June 11, 2002 Feature

The Impact of Electronic Claims Submission on Cash Flow in a Private Practice

The Health Insurance Portability and Accountability Act (HIPAA) will bring sweeping changes to the health care landscape by encouraging electronic claims submission to health insurers and making paper submission a thing of the past. Congress created HIPAA in 1996 to provide guidelines for the protection of health care information through its privacy rule and to establish standard formats for the electronic transmission of clinical data as part of its administrative simplification provisions. The electronic transmissions and code set rule, sometimes referred to as the electronic data interchange (EDI) rule, strongly encourages the use of electronic transfer for claims, referrals, explanation of benefits, remittance advices, and others. Many providers who use this technology experienced an increase in the number of claims being paid within as little as 15 days. The number of rejected claims decreased, and the ability to track resubmitted claims increased as well.

Eliminating Paper Claims

As more insurers and providers comply with HIPAA prior to the final compliance date of Oct. 16, 2003, the number of claims being transmitted electronically will dramatically increase. In fact, HIPAA rules now require that, as of the compliance date, Medicare claims from certain providers must be submitted electronically. State Medicaid programs may follow suit. Moreover, there is nothing in the HIPAA rules prohibiting commercial insurance companies from establishing these same submission requirements.

Even when paper claims are accepted, they will continue to receive less priority because of the increased costs of their manual review. Payment denials will increase beyond the already high levels currently experienced by many providers.

Some providers have the ability to submit electronic claims directly to insurers using some form of office management software. Providers who do not have access to this technology or do not want to manage the administration of the claims process have used a claims clearinghouse to electronically submit their claims. Depending on a number of factors, both options are viable alternatives to paper claim submissions.

Office Management Software

When considering an office management software package capable of electronic claim submission, a number of factors should be examined. First, any software package must be fully integrated into office procedures. This will require a careful review of current office management routines and an understanding of how the software will affect these procedures.

Once properly configured, these systems can transmit the data necessary to quickly process the claim, but periodic software maintenance is also needed to optimize system performance and increase the accuracy of the data being transmitted. For example, it may be necessary to update ICD-9, CPT4, and HCPCS code sets as they are modified by regulatory agencies. System operating parameters or network settings may need to be reset to reflect a change in office and insurer network operations.

The capability of staff to maintain the software and the time needed to do so should be a major consideration. Ultimately, the costs to acquire, maintain, and manage a system must be weighed against the return on investment (ROI) it will produce—in this case, increased cash flow. The ROI calculation can then be analyzed against alternate methods for submitting claims, such as the use of a claims clearinghouse.

Claims Clearinghouse

A claims clearinghouse is an organization that receives clinical claims and other types of health care information from providers and serves as the intermediary between the provider and the insurance company, facilitating the electronic exchange of information between the two entities. Claims can be sent to the clearinghouse electronically, on paper through the mail, or by fax. Regardless of the method of transmittal, the clearinghouse will translate the data elements into a format that complies with the format required by the target insurance company. The data will not be changed, but the order in which they are presented may be changed to accommodate the sequence required by a particular insurance company's claims processing software system. Once reformatted, the data are then sent electronically to the insurance company for processing. When the insurance company prepares to issue a remittance advice or an explanation of benefits, the response is sent electronically to the clearinghouse where the data is reformatted into the original format for transmission to the originating provider.

The need for administrative management of the claims process within the practice is usually less with a clearinghouse because it performs much of this function. Since the clearinghouse maintains the code sets and handles the translation of all data formats to and from the insurers, the cost of these maintenance functions may also be less. The cost for smaller practices to use a claims clearinghouse is usually very low, and while many large practices also use clearinghouses, they may have access to additional.

As managed care, Medicaid, and Medicare reimbursements rates continue to put downward pressure on cash flow, the ability to increase the efficiency of office operations and maximize payments on billed charges becomes even more important. Speech-language pathology and audiology practices can improve their efficiency of operation and increase cash flow through electronic claims submission. Although HIPAA does not require providers to use this form of data transfer, the law has numerous incentives to encourage providers to take advantage of its many benefits.

For more information about HIPAA, contact Nikki Brown through the Action Center at 800-498-2071, ext. 4387, or by email at nbrown@asha.org .

Arthur W. Williams, III, is ASHA’s HIPAA consultant.

cite as: Williams, III, A. W. (2002, June 11). The Impact of Electronic Claims Submission on Cash Flow in a Private Practice. The ASHA Leader.


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