Remittance is the act of paying for a service, while remittance advice (RA) is a document submitted in either an electronic or a paper form that details exactly how the insurance payer handled and processed a medical claim for a covered party. Why is it important? In short, it tells you what the payer decided to pay for a claim. A healthcare practice will use remittance advice to ensure you received the proper payment and understand any reasons why the payer denied a claim, so verification of its accuracy is critical.

Types of Remittance Advice in Healthcare: Electronic vs Standard Paper Remittance

Throughout the history of remittance advice, insurance payers have sent copies of paper documentation, called standard paper remittance (SPR), documenting their actions. Technology has made things far more efficient by allowing electronic communication of the same information.

When you consider remittance advice in medical billing, like anything else, communicating electronically provides a faster way of providing information and managing that data. Most payers opt to send electronic remittance advice (ERA) because it is faster to process, provides more security, and is far easier to store than documentation in paper form. 

What Is Remittance Advice in Healthcare Going to Look Like?

Though various exist, there are several key components of RA, and these often provide the most important details needed to decide how to log or question the data.

• Provider information: This information includes the contact name, address, and details of the healthcare provider.
• Payer information: This section lists the contact details, including the name and address of the insurance company or another type of payer.
• Patient information: The patient information section includes the patient’s name and identifying number, as well as any specific details shared, such as demographic information.
• Payment details: In the payment details section, you have a specific numerical figure for the amount paid, the date of payment, and the method used by the payer.
• Service details: This section continues the breakdown of what the insurance payer is paying, usually with the services provided, such as CPT, diagnosis codes, fees, units, and adjustments made.
• Denial or adjustment reasoning information: You will also notice details about any adjustment to the expected payment or denial of the claim listed. There will be specific codes listed that provide information about why the payer made those decisions. Claim adjustment reason codes (CARCs) like this are critical to understanding to enable you to know what your options are moving forward, such as resubmitting the information.

This remittance advice section breakdown is a basic understanding of what both ERA and SPR include. Different systems utilize slightly different wording or setups.

RA certainly offers benefits such as more accurate billing, improved reconciliation of payments, and ensuring faster payment processing. This can speed up cash flow and boost operational performance. RA challenges exist that must be considered as well, including compatibility issues if the sender and receiver lack compatible solutions. Making a move to a full in-house RA solution could be cost-prohibitive for some organizations.

Remittance Advice Medical Remark Codes

When it comes to understanding remittance advice, medical billing professionals need to focus heavily on the remark codes, which provide specific answers to the questions, “Why was this claim denied?” or “Why didn’t the payer cover the whole amount?”. Consider the following remittance advice medical remark codes (RARCs) often utilized.

• Supplemental RARCs: These codes offer information that works in conjunction with the noted standard claim adjustment reason codes (CARCs) noted previously. This could include, for example, a CARC remark of “not covered.” The RARC would then specify why with more detail, such as “non-covered benefit.”
• Informational RARCs: This remark code offers information about the remittance advice or the claim process utilized. For example, it may contain a statement such as “processed electronically” or “final amount based on review.”

Remittance advice in medical billing is communicated in simple codes. The following are some of the most commonly used, though others exist to fit specific needs:

• M51: The procedure code is missing, incomplete, or in some other way invalid.
• M62: Invalid treatment authorization code, often due to missing or incomplete data.
• M76: Invalid diagnosis or condition code, often with missing or incomplete data.
• M77: Inappropriate place of service, such as incomplete or missing information.
• MA83: Lacking confirmation of primary or secondary payer.
• MA122: Initial treatment date is invalid or missing.

The Process of Healthcare Payment and Remittance Advice Application

The process of generating remittance advice involves several steps.

• The payer sends the detailed payment information in the desired form, either electronically or through the mail with a paper document.
• For electronic or ERA methods, a standardized electronic format is used—typically the HIPAA 835 format—processed through clearinghouse software. This provides the providers with comprehensive payment details. Electronic transmission is often preferable because it reduces manual processes.
• For paper processes, the document must be printed and sent to the provider.

That’s straightforward enough, but it’s important to note that ERA offers several additional benefits once it is transferred:

• There is no risk of documents getting lost in the mail.
• The information is instantly transferred. There is no lag waiting for someone to log and deliver the information.
• The provider receives and can process the payment faster which boosts cash flow processes.
• ERA offers a complete, and often times more thorough breakdown.
• There is less risk of human error in the reconciling of information.

What Is Remittance Advice in Medical Billing Used For?

Remittance advice in medical billing is applied to various parts of the billing process. It can be used in a variety of ways within each of these areas:

• Reconciliation of accounts: Providers use RA data to reconcile or match the payment amount to the original claim submitted. This ensures accurate record-keeping. Any differences are identified and further investigated as applicable.
• Identification of code mistakes: Avoiding common coding mistakes helps prevent cash flow concerns. RAs provide identification of all data submitted with the claim. Incorrect procedure codes or modifiers are easy to spot. If present, providers can adjust these and take action to resubmit the claim, if applicable.
• Appeal denials: Providers can use the information from the RA to make a decision on when and how to appeal information. Since the payer provides the reasoning behind the denial, that information is easy to apply to the denial appeal.
• Analytics: ERA enables the use of analytics, allowing providers to gather insights from reimbursement trends that could prove valuable.

Interested in learning more? Let us know below.