Drastically Reduce Remittance Processing Time with 835Direct

Published in MEDITECH bulletin June 2010 issue


One vital element of receivables management and cash flow is the processing of insurance payments.  Timely posting of accurate payment and adjustment information can accelerate cash flow by advancing the patient account to the next stage of billing or collections.  Although HIPAA implemented a standard format for electronic remittance of data, the ANSI 835, a majority of the remittance documentation received by hospitals today is still on paper.

The healthcare industry spends 15% of each dollar on payment processing compared to only 2% in retail industries1.  Of the remittances processed by healthcare facilities, 80% – 90% are still provided on paper.

Paper insurance remittances are generally translated manually into payment and adjustment transactions for each documented account.  This process is very time consuming and prone to error.  In addition, vital details about these payments are often excluded in the interest of time.  For example, charge level denials and other detailed adjustments that are often available in the electronic remittances or on the paper equivalent are often summarized or excluded.

MEDITECH users are capable of automatically posting 835s to patient accounts as payments and adjustments.  This process, when available, provides for a significant savings in time and accuracy for these transactions.  However, these files are only available from payers that choose to provide them.  Although HIPAA requires that any electronic remittance must be in the 835 format, they do not require payers to provide their remittances electronically.

Along with the benefit of automated posting, the 835 provides a wealth of information regarding denials, revenue and payments from the payer that can be used to manage future billing operations, analyze revenue, and negotiate payer contracts.


In an attempt to address these issues, Capital Region Medical Center, a member of the University of Missouri healthcare system, decided to implement a solution to increase the number of 835s versus paper remittances and to capture the 835 data for denial management.  Capital Region Medical Center, located in Jefferson City , Missouri , has been a MEDITECH user since 2006.

The first step in the process was to capture 835 data for analytics.  To address this issue, they chose 835Direct, a web-based application by MedTranDirect, a Missouri-based software development company with 24 years experience in Healthcare IT.  835Direct allows a facility to securely import 835s into a database where payment and adjustment data can be analyzed for trends in denials and revenue by payer.  In addition, the product can be used to electronically store the data for the future production of EOBs, remittance reports, and insurance logs for any historical remittance or range of remittances.

This product addressed the need to analyze electronic remittance data, but what about the paper ones?  Once again, they implemented a component of 835Direct.   This process uses OCR (Optical Character Recognition) technology to convert scanned paper remittances into 835s.  Capital Region staff can upload a scanned remittance to a secure FTP site through 835Direct.  Overnight, the remittance is converted into an 835 and transferred back to 835Direct.  This file can then be imported into MEDITECH as a payment and adjustment file or viewed in 835Direct for future analysis or hard copies.

For Capital Region, a typical remittance processed through this procedure contains transaction activity for 200-300 accounts.  Previously, when processed manually, it took about four hours to calculate the necessary adjustments for each account and post the transactions manually.  Using the automated procedure, it takes about five minutes to upload a scanned copy of the remittance, another five minutes to download the 835 the next day, and about fifteen minutes to post and reconcile the 835 to the MEDITECH system.  This is a time savings of about 80% for each processed remittance.

Capital Region does not use this process for all paper remittances, only larger ones where the automated procedure saves a significant amount of time over the manual process or where the data contained in the remittance is vital for payer communications.

For all remittances that can be processed in this manner, the facility has a scanned image of the original document, the associated 835, and a report of the same data available from 835Direct on demand.  In addition, all data contained in the 835 is retained in full detail in the 835Direct database.  By including all remittances provided electronically, Capital Region is able to analyze payment, adjustment and denial data for all major payers.  They can reproduce this data either electronically, or on paper, in a consistent format, regardless of the original method of remittance data delivery from the payer.

Teresa Blanchard, Insurance Manager at Capital Region, believes that this new process has had a major impact on their operations.  “We can process remittances much faster than ever before and with less staff”, she said.  “We no longer have to worry about posting payments to the wrong account or manually calculating adjustments.  The OCR process and 835Direct allow us to handle more and more remittances automatically through MEDITECH and to capture and archive vital data on each transaction.  I would highly recommend this process to any other MEDITECH facility.”

After implementing the system, Blanchard noticed some other significant improvements over manual remittance processing.  “Previously, when the cashiers were figuring contractuals manually, they were sometimes including amounts with remit codes which should have been reviewed and billed separately with a modifier.  Once we started receiving 835s using our custom formula for contractuals, we were able to identify these charges and refile line items to receive additional reimbursement.   We view this component as an improvement in customer service as well.  We have reduced the number of payments posted to the wrong accounts which reduces phone calls from upset patients.”

Blanchard has used this process to automate MEDITECH processing of patient accounts in their workflow.  “The auto posting of remit codes to MEDITECH at the time of payment posting helps expedite the patient accounting process as well.  For example, if the claim was denied for no authorization, the remit code can be set up on MEDITECH to pull to a collector or biller worklist for review.”

This process works by taking a scanned remittance and extracting all data from the form.  The data collected is compared to a library of remittance formats.  If identified, the map associated with that remittance format is used to translate the account information into payments and adjustment data.

When new formats are encountered, a mapping process takes place for the new remittance format.  This adds a day or two in processing for each new remittance type, but the customer participates in the process and can translate any codes unique to the payer into HIPAA compliant adjustment codes. The customer can also combine codes that they consider to be equivalent.  Once this process is complete, the map is added to the library and all future remits from the payer can be processed in the 24 hour window.

The process is about 98% accurate when reading scanned images of 300 DPI or better.  Imaging software is used to verify the data collected to make sure that transaction totals match total payment or charge figures elsewhere on the claim.  Occasionally, due to print quality, creases or other issues with the source document, characters are scanned incorrectly and must be rekeyed by the translation staff.   This is done by viewing the original scanned document next to the transaction data and correcting each suspect transaction before delivery to the customer.

The 835Direct OCR technology can make a major impact on your AR days and remittance processing cost while providing new information on transactions between you and your payer.

For more information on how to implement this process at your facility, please contact Kalon Mitchell, President, MedTranDirect, at (417) 581-9585 Ext. 206 or kmitchell@medtrandirect.com.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s