What is a clearinghouse?

The life cycle of an insurance claim has four stages:

  • Claims submission and electronic data intechange (EDI)
  • Claims processing
  • Claims adjudication
  • Payment

The life cycle of an insurance claim begins in the providers office when the claims department completes an CMS-1500 claims using medical management software.  In most offices claims are submitted electronically to payers or clearinghouse for processing.  Electric data interchange is the transfer of data from computer to computer between providers and third-party payers in a data format agreed upon by sending and receiving parties.  What is a clearinghouse?  A clearinghouse is a public or private entity that processes or facilitates the processing of nonstandard data elements into standard data elements.  Claims processing involves sorting claims upon submission to collect and verify information about the patient and provider.  After the claim has been approved by the payer’s claims examiner it then goes through what we call the claims adjudication process.  In this part of the process the claim is now compared to payer edits and the patients health plan benefits to verify that everything checks out to be accurate.  After the adjudication process has been finalized, the claim will be either denied or approved for payment.  The provider recieves a remittance advice and an EOB (explanation of benefits) is normally sent to the patient explaining the payment from their insurance and what the patient is responsible for if anything at all.

Refernces:

Understanding Health Insurance 13th Edition

2nd post

Caron Passley Week 2 Discussion Post 1COLLAPSE

A few key terms to understand before going into how and whys of the life cycle of an insurance claim beginning with CMS1500- a form used to submit Medicare claims previously called the HCFA-1500 (Steiner, J., Pozgar, G. Pg. 730)., claims submission is the electronic or manual transmission of claims data to payers or clearinghouse(a public or private entity that processes or facilitates the processing of nonstandard data elements in to standard data elements and visa versa )for processing; a value-added network (VAN) is clearinghouse that involves value-added vendors, such as banks in the processing of claim; electronic data exchange (EDI) is the computer-to-computer transfer of data between providers and third-party payers (or providers and health care clearinghouses) in a data format agreed upon by sending and receiving parties (Steiner, J., Pozgar, G. Pg. 80-81).. This life cycle starts with the healthcare specialist completing a CMS-1500 using medical management software the submission of a claim to the payer or clearinghouse for processing (this the back and forth of whether a claim is correct, was a procedure authorized, etc )which is where the EDI takes place (the conversion of data from one form to another paper to electronic one electronic format to another) sometimes through VAN clearinghouses which is when the processing of payments is done directly with banks etc for the providers payment convenience.

Reference:

Steiner, J., Pozgar, G., McConnell, C., Schultz, H., Young, K., Mosley, G., Joos, I., Buchbinder,S., Buchbinder, S., and Shanks, N. HIPAA Compliance in HealthCare. Security and Management of Health Information. Burlington, MA: Jones & Bartlett Learning.