What is ERA in Medical Billing?

by | Published on Feb 8, 2023 | Medical Billing

ERA in Medical Billing
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Medical billing is a complex process that involves many phases and managing it efficiently for proper claim submission and appropriate reimbursement from insurance companies. That’s why most hospitals and practices outsource medical billing and coding to an experienced service provider. Experts can help providers efficiently manage all steps of the revenue cycle on their medical billing software – from patient eligibility verification, coding, billing and claim submission to payment posting and Accounts Receivable (AR) analysis. Medical billing specialists help practitioners efficiently process Electronic Remittance Advice (ERA) – electronic communication from payers which carries claims payment information – and collect reimbursement for services rendered.

What is ERA and How does it Work?

Payment posting is the last step in revenue cycle management (RCM) and involves processing reimbursements from insurance companies. When payers receive claims, they will send explanations of benefit (EOB) or statements describing what costs they will cover for medical treatment or products the plan’s member received. Paper-based EOBs are costly, and difficult to process, and can result in errors in payment posting and AR. Electronic Remittance Advice or ERA is a HIPAA-compliant alternative for paper-based EOB. CMS defines an ERA as an explanation from a health plan to a provider about a claim payment.

ERA ensures secure, streamlined computer-to-computer transactions on practice management software that provides robust ERA support and automation. To receive the electronic document listing the claims adjudication results, the provider should be enrolled for ERA. Similar to an EOB, the ERA informs the provider how a health plan has adjusted claim charges based on the following:

  • Contract agreements
  • Secondary payers
  • Benefit coverage
  • Expected copays and co-insurance

Information available in an ERA would include

  • Amount requested
  • Contractual amount allowed
  • Deductible remaining
  • Amount paid
  • Reasons for any differences between the billed and paid amounts
  • Reasons for claim denial, including denied codes and services
  • Patient financial liability applied
  • Bundling or splitting of payments
  • Payment method, such as check, electronic funds transfer

ERA typically works with electronic fund transfer (EFT), the process used to transmit health care payments from a health plan to a health care provider’s bank. ERA makes it easier for medical billing companies to track, analyze, and manage a practice’s revenue cycle more efficiently, and improve denial management and payment collection.

Benefits of ERA for Medical Practices

  • Eliminates costly and time-consuming manual processes: With ERA, practices no longer have to wait for EOB statements to arrive in the mail or to manually enter, verify, and post payment checks. They can ensure uniform ERA processing on their practice management software and post payments and all standard adjustment reason codes to the patient’s account. ERA reduces costs, saves time, and eliminates the risk of misplaced EOBs.
  • Eases coordination of benefits (COB) processing: COB comes into play when a patient is covered under more than one insurance plan. The HIPAA standard electronic claim transactions automate and standardize reporting of the previous payer’s payment and adjustments. ERA eliminates the tedious tasks associated with scanning and attaching paper secondary claims to paper EOBs, facilitates faster secondary billings, and speeds up the revenue life cycle.
  • Improved cash flow: Overall, electronic processes can mean faster payments. According to the American Medical Association (AMA), payers reimburse more quickly when physicians use the ERA. This leads to improvements in cash flow.
  • Promotes payment accuracy: With ERA, practices can easily identify paid and unpaid claims, step up their collection efforts, reduce denials and improve rate of payment collection.
  • Better denials management: By improving reliability in payment information, ERA allows for comparisons between payers and identification of practice claim submission issues. This standardizes and improves denial management processes.

With the many efficiencies it provides, ERA reduces many medical billing headaches. However, the AMA points out that, “ERA management will never be 100% automated due to difficult health care business issues”. Medical billing outsourcing to an expert can help practices get the most value from ERA implementation. Medical billing specialists can help practices enroll for ERAs, generate and submit electronic claims, and manage multiple accounts and payments from different insurance companies. They will also run different types of electronic reports, identify claims payment issues, and provide collection support. Partnering with a resourceful medical billing service provider can help practices save money and free up time for patient care and support.

Natalie Tornese

Holding a CPC certification from the American Academy of Professional Coders (AAPC), Natalie is a seasoned professional actively managing medical billing, medical coding, verification, and authorization services at OSI.

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