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There has been a lot of talk lately about reducing the costs in the healthcare industry through automation. It’s true! A premier example of how you can take advantage of automating your practice is by using the Electronic Remittance Advice. Recognized as a business-critical initiative to deal with increasing transaction volumes and complex regulatory compliance issues, ERAs will help reduce high administrative costs.

An Electronic Remittance Advice (ERA) is an electronic form of an EOB. The format is prescribed according to the ANSI 835 standard. These are provided by your payer and can improve your profit by reducing costs and increasing your productivity. When ERAs are coupled with Electronic Fund Transfer (EFT) from your payer, you can process your claims and receive your payments in dramatically shorter times than if you use paper claims and EOBs. But using EFT is optional should you prefer getting a check in the mail. You can use ERAs without EFT.

Benefits of using ERAs

Increasing profit by reducing costs

Reducing administrative costs is one of the primary benefits realized using ERA. The paper-based EOB process is really very costly and involves a fragmented process for posting and reconciling payments. Each payer has a different format for paper remittance documents. Having employees enter data from these documents is very inefficient and error-prone and makes managing denied and secondary claims more difficult. Estimates on cost saving vary but most agree that you can save an average of $2.00 + per claim using ERA.

Reducing errors

Both payers and providers realize the cost-saving benefits of an ERA. If, for example, you enter an incorrect payment amount, you may need to recheck the entire batch to find the error. Payers report significant savings by avoiding paper handling and the support time needed to resolve errors created using the paper process. The Increased accuracy afforded by ERA will avoid many of the costs associated with clerical errors in posting your payments.

Reducing the time spent on posting payments

Imagine posting thousands of dollars in payments in seconds with 100 percent accuracy. It’s easy to see why ERAs are lauded as a critical method to save your practice time and money and provides a large return on your investment to convert to electronic processing.

Faster claims payment/adjudication

You receive your payments faster using ERA. On average, payment for a “clean” claim is received within 14 business days. Using ERAs along with EFT from your payer will put payments into you account much faster that the paper system. This can not only dramatically improve your cash flow but permits much quicker billing and payments for secondary claims and patients responsibility payments.

The ERA Balancing Act

One method used by ERAs to get extremely high accuracy is the multi-level balancing that takes place for payments. Each claim you make to the payer consists of one or more charges (called a service charge) for a specific patient. When the payer returns the 835 it may contain many claims and, for each claim, multiple service payments. The payer remits to you the amount of the charge minus any “adjustments”.  The use of the term adjustments here means insurance adjustments, which are amounts the insurance company is not going to pay, for one reason or another. Insurance adjustments may or may not be adjustments for you (the provider). For example, if the insurance adjustment is because the charge you submitted exceeds a contracted amount for a service, this is also an adjustment for you as you have agreed not to charge the patient more than the “allowed amount” for a service. On the other hand, if the insurance company reduces the payment due to patient co-pay, this is not an adjustment for you as you expect to collect this amount from the patient.

An ERA contains:

• A payment, that is the total amount of money being sent to you. This is sometime called the “check amount” even if you are using EFT to receive the money.
• Payment adjustments, which are overall adjustments that are not related to the claims in the 835. An example of such an adjustment might be that the insurance company had overpaid on some previous claim and was reducing this payment by the amount of the previous overpayment.
• One or more claim payments that are the payments for each claim.
• One or more claim adjustments.  Adjustment at the claim level might include items such as patient deductible amounts.
• One or more service payments that are the payments for each item billed.
• One or more service adjustments including items such as “amount billed exceeds the contracted amount for this service”.

To be “in balance”:

• Each service payment must equal the service charge minus the service adjustments.
• Each claim payment must equal the claim amount minus both the sum of the claim adjustments and the sum of the service adjustments.
• Each claim payment must equal the sum of the service payments.
• Each payment must be equal to the sum of the claim payments minus the sum of all payment adjustments.

Any 835 that is “out of balance” should not be returned to your system for processing until the 835 can be balanced. If an “out of balance” is mistakenly sent to your system, your Practice Management system should check for all of these items and reject any 835 that does not balance.

Posting the results

Not only should your Practice Management system balance the ERA, it should automatically post the payments received to your patient accounts.  When doing this, it should:

• Allow you to identify which insurance adjustments are also adjustments for your system and automatically adjust your patient accounts.
• Handle insurance adjustments that are not adjustments for your system, normally by adding the amount as a patient responsibility.
• Handle unusual situations like the payment for a claim being greater that the patient balance. This could happen, for example, if the patient overpaid a copayment at the time of the office visit.

Reporting on the results

To receive maximum benefit from using ERAs, the Practice Management system you use to process 835s should be based on “exception” reporting. An exception report shows only the items that need your attention. This allows you to quickly deal with any payments that could not be processed, such as a payment for a patient that is not in your system. Ideally, there is little or nothing in the exception report.

The reporting system should include:

• An exception report.
• A short summary report showing the amounts received and posted to patient accounts.
• A full report should you want to see the details of the electronic EOB and how the payments and adjustments were handled.

How do you get ERAs

To get ERA transmissions from your payer, all you need to do is request them.  You also need, of course, a Practice Management system capable of processing the ERA files send by the payer. It’s important that you choose a Practice Management system that has experience in receiving and processing these files. In addition, a good system vendor will provide assistance in signing up for ERAs.

Gaining Control

Some practices express concern about “losing control” of the process. The fact is, however, that all you lose is a lot of paperwork and wasted time. Any good system will provide a full set of reports detailing all of the transactions processed. Some payers will even continue to provide paper EOBs during a transition period.

Summary

Switching from the paper EOB process to the ERA process will provide your practice with:

• Reduced costs
• Increased productivity
• Increased accuracy
• Increased profits
• Reduced paperwork

Like any change, there is a small learning curve but you’ll be amazed at the improvements ERA can bring you. One thing is certain—you’ll never want to go back to your paper process after trying the electronic EOB!