The Impact of 835s on the Healthcare Payment Value Chain

An 835 file touches three key points along the healthcare payment value chain: the payer, the provider and ultimately, the patient in the form of a provider billing showing their balance owed. What is the value of these files if the data is 100% clean and accurate? How is the healthcare payment value chain affected if data is not accurate? This article explores these questions and more.

by Jase DuRard, Senior Vice President, Membership Growth and Development, Zelis Payments

In my 25 years in healthcare revenue cycle management, I have identified several “truths” about our industry. The most important being, “He who has the best data wins!” Consider this when it comes to 835 files. An 835 file touches three key points along the healthcare payment value chain: the payer, the provider and ultimately, the patient in the form of a provider billing showing their balance owed.

The motivational speaker Zig Ziglar had a story he liked to tell called “kicking the cat.” Essentially, it was a narrative about a business man who was pulled over and ticketed for speeding one morning. His reaction to that incident led him to treat a subordinate badly, which led to the subordinate treating the secretary badly, which led to the secretary yelling at her son, which resulted in the eventual kicking of the family cat. The story is meant to illustrate how one thing has the power to kick off a chain of events which impacts others down the line. In the same manner, the accuracy of the data provided in an 835 file has the potential to do just the same.

Healthcare is one of the most process driven industries in the world. For example, healthcare providers have processes for everything: from scheduling, to eligibility checks, to registration, to claims, to billing. And more over, those processes may differ from one provider to the next. Further, each of these processes could almost be called a “cottage industry” because vendors pop up every day to address one half of 1% of a provider’s denied claims. However, the value of the one half of 1% is often millions of dollars. Facilities need these vendors because they provide the tools that allow them to manage the business of providing healthcare. Patients need these vendors as the process ultimately funds the treatment they receive. So every vendor that touches every process involved in every stage of the patient experience has value to the patient.

Let’s apply this to the Revenue Cycle specifically.
The Revenue Cycle with all its moving parts may be summed up as the process of ensuring the organization is paid EXACTLY what it should be paid for the services provided in as short a time period as possible. Notice the phrasing, should be paid… or billed, because there are of course billing errors, which create another process.

When a claim is generated at the facility and an 837 is submitted to the payer, that claim goes through a myriad of applications on the payer side. It is scrubbed for accuracy, compared to the contract, mined for subrogation or COB, etc. until finally it is adjudicated and payment is sent in some fashion to the provider. That claim is often paid in pieces, as defined by the 835 file which is then sent to the provider. Any one 835 file may address multiple 837’s and or we could see multiple 835 transactions used to respond to one 837!

The Revenue Cycle Staff is charged with keeping the cost of their processes at a point where the benefit or value of the process outweighs the cost. So what happens when the 835 file mentioned above is incorrect?

Why are lockbox services inefficient?
Studies show that remittance files created by lockbox services (the service that generally intercepts facility check payments and creates a corresponding 835) have a 30 – 40% error rate. Further, they do not include detailed adjustment codes since lockbox 835 data is interpreted from a printed Explanation of Payment (EOP). If one 835 file addresses multiple 837’s the provider is left with a single issue affecting multiple claims, which affect multiple patients! So now, we have a process of posting an 835 file that is more expensive because it requires manual error corrections of 30-40% of the information on the file. How many 835 files does a facility receive in a day?

How is the healthcare payment value chain affected if data is not accurate?
What if that 835 had not been so clean and accurate? What is the cost to your organization if the provider’s staff has to rework 40% of the 835 file? Remember, it’s not just the salary for those associates or their time. Everything discussed above is now put on hold. Multiple claims are affected. So all of the issues above can be compounded by the number of claims affected by that one bad 835.

Actual vs. expected cannot be calculated on any of these claims until the file is cleaned. This delays contract negotiations. Denials cannot be accurately appealed, which further delays a 90-day process.

Secondary insurance on multiple claims cannot be submitted. What is the value of those claims that cannot be submitted because one 835 file was incorrect?

The value of 100% clean and accurate data.
As we know with High Deductible plans on the rise, the patient portion is taking on a larger and larger role in our Revenue Cycle. Patients may be the hardest piece of our healthcare dollar to collect in spite of the fact, that there are numerous processes in place to collect that portion of the bill. However, if the 835 file is incorrect and has to be cleaned how much time is lost reaching that patient? What is the opportunity cost? And if the claim is not paid quickly or correctly, who is the patient more likely to blame? The health plan.

Consider the clean 835 as the catalyst to a chain of events, which leads to satisfied providers and plan members versus the proverbial “kicking of the cat” somewhere along the value chain. If the file is clean, the process is smooth; the cost is low to the patient, the system works. But if it’s not, one break leads to another driving up cost to your organization which ultimately leads to rising costs to the patient.

When seeking a payment partner look for one which has the ability to make accurate payments and move large amounts of data for hundreds of payers to providers in the form of a clean 835 file. Additionally, partner with an ePayment company that has built integrations into the claim payment platforms of Payers. It is also important to consider that integration is not just about the capture and manipulation of a file. It is about being imbedded into the payment process within a payer’s claim payment platform, gathering the necessary raw data such as Adjustment Codes and creating 100% clean and balanced 835s.

No cats were harmed in the writing this article.