Processing healthcare claims is an essential step in the revenue cycle management journey. From the 837s to the 835s, it’s a long process, and not always an easy one. Even if you handle every step correctly, at the end of the day the payors may just deposit the money in the wrong account leaving you to clean up the tangled mess of accounts receivable descrepencies. For healthcare providers looking to balance the accounts, it’s vital to get a good grasp of the problem
Healthcare banking deposits
Managing the discrepancy between the records and the actual money in the bank account is challenging. Hospital CFO’s can find themselves feeling like a blind-folded acrobat walking the high-wire in a circus act. Managing a hospital’s revenue cycle is difficult under the best circumstances; it’s even harder when you don’t know into which account payors are depositing revenue.
Reconciling healthcare accounts receivable (those outstanding accounts that have been charged for but not billed) can’t be done until the remittance process is completed. But without visibility into deposit almost discrepancies, it is almost impossible to balance the books and move onto the next step of revenue cycle management.
Healthcare claims is an integral step in the revenue reconciliation process, but making sense of 835s and 837s can be difficult and time-consuming
This is a problem of both time management and balancing the books. Logging claims with the 837s and going through remittance with the 835s is an integral step in the revenue reconciliation process, but payor mistakes can mean that the AR (“all revenue” which is often logged before the remittance process) figure is off. The process of reconciling the accounts is tedious and time-consuming. In fact, many hospitals choose not to address it at all, but ignoring the problem means that the accounts receivable issues will never be fixed.
Why Things Go Wrong
Every time a patient comes to a hospital and gets a treatment, receives a check-up, or obtains any medical service at all, a contract is formed between the hospital and the payor (usually an insurance provider but encompasses more than just standard insurers). Except in rare circumstances, the payor pays a certain portion of the payment due. That payment is deposited in the bank at some point after the visit, but a record of both the charge and the payment is exchanged between the hospital and the payor through 835 and 837 files.
Healthcare systems want to balance their accounts, but without a dedicated team going over the books every day, that is impossible.
Those, however, don’t always match. The amount deposited is usually correct, but the deposit information included in the 835 is often inaccurate because of adjustments to pricing made by the healthcare organization or the payor. To complicate things further, the deposit is usually a lump-sum that includes hundreds of different contract payments, and the record does not always reflect that accurately. The real crux of the problem, though, is where that deposit goes. Payors will make the final adjusted lump payment, but they won’t always post it to the correct account receivable meaning that the AR figure could be hundred of thousands of dollars off.
This cash posting problem happens when the record of the charge doesn’t match the amount or the account that the payor posts it in. This results in a significant discrepancy between what the hospital records say should be in the account and what is actually there. Healthcare systems want to balance their accounts, but without a dedicated team going over the books every day, that is essentially impossible.
835s and 837s
The key to understanding this problem is 835 and 837 payor files.
An 835 file the notice of the EFT. Sent from payors to the healthcare providers, they give information about the healthcare services being paid for. 835s document remittance information about what charges have been paid for, reduced, or changed along with insurance data about deductibles, co-pay amounts, splitting of claims, co-insurers, and bundling.
The 837 files encompass payor claim data. They are electronically sent by healthcare organizations to payors. Further complicating things is the fact that the 837 files may contain not just one claim but multiple. Within the 837s are information about medical services provided, cost of treatment, and additional adjustments.
How Hospitals Can Fix This
While some hospitals may choose to accept the inherent imbalance of healthcare banking deposits and accounts receivable problems, there is a path towards balancing the books.
Build a Team
Cash posting and accounts receivable errors aren’t problems that can be fixed by one person but will require a specialized team. The size of that team depends on the size of the healthcare organization, but they need to be detailed-oriented employees with healthcare finance experience. If you build this team internally, we suggest pulling from the billing and finance department. If you hire externally, look for candidates that have a background in accounting and billing.
In terms of actual execution, the first step is gaining visibility into individual account receivable discrepancies. The team will need to create a spreadsheet that includes the records for all cash postings from the previous day using the EFT, the ERA (835), the EOB (explanation of benefits) and their business banking records. This combination of 835s, banking records, and EOBs, and ERAs should create increase visibility into potential account posting discrepancies.
Now that the team has identified the deposit and record discrepancies that lead to the unbalanced books, they can start addressing them on a case-by-case basis. Going into the 835s and EOBs will provide more information needed to reconcile the differences and discover where exactly the cash should have been posted. This process is incredibly time-consuming, though. Walking across a tight-rope is a lot slower than strolling on the ground. For healthcare organization’s looking to save hours, there is another option.
To address healthcare cast posting issues problems, hospitals have to spend hundreds of work-hours every week meticulously going through each record and matching it to the deposit. There is another way, though. Third-party healthcare software developers can develop solutions that can instantly reconcile discrepancies, balancing the books automatically, and freeing up the billing and finance team to focus on process improvement elsewhere in the hospital. To see Avelead’s solution to healthcare banking deposits, click on the link to schedule a demo.