What Is an Electronic Remittance Advice in Medical Billing?

An Electronic Remittance Advice (ERA) in medical billing is a digital document that provides healthcare providers with detailed information about how an insurance claim has been processed. Its purpose is to explain the payment, adjustments, or denial of a submitted claim. This electronic format streamlines payment posting and reconciliation processes, reflecting the broader move towards electronic healthcare for greater accuracy and speed.

Key Information in an ERA

An ERA contains data points healthcare providers use to understand the financial outcome of a claim and reconcile patient accounts. This includes patient information (name, policy number), provider details, and a specific claim number to match the remittance advice to the original submission.

The document specifies service dates and procedure codes, often CPT or HCPCS codes. It details the billed amount (initial charge), the allowed amount (maximum payer will pay), and the paid amount (portion insurance remits). Patient responsibility, including co-pays, deductibles, and co-insurance, is also outlined.

ERAs include adjustment codes, such as contractual adjustments or non-covered services, which explain why the paid amount differs from the billed amount. Claim Adjustment Reason Codes (CARCs) and Remittance Advice Remark Codes (RARCs) provide standardized explanations for adjustments, denials, or payment differences. CARCs give the primary reason for an adjustment, while RARCs offer more detailed context for changes or denials, enabling providers to address issues accurately.

The Electronic Remittance Advice Process

The workflow of an ERA begins after a healthcare provider submits a claim to an insurance payer. Following claim adjudication, the insurance payer generates an ERA. This electronic file details the payment, patient responsibility, and any claim adjustments or denials.

The ERA is then transmitted electronically, frequently through a clearinghouse, which acts as an intermediary for secure data exchange between payers and providers. Alternatively, some payers may send the ERA directly to the provider’s billing system. Providers receive these ERAs electronically, and the data integrates directly with their practice management or billing software.

This electronic data facilitates automated payment posting, also known as auto-posting, to patient accounts within the practice’s system. For claims that require further attention, such as denials or partial payments, the ERA supports manual review by billing staff. The ERA is then used to reconcile billed services with received payments, identify discrepancies, and guide subsequent actions, including billing the patient for their responsibility or resubmitting a corrected claim.

Distinguishing ERA from an Explanation of Benefits

While both an Electronic Remittance Advice (ERA) and an Explanation of Benefits (EOB) provide details about how a medical claim was processed, they serve distinct purposes and are intended for different recipients. The ERA is specifically generated for the healthcare provider, such as a hospital or doctor’s office. Its primary purpose is to enable the provider to efficiently post payments to patient accounts, manage accounts receivable, and reconcile their financial records.

In contrast, an EOB is a statement sent to the patient, the insured individual who received the medical services. The EOB’s main purpose is to inform the patient about how their claim was processed, including what services were covered, the amount paid by the insurance, and their financial responsibility, such as co-pays, deductibles, or co-insurance. An EOB is not a bill, but rather a summary of the processed claim to help patients understand their insurance coverage and any remaining out-of-pocket expenses.

Although both documents contain similar information regarding claim processing, their format and delivery are tailored to their respective audiences. ERAs are typically received by providers almost immediately, facilitating quicker financial reconciliation. EOBs are traditionally paper-based documents mailed to patients, which can result in a delay of several weeks between service and receipt. This fundamental difference in recipient and format underscores their unique roles in the medical billing and patient communication processes.