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What is a Medical Billing Clearinghouse, and Why Should You Use One?

Many practices use a medical billing clearinghouse to process their claims to insurance companies. What is a medical billing clearinghouse, and why do so many healthcare providers invest in this option? The following guide will provide detailed answers to these and other questions.

What is a Medical Billing Clearinghouse?

Medical billing is often a complicated and time-consuming process. An intermediary clearinghouse service provider helps to streamline that process by checking claims for errors, storing detailed information on each claim, and enabling electronic funds transfer (EFT) payments. As a result, more claims are paid on time, and less time is wasted on preventable misunderstandings.

How Does a Medical Billing Clearinghouse Work?

When healthcare providers install medical billing software, each claim becomes a file known as an ANSI-X12-837. Each file is then uploaded to the clearinghouse and “scrubbed” for errors. Finally, the error-free file is transmitted to the insurance company for processing. This entire process takes place over secure electronic connections per the guidelines of the Health Insurance Portability and Accountability Act (HIPAA).

What are the Benefits of Using a Medical Billing Clearinghouse?

There are many advantages to using a medical billing clearinghouse for your claims process. Here are just a few key benefits that come from leveraging this option:

Greater Convenience

The majority of healthcare claims are now processed electronically instead of through the mail. Medicare and other large insurance payers prefer to use electronic clearinghouses to sift through and audit claims. Electronic submissions make the entire claims process quicker and smoother.

Moreover, medical billing software partners typically provider patient portals that help users to manage prescriptions, lab results, and communication. Patients can easily access these portals from their PC, laptop, tablet, or smartphone.

Better Legibility

Doctors and other medical professionals are not known for the clarity of their handwriting. With a system of electronic medical records in place (as administered by a clearinghouse provider), insurance companies can easily read patient data. This ensures that claims won’t be rejected because of a misspelled patient name or other preventable errors.

Improved Processes

Many healthcare providers have to transfer a claim’s information to their billing software, print the claim out as a CMS1500 form, and then mail it to the appropriate insurance company. After the insurer receives the claim, they audit it for errors. If they find any, they send the claim back to the provider; and the billing staff is back to square one.

All of this takes a lot of time and manpower. In contrast, the use of a medical billing clearinghouse can save you and your staff from inputting and re-inputting data, and losing precious time on fixing mistakes. Basically, you’re in a better position to focus on patient care rather than necessary but tedious paperwork.

Increased Administrative Efficiency

Healthcare providers and insurance payers each use billing software, but the two programs may not be compatible with each other. This can result in both sides spending an inordinate amount of time manually keying in data. However, when both sides use a clearinghouse that can bridge the gap between each piece of software through electronic data integration (EDI), the communication process between payer and provider becomes much quicker and simpler.

Moreover, when you accept electronic remittance advice (ERA) from your clearinghouse and EFT payments from your insurance payers, your claims process will speed up, you won’t have to worry about lost paperwork or stolen checks, and your staff will be able to focus on tasks that are more important for your operations and bottom line. Even the time saved from sending/receiving paper mail or manually completing bank deposit transactions can add up to increased productivity from your staff.

More Accurate Documentation

The American Medical Association has estimated that approximately 42% of physicians will face a medical malpractice claim at some point in their career. While there’s not much you can do to speed up the legal process around a malpractice suit once initiated, a medical billing clearinghouse provider can ease some of your burden by providing detailed and accurate information on the claim in question. In addition, you’ll be able to quickly access that information as circumstances dictate.

Fewer Errors and Returned Claims

The vast majority of billing problems and returned claims stem from human error. In fact, the U.S. Government Accountability Office found that more claims are denied because of billing errors and eligibility questions than because the insurance companies disagreed for the necessity of the care that the patient received. Moreover, medical billing errors and other issues cause healthcare providers to lose an estimated $125 billion each year.

Clearinghouses audit bills and claims for errors such as:

  • Missing patient data
  • Incorrect patient data (misspelled name, wrong birthdate, etc.)
  • Erroneous insurance provider information
  • Inaccurate billing codes (incorrect Place of Service, HCPCS, or CPT codes, etc.)
  • Incomplete data related to procedures or diagnostics performed
  • “Double-billing” for the same service

Improved ROI

Healthcare providers that use a reputable medical billing clearinghouse see a significant improvement in their return on investment. Here are just a few of the reasons why:

  • Clearinghouse software can identify errors in seconds and alert your staff immediately, which allows them to quickly make adjustments while the information is still fresh in their mind.
  • A clearinghouse stores individual payer information so that data related to that payer doesn’t have to be re-entered every single time, making the submission process much faster.
  • You have the option to send all your claims at once instead of submitting a separate file for each and every payer.
  • In the case of an emergency event, a clearinghouse can provide you with a back-up copy of any important billing data you submitted and then lost.
  • You save money on printing ink, stamps, mailing supplies, and other expenses associated with paper correspondence.

How Can You Choose the Right Medical Billing Clearinghouse Provider?

It’s important to partner with a medical billing clearinghouse provider that can truly provide what your practice needs. Each clearinghouse provides a unique set of services and values. Here are 5 factors to consider when deciding which clearinghouse to use:

1. Evaluate Your Options

Do your due diligence by researching several options. As you are investigating the different possibilities, make sure that you know the answers to questions such as:

  • What is the extent of this clearinghouse’s reach (local, regional, national)?
  • Are my practice’s insurance payers on their list?
  • Does this clearinghouse offer online access for tracking and updating submitted claims?
  • Do they charge for their services on a monthly basis, or do they charge per submission?
  • Does their support team provide analysis for rejected claims?
  • In the event that an insurance payer requires paper-based claims, will the clearinghouse handle that correspondence as well?

Thinking about the answers to these and other questions will help you to narrow your search parameters and make a better decision.

2. Focus on Customer Support

The best clearinghouses are those that offer prompt and responsive customer service. Outsourcing the technical and administrative aspects of your claims process to a third party is worthless if your staff has to wait on the phone for hours on end just to receive an answer to a key claims-related question.

With that in mind, look for a clearinghouse that offers 24/7 support, and has the capability to respond to any inquiry within a day or less. Make sure the clearinghouse has a dedicated technical support line. Go over the clearinghouse’s standard contract with a fine-tooth comb to determine what level of customer service they are willing to guarantee.

3. Investigate Claim Response Times

One of the primary advantages of using a medical billing clearinghouse is speedy claim response time. Generally speaking, you should know the same day whether a claim has been accepted or returned due to errors. In order to reduce unnecessary delays, look for a clearinghouse that offers quick updates on individual claims.

4. Verify Fast Turnaround Time for 835s

HIPAA mandates that healthcare insurance providers send out an 835 transaction set when paying providers, along with an explanation of benefits (EOB). Some clearinghouses won’t send 835s to providers for several weeks after a transaction has been completed. Others may charge extra for ERA 835s.

In contrast, the best clearinghouses will promptly send you the 835s and EOBs that match your completed transactions, at no extra expense to you. Verify that the clearinghouse under consideration has the capability to do this, as well as a proven track record of doing so.

5. Consider Usability

Finally, think about how user-friendly the clearinghouse’s software will be for your staff. In many cases, multiple staff members will require access to claims information. An overly complicated or counterintuitive program will steepen your staff’s learning curve and likely cause more errors than a simpler piece of software would.

In addition, you should verify the program’s compatibility with your current claims billing software. You also want to make sure that your clearinghouse allows you to confirm patient eligibility in real-time, and provides a powerful and extensive search engine for data access. You may also want to investigate advanced features such as rejection analysis, secondary claims processing, and free activity summaries.

The bottom line is that a medical billing clearinghouse can make your claims submission process smoother, more accurate, more efficient, and less time-consuming. If you choose the right clearinghouse for your practice, you’ll no doubt see immediate benefits from utilizing this option.

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