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The Benefits of EFT and ERA in Medical Billing

Updated Feb 21, 2023

Table of Contents

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  • Electronic remittance advice (ERA) is an electronic replacement for paper explanations of benefits.
  • Electronic funds transfer (EFT) allows patients to submit their payments directly to your practice’s bank account.
  • EFT and ERA in medical billing have numerous advantages, mostly related to your cash flow, time and medical record accuracy.
  • This article is for medical practice owners interested in electronic methods for informing patients of payments due and collecting those payments.

Most medical practices are fully aware of the simultaneous need for, and problems with, explanations of benefits (EOBs). Yes, EOBs are important 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 their attendant electronic funds transfer technology are increasingly popular. Learn all about ERA in medical billing below.

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 it’s 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.

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 funds transfer (EFT)?

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

In medical billing, EFT can facilitate payer and patient payments to your practice without any checks mailed or in-person encounters. Without EFT, the patient payment tools in your medical practice management software (PMS) 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 administrations’ 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 back for your front-office staff to interact directly with patients and complete other projects.

  • Fewer errors: When you’re manually working 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 a more accurate and comprehensive set of patient billing communication.

  • Easier grouping: With EOBs, you need to 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 in one place, making the process of receiving patient payments more efficient.

  • Quicker distinctions between paid and unpaid encounters: When you send out 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 ERA is automated, you don’t need to manually alter your AR books.
  • 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. With these tools, you can review data on how well your practice is or isn’t collecting patient payments. You’ll likely see metrics – such as how quickly your patients pay after receiving ERAs 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 need to pay doesn’t mean they’ll do so right away. With EOBs, you have no easy way to determine whether patients have received your bill and acted on them. ERAs, though, are entirely trackable. This makes it easier to get in touch with patients who are behind on payment, and receive the payments sooner.

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 PMS.

  • 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 together. The result is a client account history that shows exactly when your patient has paid for which services that you’ve provided.

  • 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 timestamped 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, based on a recent NBC News report 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.

  • Overall financial improvements: Cumulatively, the above EFT benefits show how your practice can obtain payments sooner and track which bills are not being paid. Even though the advantages of EFT and ERA outweigh the manual process, it’s understandable if the cost and time involved in implementing them concern you. That’s where third-party medical billing services come in.

How to implement ERA and EFT

Implementing ERA and EFT doesn’t have to mean building your own infrastructure for each. Instead, you can outsource these interactions to a third-party medical billing company. See our review of AdvancedMD for an example of what medical billing services can do for your healthcare organization. 

Medical billing companies typically use their own ERA and EFT infrastructure to process your claims. When you hire these companies, you save time in medical billing and the frustration of implementing new procedures. Visit our medical billing best picks page to learn more and to find the company that’s best suited to meet your practice’s needs.

Max Freedman
Contributing Writer at
Max Freedman is a content writer who has written hundreds of articles about small business strategy and operations, with a focus on finance and HR topics. He's also published articles on payroll, small business funding, and content marketing. In addition to covering these business fundamentals, Max also writes about improving company culture, optimizing business social media pages, and choosing appropriate organizational structures for small businesses.
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