Exploring the role of medical claim clearinghouses

What is a medical claim clearinghouse?

According to the Health Resources & Services Administration (HSRA), a clearinghouse in healthcare is “an organization that enables the exchange of healthcare data between the provider and the payer (insurance company).”

HRSA adds that clearinghouses are HIPAA-covered entities that “can translate between standard and non-standard transaction formats” and “provide solutions that enable data submission from provider systems into the HIPAA 837 claim format required for claims submission and payment as part of this program.”

“This can expedite the overall turnaround time from claim submission to payment,” HRSA explains.

The HIPAA Administrative Simplification Regulations also seek to define clearinghouses in healthcare and what rules apply to them. Under the Regulations, clearinghouses include billing services, repricing companies, community health information systems or value-added networks and switches that either (1) process or facilitate the processing of nonstandard data elements of health information into standard data elements or (2) receive standard transactions from one entity and process or facilitate the processing of health information into nonstandard formats for another entity.

These Regulations not only ensure health information is protected through clearinghouses but also seek to standardize the exchange of health information to streamline administrative processes. Notably, HIPAA established the 837 data standard for the electronic submission of claims information, including professional, institutional and dental claims.

Electronic claim submission is key

As the volume of medical claims continues to increase, electronic claim submission processes can help to manage higher volumes with increased efficiency and accuracy. Furthermore, a standardized format for claim submission ensures that claims are sent in a consistent format, simplifying an already complex process and reducing the need for manual data entry and paper forms.

Moving away from paper-based claims submission can significantly minimize manual data entry errors when claims are created manually. The 837 data standard, for example, ensures key data elements for accurate billing are present, including procedure codes, diagnosis codes, billed amount, provider information and payer information. Data standards also promote interoperability between systems to facilitate the exchange of claims information for reimbursement.

Additionally, electronic submission using HIPAA data standards can increase the speed of submission and, ultimately, reimbursement compared to a manual process and lack of data exchange standards.

Providers can also realize substantial cost savings from moving to electronic claims submission. CAQH reports that spending on claim submission increased by 67% to $19 billion for the healthcare industry from 2022 to 2023. By moving to more electronic processes, the industry could save $2.1 billion, and healthcare providers could get 5 minutes back per submission.

What services do clearinghouses provide?

Facilitating electronic claim submission is a significant selling point for medical claim clearinghouses. The intermediary organizations offer a way for providers to submit electronic claims data in a standardized format to payers for more accurate and quicker reimbursement. Clearinghouses can convert nonstandardized claims data into the HIPAA-compliant 837 format and ensure the claims are formatted correctly to meet payer requirements for payment.

However, clearinghouses also provide a range of services related to medical billing and claims submission. Those services include:

• Claim Scrubbing: Some clearinghouses use technology to identify and correct coding errors and inconsistencies in claim data, ensuring that the claims comply with payer-specific rules and industry standards.
• Batch Processing: Clearinghouses can enable providers to submit multiple claims in batches, saving time and streamlining the submission process, especially for larger organizations with dozens of payer contracts.
• Transmission to Multiple Payers: Clearinghouses route claims to the appropriate payers, including commercial plans, Medicare and Medicaid, allowing providers to submit all their claims through a single platform.
• Claim Status and Reporting: Providers can track the status of their claims from submission to final adjudication using the tracking tools provided by clearinghouses. Reports and dashboards help providers monitor claim acceptance, rejection, and payment status when available.
• Electronic Remittance Advice (ERA): Clearinghouses can deliver ERA from payers to providers. ERA contains detailed information about claim payments and any adjustments the payer makes.
• Eligibility Verification: Some clearinghouses offer real-time eligibility verification services, allowing providers to check a patient’s insurance coverage and benefits before rendering services to ensure reimbursement.
• Coordination of Benefits (COB): Clearinghouses can help manage COB when a patient has multiple insurance coverage plans, ensuring that claims are submitted to the appropriate primary and secondary payers.
• Denial Management: Clearinghouses may provide tools and services to help providers manage and resolve denied claims, including identifying the reasons for denials, resubmitting corrected claims and appeals management.
• Compliance and Security: Clearinghouses should ensure that all transactions comply with HIPAA regulations for privacy and security, protecting patient information and maintaining data integrity.

Emphasis on compliance and security grows

There are many factors to consider when selecting a clearinghouse. However, compliance and security concerns are rising to the top of priority lists for healthcare providers after a recent cyberattack cost the industry time and money.

In February 2024, Change Healthcare announced a cyberattack that left many of its systems down, including those that process claims. The company owned by UnitedHealth Group processes is one of the largest clearinghouses in the US, processing about $2 trillion in claims each year.

The cyberattack had lasting implications, with some systems not fully returning for weeks after the initial announcement. With a clearinghouse down, many providers were without revenue, prompting UnitedHealth Group to advance more than $6.5 billion to provider partners to compensate for some of the financial losses from downed systems. Still, nearly three-quarters of physicians surveyed by the American Medical Association reported losing revenue from unpaid claims, and 85 percent of respondents had to dedicate additional staff and resources to complete revenue cycle tasks during downtime.

This significant cyberattack emphasized the importance of compliance and security when choosing a clearinghouse partner. More providers are questioning their existing partner’s capabilities and certifications, such as whether they have SOC 2 (System and Organization Controls 2) certification.

Furthermore, the cyberattack has many revenue cycle experts wondering if putting all your claims in one clearinghouse is wise. Diversifying the number of clearinghouses a provider works with could prevent long downtimes from future cyberattacks.

What are the benefits of using a clearinghouse?

Healthcare providers do not have to use a clearinghouse to submit claims to payers. However, many providers benefit from using an intermediary to process their claims and route reimbursement to their accounts.

Clearinghouses can help providers achieve efficiency with claims management. Providers can direct all their claims through a single platform to go out to multiple payers rather than having them interact with each payer’s own platform. Clearinghouses also generally have batching capabilities so providers can submit numerous claims at once, saving time and effort. These capabilities also support scalability, which is critical as the number of medical claims processed each year increases.

Providers can also use claim scrubbing capabilities to run their claims through the clearinghouse’s technology systems, which check for errors prior to claim submission. Providers may see fewer denials tapping into this capability while accessing the technology their practice may not be able to afford or implement.

With administrative costs up by 50%, clearinghouses can also save providers money on claims management tasks. Clearinghouses streamline claims submission and reimbursement for faster turnaround times, which can also improve cash flow. The intermediaries also employ technology at scale across many providers to prevent issues with claims and give providers deeper insights into claim trends, such as acceptance rates, rejections, and payment statuses.

By leveraging the services of a clearinghouse, healthcare providers can enhance operational efficiency, reduce costs, improve the accuracy and timeliness of claims and ultimately increase their revenue and financial stability. However, recent cybersecurity events show that third-party risk is still prominent when partnering with any vendor for claims management. Providers must do their due diligence when selecting a clearinghouse (or two) for their claims submission needs.