How to Reassociate EFT/ACH Payments to ERAs in 2014

Transcription

1 How to Reassociate EFT/ACH Payments to ERAs in 2014 Written by: Mark Brousseau, President of Brousseau & Associates Michael Manna, Business Manager HRCM of Orbograph June 13, 2013

2 Table of Contents Opportunities in Grand Proportion... 3 Paper, Paper Everywhere... 4 Enter: Administrative Simplification... 4 The ACA Challenge... 5 The Solution... 7 The Bottom Line... 7 Arrange a private briefing... 8

3 Introduction The healthcare industry has high hopes that federal health reform will be the impetus to finally reducing the sky-high administrative costs that burden payers and healthcare providers alike. The industry is particularly keen on mandates for electronic transactions such as the Healthcare Operating Rules for EFT & ERA and NACHA s TRN Association defined by X TR3 V5010. These new standards are aimed at streamlining the reassociation of payments and remittances (remittances describe the payment details of payer payments). These initiatives are great steps for the industry, but there are significant limitations that need to be addressed. The underlying problem that federal health reform and the NACHA rules changes don t address is that electronic remittance advices (ERAs) and electronic funds transfers (EFTs) are sent from health plans to providers through separate channels. With no automated bridge between the EFT/Automated Clearing House (ACH) and ERA data sets, providers will still face challenges in reconciling payments and tracking receivables. Tools must be developed to link payments and remittances, or providers and their financial institutions (FIs) are likely to find themselves left wanting. FIs may even find themselves at a disadvantage to competitors such as billers or clearinghouses that adopt the solutions required to automatically reassociate payments and remittances. Opportunities in Grand Proportion An estimated $2.6 trillion is spent on healthcare annually in the United States, representing an eye-popping 17 percent of the nation s Gross Domestic Product (GDP), according to the Department of Health and Human Services and the CMS Office of the Actuary. Incredibly, healthcare expenditures are growing by approximately 6 percent annually, far outpacing recent GDP growth and could top $4.5 trillion or 20 percent of the U.S. GDP by 2019, according to the CMS Office of the Actuary. Even more staggering than the size of the healthcare industry is its complexity. No other comparably sized U.S. industry segment has such weak administrative standards, lousy adoption of existing standards, and disjointed legacy operating platforms. It s largely for these reasons that administrative costs account for 14 percent of all U.S. healthcare expenditures or about $360 billion annually, according to the Council for Affordable Health Insurance. To put this in perspective, the council reports that the industry loses $396 billion a year in fraud, waste and abuse. Section 1104 of ACA takes on the issue of Administrative Simplification in healthcare head-on. Some of the many objectives of Administrative Simplification in ACA include: Reduced clerical burden Increased electronic transaction adoption Standardized operating rules for eligibility, claims status, claims payment and remittance, and enrollment and referral authorization Compliance with standards Healthcare payments are a major contributor to the industry s administrative burden. The healthcare industry spends an estimated $150 billion annually on billing and insurance administration alone, according to the Council for Affordable Health Insurance.

4 A key contributor to these costs is the amount of paper throughout the healthcare revenue cycle: Payers generate 600 million envelopes for payments annually 60 percent of payments are made via paper 50 percent of Explanation of Benefits (EOB) documents are paper-based Current estimates indicate that between 10 and 30 percent of those payments travel through the ACH Network, leaving approximately 1.75 billion payments still issued by check, which also means that paper EOBs are abundant. Paper, Paper Everywhere All of this paper drives up costs, creates inefficiencies, and generates customer inquiries. For example, providers with in-house EOB processing can have large departments of data-entry staff keying service lines of patient activities into practice management (PM) software. Outsourcing is no panacea as providers may be at risk if they use vendors without tight HIPAA compliance procedures. Additionally, providers have no visibility into the true collected revenue of the organization. Not surprisingly, most providers suffer significant financial losses from a high percentage of write-offs. Today, Celent finds that only 76 percent of providers are able to receive an electronic remittance for posting. This has resulted in only about 60 percent of payments from payers being made electronically. Why is this so low? For starters, the industry s lack of a true remittance standard has resulted in payers using multiple EOB formats and multiple Remittance Advice Remark codes. In many cases, the information that providers require to reassociate payments and remittances is incorrect, missing, or not provided on the payment or remittance in a way that is meaningful to the provider or its financial institution. In other cases, providers do not receive uniform code combinations for the same or similar business scenarios from all health plans. As a result, providers are unable to automatically post claim payment adjustments and denials accurately and consistently. Additionally, many billing systems require 835 files to be received in a specific format; otherwise, the 835 files must be translated. Faced with this dynamic, many providers are forced to manually reconcile transactions. Enter: Administrative Simplification The Patient Protection and Affordable Care Act (ACA) addresses the barriers to electronification by defining standards and regulations for ERA and EFT adoption. In particular, ACA requires: All Medicare payments be made via EFT All commercial payers to adopt EFT and ERA operating rules and standards All commercial payers to certify that they have the ability to facilitate EFT and ERA transactions, should a healthcare provider request them

5 All commercial payers to use standard Remittance Advice Remark codes Department of Health and Human Services Secretary Kathleen Sebelius predicts that electronic payments alone will reduce administrative costs by as much as $4.5 billion over the next decade. Unquestionably, expanding and extending the mandated specifications of HIPAA through the provisions in ACA will place significant pressure on health plans (payers) and healthcare providers to achieve internal business strategies as well as meet industry-wide and legislative requirements. The cornerstone of Administrative Simplification is the adoption of ERAs and EFT. ERAs contain the information on claims reimbursement amounts for specific patient treatments and allow healthcare providers to update their patient accounts receivable and file for any secondary insurance. EFT leverages the ACH Network to enable healthcare providers to receive claims payments electronically. For starters, ACA includes a mandate that Medicare move all of its provider reimbursements to EFT by January 1, ACA also requires that all commercial health plans (payers) be able to deliver ERAs and EFTs to healthcare providers, if requested. While there is no mandate within ACA for private-sector healthcare providers to accept ACH claims payments, health plans increasingly are requiring healthcare providers to accept ACH claims reimbursements as part of their contracts. What s more, if a healthcare provider submits a claim electronically, ACA allows health plans (payers) to settle the claim electronically. This mandate will either encourage paper claims among providers that are not ready for ERAs or encourage providers to get ready for ERAs since they will be receiving them from plans to which they submit electronic claims. ACA also includes provisions that allow states to write their own stronger legislation covering electronic payments. Ohio already has a law on the books that exceeds the federal mandate. Fifty-seven percent of healthcare providers surveyed by The Association for Work Process Improvement (TAWPI) in 2010 believe that ACA will ultimately drive EFT and ERA adoption. Beyond EFT and ERA mandates, ACA tackles some of the issues providers face in reconciling payments and remittances. For instance, ACA requires payers to send payments within three days of an ERA. ACA also establishes a Trace Reassociation Number or TRN. The TRN is a tracking code, comprised of machine-readable numbers and asterisks, unique to each payment transaction. It also identifies the payer originating the transaction. TRN information is passed along in the ERA and CCD+ Addenda Record associated with the EFT transaction. Importantly, the TRN is not the ACH Trace Number but rather the Payment-Related Information in the CCD+ Addenda Record of the ACH transaction. The TRN is designed to help healthcare providers confidently match EFT deposits with corresponding ERAs. The ACA Challenge Fifty-seven percent of healthcare providers surveyed by The Association for Work Process Improvement (TAWPI) in 2010 believe that ACA will ultimately drive EFT and ERA adoption. For financial institutions and providers, Administrative Simplification may be easier said than done. One of the most complex and challenging requirements in Section 1104 is trying to reassociate ERAs and EFTs, even with mandates for the timing of payments and the creation of TRN data. The reassociation of

6 ERAs and EFTs is so vexing for healthcare providers that 19 percent of them don t even try to reconcile their bank deposit, according to a study by PayStream Advisors. Here s how the process will work in cases where both the payment and the remittance are electronic: The health plan creates an EFT and an ERA The ERA is sent from the health plan to the provider Within 3 days of the ERA creation, the health plan s financial institution sends an EFT to an ACH operator The CCD+ Addenda contains the TRN data segment The provider s financial institution (also known as the Receiving Depository Financial Institution or RDFI) receives the EFT and posts funds for the payment to the provider s account The provider receives the ERA with the TRN data segment and must match it to the TRN data segment received from its financial institution NACHA has made several rules changes to help facilitate this process: Standard identification of health care EFTs: Health plans must clearly identify CCD+ entries that are healthcare EFT transactions through the use of a specific identifier Additional formatting: For a CCD+ entry that contains the healthcare identifier, health plans must include an addenda record that contains the TRN data segment. Health plans must also identify themselves in the transaction by the name they would be known by the provider Delivery of payment-related information: The healthcare provider s financial institution (RDFI) must provide or make available, either automatically or upon request, all information contained within the paymentrelated information field of the Addenda Record no later than the opening of business on the second banking day following the settlement date. RDFIs must also offer or make available to the provider an option to receive or access payment information via a secure, electronic means The reassociation of payments and remittances will remain a largely manual affair. New data segment terminator: NACHA now allows for the use of a second data segment terminator ( ~ ) to any data segments carried in the Addenda record of the CCD entry However, the underlying problem that ACA and the NACHA rules changes don t address is that ERAs and EFTs are sent from health plans to providers through separate channels. With ERAs and EFTs coming via different paths, there is no automated bridge between the ACH data set and the ERA data set. Payments and remittances must be manually reassociated to determine which items were paid (such as in the case where a provider receives 10 remittances for $100 and eight payments for $100). The process becomes even more complex if the provider receives high volumes of payments; in many cases, reconciliation doesn t get completed. Surprisingly, most financial institutions are not prepared to help with this problem. Many financial institutions have little experience with ACH Addenda Records. At best, these financial institutions could generate reports based on the Payment-Related Information contained in the CCD+ Addenda Record and

7 publish the information as a PDF. The report then can be reconciled by the financial institution or its healthcare provider customer against a report of information contained in ERA files, assuming the provider s patient accounting system is modern enough to generate such a report. Other financial institutions may offer providers spreadsheets or statements with payer information. In either scenario, the reassociation of payments and remittances will remain a largely manual affair. The Solution To achieve the full benefits of electronification, providers and their financial institutions must find a way to link EFTs (ACH transactions) with EOBs and ERAs to automatically reassociate payments and remittances. Orbograph offers an approach that accomplishes this objective. Here s how it works: A healthcare provider s EOBs and/or ERAs are received by the Orbograph P2Post/E2Post Portal Orbograph automatically converts any EOBs into 835 files Orbograph accesses the ACH payment Orbograph then matches ERAs with CCD+ Addenda Records using several data elements. Matched ERA and CCD+ Addenda Records can be downloaded as a pair from the Orbograph Portal. In cases where ERAs and CCD+ Addenda Records don t match, an exception report is created along with an anticipated date of deposit Advanced users of the solution can even drill down to specific billing information contained on each claim that was paid by specific ACH transactions, enhancing receivables processing. The reasons: Deposited funds not associated with ERA information are unapplied funds that cannot be recognized ERAs not associated with deposited funds is a posted receivable with no cash By reassociating EFTs and ERAs, providers eliminate these issues and positively impact their AR. The Bottom Line The healthcare revenue cycle is burdened by manual processes for reassociating payments with remittances. These manual processes increase operational costs, delay reconciliation, denial management and secondary billing, and result in a high percentage of provider write-offs. As it stands, the healthcare industry writes off 4.88 percent of its total receivables each year, according to ACA International. ACA mandates for ERA and EFT adoption, tighter delivery windows for ERAs and EFTs, and the creation of TRN information will help. But many providers do not have modern enough systems to post ERAs automatically, must less reassociate them with EFTs. Additionally, some providers will never enroll for EFT or ERA with every plan, so paper will continue to exist in the healthcare industry. This systemic bifurcated process will perpetuate confusion and inefficiency indefinitely. To truly move the needle in reducing administrative costs, healthcare providers and their financial institutions need solutions that automatically bridge the ERA and EFT/ACH data sets. For providers,

8 solving the reassociation challenge can be the difference between significant efficiency gains and the status quo. Financial institutions stand to gain substantial incremental revenues. Arrange a private briefing This white paper was sponsored by Orbograph. A leader in converting paper-based financial documents into electronic records, Orbograph products and services touch nearly 5 billion financial transactions annually. Our solutions are used more than 1,500 financial services and remittance processing companies throughout the Americas. Orbograph s Healthcare Revenue Cycle Management solutions enable healthcare providers, financial institutions, service bureaus and medical billers to convert EOBs or electronic data into a variety of postready files (such as EDI 835/X12 835) within the revenue cycle management process. These solutions allow for faster processing times and reduced costs in processing healthcare payments. To arrange a private consultation with an Orbograph representative, please info@orbograph.com.