Healthcare Claims: The Role of 835s and 837s

Recovering healthcare claims from insurance providers is an essential part of good revenue cycle management, but the process is convoluted. This claims process revolves around two different files, 835s, and 837s. These files can be understood as the bill and the receipt, but just what exactly are they, and what role do they play in healthcare claims?

Check out our Video Guide on 835 and 837 Files Here: 

What is Healthcare Claims and Remittance?

Remittance is the process of sending a sum of money back to a person or organization electronically. In Healthcare claims, remittance usually refers to the process of insurance providers sending back payment to a hospital. Remittance is an integral part of the revenue cycle, but it can lead to problems if the EFT (electronic funds transfer) is deposited in the wrong account by the payers, leading to imbalanced books that take hundreds of work hours a week to untangle.

What is the problem?

Healthcare claims start when a healthcare provider seeks to claim monetary compensation from an insurer based on a patient contract. The healthcare organization will send an EDI, an 837 file. When a hospital sends an EDI (the electronic record of a claim) to an insurance provider, the insurer doesn’t immediately send a remittance payment back. It takes weeks or months for that payment to be deposited directly into a hospital’s bank account via an electronic funds transfer (an EFT). However, that final payment, recorded through an 835 ERA, doesn’t always match the original 837.

The EFT is almost always accurate, but the deposit information included in the 835 is often inaccurate because of adjustments to pricing made by the healthcare organization or the payer. To complicate things further, the deposit is usually a large deposit that includes hundreds or even thousands of different contract payments, and the record does not always reflect that individually. The major problem, however, is where that money goes. A healthcare organization will have many different banking accounts associated with it, and payers will often post money in the wrong account, a problem that is difficult to sort out.

If you want to get a better grasp of this problem, you need to understand the purpose of 835 vs 837 files in healthcare claims.

What is an 837 file?

The 837 file is actually a HIPAA form utilized by healthcare organizations and medical providers to communicate healthcare claims. Also known as EDIs, they are essentially electronic files that contain information about an electronic claim. They are “electronic” because the file is submitted to an insurance provider in lieu of a paper claim.

The 837 file includes insurance claim data. The complication is that 837 files may contain not just one claim but multiple from the hospital to the payer. The 837s will include information that details aspects of patients’ treatment, including medical services provided, cost of treatment, and additional adjustments. Finally, the 837s will consist of the actual claim amount.

What is an 835 file?

An 835 is also known as Electronic Remittance Advice (ERA). It is the electronic transaction that provides claim payment information and documents the EFT (electronic funds transfer). An 835 is sent from insurers to the healthcare provider. Similar to an 837, they also provide information about the healthcare services being paid for. This includes data like what medical treatment is being paid for and if it has been reduced or changed in the time between when the 835 remittance file was sent out. Furthermore, it also includes insurance information about deductibles, co-pay amounts, splitting of healthcare claims, co-insurers, and bundling.

If we understand an 837 as the bill, the 835 is the receipt of the bill. Hospitals send healthcare claims to insurers to recoup revenue, and then sometime later, insurance providers will electronically deposit money in the bank account and send a record of that transaction as an 835 file.

Software Solutions

The problem, once again, is that the EFT is not posted properly into the right account and so the AR figure calculated based on the the initial 837 healthcare claim does not always match the cash posting. This creates an imbalance.

However, we’d like to note that electronic problems often have software solutions. Third-party software can fix discrepancies quickly and automatically.

In conclusion, understanding the roles of 835 and 837 files is crucial for healthcare organizations looking to streamline their revenue cycle management processes. These files represent the electronic exchange of information between healthcare providers and insurance companies, with the 837 files acting as the bill and the 835 files as the receipt. The process of claims and remittance can be complex and time-consuming, often leading to imbalances and inaccuracies in financial records.

Thankfully, hospital charge capture software solutions are available to help mitigate these issues by automatically reconciling discrepancies between the 837 and 835 files, improving overall efficiency and financial management for healthcare organizations. Organizations can ensure a smoother revenue cycle and better financial health by leveraging technology and deepening their understanding of these vital elements in healthcare claims.

835 and 837 Files Frequently Asked Questions