What is Remittance Advice & How Can it Help Medical Practices?

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What is Remittance Advice

Remittance Advice Meaning
Remittance advice (RA) is a document (either paper or electronic) sent by an insurance payer that details how they processed a medical claim. In simpler terms, it’s a breakdown of what the insurance company decided to pay for and why.

Remittance advice (RA) might seem like another wasted sheet of paper sent by insurance companies, but this one is worth holding on to. Healthcare practices can use remittance advice to ensure they were adequately paid and understand reasons for claim denials.

If your practice is throwing away RAs, you’re basically throwing away money right along with it.

Electronic Remittance Advice

Traditionally, remittance advice was sent like many explanations of benefits (EOBs), via paper, in the mail. However, as technology continues to advance healthcare efficiency, many payers opt to now send electronic remittance advice, commonly referred to as ERAs. Electronic remittance advice offers several benefits over paper RAs, such as:

  • Faster processing: ERAs are transmitted electronically, significantly speeding up the process compared to waiting for mailed paper documents.
  • Improved security: ERAs offer enhanced security features compared to paper documents, protecting sensitive patient information.
  • Easier storage and retrieval: ERAs are easily stored electronically, simplifying retrieval and eliminating the need for physical document storage.

Both ERAs and paper RAs contain similar information, but the electronic format offers a more efficient and secure way for medical practices to receive claim processing details from payers.

What’s included in Remittance Advice?

As mentioned, both ERA and RAs contain the same information. Remittance advice contains:

  • Payment details: This includes the total amount paid, the date of payment, and the payment method used.
  • Service details: The RA specifies the specific services rendered to the patient, including procedure codes and descriptions.
  • Denial or adjustment reasons: In cases where the entire claim or a portion of it is denied or adjusted, the RA provides specific codes and explanations for these actions. These codes are known as claim adjustment reason codes (CARCs) and are intended to help you understand the reason behind the denial so you can potentially take corrective measures for reimbursement.
  • Patient information: The RA identifies the patient for whom the services were rendered.

Remittance Advice Remark Codes

In addition to the above information, RAs also contain codes that go into more detail about claim denials and adjustments. These codes are known as Remittance Advice Remark Codes (RARCs) provide further information than the standard claim adjustment reason codes (CARCs) mentioned above. RARCs can be broken down into two categories:

  • Supplemental RARCs: These codes provide further details in conjunction with a CARC. For example, a CARC might simply state “service not covered,” but a supplemental RARC could specify why the service wasn’t covered, such as “non-covered benefit” or “exceeds plan limitation.”
  • Informational RARCs: These codes convey general information about the remittance advice itself or the claim processing process. An example might be a code indicating the claim was processed electronically or a code highlighting that the payment is the final amount based on a specific state law.

Common Remittance Advice Remark Codes (RARC)

While there are many different RARCs used in healthcare, here’s an example of some common codes you might see:

Remittance Advice Remark Code (RARC)Description
M51Missing/incomplete/invalid procedure code(s).
M77Missing/incomplete/invalid/inappropriate place of service.
M62Missing/incomplete/invalid treatment authorization code.
M76Missing/incomplete/invalid diagnosis or condition.
MA83Did not indicate whether we are the primary or secondary payer.
MA122Missing/incomplete/invalid initial treatment date.

These are just a few examples, however X12 has provided a complete list here.

How is Remittance Advice Used During Medical Billing?

Remittance advice is used throughout several steps of the billing process, and in many ways.

  • Account Reconciliation: By comparing the RA to the original claim submitted, you can ensure your accounts are reconciled accurately. This means any discrepancies between the billed amount and the payment received are easily identified for further investigation.
  • Identifying Coding Errors: RAs will assist in identifying claims that are being denied due to coding errors, such as incorrect procedure codes or missing modifiers. By identifying and correcting these errors, you can prevent them from happening again to improve claim acceptance rates in the future.
  • Appealing Denied Claims: Remittance advice provides crucial information for appealing denied claims. The specific reasons for denial are outlined in the RA, allowing the provider to understand the payer’s rationale and follow the appropriate procedures for contesting the decision (when appropriate).
  • Identifying Reimbursement Trends: By analyzing remittance advices over time, your practice can gain valuable insights into reimbursement trends. This helps identify areas where you might be losing revenue due to denials or adjustments and implement strategies to improve your overall financial performance.

Best Practices for Leveraging Remittance Advice

Prompt Review of ERAs

Regularly review electronic remittance advices (ERAs) as soon as they are received. This allows for early identification of potential issues, such as denials or adjustments. Addressing these issues promptly can minimize delays in reimbursement and ensure you receive timely payments.

Develop a Denial Tracking System

Implement a system to track denied claims and the associated reasons for denial as identified in the RAs. This helps you identify recurring problems and implement corrective measures to prevent future denials. Analyzing denial trends can also reveal areas where your coding practices might need improvement.

Invest in Staff Training

Ensure your staff members are adequately trained on interpreting remittance advice codes. Understanding these codes empowers them to decipher the reasons behind claim denials or adjustments and take appropriate action. This can involve appealing denials, correcting coding errors, or following up with payers for clarification.

Receive ERAs Through Clearinghouse Software

As mentioned, paper remittance advice is becoming obsolete as payers switch to sending them electronically (ERAs). One of the most popular ways to receive ERAs is through a claims clearinghouse, which is often integrated with your existing PMS or EHR.

A clearinghouse acts as a central hub that translates data between your practice management system (PMS) and the payer’s system. This eliminates the need to manually process paper RAs or download individual ERA files from each payer.

Benefits of Using a Clearinghouse for ERAs:

  • Automated Processing: ERAs are automatically received and integrated with your PMS, eliminating manual data entry and reducing the risk of errors.
  • Improved Cash Flow: Faster processing of ERAs allows for quicker identification of payments and potential denials, leading to faster reimbursement.
  • Enhanced Reporting: Clearinghouses provide comprehensive reports that summarize remittance advice data, offering valuable insights into claim processing trends and denial patterns.
  • Reduced Administrative Burden: By automating ERA processing, staff can focus on other critical tasks, improving overall efficiency.

In addition to ERA processing, a clearinghouse allows you to handle all components of medical billing, including claim submission, denial management, prior authorizations, real-time benefits checking, etc.

If you don’t currently have an integrated clearinghouse, they’re incredibly quick and easy to adapt, without changing your existing software or workflows. Schedule a demo of Apex EDI’s leading clearinghouse to learn more.

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