Hate Your Clearinghouse?

March 1, 2005

How to tell if your clearinghouse is worth keeping

For years, claims clearinghouses and how they operated were something of an enigma to Jennifer Huneycutt. Why were her practice's claims being rejected? Whose fault was it? She couldn't tell from the reports she got. Worse, the clearinghouse blamed the practice management software for any denials -- and the vendor blamed the clearinghouse.

"What I can say about clearinghouses is that a lot of them are like a black box," says Huneycutt. "You'd ship your claims out the door, then they get rejected or denied. The reports can be sketchy and hard to understand. There is a lot of finger-pointing, and the practice is left in the middle, wondering what to do."

Huneycutt, who's much happier today with her current clearinghouse, is the administrator of Southeast Renal Associates, an eight-physician practice based in Charlotte, N.C. She isn't alone in her confusion.

Physicians and administrators often think of claims clearinghouses as a necessary evil, relying on them to send claims and conduct other transactions electronically, but not expecting much more. Some have learned the hard way that clearinghouses may not respond quickly or appropriately to address the practice's concerns.

But there's no reason to accept a substandard clearinghouse. Thanks to innovations such as Web-based claims management systems and increased competition among clearinghouses, practices can demand, and expect to receive, greater accountability.

Get to know them

Flexing your muscle with clearinghouses begins with knowing how to judge their performance. Experts say some of the key aspects of clearinghouse operations to watch are rejection rates, reports, and customer service support.

While clearinghouses have quietly done their jobs for years, the advent of standardized transactions and codes sets -- mandatory under HIPAA --  turned a spotlight on their operations. Suddenly practices had to work with their clearinghouse to ensure they were able to send transactions in the proper formats.

"If I were advising a physician practice, the first thing I would do is make sure the clearinghouse they have selected is HIPAA-compliant," says Robert M. Tennant, senior policy advisor for health informatics for the Medical Group Management Association (MGMA). "Even though we are well into the compliance timeframe, there is no guarantee the clearinghouse can accept and send all the HIPAA transactions. Most can send claims."

However, Tennant has long argued that in order to see cost savings from electronic transactions, practices should do as many of them as they can, including checking eligibility and receiving payment electronically.

Some practices may only have recently learned who their clearinghouse actually is. That's because practice management vendors often couple their software with the services of a clearinghouse, sometimes giving the office no option to use a different organization.

Similarly, some health plans require providers to use only their designated clearinghouse. Learning whether you are being held "captive" in this way is the first step in improving -- or changing --  your clearinghouse.

"I am not going to tell anyone to get rid of their practice management system," says Tennant. "But if the practice is in the market to change or upgrade their practice management system --  and that is something they should look at every five to 10 years --  that is one question to ask. Ask the practice management vendor, 'Will you allow me to use a clearinghouse of my own choosing?'"

Reduce rejection rates

To practices, the clearinghouse's most important job is to successfully submit claims that result in payment. Of course, claims rejections are part of the picture.


There are at least two rejection rates that practices should pay attention to: the clearinghouse may reject your claims up-front, and the health plan or other payer may reject claims from the clearinghouse.

By understanding the two types of rejections, offices will know where to concentrate their efforts and improve their acceptance rates. A clearinghouse may quote a low rejection rate, but practices need to know which rate is being referenced.

Clearinghouses should work diligently with offices to reduce the number of claims that the clearinghouse itself rejects, so that more claims and other transactions go straight through to payers. Similarly, it is the clearinghouse's responsibility to remain current with payers' requirements so claims are not rejected because of clearinghouse errors.

New technology has made sending correct claims easier for offices. Richmond, Va.-based Payerpath, Inc., the clearinghouse that Huneycutt uses now, for example, offers a feature that allows practices to see in "real time" what their claim might be missing before it is sent. "The thing I love is that it teaches the person what is causing her claims to fail, why the [clearinghouse or payer] is rejecting it, so you don't make the same mistakes. You can use it as a tool to train your staff," says Huneycutt.

The old way of addressing denials and rejections was to wait for a denial letter to arrive from the payer, and then to get on the phone to try to figure out what went wrong. Often the claim -- although corrected -- would be rejected a second time if it was perceived as being a duplicate, Huneycutt says, describing a process all-too-familiar to some practices.

With some payers, Southeast Renal Associates has been able to receive reimbursement within five to six days of an electronic claims submission, and denial notices are available online the day after submission. "We can correct them before we get the denial letter in the mail," says Huneycutt.

Not all clearinghouses have this real-time ability to review claims, but it should be more widely available in the near future. For example, GatewayEDI, Inc., a national clearinghouse based in St. Louis, is expected to provide this early in 2005.

Jim Riley, vice president of sales and marketing for Payerpath, says offices need not be very tech-savvy to take advantage of his company's services. Half of Payerpath's clients are one- to two-physician practices, Riley says.

"All you need to interact with our system is a PC and access to the Internet," says Riley.

Gateway, which processes 3 million claims per month, commonly rejects about 9 percent of the claims it gets from providers, while its health plan and other payer rejection rate is 6 percent, according to Jim Bettendorf, director of compliance and business development.

To help reduce rejection rates, Gateway distributes a proprietary "best practices" document to its clients, which has helped some achieve a 1 percent rejection rate.

Boonslick Medical Group in St. Charles, Mo., a 10-physician multispecialty practice, is one such practice. The office sends 200 to 300 claims per day, says its administrator, Trish Schmidt.
In 1998 her office upgraded its practice management software to a company that had its own clearinghouse. But while the software functioned acceptably, the interface with the clearinghouse and the problems the practice encountered were "disastrous," according to Schmidt. In contrast, today her office enjoys a "good relationship" with Gateway.

Expect detailed reports

In addition to seeing the status of claims on the way out, it is imperative for offices to have thorough reports from their clearinghouses so they get a sense of how well they are doing overall with all their payers.

Both Payerpath and Gateway say they produce a report that includes data from all a practice's payers, in a single format, rather than in a hodgepodge that the clearinghouses themselves may receive.


Practices may want to insist that their clearinghouse separate out rejections from acceptances in reports, as Gateway does, so they can focus on rejections more quickly. "For the most part, the provider isn't going to do anything with the accepted claims," Bettendorf says.

"It is one thing for a clearinghouse to send a note back that says, 'Sorry, [the insurance company] didn't pay this.' What the practice needs to know is why the claim wasn't paid," adds Tennant. He also says practices should look to their clearinghouse to provide help in resubmitting a claim.

Bettendorf agrees; Gateway provides what he calls a "safety net report" that reminds offices to send rejected claims back in. "If you submit claims electronically and you don't resubmit a rejected claim, you can get a report on what was rejected and not refiled," he explains.

Demand good support

Schmidt says the service and support she gets from a clearinghouse is most important to her. Gateway offers user group meetings, for example, which she or an office member attends. "You can't have too much help," she says.

She recommends that practices research this aspect of a clearinghouse before making a decision.

"Talk to people who use them. See what their experience is. See what their service is like. What is the turnover rate of their staff? Make sure you have a contact person so you know who you are talking to," Schmidt says.

Huneycutt also values good customer service support. Before moving to Payerpath and a new practice management system, she had to contend with the clearinghouse that worked with her software vendor, whose support was "so poor." She says the vendor would promise to return calls in 24 hours, but replies often took days.

Adds Tennant, "If you have a quick question, you don't want to be on hold for a long time, and if you have a severe problem, you want a person on the phone right away. It's nice if you can have someone on call 24-7. If you are in Alaska you don't want to have to call between 9 a.m. to 5 p.m. EST."

Many health plans -- and the federal government --  have been lenient about accepting noncompliant submissions since the HIPAA transactions deadline passed in October 2003. But that is changing as time goes on. Practices will be expected to know what is required and payers are already getting tougher about bouncing back transactions that aren't correct, Tennant says.

As this happens, providers and clearinghouses will have to further solidify their communications so that claims and other submissions are accurate. As Tennant points out, "What was [once]accepted may be rejected."

"Truly, it has to be a relationship," says Schmidt. "I can't say that enough. It's your money, and you have to have a relationship with the [organization] handling your money."

And generally the administrative staff --  not the physicians --  will be the ones handling all the clearinghouse issues. As Schmidt puts it, "The doctors' involvement is knowing they are getting their money. When they see our accounts receivable reports -- and most of ours are under 30 days - they are thrilled. They know they are better than their colleagues, and better than it used to be. But how that happens, they haven't a clue."

Theresa Defino, editor for Physicians Practice, last wrote about employee assistance programs in the February issue. She can be reached at tdefino@physicianspractice.com.

This article originally appeared in the March 2005 issue of Physicians Practice.