Healthcare - like most industries - has been transitioning from paper-based processes to electronic transactions but - unlike most industries - the pace has been slow. Most healthcare providers still collect and deposit paper checks and manually post and reconcile claim payments. With automation, time and labor spent on payment collection can be sharply decreased. AR can be updated more quickly and accurately, secondary insurance claims can be filed sooner, and funds will be deposited more quickly, to name just a few advantages.
The benefits of electronic transactions for healthcare payments — reduced operating costs, efficient processing, enhanced reliability and strengthened security — are widely acknowledged. But the healthcare industry has been slow to adopt electronic transactions even as more and more research demonstrates the potential for significant cost savings. The U.S. Department of Health and Human Services reported in 2012 that EFT represented just 33 percent of healthcare claim payments. Electronic remittance advice (ERA) accounted for just slightly more than one-third of total remittances. The costs associated with still largely paper-based billing and insurance-related activities consume up to 12 percent of a provider’s revenue annually.
Lack of universal operating rules to establish industry-wide standardization and consistency has stalled provider adoption, particularly the lack of rules addressing the reconciliation between two separate electronic files - the ERA and the EFT. Providers have historically had a difficult time matching an Automated Clearing House (ACH or EFT) payment with its associated ERA. This difficulty is compounded by the typical time lag — as much as several weeks — between an EFT issuance and the associated ERA issuance. Enrollment has been another problem area. providers often found electronic payment enrollment overly complicated and labor-intensive as health plans used different types of information in disparate formats.
The pace of change, however, is going to accelerate with the ACA legislation forcing a more aggressive transition to electronic payment processing through greater standardization. Two industry organizations — NACHA and CAQH® — have been charged with authoring EFT and ERA operating rules for Health Insurance Portability and Accountability transactions. The new rules should speed the shift from manual to electronic healthcare payments and administration. According to projections by HHS, EFT is projected to grow from 33 percent of all healthcare payments in 2010 to 84 percent by 2023, while ERA will increase from 35 percent to 82 percent of all payments over the same period.
Some of these new operating rules governing healthcare transactions took effect Jan.1, 2014.
The rules specify how EFT transactions should be executed in the ACH network, providing greater standardization and consistency throughout the industry. (Health plans are not required to send an EFT through the ACH network — the rules do not prohibit the use of other EFT payment options like virtual cards and wire transfers.)
If a provider requests healthcare claim payments electronically, health plans must provide it using the new EFT standards.
By establishing the maximum set of standard data elements that the health plans will have, the rules ensure that health plans will have the proper data needed for automated reassociation.
Health plans are required to use common format, flow and vocabulary in their enrollment forms for EFT and ERA. Since health plan enrollment forms will be similar, EFT and ERA enrollment for providers will be greatly simplified. CAQH offers a secure, online system that allows providers to enroll in electronic payments with multiple payers at no cost, eliminating redundant paper forms and saving administrative time and costs. When providers update their electronic payment information, the changes are shared automatically with their selected payer partners.
The rules place limits on codes used for rejections, making it easier for providers to understand the reasons for a health plan's rejection or adjustment of a claim payment.
Reassociation requirements set a narrow range of plus or minus three days between transmission of the EFT and the ERA — a significant improvement over current practices.
In addition to addressing enrollment, reassociation, and standardization issues, ACA requires that 100 percent of Medicare claims payments and associated data be made electronically. Providers with even one Medicare patient must be able to effect electronic transactions — a powerful inducement for them to make the move to EFT/ERA.
Being prepared for the age of electronic payments starts with understanding the new rules and the options available. Providers need to work closely with their partners and health plans to get the support needed and ensure that they are realizing all of the benefits of getting their money faster and with less hassle.
Federal Register, Vol. 77, No. 155, August 10, 2012, Department of Health and Human Services
NACHA, ACH Primer for Healthcare (Revised April 2013)
“Preparing for the New PPACA Electronic Payments Environment” Healthcare Insights