What Is an 835 in Healthcare Billing?
Understand the pivotal electronic standard that optimizes healthcare billing, detailing claim payments and enabling efficient revenue cycle management.
An 835, formally known as an Electronic Remittance Advice (ERA), is a standardized electronic transaction used in healthcare. It serves as a digital communication from payers, such as insurance companies, to healthcare providers. The purpose of an 835 is to convey detailed payment information for claims submitted by providers. This electronic format streamlines the exchange of financial data within the healthcare system.
Understanding the 835 Transaction
The 835 transaction set is the electronic counterpart to a paper Explanation of Benefits (EOB) or Remittance Advice (RA). This electronic file details how a healthcare claim has been processed by a payer, indicating payment, denial, or adjustment. It functions as an electronic receipt for bills providers send to insurers.
The transition to electronic 835s reflects a move towards efficiency in healthcare billing. This electronic format falls under the Health Insurance Portability and Accountability Act (HIPAA) Electronic Data Interchange (EDI) standards, which mandate specific formats for electronic healthcare transactions. The 835 is used by Medicare, Medicaid, and private insurance companies to communicate payment details, ensuring consistent data exchange.
Key Information Within an 835
An 835 contains financial and claim-related information that helps providers understand how a claim was adjudicated. It includes details about the patient and the payer, such as the patient’s name, policy number, and the payer’s identification.
The file provides claim-level data, including the original claim number, total amount charged, total amount paid by the insurer, and any patient responsibility (e.g., deductibles, co-insurance, or co-pays). For each service line, the 835 specifies procedure codes, dates of service, billed amount, allowed amount, and paid amount. It also includes adjustment reason codes that explain denials, partial payments, non-covered services, or contractual adjustments. Finally, the 835 includes payment details, such as the electronic funds transfer (EFT) trace number or check number, enabling providers to match the electronic remittance with the actual payment received.
The Role of 835s in Healthcare Operations
The 835 transaction impacts a healthcare provider’s revenue cycle management by facilitating automated payment posting. Practice management systems can process 835 files electronically, reducing manual effort and minimizing data entry errors. This automation streamlines the accounting process.
These electronic files are also used for reconciling payments. Providers use the 835 to match funds received from payers with submitted claims and patient accounts. This reconciliation ensures accuracy in financial records and helps identify discrepancies.
The detailed adjustment codes within an 835 are useful for denial management. Billing staff can identify reasons for claim denials or underpayments, allowing them to appeal decisions or resubmit corrected claims. This approach to denial resolution improves revenue recovery.
Once an 835 is processed, the remaining patient responsibility, including deductibles or co-pays, becomes clear. This clarity enables providers to generate accurate patient statements, ensuring patients are billed correctly. The utilization of 835s enhances operational efficiency, improves financial data accuracy, and accelerates cash flow for healthcare providers.