What Is a 835 File in Healthcare Accounting?
Discover how the 835 file standardizes healthcare payment processing, automating reconciliation and optimizing financial workflows for providers.
An 835 file is an electronic document in healthcare accounting, specifically within the revenue cycle. It provides detailed information about healthcare claim payments and adjustments. This standardized electronic format streamlines financial processes between healthcare providers and insurance companies. The file communicates how a submitted medical claim has been paid, partially paid, or denied, offering transparency into the adjudication process. This electronic exchange is fundamental for efficient financial management.
Understanding the 835 File
The 835 file is formally known as an Electronic Remittance Advice (ERA). It serves as the digital counterpart to a paper Explanation of Benefits (EOB) or Remittance Advice (RA). This electronic document adheres to the Accredited Standards Committee (ASC) X12 835 standard for electronic data interchange (EDI) transactions. This standardization ensures consistency in payment information exchange across systems.
Insurance companies and other payers generate these 835 files after processing healthcare claims. They transmit these files to healthcare providers, such as hospitals, clinics, and individual practitioners, and to third-party billing companies. The electronic nature of the 835 file offers benefits over paper methods, including increased speed and improved data accuracy. Eliminating manual data entry reduces human error, contributing to a more efficient revenue cycle.
Core Information Within an 835 File
An 835 file contains information related to claim payments and adjustments. This includes patient details like name and account number. Information about the healthcare provider, including their National Provider Identifier (NPI) and tax identification number, is also present. The file provides specific details about services rendered, including the date of service, procedure codes (like CPT codes), and original billed charges.
It outlines payment information, such as the amount the payer approved and paid, along with patient responsibilities like deductibles, co-insurance, or co-payments. 835 files include adjustment codes, which explain reasons for denials, partial payments, or non-covered services. Common adjustment group codes include:
Contractual Obligations (CO) for negotiated rates.
Patient Responsibility (PR) for amounts owed by the patient.
Payer Initiated Reductions (PI) for adjustments not the patient’s responsibility.
Other Adjustments (OA) for other scenarios.
The Purpose of an 835 File
The function of the 835 file is to facilitate automated payment posting to patient accounts within a healthcare provider’s billing system. This automation reduces manual data entry, saving time and administrative costs. Software systems interpret the structured data within the 835 file to apply payments accurately and efficiently.
The 835 file is also used in claim reconciliation, allowing providers to match received payments against original claims submitted, often through an 837 file. This comparison helps identify discrepancies between the billed and paid amounts, such as underpayments, overpayments, or denials. Identifying these variances enables providers to initiate follow-up actions, such as appealing denied claims or collecting outstanding patient balances. The use of 835 files streamlines the revenue cycle, enhancing financial accuracy and contributing to improved cash flow for healthcare organizations.