Understanding Electronic Remittance Advice (ERA) and How It Operates

Payment posting represents the final phase of revenue cycle management (RCM) and involves the processing of reimbursements received from insurance companies. When payers receive claims, they respond with Explanations of Benefits (EOB) or statements outlining the costs they will cover for the medical services or products received by the plan’s members. Traditional paper-based EOBs are costly, cumbersome to process, and can lead to errors in payment posting and accounts receivable (AR). Electronic Remittance Advice (ERA) offers a HIPAA-compliant alternative to paper EOBs.

The Centers for Medicare & Medicaid Services (CMS) defines ERA as an explanation provided by a health plan to a healthcare provider regarding a claim’s payment. ERA streamlines secure computer-to-computer transactions using practice management software that supports robust ERA functionality and automation. Providers must be enrolled to receive this electronic document, which details the results of claim adjudication.

Similar to a traditional EOB, an ERA informs the provider about how a health plan has adjusted claim charges based on various factors, including:

1. Contractual agreements
2. Secondary payers
3. Benefit coverage
4. Expected copays and co-insurance

Key information found in an ERA includes:

1. Amount requested
2. Contractually allowable amount
3. Remaining deductible
4. Amount paid
5. Explanations for discrepancies between billed and paid amounts
6. Reasons for claim denials, including denied codes and services
7. Patient’s financial responsibility
8. Bundling or splitting of payments
9. Payment method (e.g., check or electronic funds transfer)

ERA typically complements electronic fund transfer (EFT), which is the method used to transmit healthcare payments from a health plan to a healthcare provider’s bank. ERA simplifies the tracking, analysis, and management of a practice’s revenue cycle, leading to enhanced denial management and payment collection.

Benefits of ERA for Medical Practices:

1. Eliminates Manual Processes: ERA eliminates the need to wait for paper EOB statements or manually handle payment checks. It enables uniform processing in practice management software, leading to cost savings, time efficiency, and reduced risk of document misplacement.

2. Streamlines Coordination of Benefits (COB) Processing: COB scenarios arise when a patient has coverage under multiple insurance plans. ERA automates and standardizes the reporting of the previous payer’s payments and adjustments, eliminating the time-consuming tasks of scanning and attaching paper secondary claims to paper EOBs. This expedites secondary billings and accelerates the revenue life cycle.

3. Improves Cash Flow: Electronic processes, including ERA, often result in faster payments. The American Medical Association (AMA) reports that using ERA leads to quicker reimbursement by payers, ultimately enhancing cash flow.

4. Enhances Payment Accuracy: ERA allows practices to easily distinguish between paid and unpaid claims, facilitating more proactive collection efforts, reducing denials, and improving payment collection rates.

5. Streamlines Denials Management: By providing reliable payment information, ERA enables practices to make comparisons between payers and identify submission issues. This standardization enhances denials management processes.

While ERA significantly reduces many challenges associated with medical billing, the AMA acknowledges that “ERA management will never be 100% automated due to difficult healthcare business issues.” In such cases, partnering with Revenue Cycle Rx can be beneficial. We can assist with ERA enrollment, electronic claim generation and submission, managing multiple accounts and payments from various insurance companies, generating electronic reports, identifying claims payment issues, and providing collection support. This helps practices save money and allocate more time to patient care and support.