What Is ERA in Medical Billing?

What Is ERA in Medical Billing

Running a healthcare organization is not all about providing high-quality patient care. Each healthcare facility has a lot of financial and administrative work. Luckily, with electronic health care transactions, the administrative work is simplified. One of the ways to increase operational efficiency, accuracy and quality is by utilizing Electronic Remittance Advice or ERA. But what is ERA in medical billing exactly?

As a healthcare business outsourcing company, we can guide you through the entire process of managing ERAs. We also have some tips on how to implement ERA into the medical billing process and overcome the most common challenges.

What Is ERA in Medical Billing?

Electronic remittance advice, or ERA, in short, is an essential part of the medical billing process that explains the claim payment. In simple terms, the ERA is an electronic transaction option that eliminates the need for filing its paper-based equivalent: the Explanation of Benefits (EOB).

According to the adopted transaction standards and operating rules, electronic remittance advice is a federally mandated operating rule. The ERA is mandatory for all HIPAA-covered entities, such as healthcare providers using electronic transactions, healthcare clearinghouses, and health plans.

Key components of ERA in medical billing

To understand what ERA is in medical billing, you should have a general idea of all the information that the electronic file contains. Typically, an ERA has three sections: a header, detail and trailer.

The header is dedicated to important details considering the payer, payee and the payment. This section of the ERA usually includes:

  • Payer tax ID
  • Payee tax ID
  • Personal information about the payer
  • Payment data such as amount, method, and date
  • Trace number

The detail includes a comprehensive overview of the claim and adjustments. The detail section of the ERA contains valuable data about the claim, specifically its status, submitted charge, claim payment and the amount the patient is responsible for. 

If there are any, the detail section will also include reasons for reduction and denial. Typically, health plans adjust the payments to the healthcare providers considering factors such as:

  • Benefits coverage
  • Capitalization payments
  • Contract agreements
  • Copays and coinsurance
  • Secondary payers
  • IRS withholding

Lastly, the trailer contains data about the forwarding balance, overpayment recovery, capitation payments, and IRS levy.

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Important codes for ERA

The core of every medical billing process is the codes. Consequently, as medical billers, our CLICKVSION BPO team is familiar with the standardized ERA codes. They reveal details about the claim’s status, reductions or even possible payment increases. We distinguish three types of codes in ERA files:

  • Claim adjustment group codes (CAGC)
  • Claim adjustment reason codes (CARC)
  • Remittance advice remark codes (RARC)

Generally, the CARC and RARC codes also come with a description. If there is no description, we can use the online database of Claim Adjustment Reason Codes and Remittance Advice Remark Codes.

Difference Between ERA and EFT in Medical Billing

ERA and EFT are both electronic transactions. However, they represent different parts of the healthcare transaction process. The EFT stands for Electronic Funds Transfer. 

As the name suggests, the EFT uses the Automated Clearing House Network to transfer funds from the health plan to a health care provider’s bank account. In other words, the EFT represents a direct deposit. The EFT is actually an electronic message that contains the following data:

  • The amount that is paid
  • Identification details and bank accounts of the payer and payee
  • Routing numbers
  • Date of payment

Both ERA and EFT are crucial for the medical billing process. The EFT is the process that moves the money, while the ERA is a file that explains the payment in detail.

According to the CAQH Operating Rules for Information Exchange Payment and Remittance (CCD+/835), the time between the sending dates of the EFT and ERA transactions shouldn’t be longer than three business days. Breaching this deadline might result in management issues.

Benefits of ERA in Medical Billing

Since the operating rules for EFT and ERA became mandatory in 2014, healthcare facilities and, more specifically, we, as medical billers, have leveraged many benefits. First, the more ERAs we receive the more the medical billing process is becoming quicker and more efficient. Healthcare facilities, in general, benefit from reduced administrative burdens and costs.

The paper handling is minimized since the whole process is being transferred electronically. As an added benefit, your staff will have more time to deal with other revenue cycle management functions and ensure higher cash flow.

Also, the ERA reports are a standardized practice. All health plans, including federal and private, incorporate the ERA files.

Next, ERAs tend to speed up the entire claims revenue process. Generally looking, when healthcare facilities use ERA, payers reimburse the amounts faster. All in all, ERA improves payment accuracy and payment collection rates.

Ultimately, using electronic claims reduces manual error and denial rates. If an error is noticed, it can be easily corrected so that the transactions can go smoothly.

Implementation of ERA in Medical Billing

The first step to implementing ERA in your medical billing process is to check whether your current software offers electronic remittance advice. More often than not, the commonly used softwares offers remittance advice.

If you are outsourcing your medical billing processes, we will determine whether the current software we are using will meet your organization’s needs. Our team will seek any integration limits and concerns. We can offer your healthcare facility a seamless ERA integration.

On the other hand, if you still have an in-house medical billing team, they will have to decide regarding the software’s compatibility. Then, you will have to spend valuable resources and time training your staff on using the platform and introducing them to ERAs.

Testing procedure

Before putting the ERA into function, you should test it. This step of the implementation process includes ensuring the data is received and integrated into the billing system accurately. If everything goes according to plan, you can officially start using the ERA feature as a part of your medical billing system.

Don’t forget that constant monitoring and evaluation are required for ERAs, as for the entire revenue cycle management. It might happen that you will identify discrepancies that will require immediate addressing.

Lastly, keeping up with the latest ERA regulations is a must. That is the only way you can stay compliant.

Challenges in Using ERA in Medical Billing

Using ERA in your medical billing is not a straightforward process. The first challenge is the adaptation to the new way of handling the transactions. It takes some time for your in-house team to learn the codes and how to act in different scenarios.

Instead of thinking about strategies for overcoming this challenge, you can let our experienced medical billers handle the ERAs. Our team is experienced in interpreting the ERA files and knows how to process the information accurately.

Another challenge in using ERA in medical billing is using different tools for ERA management from multiple software. It might be a real hassle to integrate the tools, costing you both money and your valuable time.

Finally, with electronic transactions, there is always the concern for data security and staying compliant with privacy standards such as HIPAA. Adhering to certain standards and regulations will allow your healthcare organization to mitigate the risks of data breaches and safeguard patient privacy.

Challenges in Using ERA in Medical Billing

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Medical billing is an important process for all healthcare facilities, and electronic remittance advice is a part of it. So, what is ERA in medical billing? To sum up, it is an electronic document that explains the claim payment.Understanding ERA in medical billing will streamline the organization’s revenue cycle management. If you are interested in outsourcing your medical billing and leveraging benefits such as cost reduction, reduced errors and increased practice revenue, we are here to assist you and much more.

With a strong background in the marketing industry and healthcare leadership roles, Filip is responsible for CLICKVISIONBPO's sales strategies and onboarding new clients. With a passion for sharing insights gained from his experience, he also shares valuable knowledge through industry related articles.

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