Are you processing electronic remittance advices?

By: Stephen Weiss

In today’s healthcare environment, if you are processing claims you should be submitting charges and receiving payments electronically. If you are not, you should be asking yourself why not?

Charges should be submitted electronically and dropped to paper if the Payer cannot accept charges electronically. Submitting charges electronically is being performed by many billing entities while receiving payments and payment advice electronically is not as widespread. The huge advantage to receiving payments electronically is that it eliminates the need to post the payments manually.

Receiving and processing payments electronically is not as straightforward as submitting charges. Here is a little background on processing electronic payments.

HIPPA envisioned the flow of medical payments via a transaction defined by the ANSI (American National Standards Institute) X.12 standard. ANSI X.12 defines a transaction called an “835” to define the electronic Explanation Of Payment (EOP). The 835 has two parts: one section of the transaction acts as an Electronic Funds Transfer order, the other part the actual explanation of what was paid, with a summary and line item for each of the charge line items.

The larger Payers had systems in place for electronic funds transfer and did not adopt the EFT portion of the transaction. Those Payers that implemented the 835 transaction only provide explanation of payment information.

But now things start to get a little trickier – it doesn’t sound too bad that only one portion of the 835 transaction is implemented but this omission causes many processing challenges. A Payer may elect to send an 835, also called an Electronic Remittance Advice (ERA) transaction and make payment by either paper check or electronic funds transfer.

And therein lies the rub: you may receive an ERA but not actually have the money in the bank! The ERA may come before or after an electronic funds transfer and a check may arrive after you receive the ERA.

Typically, a service is required to perform something called Payment Association. Payment Association matches the ERA with the actual funds being available in your bank account. After the association is made, the ERA is released. Payment Association is performed by different third party vendors including several large money center Banks.

Not every Payer supplies an Electronic Remittance Advice. Payers may still send paper Explanations Of Payment with checks. Some Banks offer Lockbox services to accept the paper checks, deposit them and convert the paper Explanation Of Payment into an ERA along with the Payment Association services. The fees for this processing can be expensive and have to be weighed against the savings realized from the electronic posting of payments.

The conversion of the paper Explanation Of Payments is non-trivial as the paper is first scanned and then Optical Character Recognition software is used to lift the information off the images and is converted into electronic data. Staff is required to review areas of the images that the software could not identify. Patience and appropriate due diligence are required to select your vendor to perform this service for you.

Here are some things to do when setting up receiving electronic payment advices:

–         Your Practice Management System should have the ability to process Electronic Remittance Advices. If not, speak with your vendor about adding the feature via upgrading. If the vendor does not support this feature it’s time to find a new vendor.

–         Work with your Payers and software vendor to set up the Electronic
Data Interchange required to transfer the required files to your system.

–         If you receive a large volume of paper remittance from Payers that do not support electronic remittance, find a third party to convert the paper to Electronic Remittance Advices.

Setting up your practice to receive payments electronically can create huge savings in reduced labor costs and reduce processing errors.

To learn more about the solutions offered at AllegraMD, contact Stephen Weiss,, at [email protected]

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