Understanding Health Care EFT Standards

On March 23, 2010, the Patient Protection and Affordable Care Act (PPACA) was signed into law.  Section 1104 of the PPACA requires the adoption of operating rules for health care electronic funds transfers (EFT) and electronic remittance advice (ERA) transactions.  The goal of section 1104 is to reduce the administrative burden on healthcare providers by lessening the time and labor spent interacting with multiple health insurance plans, often referred to as billing and insurance related (BIR) tasks. 

During 2010, NACHA collaborated with the Council for Affordable Quality Healthcare (a non-profit alliance of health plans and trade associations) Committee on Operating Rules for Information Exchange (CAQH CORE) on a research project to better understand how health plans and providers use EFTs and ERAs. 

In December of 2010, a hearing was held by the National Committee on Vital and Health Statistics (NCVHS).  The NCVHS engaged in a comprehensive review of potential standards and operating rules for the EFT and ERA transactions.  The hearing included public testimony by stakeholders representing a cross section of the health care industry, banking industry and standards development organizations.

In March of 2011, NCVHS recommended to the Secretary of Health and Human Services (HHS) that CAQH CORE and NACHA draft the healthcare operating rules for EFT and ERA transactions.  Over the next 6 months, a working group developed operating rules that addressed barriers to healthcare providers’ acceptance of EFT and ERA. 

In December 2011, the NCVHS recommended to the Secretary of HHS that the health care EFT standard for payments made via ACH be the NACHA CCD+ format and that the ERA content be as specified in the X12 835 TR3 Report.

On January 10, 2012, the Administrative Simplification: Adoption of Standards for Health Care electronic Funds Transfers (EFTs) and Remittance Advice; Interim Final Rule was published in the Federal Register. This regulation became effective on that date and has a compliance date of January 1, 2014.

On August 10, 2012, the Administrative Simplification: Adoption of Operating Rules for Health Care electronic Funds Transfers (EFTs) and Remittance Advice; Final Rule was published in the Federal Register. This regulation became effective on that date and has a compliance date of January 1, 2014.

Four Areas Major Problem Areas

The research performed by NACHA and CORE and the testimony provided during the Dec. 2010 NCVHS hearing identified several major obstacles for health care providers to adopt EFT and ERA, resulting in increased administrative costs and offering opportunities for efficiency improvements.

• There were no standards related to how a provider enrolls to receive EFT and ERA
• The use of 835 is non-standard due to conditional and optional fields
• There can be a considerable elapsed time between the origination of the ERA and the associated EFT
• There was no standard regarding the use of a key value to reassociate the data in the ERA with the EFT

The Challenges of Leaving the Check Behind

For 2013, it is estimated that slightly less than 70 percent[1] of health care claim payments will be made in paper check form and 65% of remittance advice will be sent through the mail in paper form.  The reasons for this are nearly identical to the reasons that B2B invoice payments continue to be made via paper check. 

• No reassociation is necessary when the dollars and data arrive together in the mail. 
• Information on printed EOBs is more easily understood than the EDI 835. 
• Providers have limited budget for investments in payments technology, particularly at smaller practices. 
• Delivery and processing of ERA by the provider requires a custom implementation. 

Just as in B2B payments, checks still rule in health care despite the acknowledged advantages of EFT including cost savings, fraud control and improved cash flow and cash forecasting. 

Just as in B2B payments, checks still rule in health care despite the acknowledged advantages of EFT including cost savings, fraud control and improved cash flow and cash forecasting.  

In my next post, I’ll discuss In-Band vs. Out-of-Band Remittance Delivery and how it relates to Health Care EFT Standards. 

Are you still burdened by paper checks processes? I’d like to hear from you.

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[1] Estimates for the percentage of EFT and ERA are taken from the final rule “Administrative Simplification: Adoption of Operating Rules for Health Care Electronic Funds Transfers (EFT) and Remittance Advice Transactions” published in the August 10, 2012 Federal Register (77 FR 48008).