Health care payments are among the top three challenges facing the U.S. health care industry, exceeded only by the state of Medicare and unresolved legislative and regulatory issues, according to a new Aite Group report. Aite in June surveyed 22 executives from a cross-section of the health care industry to gather information about problems and possible solutions to health care payment problems. In "Healthcare Payments: An Issue Potentially Under the Industry's Control," Aite senior analyst Kunal Pandya says the $2.2 trillion health care industry's costs are rising so rapidly that the industry could grow to $4 trillion by 2016. Financial institutions, payment networks and card issuers potentially could provide relief for one major area of concern: the health care industry's soaring costs associated with health care payments, he argues. Federal and state governments initiate 49% of all health care payments, while private insurance companies make 40% of payments and consumers pay the remaining 11% through cash, check or cards. Yet some 60% of all payments are handled manually, resulting in massive waste that could be reduced if more payments were moved from checks to electronic funds transfer and cards, the report contends. Manual processing, including issuing a paper check, costs about $9 per claim compared with about 80 cents per claim processed electronically, Pandya says. Obstacles to health care payment efficiencies include financial institutions' lack of interoperability with health care providers' and payers' systems. Financial institutions' difficulties in handling complex and sensitive health care data also hobble their ability to improve payments efficiency, Pandya says. Opportunities for financial institutions and payments companies to improve efficiency include testing new health care payer-to-provider payment models, using existing systems to transmit health care payments and other information electronically and helping to increase acceptance of card payments at providers' sites at the time of service, Pandya suggests. Financial institutions also could develop better financing models for consumer health care and underwriting standards for the health care industry's small-business players, he says. Health care payments have "the potential to have a positive outcome by 2012 due to the amount of work that has (already) been (accomplished) ... and key areas that can be fixed immediately," Pandya says.