What is a medical claims clearinghouse, and what do they do?
Why Clearinghouses Transmit Electronic Claims to Insurance Carriers, and Why the Services they Provide are Essential to Medical Practices.
The simplest way to explain what a medical claims processor is and what they do is to paint a picture of the problem they solve - their piece of the puzzle.
Imagine several million licensed healthcare professionals all using a different claim software, sending out medical claims to over 4000 different insurance carriers, daily - across fifty different states - each state having its own insurance regulations; and then each carrier having its own internal software infrastructure.
In essence, what you have is the perfect recipe for an information super disaster.
If on average just 10 claims per day were sent to 5 different insurance carriers by every practice, you'd have millions of medical claims daily heading to the four corners of the earth. Now, compound this scenario with the numerous phone calls and claim re-submittals that each claim error produces until all reimbursement issues are resolved and the bill is paid.
For years this was carried out on paper -an absolute nirvana for the U.S. Postal Service, who just so happens to have the infrastructure to handle it. And on a good day they do.
But the manpower required for thousands of insurance carriers to handle all the paper work and phone calls for each claim error represents a huge cost to HealthCare, which we as beneficiaries pay by way of insurance premiums (here, a medical office manager would say: "Just pay the darn claim and I wouldn't have to call!), but that would eliminate the problem: Somehow, deep in our subconscious, it appears that we really need all those auditors, adjusters, underwriters, actuaries, reviewers, and insurance bureaucrats et el.
Enter the advent of healthcare claims being transmitted electronically. Sounds great you say, except that you no longer have a US Postal Service to do the transmitting. Electronic claims clearinghouses were devised by Medicare and the large insurance companies to step in electronically where the postal service was unable to and to prescreen for claim errors as they act as air traffic controllers of electronic claims submission, so to speak.
Most simply, clearinghouses are aggregators (senders and receivers) of mountains of electronic claim information almost all of which is managed by software. Large clearinghouses today process trillions of transactions each year. They are essentially regional hubs that enable healthcare practices to transmit electronic claims to insurance carriers, and additionally they provide a Biller or an Office Manager with a single place to manage all their electronic claims from one central control panel, similar to online checking.
How a Clearinghouse Works
Here's the nuts and bolts of how it works. The medical billing software on your desktop creates the electronic file (the claim) also known as the ANSI-X12 837 file, which is then sent (uploaded) to your clearinghouse account. The clearinghouse then scrubs the claim checking it for errors (arguably the most important thing a clearinghouse does); and then once the claim is accepted, the clearinghouse securely transmits the electronic claim (very important) to the specified payer with which it has already established a secure connection that meets the strict standards laid down by a HIPAA.
At this stage, the claim is either accepted or rejected, but either way, a status message is usually sent back to the clearing house who then updates that claim's status in your claim software. It then alert's you with a status update that you have an accepted or rejected claim. If rejected, you have 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 was valid, you'll receive a reimbursement check along with an explanation of benefits (EOB). All very simple right? Not.
The same sort of activity takes place every night within the federal banking system as our checks and banking activities are sent electronically from local banks to central ACH repositories (Automated Clearing Houses) and then on to banks of origin across the country, and then back to local banks -- all done electronically, and somewhat instantly, all behind the scenes.
Thus today, you have dozens of regional medical billing clearinghouses throughout the country all serving the same role; that of scrubbing medical claims and then transmitting the electronic claim information securely to insurance carriers.
You might think: "That's nice, but why do I need one?"
The best clearinghouses offer high value features that provide a whole new level of claim intelligence for revenue cycle management that makes their services extremely compelling from a financial perspective, and also make it highly desirable from an office-staff efficiency point of view.Here are some highlights to look for in a premium claims clearinghouse:
- Eligibility Verification - Determine coverage before treatment
- Electronic Remittance (ERA) - Automatically updates patient accounting
- Claim Status Reports - Know the status of a claim at all times
- Rejection Analysis - Have error codes displayed in plain English
- Online Access - Edit and correct claims day or night online
- Printed Claims - When necessary, have medical claims automatically dropped to paper but still be able to track them electronically.
- Patient Statement Services - Have your patient statements put on 'autopilot' at less cost than you can mail them out yourself.
- Real Support - The best clearing houses offer 1-on-1 personal support and training -provided by experienced billing experts
- Affordability - When you take into consideration the cost of purchasing forms, printing, envelopes, and postage; a clearinghouse ends up costing about the same as processing paper claims, except you have the many added benefits.
Main Clearing House Benefits
Here are the main benefits of submitting electronic claims through a clearinghouse - in a nut shell.
Using an clearinghouse to send electronic claims:
- Allows you to catch and fix errors in minutes rather than days or weeks
- Results in significantly higher claim success --fewer rejected claims.
- Rapid claims processing: submission can reduce your reimbursement times to under ten days.
- Submit all your electronic claims in batch all at once, rather than submitting separately to each individual payer.
- Eliminates the need to manually re-key transaction data over and over at each payer's website.
- It provides a single location to manage all your electronic claims
- Vastly improve vender relationships with insurance carriers.
- Avoid long wait-times being on hold with Medicare and Blue Cross inquiring about claim errors.
- If you subscribe to a good clearinghouse, you'll be speaking with a knowledgeable support person within just a few rings.
- Shorter payment cycles lead to more accurate revenue forecasts.
- Reduce or eliminate need for paper forms, envelopes and stamps
- Plain and simple, using a clearing-house greatly simplifies and speeds up your claims processing.
ADVANTAGES OF GOING DIRECT:
Many large payers such as Medicaid, Medicare or BlueCross do their own claim processing and allow you to submit claim information directly to them. Here are the advantages:
- Ability to submit claims directly to the payer without a middleman
- Free claims. No recurring fees.
DISADVANTAGES OF SUBMITTING DIRECTLY TO PAYERS
Each new payer that you want to send claims to can entail a potentially long and involved testing/certification process that can take weeks (or months) while you send (endless) test claims (and then live claims) which get rejected over and over until all the details unique to that payer are all worked out. Going direct to each payer would mean repeating this process afresh each time you want to add a new payer to send medical claims to (here, a clearinghouse administrator would say yes, I know).
Submitting claims directly to more than a single entity puts an extra, unnecessary burden on billing staff who are forced to remember multiple transmission methods, multiple logins and passwords, multiple file names and file types, and to memorize each carrier’s often cryptic error codes and interpret each carrier's often confusing claim status reports. Here are a few disadvantage highlights:
- Lack of centralization (claims and claim data at many locations)
- Hidden costs. Often you must purchase additional software
components, which can impact your regular software support fees.
- Unnecessary added confusion of multiple accounts to log into, and multiple data entries, which increase the opportunity for errors
- Lost claims and lack of tools for efficient claim management.
- Little or no support (Would you naturally really call Medicaid or
Medicare for technical support?)
In the end, it becomes difficult to calculate the actual cost of 'free' when it translates so fundamentally to lost claims, wasted time, frustrated staff, increased billing errors, increased claim denials, and lengthened payment cycles. There may be good and bad clearinghouses, but submitting medical claims to more than a single entity (e.g. a clearinghouse) begins to look like inefficiency gone to seed. Whereas the advantage of submitting medical claims to a single entity are clearly evident.
So, in conclusion, the vast majority of health insurance carriers do not have the manpower or the infrastructure to handle millions of medical practitioners (each using a different claim software) daily sending electronic claims (in slightly different ways) across 50 states that are each regulated differently. So there exist a desperate need for the centralization, standardizing, and the secure transmission of claims via these important intermediaries we call a clearinghouse.
How To Tell If You Need One
You can easily tell if you would directly benefit from subscribing to an medical billing clearinghouse service by answering a few questions:
- Does your practice bill (or plan to soon bill) electronically?
- Does your practice bill a number of insurances; ..or just one?
- Is your staff experienced at billing electronically? (The less experience, the greater the need, and greater the benefit).
- What is your claim volume? The cost of a clearing house is often offset by no longer having to send in paper claims.
- Would it help to quickly and greatly reduce medical claim errors?
- Would it help to drastically shorten reimbursement times?
- Do you have better things to do than be on hold with Medicare and Blue Cross trying to figure out claim errors?
How to Select a Good Claims Clearinghouse
How does one distinguish a good clearinghouse from a bad one? The answer is not always simple. But here are some important things to look for:
Payer List: First and foremost, make sure that the insurances you bill on a regular basis are on their payer list. This list is most often available online at their website.
Nationwide: Many clearinghouses are regional. Steer towards ones that operate nationally.
Claim Software: Let them know what medical billing software you have and ask if they have people using it on their system (successfully we might add). This part can make a tremendous difference to avoid what billers know as clearinghouse hell.
Clearing house hell is when you call your clearing house about a claim error and they tell you that you absolutely have a billing software problem. Then you call your claim software provider and they assure you that the problem lies with the clearing house. This circle of stupidity can go on for weeks and make you insane when all you want is the darn claim to go through, but no one will take responsibility to get to the bottom of it. Avoid clearinghouse hell when at all possible.
Easy-out Contract: Most of the better claims processors today offer a month to month subscription.
Support: Try contacting their support before you sign up.
Error Reports & Control Panel: Most clearinghouses will offer you a quick tour of their control panel, (the location online where you'll be managing your medical claims). What you want here is easy navigation within the management area, and claim errors and rejections to be reported in clear, concise language, not merely as numbers which can be extremely confusing.
Monthly Fees: Many of the best clearinghouses charge between $75 to $95 per month (per doctor) (rendering provider in box 24-J) for unlimited medical claims. The ones that charge more are not necessarily worth the extra cost. Checking eligibility and importing ERAs are almost always a separate cost.
Pets: If you're a pet lover, choose a claims clearinghouse that's pet friendly ..really :) ;-) ;^)
Advanced Features: Over and above just processing medical claims, the best clearinghouse providers offer many highly desirable advanced features such as: Eligibility Verification, Sent File Status, Claim Status Reports, Rejection Analysis, Paper Claims (created for you and mailed when necessary), Secondary Claims Processing, Electronic Remittance Advice (ERA), Patient Statement Services (you no longer have to mail out all those patient statements each month), Payment Processing, and finally, Transaction Summaries of all your clearinghouse activity. These advanced features make a good clearinghouse worth its weight in gold.
Following is a growing directory list of 'happy' clearinghouses. Ones that operate nationally, provide one-on-one support, and have a good reputation as rated by thousands of medical billers and claim software users.
National Directory of Electronic Claim Clearinghouses:
Free Claims Software
NHS Net Healthclaims
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written permission from the author; Michael J. Sculley