What Are 835 Files in Healthcare Billing?

In healthcare billing, an 835 file is a standardized electronic document that facilitates financial transactions between insurance companies (payers) and healthcare providers. It communicates detailed information about claim payments and adjustments. This electronic format streamlines the process of reconciling received payments with submitted claims, helping healthcare organizations manage their revenue cycle efficiently.

The Purpose and Standard of 835 Files

An 835 file is formally known as an Electronic Remittance Advice (ERA). This digital document provides a comprehensive breakdown of how a healthcare claim was processed and paid by an insurer. Its primary purpose is to inform healthcare providers about the payment status of claims they have submitted for services rendered to patients. The ERA details which services were paid, denied, or adjusted, along with the reasons for any discrepancies.

The standardization of the 835 file is governed by the Health Insurance Portability and Accountability Act (HIPAA) through the Electronic Data Interchange (EDI) 835 transaction set. This federal mandate ensures a uniform method for electronic communication of payment and benefit information across the healthcare industry. The adoption of the EDI 835 standard simplifies the exchange of financial data, making it more efficient and reliable for both payers and providers. This consistency allows for automated processing and reduces the need for manual intervention in payment reconciliation.

Content of an 835 File

An 835 file contains specific details that explain how an insurance claim was adjudicated. This includes the payment amount for each service line and any adjustments made to the original billed charges. It also specifies the portion of the cost that is the patient’s responsibility, such as deductibles, copayments, and coinsurance amounts.

The file also provides codes that clarify why a payment might differ from the billed amount. Claim Adjustment Reason Codes (CARCs) explain the reason for a payment adjustment, denial, or reduction. Remittance Advice Remark Codes (RARCs) offer additional explanations or supplemental information to further detail the adjustment described by a CARC. These codes are standardized and maintained by industry organizations, ensuring consistent communication across different payers.

The Role of 835 Files in Payment Processing

835 files play a central role in automating the payment posting process for healthcare providers. After an insurer processes a healthcare claim, they generate an 835 file detailing the payment and any adjustments. This electronic file is then transmitted to the healthcare provider. The provider’s billing system can then automatically apply the payment and adjustment information to the respective patient accounts.

This automated process significantly streamlines the reconciliation of payments compared to traditional manual methods. The 835 file, as the electronic equivalent of an Explanation of Benefits (EOB), allows for quicker and more accurate updating of patient ledgers. This automation reduces administrative overhead, accelerates the payment cycle, and improves the overall efficiency of revenue cycle management.

Systems for Managing 835 Files

Healthcare providers utilize various software systems to manage and process 835 files efficiently. Practice Management Systems (PMS) are commonly used to handle administrative and financial tasks, including the ingestion and processing of 835 files. Electronic Health Records (EHR) systems often include integrated billing modules that can also manage these electronic remittance advices. Dedicated Revenue Cycle Management (RCM) software solutions specialize in optimizing the entire billing and payment process, with robust capabilities for 835 file handling.

These systems automatically import the 835 data, post payments to patient accounts, and identify any discrepancies or denials that require further review. Clearinghouses serve as intermediaries in this electronic exchange, facilitating the secure transmission of 835 files between payers and providers. They ensure that the data adheres to the necessary standards and can be seamlessly integrated into the provider’s chosen management system. The automation provided by these systems reduces manual data entry, minimizes errors, and accelerates the reconciliation of payments.