-to-24 months, to use the third stripe on a mag card in some sort of efficient way to improve eligibility verification and real-time claims.” A payments company that can offer a medical practice something like that, thinks Burghard, will have a green field sales opportunity. (Contact: Gartner Inc., Cynthia Burghard, 975-323-6048)