Practice Management | 5 MIN READ

Payment Reconciliation: Process, Challenges & Solutions

Kim Bruce

There are many activities in today’s challenging healthcare environment that absolutely need to be high touch: the care given to a patient, the understanding of the patient’s social and living environment, and knowing and working within a patient’s financial constraints to help manage high deductible health plans are among the many issues you must tightly manage.

Within the healthcare business office, we have been very fortunate to see improvements to what was once a highly manual or paper-based system over the past 15 years, with Electronic Data Interchange (EDI) certainly helping to lead the way. Wide adoption of electronic claim submission, electronic remits, electronic eligibility verification (just to name a few), have for most organizations improved and streamlined the processes between payers and providers. However, there are still many opportunities to increase or improve automation for much of the business side of healthcare. One area near and dear to me: automating the payment reconciliation process.

What is Payment Reconciliation?

Payment reconciliation is the process of comparing and verifying internal records of payment history with external resources such as bank records. This process ensures that the money leaving an account matches the amount spent at the end of each recording period. Payment reconciliation reports help you identify inconsistencies between payments that banks report and payments that internal resources report. Automatic payment reconciliation systems can instantly compare your payment history with your bank records.

Payment Reconciliation Process Challenges

In the context of this post, I initially want to focus on the payment reconciliation process, specifically about what is coming in through an ERA (835 transaction) and the data that is deposited into your organization’s bank accounts. In working with healthcare organizations, I have found that in today’s highly automated business office at least 75% of their ERA and deposit information is manually reconciled. For some organizations, reconciling means printing a report of the remit file data and downloading their bank deposit file to manually compare the two. Other organizations create excel reports with pivot tables and manual report manipulation to try and alleviate the reconciliation headaches. No matter how an organization confronts the manual challenge, it is a high touch process done every single day, in some cases involving multiple resources, with effort ranges between five effort hours to 40 effort hours per week.

 January 2014 Compliance Deadline

January 2014 was the deadline for the adoption of the CAQH CORE Phase III EFT&ERA Operating Rules.  As part of this rule set, a minimum set of data elements were outlined as required to help assist in the reassociation between the ERA-835 and the ACH CCD+. What this means is that in the actual 835 is that the details of the information sent to your financial institution are included. That is a fantastic first step, but still it’s still onerous and time-consuming to pull that data out of each check in the ERA file! Some ERA files can contain A LOT of checks. The associated EFT files are not necessarily sent on the same day the ERA file is received. In fact, the EFT & ERA Reassociation Rule allows for a three-day window before the effective date (payment date) and three days after the effective date. Again, a great step forward but still can require multiple manual checks to see if the deposit is in the bank, or if the deposit is already in the bank, that the ERA file was received.  If you don’t get it right, you open the very real possibility that your month-end reporting will have inaccuracies between the G/L and A/R.

 What if there was a better way?

Our team has had the opportunity to work with some really smart customers and colleagues to address payment reconciliation process issues. The goal was to serve as the ‘officiant of the marriage of data’ between what is received in the 835 files and what the bank reports back in their daily deposit reports? As an EDI Clearinghouse, we already have our customers’ 835 files along with capabilities for identifying and mining the specific segments which contain the ACH CCD+ details. All that is needed is the daily deposit file from the bank to complete the coupling of the data.

The collaboration between our team and our customers resulted in the creation of the Payment Reconciliation solution. The solution extracts the key data elements for reassociation in the 835 and matches to those same elements in the bank deposit file. We created a simple bank agnostic specification (eight – nine data elements) to import into the EDI gateway to reconcile against the ERA files. The matching takes place with the receipt of each daily deposit file and each ERA file, to accommodate for the known time lags. We also provide exception-based reports and workflows as well as the ability to manually reconcile for situations were an auto reconcile is not possible. The best news is that this solution can be used by any Centricity EDI Services customer regardless of your practice management system, and it is available today!

With this solution, you now have the ability to reduce manual efforts that are taking place on a daily basis, with a cleaner line of sight to those situations that require extra effort.

What other issues can you tackle now that you aren’t spending untold hours on manual payment reconciliation?