EDI Unleashed – Series 3

We discussed in previous blog, the limitations of paper based claim submission. To overcome these limitations, electronic claim submission was introduced. Along with that came the concept of ‘Clearinghouse’.

So let’s see what exactly a Clearinghouse is and how it works.

ClearingHouses:

Electronic claims clearinghouses were introduced by Medicare and the insurance companies to send/receive claims electronically. The postal service was unable to validate for claim errors and act as controllers of electronic claim transmittal.

Medical clearinghouses are senders and receivers of large amounts of medical claim information, almost all of which is managed by software. Large clearinghouses process trillions of transactions each year.

The billing software on Providers desktop creates the electronic file (the electronic claim), which is then sent (uploaded) to his/her clearinghouse account. The clearinghouse validates the claim checking it for errors. Then once the claim is accepted, the clearinghouse securely transmits the electronic file to the specified payer with which it has already established a secure connection that meets the strict standards laid down by HIPAA.

The claim is either accepted or rejected. In both situations, a status message is sent back to the clearing house which then updates that claim's status in Providers account. It then alerts Provider (e.g. by email) that it has accepted or rejected a claim. If rejected, Provider has a chance to make any needed corrections, and then re-submit the claim.

Ultimately assuming there are no other corrections required, and the patient's insurance is valid, Provider will receive a reimbursement check along with an explanation of benefits (EOB).

ClearingHouse Benefits:

Using an electronic clearinghouse to send claims:

• Allows Provider to catch and fix errors instantly.
• Results in significantly higher claim success as fewer claims are rejected.
• Submitting claims electronically can reduce reimbursement times to less than ten days.
• Eliminates the need to prepare claims and manually re-key transaction data over and over for each payer. Submit all electronic claims in batch all at once, rather than submitting separately to each individual payer.
• It provides a single location to manage all electronic claims.
• Vastly improve vendor relationships with insurance carriers.
• Shorter payment cycles lead to more accurate revenue forecasts.
• Reduces or eliminates need for paper forms, envelopes and stamps

In next blog, we will look into criteria for identifying selecting a ClearingHouse.