Remittance Advice Reconciliation and Payment of Claims

Chapter 4: Revenue Management

Section 4-2d: Remittance Advice Reconciliation and Payment of Claims

After the adjudication process is completed, claims are either approved for payment or denied. A remittance advice (RA) is generated and sent to the provider, while the patient or policyholder receives an explanation of benefits (EOB). The RA details the status of the claim and is crucial for providers to process payments and adjust patient accounts. A more expedient version, the electronic remittance advice (ERA), is also available, which allows for quicker payments, as it is submitted electronically containing the same information as the paper version. Providers need to thoroughly review the remittance advice, checking for any possible processing errors such as changes in codes or denials of benefits. It is equally important for patients to review their EOBs. If a claim is denied, patients should proactively verify with their provider’s office regarding the resubmission of the claim or any requested documentation that might assist in the approval process.

Follow-up Procedures

Upon reviewing the RA and posting the relevant payments and adjustments, providers must follow up on any identified code changes, denials, or partial payments. This often requires additional communication with the payer to provide any requested information, thereby expediting the payment process.

Chapter Insights

Workbook Interactivity

The accompanying workbook emphasizes practical exercises that help students interpret data found on EOB and RA/ERA documents. For instance, Medicare references its remittance advice as a Medicare Remittance Advice and the EOB as a Medicare Summary Notice (MSN), which is elaborated upon in Chapter 14.

Payment Procedures

It is common for payers to consolidate payments for multiple patients in one remittance advice and process a single check for several claims. Providers have the option to set up electronic funds transfer (EFT) systems, enabling automatic deposits to their bank accounts for greater efficiency.

State Regulations

The Prompt Payment Act of 1982 mandates federal agencies to make timely payments for claims, lest they incur penalties for delays. Many states enforce similar laws, specifying that insurance plans must process claims—either approving or denying them—within a defined timeframe (usually 30 days for electronic claims). States may impose penalties on late payments to ensure compliance.

Claim Processing Details

Claims Adjudication Overview

When third-party payers evaluate claims, they establish whether the services fall within the coverage of the patient's insurance (for example, elective cosmetic surgeries typically are not covered). The payer's final decision leads either to a denial or approval of payment. A remittance advice (or remit) is then shared with the provider, while the patient receives an EOB, detailing the claims' outcomes, including denied services and amounts covered.

Essential Information in Remittance Advice

The RA includes vital information such as:

  • Third-party payer’s name and contract number

  • Electronic Data Interchange (EDI) information (exchange number, generation date and time, receipt identifier)

  • Provider's name and address

  • Adjustments made to the submitted claim (e.g., reduced or partial payments)

  • Payment details (amount paid, date issued)

  • Patient's identification details (name, number, service date, etc.)

  • Paid statusFederal regulations compel Medicare Advantage organizations to process claims promptly, requiring a 95% rate for clean claims settled within 30 days. Outstanding claims that exceed this timeframe incur penalties for delays.

Components of Patient EOBs

The EOB generally comprises:

  • Third-party payer contact information

  • Payment details and patient responsibility (co-payment and deductible amounts)

  • Coverage descriptions and service details (including claim number)

  • Notation clarifying that the statement is not a bill.Understanding the information laid out in RAs and EOBs is critical, enhancing clarity and workflow in billing and reimbursement processes.

Transition from Traditional to Electronic Claims Processing

Yesterday’s Claims Handling

Traditionally, claims were received via mail, opened, sorted, and assessed for validity. Valid claims received payment through checks. Invalid claims prompted additional paperwork and manual intervention by healthcare providers. Claim details included various essential parameters such as date of service, procedure codes, provider ID, etc.

Modern Advances in Claims Processing

Today, claims processing is executed electronically with advanced software enabling streamlined submissions. The healthcare industry has largely shifted to electronic claims, fostering efficiency and accuracy in tracking. With the enforcement of electronic submissions, claims submitted on paper are routinely denied, prompting providers to adapt to digital transformations.