What is a Clearing House in Medical Billing?
After a claim is generated, where do we send the bill?
You might immediately say, "To the insurance company if the patient has insurance."
That's correct. But do we send claims directly to each individual insurance company? Patients may be enrolled with different insurance providers, not just one. Manually sending claims to each insurer would be a tedious and time-consuming task.
Why? Here are the reasons:
New Insurance Setup:
Each time a patient has a new insurance provider, you must contact the insurer, gather the necessary details, and complete the setup for direct claim submission. This process often involves a lengthy testing and certification phase before going live.Complex Configuration:
The billing staff or practice management team must configure and maintain transmission settings for each insurer, including login credentials, passwords, and the mode of transmission.Administrative Burden on Insurers:
On the insurer's side, they receive claims from numerous medical practices. Managing direct submissions from each provider would require significant manpower, increasing their operational costs.Increased Complexity and Errors:
Managing multiple accounts, logging into various systems, and handling different data entry formats create confusion. This increases the risk of errors, lost claims, and inefficiencies in claim management.
What is the solution?
We need a POST OFFICE for claims. Instead of sending claims to each insurance company individually, we submit them to a Clearing House, which then delivers them to the appropriate insurance payer.
That’s exactly what a Clearing House does—it acts as an intermediary, simplifying and streamlining the claims submission process.
Here is the diagram that explains.
A clearing house is a company that facilitates the transmission of claims and reports between healthcare providers and insurance companies.
Is there a cost for this "Post Office"?
Yes. Clearing houses charge fees in different ways. Some impose an initial startup fee for the billing service, typically ranging from $125 to $300. Most charge a per-claim fee, which varies depending on the insurance provider (hereinafter, I will use the terms insurance, payer, or carrier interchangeably).
If you submit claims directly to the insurance company, there is no associated cost. However, this is the only advantage over using a clearing house.
Advantages of Using a Clearing House for Claim Submission
Faster Error Detection & Correction
- Identify and fix errors within minutes instead of waiting days or weeks.
Higher Claim Success Rate
- Significantly reduces the number of rejected claims.
Faster Reimbursements
- Submitting claims electronically can reduce reimbursement times to under ten days.
Eliminates Manual Data Entry
- No need to repeatedly prepare claims and manually re-enter transaction data for each payer.
Batch Claim Submission
- Submit all your electronic claims at once, instead of submitting them individually for each payer.
- The cleaner and faster claims are submitted, the quicker payments are received.
Reduces Paperwork & Mailing Costs
- Minimizes the need for paper forms, envelopes, and stamps.
Can I Send Paper Claims to a Clearing House?
No, only electronic claims (EDI) can be submitted to a clearing house.
However, in rare cases where a specific insurance company does not accept electronic claim submissions, you can still submit the claim electronically to the clearing house and instruct them to send it as a paper claim to that insurer.
Additional Functions of a Clearing House
Besides transmitting claims to insurance companies, clearing houses also perform additional tasks, including:
- Eligibility verification
- File submission status tracking
- Claim status reports
- Electronic Remittance Advice (ERA)
- Patient statement services
- Payment processing reports
- Transaction summaries and reports of all clearinghouse activity
We will discuss these in more detail in the upcoming chapters.
Following are the growing list of Clearing house.
ZirMed
Emdeon
Gateway EDI
Fusion EDI
Simple Workflow
Provider Smith uses ABC billing software. Provider Smith then enrolls with XYZ clearinghouse. ABC software sends the claims entered into it to XYZ clearinghouse. Payer Gold is enrolled with the same XYZ clearinghouse. So XYZ receives Provider Smith’s claims and sends them directly to Payer Gold
Example flow of EDI 837
1. Provider Smith uses ABC Billing Software.
2. Provider Smith already signed up with XYZ Clearing House and an ID has been assigned to Provider Smith by the clearing house.
3. ABC Billing software has the option of generating EDI 837 message and transmit the claims via FTP Method to the clearing house.
4. XYZ receives message and then identify the Payer from claims received and then it just forward the each claims to corresponding Payer.
5. Each Payer receives the claim and claim adjudication process takes and prepare the response 835 and send back to the clearing house. And then Payer also will send the check payment to the provider.
