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The Benefits of EFT and ERA in Medical Billing

Updated Oct 25, 2023

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Most medical practices are fully aware of the simultaneous need for and problems with explanations of benefits (EOBs). Yes, EOBs are essential for obtaining patient payment when insurers don’t fully cover your services. No, they aren’t easy, enjoyable or error-free to create and distribute. That’s why electronic remittance advice and the attendant electronic funds transfer technology are becoming increasingly popular. Learn all about ERA in medical billing below.

Editor’s note: Looking for the right medical billing service for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

What is electronic remittance advice (ERA)?

ERA is a HIPAA-compliant electronic substitute for paper-based EOBs. An ERA includes the same information as an EOB but is faster to generate and less prone to errors. In medical billing, ERAs detail a patient’s paid and denied medical claims, adjusted amount owed, and final claim status. Despite the term “advice” in the name, ERAs detail mandatory rather than suggested payments.

What is electronic funds transfer (EFT)?

EFT allows for the electronic deposit of money directly into a bank account. It’s the same technology that allows employees to be paid via paperless payroll with direct deposit instead of a paper check. 

In medical billing, EFT can facilitate payer and patient payments to your private medical practice without any checks mailed or in-person encounters. Without EFT, the patient payment tools in your medical software wouldn’t work.

Did You Know?Did you know

EFT powers both employer direct deposits and patient payments following the receipt of an ERA.

The benefits of ERA and EFT in medical billing

Based on the definitions of ERA and EFT, you’d be right to guess that both technologies have numerous benefits for your modern practice. The advantages are detailed below.

The benefits of ERA in medical billing

There are many benefits to using ERA in medical billing, including freeing up your team’s time for other tasks and receiving payments faster. These are some ways ERA can support your practice’s medical billing:

  • Saving time: EOBs are often processed manually. Given the high volume of claims that move through the medical industry, such manual processes quickly become time-consuming and tedious. Since ERAs are electronic, they’re seamless to create and send. The result is invaluable time saved for your front-office staff to interact directly with patients and complete other projects.
  • Fewer errors: When you manually work with a high volume of EOBs, it’s easy to list incorrect dollar amounts that cause trouble for you, your patients and your payers. Switching to an ERA medical billing model vastly reduces the frequency of these errors. The result is more accurate and comprehensive patient billing communication.
  • Easier grouping: With EOBs, you must send billing and payment details to your patients after each encounter. The digital technology behind ERAs allows you to group all of a patient’s claims into one communication. This grouping keeps a patient’s bill up to date and in one place, making the process of receiving patient payments more efficient.
  • Quicker distinctions between paid and unpaid encounters: When you send individual EOBs, there’s no easy way to track which patients have and haven’t paid. Since ERAs are electronic, they’re much easier to track. With this tracking comes more accurate accounts receivable records. Plus, since ERAs are automated, you don’t need to alter your accounts receivable books manually.
  • Streamlined denials management: A small number of denied claims is inevitable for your partnership. The good news with ERAs is that you can group denials and approvals. This grouping matters because, although approved claims leave a balance for the patient, that balance is still less than a full-on denial. Focusing on denied-claim ERAs means faster revenue.
  • Reporting and analytics: Since ERA platforms are electronic, they often include reporting and analytics tools that can streamline medical billing and collections. With these tools, you can review data on how well your practice is collecting patient payments. You’ll likely see metrics – such as how quickly your patients pay after receiving an ERA and how much money you earn per period, including months or quarters, from ERAs. You can use these metrics to improve your organization’s performance.
  • Quicker patient collections: Just because you’ve alerted patients that they must pay doesn’t mean they’ll do so immediately. With EOBs, you have no easy way to determine whether patients have received your bill and acted on it. In contrast, ERAs are entirely trackable. This makes it easier to contact patients who are behind on payment and receive the payments sooner.
Did You Know?Did you know

Accounts receivable indicates how much money you’re still waiting to receive from the bills your practice has issued its patients and payers. You can use the best accounting software to convert these outstanding payments to actual cash in your bank account more efficiently.

The benefits of EFT in medical billing

EFT improves medical billing processes in the following ways:

  • More cash flow: Paired with ERA, EFT eliminates the cash flow obstacles common with EOBs and paper payments. The combination of EFT and ERA means patients know what they owe sooner and can pay it immediately. For you, that means cash now instead of later.
  • Easier identification of services paid for: Paper payments for EOBs don’t necessarily indicate the service for which the patient is paying. EFT, when paired with ERA, inherently does so. That’s because ERAs are often tied to your practice management software’s patient portal, so patient payments automatically link to the corresponding services.
  • No manual EOB filing: Without EFT, you’d have to keep your EOBs on file to know which patient payments correspond to which services. Instead, EFT indicates the charge paid for, essentially building an ERA file for you in your patient management system.
  • Digital accounting records: EFT creates an easy-to-follow electronic payment trail, whereas paper payments require extra effort on your end to track and link. The result is a client account history that shows exactly when your patient has paid for which services.
  • Payment search tools: Opening your file folder of EOBs and searching for specific ones that have been paid can be a frustrating process. EFT solves this problem. The time-stamped electronic payment records show exactly when and for what purposes payments have been made. The result is a simplified tracking of patient payments.
  • Payment security: If you’ve sent statements via postal mail, you should know that this method lacks security due to the risk of checks being stolen from mailboxes and paid to incorrect accounts. The built-in cybersecurity for EFTs deftly protects against such breaches in the payment process, lessening the risk for both your practice and your clients.

How to implement ERA and EFT

Here’s how to put ERA and EFT in place for your practice.

How to implement ERA

The best medical software platforms come with ERA infrastructure; you just need to get some formalities in place to start using it. The process varies considerably by provider, so you’ll need to work on this directly with your vendor from start to finish. 

As an example of what this might look like, here are the three steps practices using Kareo’s software take to enroll in electronic services. Patient-facing ERA may require a different implementation process.

  1. Fill out a web enrollment form. With the information on your form, Kareo can begin electronically remitting claims and eligibility requests to your payers. Kareo will email you within 48 hours of form submission to confirm your enrollment in electronic services.
  2. Complete payer enrollment. Some of your payers may have their own ERA agreements. Your physicians will need to sign these, and you’ll need to send the signed versions to the payer. From there, you can begin submitting electronic claims to these payers. For payers who don’t enforce separate agreements, you can immediately start submitting claims after taking step one.
  3. Contact payers. Kareo requires that you directly contact your payers to confirm ERA enrollment. The vendor suggests separating paperwork into “pending” and “approved” categories so you know the payers for which you’ve fully implemented ERA. If a payer remains pending after 10 to 15 days, call their number for practices and request to speak with the EDI enrollment department.

How to implement EFT

Below is how to set up EFT for payers. A separate process may be required for patient EFT.

  1. Check which of your payers offer EFT. You can often find EFT authorization forms on a payer’s website; these confirm that the payer offers EFT. If you can’t find these forms, ask your payer representative directly about EFT possibilities. Consider asking payers that don’t yet offer EFT when they plan to do so and inquiring about how their EFT program will comply with regulations.
  2. Assess your EFT processing infrastructure. Accepting payer EFT payments typically requires your practice to receive payer ERAs via HIPAA-compliant 835 electronic standard transactions. If your practice can’t accommodate this type of transaction, inquire with your payer about whether you can access ERAs via the payer’s website. Ask your medical software provider, which may offer additional solutions, about this too.
  3. Read your payers’ EFT agreements. Your contract should include clauses requiring your consent before the payer or a third party can offset or debit payment transactions. As you read the contract, you should determine what conditions your practice must meet to avoid a breach.
  4. Confirm CCD+ EFT format. In most cases, your bank and your payers will use the CCD+ format for EFT. Confirm this with both entities before signing on the dotted line. It’s worth noting that any agreement you sign with a payer supersedes your bank’s protections.
  5. File enrollment forms. These forms will likely vary for each payer. Your medical billing service can help you properly file them.
  6. Confirm enrollment with your bank. As you verify enrollment, determine how your bank will alert you to completed payer deposits. Ensure that any payment notifications include reference information for the corresponding ERA.

The best medical billing services

Even though EFT and ERA have multiple advantages over manual processes, it’s understandable if the cost and time involved in implementing them concern you. That’s where third-party medical billing services come in. The best medical billing services for any practice include the following:

  • CareCloud: With CareCloud, you can get third-party assistance with some or all of your billing cycle. Learn more via our CareCloud review.
  • Kareo: This medical billing service makes it especially easy to track claims, with pricing suitable for new or small practices. Read our Kareo review for specifics on pricing and features.
  • AdvancedMD: When you outsource your revenue cycle management to AdvancedMD, you get unpaid claim follow-up and a guaranteed first-pass acceptance rate of 96 percent. Our AdvancedMD review explains why this service is great for supplementing in-house billing teams.
  • athenahealth: This medical billing service takes a consultative approach, advising you on how to boost your revenue and comparing your practice’s performance to others. Get the details on athenahealth’s data-based approach via our athenahealth review.
  • DrChrono: Registering for DrChrono’s medical billing service means you also get full access to its electronic medical record (EMR) platform. Learn more via our DrChrono review.

From paper to painless

Medical billing goes more smoothly when you move the whole process online, from patient bills to payer payments. If anything, implementing ERA and EFT is key to successfully setting up medical software for your practice. Getting started is easy: Just submit a handful of straightforward forms and make some calls to get these tools in place. From there, you’re well on your way to eliminating revenue headaches and improving your patient and payer relationships.

Max Freedman
Business Operations Insider and Senior Analyst
Max Freedman, has spent nearly a decade providing entrepreneurs and business operators with actionable advice they can use to launch and grow their businesses. Max has direct experience helping run a small business, performs hands-on reviews and has real-world experience with the categories he covers, such as accounting software and digital payroll solutions, as well as leading small business lenders and employee retirement providers. Max has written hundreds of articles for Business News Daily on a range of valuable topics, including small business funding, time and attendance, marketing and human resources.
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