what does a Clearinghouse do during Claims Submission in Medical Billing?

clearinghouse during claim submissions

Claim submission is not a single entity that you send and finish out. Instead, a claim is submitted after going through several stages. Among those stages, clearing house is one which helps to make your claims error-free and then submit it to the insurance payers. When your claim contains any error there are most likely chances of its rejection. And when your claim is rejected it directly impacts the revenue of your company. So when you submit the error-free claim you need the clearinghouse but what role does the clearinghouse play during claim submission in medical billing? Let’s see in detail:

What is a Clearinghouse in Medical Billing?

A clearinghouse acts as a middleman between the insurance payer and the healthcare provider. They check the claims received from healthcare providers and analyze if they contain any errors. After ensuring that the claim is error-free they forward it to the insurance payers for reimbursement. The main purpose of a clearinghouse is to eliminate errors in the claim, evaluate details in the claim, add the right information about the insurance providers, and make arrangements for electronic funds transfer. Clearinghouses electronically convert non-standardized data from healthcare providers into a standard format, which payers’ HIPAA-compliant billing systems can process and accept.

What Does the Clearinghouse Do During Claim Submission?

A clearinghouse carries out a number of vital functions during claim submission to guarantee the seamless processing and effective transfer of claims to insurance payers:

Verification of Patient Information

Before filing claims, clearinghouses confirm patient data, insurance information, and policy details to make sure everything is accurate and comprehensive. This step helps prevent claim denials and delays due to incorrect or incomplete patient information.

Examining Claims for Mistakes

Clearinghouses carefully review claims for mistakes or inconsistencies before sending them to insurance payers. Known as “claim scrubbing,” this procedure entails examining claims for coding mistakes, missing or inaccurate information, and payer standards compliance.

Preparing Claims for Compliant Payment

Clearinghouses make sure that the claims are organized properly and in compliance with each insurance payer’s requirements. To speed up the processing of claims and enable smooth communication between payers and providers, this involves following billing policies, EDI requirements, and coding rules.

Electronic Submission of Claims

Clearinghouses electronically send claims to the relevant insurance companies after verifying, scrubbing, and preparing them. They protect sensitive patient data during transmission, and this electronic filing method speeds up claim processing and lessens administrative demands on healthcare providers.

Verifying the Status of Claims

Clearinghouses keep track of the filed claims’ progress and resolve any disagreements or denials. To guarantee accurate and effective claim processing, they monitor claims throughout the adjudication process, pinpoint the causes of rejections or delays, and work with insurance payers to quickly resolve problems.

What Happens When You Go Direct Without Clearinghouse Services?

Trusting a clearinghouse for its reliable claim-scrubbing process is a wise choice, no doubt. But did you know that medical billing experts in healthcare can also opt for direct claim submission? Yes, indeed! Especially when dealing with large insurance payers among US healthcare plan providers who handle their claim processing, medical providers have the option to bypass clearinghouse services and submit claims directly.

Benefits of Direct Claim Submission

  • Independence from Middlemen: Medical providers can submit claims directly, freeing them from the need to use an intermediary. Providers can independently file claims without the need for middlemen when they have direct access to insurance payer websites.
  • Cost Savings: By avoiding the ongoing costs connected with clearinghouse services, this strategy works out to be more cost-effective for providers. Direct claim submission suggests there is no extra charge for the claim submission procedure. 

Now, you might wonder, If providers can submit claims by themselves, then why choose a clearinghouse for this?

Drawbacks of Submitting Claims without a Medical Clearinghouse

Increased Risk of Errors:

Human errors are commonplace in medical claims, including data entry mistakes, typos, and omissions. When submitting a claim directly through a payer’s portal, data transactions must be manually entered again, increasing the possibility of mistakes with each submission.

Burdensome Tasks for Billing Experts:

Experts in medical billing already handle a wide range of tasks related to billing, such as figuring out different transmission techniques and managing complex payer criteria. Their duty is further increased when they have to record and submit claims to several organizations (insurance payers).

Lack of Data Centralization:

The first stage in the medical billing process includes collecting data from the facility’s front desk and attending physicians. There are several processes involved in this procedure. But this process doesn’t end there. Before a claim is created, information is shared between several stakeholders, including staff personnel who handle medical billing and coding. Consequently, medical claims files and data become scattered over many sites, making them difficult to efficiently handle. 

Hidden Costs of Additional Software Components:

In situations when extra software elements are needed to enable the filing of direct claims, healthcare providers can have to pay ongoing software maintenance fees. Over time, these costs will add up and could exceed the apparent financial benefits of avoiding a clearinghouse.

Impact on Revenue Cycle:

The Revenue Cycle can suffer from choosing direct claim submission without the help of a medical clearinghouse in a number of ways.

More Lost Claims: The possibility of missing or lost claims increases in the absence of clearinghouses’ automated validation and error-checking procedures, potentially costing healthcare providers money.

Time Wastage: Handling claim filing procedures alone without centralized assistance can take a lot of time and resources, taking time away from essential patient care tasks. 

Frustration and exhaustion: The difficult and challenging nature of the direct claim filing processes can cause frustration and exhaustion in healthcare staff, which lowers confidence and reduces productivity.

Increased Risk of Medical Billing Errors: The lack of automated checks and balances raises the possibility of errors in medical billing, such as incomplete claim submissions or incorrect coding, which increases the difficulties in revenue cycle management.  

Increased Claim Denials: When claims are submitted directly without the assistance of a clearinghouse, there is a greater chance that errors and inconsistencies can be missed before submission, which might cause delays and more effort.

Revenue Delays: For healthcare providers, cash flow can be negatively impacted and the collection of revenue can be limited by delays in claim processing and reimbursement caused by mistakes, denials, or inefficiencies in the direct submission process.

Frequently Asked Questions

A clearinghouse in medical billing acts as an intermediary between healthcare providers and insurance payers. Its primary function is to validate, format, and submit electronic claims to insurance companies on behalf of healthcare providers. 

During claims submission, a clearinghouse performs several essential tasks, including verifying patient information, scrutinizing claims for errors, formatting claims for payer compliance, electronically submitting claims to insurance payers, and reconciling claims status.

Claim scrubbing is the process of meticulously scrutinizing claims for errors or inconsistencies before submission. It involves checking for missing or incorrect information, coding errors, and compliance with payer requirements. Claim scrubbing helps minimize the risk of claim rejections and increase the chances of timely reimbursement.

Clearinghouses ensure that claims are formatted correctly according to the standards of each insurance payer. This includes adhering to coding protocols, billing guidelines, and electronic data interchange (EDI) specifications to expedite claim processing and facilitate seamless communication between providers and payers. 

Yes, healthcare providers have the option to submit claims directly to insurance payers without using a clearinghouse. However, this approach may involve challenges such as increased risk of errors, lack of data centralization, and hidden costs associated with additional software components.

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