Analyzing Today’s Healthcare Revenue Path:
What is a healthcare clearinghouse?


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June 26, 2024

Author: Jessica Baker, Director of Marketing at The SSI Group, LLC

As technology allows for more direct connections from providers to payers, one may ask themselves, what is a healthcare clearinghouse and what purpose does it still serve? The modern healthcare clearinghouse serves as a crucial intermediary between a healthcare provider and a health insurance plan. Its primary role is to check medical claims to ensure they don´t contain errors before forwarding them for payment. Additionally, the clearinghouse can translate the data from one system to another when necessary. While healthcare providers are not explicitly required to use a clearinghouse for processing medical claims, it remains the most efficient way to submit electronic claims. The electronic submission of claims overall enhances accuracy, reduces workloads on both ends and accelerates the time to payment of claims. Here is a more detailed exploration of the clearinghouse’s integral role within the intricate puzzle of the healthcare revenue cycle, to help answer what is a healthcare clearinghouse.

Healthcare Produces Overwhelming Amounts of Claims
As of January 2024, Statista reports 1,100,000 licensed physicians in The United States. When you add the countless therapists, dentists, and other specialized fields billing medical claims, the total number of medical claims becomes astronomical. These healthcare professionals can choose from a variety of different claim preparation and management software programs for their billing offices, and then submit medical claims to between 5000 and 6000 different insurance payers across fifty states, each with its own state-specific insurance regulations. Compound the equation with the fact that each insurance company has customized internal software to manage subscriber benefits, apply payment rules distinct to each policy, and adjudicate claims. Additionally, there are resubmissions required to correct errors on original claims, further complicating the process.

Within these many claims, the many different niches of healthcare costs are represented. Billing for the services and treatments in these areas is standardized in medical data code sets. To give a sense of the many complications of a claim, just one of these data code sets – ICD-10 – has more than 68,000 codes to represent different diagnoses and treatments. Once you further add codes to each claim from the Healthcare Common Procedure Coding System (HCPCS) for additional related medical services and necessary medical supplies, and then numerous National Drug Codes, it is easy to see how there is overwhelming potential for error.

For decades the above scenario was played out on paper and facilitated with the regular mail service. During this time the manpower necessary to manually complete the healthcare revenue cycle was a huge cost to the healthcare industry, and in turn, was absorbed by the public in their insurance premiums. To combat the time and cost of the manual medical claim, technology was developed to convert the process to a digital one. This has been made possible through Electronic Data Interchange (EDI), which is the electronic exchange of business information using a standardized format; allowing one company to send information to another company digitally rather than with paper.

The development of EDI allowed the healthcare clearinghouse to quickly expand from checking for claim accuracy and missing information needed for payment to other services geared toward streamlining the billing process, reducing denials, and speeding up reimbursements for healthcare providers. Clearinghouse services now include converting medical billing data into a standard format that can be understood by different payer’s systems, verifying the patient’s insurance eligibility, submitting the claims electronically, tracking their status, and more. With each passing technological advancement, the connections and software improve, and the billing workflow gets faster.

HIPPA: Protecting and Maintaining Mountains of Data
With the ability to send large amounts of data digitally in a fraction of the time it used to take, new concerns arose about its use and protection of the data. The Health Insurance Portability and Accountability Act (HIPAA) of 1996 known for its many regulations around patient privacy, also changed the industry with the HIPPA Administrative Simplification Rules (§160.103), which established some national standards for healthcare industry electronic files and documents. The dual goals of the rules were to reduce costs and streamline business processes while protecting Patient Health Information (PHI). These rules apply to all HIPAA-covered entities, including healthcare providers, health plans, clearinghouses, and business associates.

Is Data Really Standardized?
One might ask, if the HIPAA Administrative Simplification Rules had a priority objective of standardizing the claims process to reduce inefficiencies and allow systems to speak to each other, why do providers still need clearinghouses today? Why can’t the provider get the claim into the correct file type and send it directly to the payer? While possible, the clearinghouse still plays a vital role in the smooth submission and payment of claims. What is a healthcare clearinghouse to the efficiency of the revenue path is explained in the following details of the HIPAA standards adopted.

Providers that file electronically need to use medical billing software within their internal billing process to create an electronic file for the claim also known as the ANSI-X12 837 file. This file is compliant with the American National Standards Institute (ANSI) format, which is an encoded format that converts text into a series of numbers. The numbers, called “numerical character sets,” can subsequently be decoded.  While the standards make 837 files similar, they are not all the same, and the different software platforms producing the files are not equal. 837s are not always clean or encoded correctly by the different software. Therefore, not all clearinghouses or payers can accept all 837s. All of the large national clearinghouses, including The SSI Group (SSI), have their own billing software package or application that is tailored to build an 837 that will be acceptable to their clearinghouse, which in turn can connect directly to the payer’s systems.

Additionally, the variations in software systems used by health plans further complicate the claims process. Take, for example, 10 patients at a hospital that all have the exact same diagnosis and treatments but have 10 different insurance plans. While each plan accepts an ANSI-X12 837 file, there are differences in filing and specific requirements built into each insurance plan. The clearinghouse and its billing software automatically look for the differences to ensure that the individual patient’s 837 is built to their health plan’s requirements. Providers that do not use a clearinghouse are forced to have in-house experts in their billing department for each of their major health plans so that claims submission has a chance to be successful.

What is a Healthcare Clearinghouse to Medical Data Security?

Healthcare clearinghouses ensure the security of medical data in several ways:

  • Compliance with HIPAA Regulations– Clearinghouses are required to comply with the applicable standards of the HIPAA, which mandates the secure and confidential handling of sensitive patient data.
  • Secure Data Transmission– Healthcare clearinghouses function as electronic hubs that allow healthcare providers to transmit claims to health plans in ways that ensure Protected Health Information (PHI) remains secure.
  • Data Normalization– Clearinghouses process and convert medical claims into a standardized format, a process termed “normalization”. This involves transmuting the diverse data formats from healthcare providers into a uniform structure that health plans can readily process.
  • Claim Scrubbing– Healthcare clearinghouses and their billing applications review each claim before it reaches the health plan, which not only minimizes errors and speeds up the reimbursement process but also identifies potential security issues.

The SSI Group, LLC: The Modern Clearinghouse Approach
The SSI Group, LLC is an industry leader in healthcare transactions. With 35 years of healthcare revenue experience, our clearinghouse and claims teams have been instrumental in developing what is a healthcare clearinghouse and also all the processes necessary for our industry to move forward with the ever-changing technological advances in the healthcare revenue path. The SSI Clearinghouse connects to more than 5500 payers across all 50 states, and our flagship claims management software, SSI Claims Director, is known for having the most robust edits suite in the industry. If you ask not only what is a healthcare clearinghouse, but also what it should be, we are confident you will find the best clearinghouse service and team at SSI.

For more information on how you can get the SSI Clearinghouse working for you call 800-881-2739 or click here to request a demo.

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