What Is an Electronic Remittance Advice?

Electronic Remittance Advice (ERA) is a digital document sent by healthcare payers, such as insurance companies, to healthcare providers. It serves as a detailed explanation of how a healthcare claim has been processed and paid. The ERA outlines the payment or denial of services rendered to patients, forming a core component of the financial reconciliation process within the healthcare billing cycle. This electronic format streamlines the communication of payment decisions, replacing traditional paper-based explanations of benefits.

Key Information Within an ERA

An ERA provides a breakdown of how a healthcare claim was adjudicated, detailing which services were paid, denied, or adjusted. It includes patient information like name and policy number for identification. Service data, such as date of service, procedure codes, and initial billed amount, are presented. This allows providers to match the payment explanation to the services they delivered.

The document contains payer information, such as payer ID and claim number, for tracking. Payment details are itemized, showing the amount paid, any applied deductible, co-insurance, or co-pay amounts, and adjustments. The ERA includes reason codes, known as Claim Adjustment Reason Codes (CARC) and Remittance Advice Remark Codes (RARC). These standardized codes explain why a claim was paid differently than billed, partially paid, or denied, offering insights into the payer’s decision.

How an ERA Works

The ERA process begins after a healthcare provider submits a claim for services, often electronically as an EDI 837 transaction. Once the payer processes this claim, they generate an ERA as an EDI 835 transaction. This electronic document is sent back to the provider through a secure channel, often via a healthcare clearinghouse. Clearinghouses act as intermediaries, validating and transmitting electronic transactions.

Upon receiving the ERA, the provider’s system, such as practice management software, automatically processes the data. This automation allows for efficient payment posting and auto-reconciliation of ERA data with original claims. The system matches payment details to outstanding balances. For denied or partially paid claims, the ERA’s detailed reason codes facilitate manual review and follow-up actions.

Advantages of Using ERAs

ERAs offer advantages over traditional paper remittance advices, enhancing efficiency and speed in payment processing. Electronic processing allows for faster posting of payments to patient accounts, reducing the time it takes to reconcile outstanding balances. This digital format improves accuracy by minimizing the need for manual data entry, which is prone to human error. Automation capabilities within practice management systems can directly import and process ERA data, further reducing administrative burdens.

Using ERAs leads to cost savings for healthcare providers by eliminating expenses associated with printing, mailing, and storing paper documents. Quick identification and resolution of denied or underpaid claims improve cash flow. The detailed data within ERAs provides insights, allowing providers to analyze payment trends and identify common reasons for claim denials. This analytical capability helps optimize future claim submissions and billing practices.

ERA Versus Electronic Funds Transfer

It is common to confuse an Electronic Remittance Advice (ERA) with an Electronic Funds Transfer (EFT), but they serve distinct yet complementary purposes. An ERA functions as the detailed explanation document. It clarifies why a payment was made, how it was calculated, and provides a detailed breakdown of all adjustments, denials, and paid amounts for specific services. The ERA tells the provider what they were paid for.

Conversely, an Electronic Funds Transfer (EFT) represents the movement of money. This is the direct transfer of funds from the payer’s bank account into the healthcare provider’s designated bank account. The EFT signifies how the money for the claim arrived. While an ERA explains payment details and an EFT delivers funds, they are separate electronic transactions that often occur in close conjunction to complete the payment cycle.