A couple of weeks after claim submission the medical
practice will receive a correspondence from the insurance company to tell you
their decisions as to whether the claim will be paid. This is called either an explanation
of benefits (EOB) or electronic remittance advice (ERA). The difference between
the two is the delivery method. An EOB comes via traditional mail and an ERA is
delivered electronically. If there is a payment (money) associated with the EOB or ERA, it will either be sent as a check via traditional mail or delivered by EFT (electronic funds transfer often known as direct deposit).
The purpose of an EOB and ERA is to explain payments and denials for the claims you previously submitted. The EOB/ERA will
also tell you about the amounts, such as deductibles, coinsurances and copayments,
that the patient is responsible for paying out of pocket. Finally the EOB or
ERA will show you how to properly apply the payments to patient’s accounts so
you can keep track of what is paid and what is outstanding.
To keep track of payments and outstanding balances the
biller must enter information from the EOB into the practice’s medical billing
software. This is called payment posting. This is very important for three reasons.
First the payments and accounting data entered in to the billing software will
directly affect the practices overall accounting and taxes. Next, the
accounting will directly affect the patients billing (patients do not like to
receive medical bills that are not legitimate). Finally, payment posting will
directly affect your job. Unpaid or incorrectly paid claims need follow up. It
is a waste of your valuable time to call on a claim that was already paid claim
in the event of an accounting error.
Previously we discussed the “allowed amount” as it pertains
to the insurances fee schedule. Just a brief refresher, the allowed amount is
the amount the doctor agreed to accept as full payment when s/he signed a
contract to participate with the insurance company the time of credentialing.
Again you’ll recall that the insurance allowed amount is not usually the same
as the amount you billed because traditionally we bill at a rate higher than
insurance fee schedule as to avoid any underpayments. With that refresher done,
we’ll begin.
The EOB or ERA may have information for just one patient’s
claim or it may contain information regarding many patients. The EOB/ERA shows
the patient’s name, the account number assigned by your medical billing software,
the allowed amount, the patient responsible amounts such as copayment,
deductible, and coinsurance, the payment amount, and messages from the
insurance about the claims processing. Each CPT procedure code is processed
separately and shown on the EOB/ERA as a separate line item.
The allowed amount is the maximum payment that you can
receive on each line item. The difference between the insurance’s allowed
amount and your charge amount is called the contract adjustment. The contract
adjustment is a write off. It is a breach of contract and against the law to
bill the patient for this difference, billing a patient for the contract
adjustment is called balance billing. If you are caught balance billing you can
loose your contract with the insurance or even be prosecuted for fraud.
Many times there is also a difference between the allowed
amount and the payment amount, that balance is the patient’s responsibility
(out of pocket). The EOB or ERA will usually give some detail about why this
balance is due by the patient, such as deductible, copay, coinsurance or
non-covered item or service. We will review each but first you must understand
exactly how the EOBs are calculated and presented. Closely review the example
and my mark ups to follow on the sample EOB from Medicare:
To follow is a sample from Aetna that we can look
at item by item. Medicare’s EOB and Aetna’s are quite similar in contents (even
though they look a little different). You will find that all EOBs/ERAs have the
same basic information.
In the center of the page, number 21-35 is
the line by line detail. Each line is called a claim line and indicates a
service rendered to the patient. The date of service is in box 21 and service
code (CPT) is listed in box
23Box
25boxes 26
As I mentioned before, the doctor’s office
sets its own prices for the services that they provide but if the doctor is in
contract with the insurance he/she is obligated to accept the allowed amount
noted by the insurance in box
26
That total payment (allowed amount) is divided
between the insurance responsibility and the patient responsibility as shown in
box 32box 32
A deductible is a patient’s annual out-of-pocket payment
before insurance will being paying. The deductible amounts vary based on
policy. But a deductible can also be a sign of a problem in claim processing.
If a patient’s policy doesn’t usually have a deductible but an EOB shows the
patient responsible for a deductible, chances are the claim was processed
out-of-network. Out-of-network processing can indicate that your claim did not have a
referral, or that your practice is not the patient's chosen primary care physician (PCP) or a
problem with the practice’s credentialing. This is not to say that some
deductibles are not legitimate, many are... When in doubt, call the
insurance and ask.
A copay is a small out of pocket amount due for each visit.
It is usually paid prior to seeing the doctor. You will note on the insurance
card examples in the reading insurance cards section that copays vary, not only
be patient but also by provider type. Many policies will have different copays
for primary care providers, specialists, prescriptions, mental health,
hospital, emergency room, and urgent care. Remember that some insurance require
a selection of a primary care provider prior to processing claims for the PCP.
If your practice is not the PCP the patient is expected to pay the specialist copay.
Some examples of specialists include surgeons, cardiologists, and neurologists.
The patient’s co-insurance is a share of the bill. It is
usually a percentage of the allowed amount. For example Medicare requires a
co-insurance of 20% from their patients. Here’s an example: Medicare will allow
$100 for a service of that amount Medicare will pay 80% or $80 and the patient
is responsible for 20% or $20. The coinsurance is usually applicable for all
visits for that patient.
If there is a patient balance, the patient should receive an
invoice or statement from the practice asking them to pay their portion. Usually
statements are issued once per month and if the patient fails to pay the
balance the outstanding amount is referred to an outside collection agency for
follow up and collection.
Finally the totals listed in box 32box 26box
35
The payment listed on the EOB, would be
posted in to the doctor’s office practice management system to keep track of
which claims have paid and which have not been paid in addition to record the
practice’s revenue.
You will notice that line item 3, CPT code
82541 is not paid by insurance. That is indicated both by the fact that the
allowed amount is listed in the “not payable” field, box 28box 29
In some cases the reason for non-payment may
be due to a claim submission error by the doctor’s office or a processing error
on the part of the insurance. Either way, claims that are not paid should be
followed up on. In this sample the insurance states that the patient is
responsible for paying for this serviced, but why? Could this be a processing
error or maybe the office made a mistake with the CPT code. Although this line says
that the patient is responsible, you want to avoid billing patients when it is
not necessary for the sake of good relations with your patients. If this line was denied
because of some error, the patient may be angry by an unwarranted bill. When in doubt,
call the insurance.
Again, I will stress that it is imperative that
someone follow up on unpaid claims or practice revenue will be adversely
affected (and that means no money to give the biller a raise).
