Understanding Electronic Remittance Advices: Benefits & Obstacles

EOBs Are Going the Way of the Dinosaurs – Extinction!
Make Sure Your Facility Doesn’t Follow Them.

The “paper blizzard” that the healthcare industry has been caught in for many years is finally starting to subside. The inefficiencies of dealing with too much paper in the healthcare payment process are well documented.

One of the major contributors to this blizzard has been paper-based explanations of benefits (EOBs). Slowly but surely the clouds are clearing with the advent of more and more healthcare plans moving to electronic remittance advices (ERAs). The efficiencies and technological advantages of ERAs will surely doom the old EOBs to eventual extinction.

The federal Centers for Medicare & Medicaid Services (CMS) reports that 28 percent of administrative staff time spent on billing and insurance-related tasks in a doctor’s office goes to receiving and posting payments, follow-up, and payment reconciliation.

CMS’s interim final rule, which became effective August 10, requires that medical practices adopt electronic funds transfer (EFT) and electronic remittance advice (ERA). The compliance date is January 1, 2014.

CMS reports that when health plans and physician practices implement its regulations, the industry should save between $300 million and $3.3 billion over the next decade.

The Electronic Remittance Advices are a refreshing replacement for paper-based EOB documents.

The ERAs contain the same claims payment information as EOBs, but they are designed to allow for the electronic posting of payments to an accounts receivable system without human intervention. ERAs provide details about claims payments as well as notice of a payment due to the provider via electronic data interchange (EDI). To accomplish this process, the healthcare industry devised a standard for electronically transmitting the explanation of what the insurer is paying to the provider: the HIPAA X12N 835. This is the reason ERAs are commonly referred to as 835s.

ERAs have been around for several years and their benefits are indisputable:

  • full electronic processing
  • no mailing or faxing paper remittances
  • faster and easier payments
  • easier tracking of payments
  • improved compliance and better auditability

Question:
Why then has ERAs adoption not been more wide spread?

The answer:
Technology Challenge.

technology challenge

A key obstacle to the faster adoption of ERAs is that many healthcare providers are not equipped to handle them. Smaller provider sites – those with less than 10 doctors – still make up a substantial percentage of the U.S. claims volume. Though many of these providers have signed up for ERAs, most do not have the knowledge of how to load the 835s into their systems, so they end up either printing an imaged version of the 835 or reverting to the paper remittance. In either case, the provider must manually key the data, which defeats the ERA purpose.

 Smaller hospitals, in particular, seemed to be challenged by ERAs. Either they can’t post the ERAs because their systems are too antiquated, or the format of the ERAs is not compatible and won’t post cleanly, creating downstream exceptions that are costly in time and labor.

As a healthcare provider, how can you make sure your facility can take advantage of the benefits of ERAs?

A professional medical billing outsourcing provider can ensure that your facility has the technology and staff training to accept ERAs. They can help you meet the technology challenge that is holding back so many healthcare providers and ensure that you don’t go the way of EOBs and the dinosaurs – extinction.