In healthcare, accounts receivable, or AR, is the balance of money due from patients. Processing healthcare claims is an essential step in the revenue cycle management journey. From 837s to 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 discrepancies. For healthcare providers looking to balance the accounts, it’s vital to get a good grasp of the problem.
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Understanding the Issue
Managing the discrepancy between the records and the actual money in the bank account is challenging. 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 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 837s and going through remittance with 835s is an integral step in the revenue reconciliation process, but payor mistakes can mean that the AR (“all revenue”) figure is off, which is often logged before the remittance process. 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 any accounts receivable issues will never be fixed.
Where Things Can Go Wrong
Every time a patient comes to a hospital and gets treatment, receives a check-up, or obtains any medical service at all, a contract is formed between the hospital and the payor. The payor is usually an insurance provider but could encompass 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.
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 accurately reflect that.
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 hundreds 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, it can be nearly impossible.
835s and 837s
The key to understanding this problem is 835 and 837 payor files.
An 837 file encompasses payor claim data. They are electronically sent by healthcare organizations to payors. Further complicating things is the fact that the 837 files may contain multiple claims at one time. Within the 837s are information about medical services provided, cost of treatment, and additional adjustments.
An 835 file is 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.
Three Tips for Fixing Your Hospital’s Accounts Receivable Discrepancies
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.
1. 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 intensive healthcare finance experience. If you build this team internally, we suggest pulling from the billing and finance departments, since they will be using these disciplines for accounts receivable. If you hire externally, look for candidates that have a background in accounting, billing, and revenue cycle management.
2. Create a List
In terms of actual execution, the first step is gaining visibility into individual account receivable discrepancies. The team will need to create a master record 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, EOBs, and ERAs should create increased visibility into potential account posting discrepancies.
3. Begin Account Reconciliation
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 the information needed to reconcile the differences and discover where exactly the cash should have been posted. This manual process can be incredibly time-consuming. For healthcare organizations looking to save hours, there are other options.
Third-Party Solutions
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. Thankfully, third-party healthcare software developers have developed solutions that can instantly reconcile discrepancies, balance the books automatically, and free up the billing and finance team to focus on process improvement elsewhere in the hospital.