Healthcare Business Management Association - HBMA
Leading the Business of Healthcare Login
Commercial Payer News Commercial Payer News - HBMA Healthcare Business Management Association

CPR White Paper, "835 ERA Processing: Pros and Cons, and How to Make it Work for You"


Electronic Claims Processing – Submission and Reception

The enactment of HIPAA legislation set a standard for the medical industry that opened the door for much more electronic claim submittal and processing.  The law also outlined a format for how claims adjudication should be returned to the provider in an electronically readable format.  As of February 2013 over 94% of all claims are submitted electronically.[i]   Ninety-three percent of claims were submitted within 14 days of receipt, and 98 percent of all claims within 30 days, according to a survey released by America’s Health Insurance Plans.  Due to huge cost savings on both the health plan side and the provider-facility side, many insurance plans require paneled physicians to submit claims electronically.  The estimated cost of claims submission for the provider has dropped from an average of $1.84 to $0.28 per claim through the use of electronic vs. manual methods.[ii]

The adaptation of electronic remittance advice from the payers has been much slower.  From the study mentioned above, the cost of manual claim payment posting has dropped from $1.83 to $0.30. [iii]  The savings realized by a health plan drops from $0.66 to $0.21.  Why is the adaptation of the electronic posting of claims so slow when the industry savings could be more than $360 million for providers alone?  About 56% of claims are paid electronically and only about 51% are processed via electronic remittance advice.[iv]  Eventually the mailed paper EOB will become a thing of the past as healthcare payers begin to mandate the acceptance of electronic remittance advice as well as electronic funds transfer to the provider.

Possible Savings

The savings of electronic ERA (or 835) posting can create savings in multiple areas.  The obvious and most understood saving is electronic posting vs., costs of an employee manually posting payments.  Below are some pros to consider when considering adaptation of electronic payment receipt and automatic claim posting:

  • Reduction of processing errors.  The manual posting of payment information allows for errors.  Importing electronic files reduces data entry errors. 
  • Time is money.  Receiving EFT puts money in the pocket of your client much quicker.  It reduces the provider’s A/R sooner – your reports look better.
  • Turnaround time.  The turnaround time for electronic posting vs., manual allows patient accounts to reflect accurate balances more quickly.  Example: How many patient statements are sent or phone calls made/received on paid (but not posted) claims? 
  • Savings in time – man hours:
    • Opening mail
    • Making deposits
    • Filing and/or scanning
  • Other savings:
    • File folders
    • Storage (Electronic and/or offsite paper storage)
    • Shredding – Recycle bins
    • Scanning fees

Possible Costs

There are also some cons to consider when moving to 835 posting:

  • Is there a clearinghouse cost for the ERA – 835?
  • Up front time and effort to change credentialing – method of delivery with insurance carriers
  • Electronic reporting may also require EFT.  This is often seen as a pro, but some may see this as a loss of control or just have angst over EFT.
  • Cost of PM system to include auto posting.  Most systems now include this as a standard feature.
  • Time and expense of revising policies and procedures
  • Care must be taken to make sure that non-contracted payers are not given write offs and adjustments they are not entitled to. 
  • Auto posting removes the instant human review of an EOB.  However, this process still requires human review and correction.  A missing or misfiled EOB must be dealt with whether it came on paper or electronically. (Both delivery methods will have the same adjudication data.)

Making the decision to move

Every business, large or small, must analyze the cost involved in implementing new procedures.  The revenue (payments) to the provider will remain the same whether payments are posted electronically or manually.  The benefits and/or costs will be realized by the billing organization.  The pros and cons mentioned above should be reviewed.  Your organization may have to do a pilot project with a smaller volume payer to see how the process will work in the organization to determine the amount of savings or expense.  As previously stated, the adoption of electronic ERA will be forced upon the industry.  If your organization hasn’t taken this important step, is it time?

The fundamental billing process is still the same whether you do it manually or electronically. Are you taking advantage of the improvements in technology to benefit your clients and your bottom line?


[i] AHIP – Center for Policy and Research.

[ii] CAQH – 2013 U.S. Healthcare Efficiency Index (Revised May 2014)

[iii] Ibid.

[iv] Ibid.

This paper was written by Commercial Payor Relations (CPR) Committee member David Gillies, and approved for distribution by the HBMA CPR Committee. Copyright 2016 HBMA. All rights reserved.