What is a Clearinghouse?
The cyberattack against the clearinghouse Change Healthcare in February 2024 has many mental health providers asking the question: what is a clearinghouse, and why are they important?
In this blog, we will discuss what a clearinghouse is and what it does, why clearinghouses play an essential role in transferring electronic data, list common clearinghouses, explain how information flows through clearinghouses, and provide some key takeaways from the cyberattack against Change Healthcare.
What is a Clearinghouse?
A clearinghouse is a third-party entity that acts as an intermediary between healthcare providers and insurance payers. Its primary function is to process and manage the electronic transactions related to insurance claims. These functions include verifying the accuracy of claims, checking for errors, and transmitting claims to insurance payers for reimbursement.
What Does a Clearinghouse Do?
Clearinghouses perform several critical functions in the revenue cycle that enable the functionality of our healthcare system at a rapid pace. Without clearinghouses, the same functions done by a person would mean that claims are not processed or paid as quickly as they are now. The technology allows the healthcare industry to move vast amounts of data around with speed and efficiency, taking a fraction of the human resources needed if we didn’t have a clearinghouse.
Here are some of the functions that the clearinghouse technology provides:
Claims Scrubbing: A clearinghouse's essential function is scrubbing claims for errors or missing information before submitting them to insurance payers. This helps reduce claim denials and reimbursement delays.
Electronic Data Interchange (EDI): Clearinghouses use EDI to electronically exchange claims information between providers and payers. This streamlines the claims submission process and reduces the need for manual intervention.
Claim Submission: Clearinghouses submit claims to insurance payers on behalf of healthcare providers. They ensure that claims are submitted in the correct format and include all necessary information.
Claim Status Checking: Clearinghouses provide tools for providers to check the status of their claims, including whether they have been received, processed, or denied by the payer.
Reimbursement Management: Clearinghouses help manage the reimbursement process by tracking payments, identifying underpayments or denials, and facilitating the resolution of payment issues.
Why is a Clearinghouse Important?
Clearinghouse technology provides critical benefits to the healthcare industry. They offer a robust and efficient tool, allowing claims to be processed quickly and accurately. Here are some examples of why a clearinghouse is an essential part of the healthcare provider’s toolbox:
Efficiency: Clearinghouses help healthcare providers save time and resources by automating and streamlining the claims process. They reduce the need for manual paperwork and eliminate the risk of errors associated with manual data entry.
Accuracy: Clearinghouses use advanced software to scrub claims for errors before submission, reducing the likelihood of denials or reimbursement delays. This helps ensure that providers receive accurate and timely payments.
Compliance: Clearinghouses help providers stay compliant with the complex regulations and requirements of insurance payers. They ensure that claims are submitted in the correct format and include all necessary information to avoid claim rejections.
Cost-Effectiveness: Clearinghouses help providers maximize their revenue and reduce administrative costs by reducing claim denials and streamlining the reimbursement process.
Common Clearinghouses
With any robust and valuable technology, there is going to be an array of companies that offer this kind of technology for a price. Some common clearinghouses include:
Change Healthcare, owned and operated by United Healthcare
Availity
Office Ally
Cerner
Navinet
Trizetto
This is not a complete list, there are many more clearinghouses in the healthcare industry.
How Information Flows through Clearinghouses
Clearinghouses pass information from your EHR system to insurance companies and back. The information superhighway that clearinghouses facilitate is best understood by following the pathway of a claim.
As a therapist, you see a client and enter all the session information into your EHR system. The EHR system generates what is known as a CMS 1500 claim form. The generated claim form is in a format that is unreadable to the software that processes a claim. Since the claim form is illegible, the first job of a clearinghouse is to convert the CMS 1500 claim form into a line of code that the insurance company and their clearinghouse can read. The claim is submitted through a clearinghouse and is received at the insurance company’s clearinghouse.
A claim is checked against all of a person’s information, along with the specifications of the client's insurance plan. A clearinghouse will first compare the information on the claim to the information that an insurance company has on file to determine if there are demographic discrepancies. If there are discrepancies, the claim will be rejected. If there are no discrepancies, the claim will be moved to the next step in the process.
The insurance company’s clearinghouse will process the claim and either produce a denial or a payment. The result is sent to the provider either as electronic remittance advice or as an explanation of benefits.
This process continues until the course of treatment has been finalized.
Takeaways from the Cyberattack against the Clearinghouse Change Healthcare
On February 21, 2024, Change Healthcare was offline due to a cyberattack against the clearinghouse. This resulted in the halt of claim submission and remittance for a third of US healthcare claims, highlighting the risk associated with one entity managing such a high volume of data. For Practice Solutions, this meant aiding our providers by utilizing alternative claim submission methods. Leveraging our billing expertise, we were able to pivot to ensure that providers were still reimbursed for their sessions during the outage. Providers enrolled in our billing services could count on Practice Solutions to seek alternative solutions so they could focus on patient care.
There is no way to predict such outages; the best defense is to be prepared to lead your practice effectively through hardship. However, there are some actions you can take to be prepared:
Have an alternative clearinghouse ready. This means your team is ready and willing to accept the challenge of submitting claims through a different system. Knowing your billing team can handle this kind of pivot means you can sleep well at night without worrying about how your claims will be processed.
Have a billing team that is experienced. Practice Solutions has a team of billers with extensive experience and a willingness to help your practice in its time of need. The diversity of experience and energy brought to your practice means you don’t have to worry about billing in an emergency.
Continue to grow your practice. With a first-rate team of billers in your corner, you know your team is secure, and you can continue running and growing your practice. Once you are finished with a national emergency, you are poised for more remarkable and purposeful growth.
Conclusion
Clearinghouses serve an important purpose in the lifecycle of a claim. While the risks of cybersecurity have been illuminated by the cyberattack against Change Healthcare, the importance of a clearinghouse necessitates that providers consider methods to mitigate the risk. Practice Solutions is committed to standing by providers and providing solutions if such problems arise.
Your practice is essential to your entire community, not just the therapists and clients you serve. Ensuring your success means that we are participating with you in ensuring the success of one of the best possible companies from which your community can benefit. We don’t do what we do just because we love billing (because we do). We bring our best work to your practice because we believe supporting your practice is helping and supporting your community. Let us come alongside you and help you through the challenges you face in private practice! Call us, and we will help in any way we can.
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