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Why Work Comp e-Bills Need Multiple Clearinghouses

November 3, 2017 by Catherine Montgomery

Here’s a question we often get: “Our office sends our electronic bills to a clearinghouse. Why do so many of them never reach the insurance carrier?”

Clearinghouses claim to scrub and electronically submit bills to all payers, theoretically making them easy to pay. In reality, clearinghouses often mismanage e-bill delivery, resulting in delayed or outright lost bills. We know this first-hand — not only do we hear constant “lost bill” stories from providers, we’ve had our own bad experience.

This post is a cautionary tale about how providers cannot rely on a single clearinghouse.

Electronic billing protects a provider’s revenue with verifiable bill delivery to payers, which guarantees prompt payment by law. Unfortunately, merely submitting all bills to a single clearinghouse can set off an unprecedented billing nightmare, one that can make providers believe electronic billing for workers' comp just doesn't work. E-billing, however, isn’t the problem.

Direct e-Bill Routing

In California, payers use one of five different clearinghouses. The Division of Workers’ Compensation (DWC) requires providers that bill electronically to establish a direct electronic route to either the clearinghouse used by each payor or to the payor’s claims administrator directly.

No single clearinghouse is the designated clearinghouse for every payor or claims administrator. When a provider sends all bills to a single clearinghouse, many bills will inevitably need rerouting to a different clearinghouse. This clearinghouse to clearinghouse bill routing is considered indirect e-billing, and is not compliant per the DWC requirements.

More importantly, indirect e-billing simply does not work.  

With five different clearinghouses, all using incompatible systems and serving thousands of self-insured employers and insurers (and their respective claims administrators, TPAs and bill reviews), the journey of an electronic bill gets complicated, fast.  Each clearinghouse makes at least nominal attempts to get the provider's e-bills to the right clearinghouse (often mailing the bill and charging the provider for mailing costs). But all too often, these efforts fall lamentably short.

The result? You guessed it: lost bills.

With indirect e-bill routing, providers’ bills go missing and untraceable, lost despite being sent electronically. Instead of taking responsibility, the clearinghouse blames the claims administrator for not being e-billing compliant — a misrepresentation designed to save face with the provider.

Even worse, this indirect routing leaves the provider out of compliance! Technically, the claims administrator is free to reject these indirect e-bills, because the provider failed to send them directly to the claims administrator's chosen clearinghouse.

By contrast, DaisyBill genuinely and effectively takes responsibility for the direct routing of every bill our providers submit. Instead of using a single clearinghouse, we directly send bills to all five clearinghouses. This allows us to maintain unobstructed electronic connections to every claims administrator. Wherever our providers’ bills need to go, the bills get there quickly and compliantly.

Too often, the clearinghouses mislead [a]providers, claiming the ability to process all the provider’s bills. The clearinghouse assures the provider that bills will be re-routed to each claims administrator’s designated clearinghouse. The unsuspecting provider believes the clearinghouse, just as we did in DaisyBill’s early years.

When DaisyBill first started, we used a single clearinghouse to submit our clients’ bills. Just as with providers, that clearinghouse led us to believe this was the correct way to manage electronic billing. But the lost bills (and bills dropped from electronic form to paper and mailed) piled up quickly. We immediately pivoted and established direct connections with all clearinghouses.

Now, we know better.

Providers need support. They need an advocate with the mission of shepherding their bills to the claims administrator, whatever it takes. Managing clearinghouses, and navigating the obstacles they pose to speedy reimbursement, is an unfortunate necessity. But with a quality, expert e-billing team behind you, that necessity doesn’t have to be a burden.


DaisyBill is tailor-made to address work comp’s unique challenges using all the advantages of today’s tech. From authorization to billing to appeals for review, we’ve got providers covered. Schedule a free demonstration, and see what DaisyBill can do for your office.

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Other versions/sections below:

2. A Clearinghouse Cannot Serve Two Masters

As the saying goes, “Follow the money.” A claims administrator pays a clearinghouse to facilitate electronic billing on behalf of the claims administrator their behalf. The clearinghouse’s first loyalty and duty is to the claims administrator that pays it — not to the provider.  who use the clearinghouse to get paid by the claims administrator. Inevitably, the clearinghouse will always err in favor of the payor, not the payee. [b][c]

We learned this the hard way.

Now, our providers’ bills go to the correct clearinghouse and sail through the payment system. Our proof is the average days to payment, available to view with our Insights Tool.[d] 

The fact of the matter is that while clearinghouses attempt to get bills to their appropriate destination, they can’t always manage it. Where time and resources must be prioritized, clearinghouses are unlikely to go the extra mile to make sure providers are paid in a timely manner.

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DaisyBill is tailor-made to address work comp’s unique challenges using all the advantages of today’s tech. From authorization to billing to appeals for review, we’ve got providers covered. Schedule a free demonstration, and see what DaisyBill can do for your office.

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Original:

5 Reasons Work Comp Providers Can’t Rely on Clearinghouses[e]

Here’s a question we often get: “Our office sends every bill to a clearinghouse, but many of our our bills never reach the carrier?”

We can see how providers might think that clearinghouses perform the same function that billing software services like ours do (of course, there is no billing software like ours...but I digress[f]). Clearinghouses claim to scrub and electronically submit bills, making these bills easily payable — at least in theory. In practice, clearinghouses often inadequately manage provide bills resulting in lost bills.

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First, let’s clear this room of its elephant: yes, there’s a certain degree of self-interest [g]in our pointing out the shortcomings of clearinghouses and the need for e-billing services.

That being acknowledged, it’s undeniable that work comp providers need efficient electronic billing software to protect their revenue.  When one considers the real drawbacks of clearinghouses, it’s clear that providers need support. When one considers how e-billing addresses those drawbacks, the administrative resources saved by quality e-billing far outweigh the cost.

1. A Clearinghouse Cannot Serve Two Masters

As the saying goes, “Follow the money.” Clearinghouses serve their benefactors. They are paid by the insurer’s claims administrator, not the provider. While one can argue that processing the bill benefits both payor and payee, clearinghouses always err in favor of the insurer.

If a clearinghouse makes a mistake that costs the insurer money, they’ve bitten the hand that feeds them. But when clearinghouses cost the provider money, that’s no skin off their noses.

That’s why lost bills and endless delays are so prevalent. There’s simply no incentive for the clearinghouse to ensure timely, correct payment, because that doesn’t benefit their client. As in every other facet of work comp, the default outcome [h]of any error or dispute is that the provider loses. And generally speaking, that’s just fine with the clearinghouse.

An e-billing service, on the other hand, works for the provider. Services like ours profit by earning the provider’s confidence in their ability to produce proper reimbursement.

2. Clearinghouses Are Stuck in a Paper Past

Many clearinghouses deal in the relic of an older, less efficient billing and payment model: paper. Because they lack the direct electronic routes to claims administrators, clearinghouses often simplify their own job by sticking with non-electronic bills, even dropping originally electronic bills to paper form.

Some have even blatantly lied to providers[i], claiming that major claims administrators only accept paper bills.

The fact is, using paper is just easier for clearinghouses. It’s also terrible for the provider, not to mention the environment. The result is lost bills, delayed payments, and goodness knows how many fewer trees in the world.  

E-bills are easier to generate, eco-friendly, and don’t get lost in the mail. In fact, California law requires that insures pay e-bills within 15 days[j] of receipt — unlike paper bills, which insurers can legally take up to 45 days to pay. [k][l]It’s vital to use an e-billing service that keeps your electronic bills electronic, no matter what’s easier for the clearinghouse.

3. Direct Electronic Connection

Many providers are unaware of a Division of Workers’ Compensation (DWC) rule: when providers bill electronically, they must establish a direct electronic route[m] to the claims administrator or their chosen clearinghouse.

Unfortunately, providers without adequate e-billing services often send all their bills to a single clearinghouse. If that clearinghouse happens to be the appropriate one for the given claim, no harm done. But all too often, it’s the wrong clearinghouse. The clearinghouse in question then makes a nominal effort to send the bill to the right one, with varying degrees of success.

The result? You guessed it: lost bills.

Even worse, when a provider sends a bill to the wrong clearinghouse, the provider is out of compliance. Technically, the claims administrator is free to reject it on those grounds alone.[n] 

Another frustrating symptom of this indirect bill routing is multiple payor ID’s. Clearinghouses must assign unique ID numbers to every payor. That doesn’t mean one ID number per insurer or claims administrator; it can also mean a separate ID number for each individual employer.

With multiple clearinghouses serving multiple insurers and claims administrators, which in turn serve multiple employers, a given bill’s journey can get complicated, fas[o]t.

By contrast, DaisyBill takes responsibility for the direct routing of every bill. It’s our job to identify the correct payor ID, and we have direct electronic connections to every claims administrator to whom our providers send bills. No matter what clearinghouses are involved, our providers’ bills get where they’re going intact.

4. E-billing Cuts Out the Middlepeople

Or at least keeps the middlepeople from creating obstacles. Unfortunately, the provider can’t send bills directly to the insurer’s claims administrator without going through the appropriate clearinghouse. This means that at least one entity has a chance to lose, mis-format, or otherwise fail to properly process a bill.

Given the shortcomings we’ve already mentioned, that’s a sad but likely scenario. But while e-billing can’t bypass clearinghouses, it can eliminate the friction that slows a bill down, or derails it altogether.

Again, a quality e-billing service identifies which clearinghouse the bill needs to go to. With so many in play, that’s a time-and-resource saver in and of itself. Second, e-billing services with features like ours smooths all rough edges off the bill, from coding issues to routing issues and more. Every potential source of friction is polished away, leaving the bill smooth enough to sail right through the clearinghouse to the payor and back.

The clearinghouse still has to process the bill, but by the time our software is through with it, there’s not much processing to do — making it far less likely for the bill to get caught up.

5. Value Added Services

A great e-billing service produces a complete, compliant bill far less likely to be lost, underpaid, or untimely paid. That’s no simple feat, especially in work comp. Considering the harrowing hellscape of complications every work comp bill faces, getting the bill in shape to navigate all the obstacles is a must.

Clearinghouses scrub bills, but compared to what our software does, that “scrub” is like paying the neighbor’s kid to hose off your car’s exterior and call it a day. We offer a full-service detail, scrubbing for every possible point of contention, including the aforementioned scrubbing for codes. If a code isn’t payable, we recognize it and let the provider know.

Our software calculates payment based on the latest updates to California’s Official Medical Fee Schedule (OMFS) for workers’ compensation. This eliminates mistakes caused by obsolete coding, and results in truly payable bills. This alone saves time and money that clearinghouses aren’t interested in saving.

In the event the claims administrator does dispute the payment amount, our tools make appealing the incorrect payment easy. Given that our clients have recovered over $22.5 million via our 30-second Second Review appeals, that’s a tool worth having.

If the dispute goes further, we offer Independent Bill Review (IBR) packages, as well as a library of IBR decisions for reference. And all along the way, we offer support for all our clients.

As long as insurers and their claims administrators continue to rely on clearinghouses, providers can’t avoid them. Managing clearinghouses, and navigating the obstacles they can pose to proper reimbursement, is an unfortunate necessity. With a quality, expert e-billing team behind you, that necessity doesn’t have to be a burden.

______________________________________________________________________________

DaisyBill is tailor-made to address work comp’s unique challenges using all the advantages of today’s tech. From authorization to billing to appeals for review, we’ve got providers covered. Schedule a free demonstration, and see what DaisyBill can do for your office.

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[a]something like: confuse

[b]Not sure we need this sentence. Leave it open for bigger interpretation.

[c]I think the paragraph benefits from that conclusion, and the reader benefits from a little spelling out. But I'll defer if you feel strongly

[d]link

[e]The Trello card says to contrast DB with clearinghouses, but it's bad practice to blatantly blog about your own business (too sales-y for marketing content). The value of the post has to be in the "objective" advice we give, so it has to be about clearinghouses vs. e-billing services in general---even though only one really exists for CA work comp as I understand it.

[f]I'm experimenting with something more conversational here. We can ditch if you prefer.

[g]Candor goes a long way in this kind of post. There's no hiding our intentions, so let's be up front.

[h]parity blog

[i]Link to Jopari blog

[j]link to whatever LAB code or CCR

[k]I think what we're missing either in this section or in a section of its own is the notion of direct connections. Perhaps a link to this blog would suffice? http://blog.daisybill.com/missed-connections-indirect-routing-of-workers-comp-e-bills

Or, a mention of this issue with an opportunity to update the above linked blog?

[l]I've put it all under Reason 3. Does it work factually?

[m]link to the direct route blog

[n]I think this should be removed

[o]If this sentence isn't clear...good. The reader's confusion helps make our case.

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