Payment Trends

Overcoming Common Obstacles of Transitioning to Electronic Insurer-to-Provider Payments

January 29, 2018 11:25 am

A provider-sponsored health plan in Pennsylvania streamlined its electronic payment processes, with widespread success across providers.

Jan. 1, 2018, marked the fourth anniversary of the federal mandate that requires all health plans and government payers to support electronic funds transfer (EFT) and electronic remittance advice (ERA) transactions to providers. The mandate, better known as the CAQH CORE Phase III Operating Rules, was developed in part with a broader set of rules that were aimed at streamlining inefficient processes surrounding healthcare payment transactions. Essentially, the federal mandate set forth electronic transactions as a way to decrease the costs, delays, and errors that are inherent with paper transactions.

The Phase III Operating Rules mandate requires not only that health plans and government payers offer provider networks with electronic payments, but also that those payments include the EFT trace number with the remittance to allow for reassociation with the ERA. The mandate further defines requirements around uniform use of claim adjustment reason codes (CARCs) and remittance advice remark codes (RARCs), ERA/EFT enrollment standards, ERA/EFT association standards, and claim payment and remittance infrastructure standards.

Limited Progress

In the time since the federal mandate was first introduced in January 2011—a full three years before it went into effect—the promises of ERA/EFT have yet to be fully realized in the industry. According to the 2016 CAQH Index Report, EFT adoption increased from 61 percent to 62 percent between 2014 and 2015, while ERA adoption increased from 51 percent to 55 percent during that same period. These single-digit increases for both ERA and EFT transactions have done little to improve the industry’s problematic relationship with paper.

The limited progress of ERA/EFT adoption in the industry has caused significant drains on resources for both insurers and providers. Administrative costs account for 16 percent of all healthcare spending. a However, the strain on the industry goes far beyond the financial side of the equation: Clinicians are spending 21 percent of their time on nonclinical paperwork, and 87 percent of physicians say that paperwork and administration are key sources of staff burnout. b

Industry data prove that ERA/EFT not only streamlines workflow and improves operations for provider organizations, but also is the preferred payment approach for providers despite the prevalence of paper checks in the industry. In 2016, 88 percent of providers reported receiving paper checks and explanations of payment (EOPs) from one or more of their payers, yet 85 percent of that same group of providers preferred to receive payer payments via ERA/EFT. c

Geisinger’s Transition

Geisinger Health Plan (GHP), a provider-sponsored health plan in Danville, Pa., first introduced electronic data interchange in 2008 in response to provider requests for payments via EFT and then later ERA. GHP set up an online form for providers to enroll for EFT payments, which providers had to download and print, then mail back. For ERA enrollment, providers had a separate enrollment process that included a different form and letter.

After providers were successfully enrolled, the execution of payment was administered directly by GHP resources, requiring labor-intensive work of entering ERA/EFT information, creating payment files to send to the bank, and routing ERA files to multiple clearinghouses. These processes involved multiple GHP departments: IT managed all changes for HIPAA compliance; accounting operations managed rejected automated clearing house (ACH) transactions; and customer service responded to provider payment calls and concerns. Handling ERA/EFT transactions with GHP resources created a complex IT management structure and greatly magnified compliance efforts.

For providers who did not enroll in ERA/EFT, GHP worked with an outside vendor for the printing and mailing of paper checks. The two disparate processes for provider payments decreased visibility into payment reporting and required that GHP manage multiple contracts, fees, and IT resources for one payment channel.

Despite these payment challenges, ERA/EFT adoption among providers was seemingly a success when looking at the dollar volume that went out as electronic payments versus paper checks. However, upon closer inspection, it was clear that a high percentage of dollar volume delivered via EFT did not equate to high adoption of electronic transactions.

A hypothetical example may help to shed light on this discrepancy: A health plan must pay 1,000 providers in its provider network. The first 300 payments are worth $800,000 and sent via ERA/EFT. The remaining 700 payments are worth $200,000 and sent via paper check. In this example, in terms of the payment amount, the payer has achieved 80 percent adoption of ERA/EFT, but it still had to send out 70 percent of payment transactions with paper checks.

Developing a Better Process

GHP became increasingly concerned with the significant challenges associated with paper checks and EOPs. According to industry averages, each manual claim payment costs $3.46 and each manual claim remittance advice costs $6.19, compared with $0.78 and $1.00 respectively for each of those transactions to be sent electronically. These numbers roughly match the amounts GHP experienced.

The costs alone were enough to motivate GHP to reduce paper transactions. But GHP also was contending with other problems in its payment process that prompted it to make a wholesale change. In July 2015, GHP opted to work with a payments network to streamline and consolidate the provider payment process, which allowed GHP to achieve three key objectives.

Eliminate a disconnected payment process. All forms of payment in health care were supported by the payments network. In moving to one source for all payment data and transactions, GHP streamlined a complex IT management structure and eliminated excess costs and administrative effort.

Increase provider adoption of ERA/EFT. GHP was able to connect with providers already receiving ERA/EFT transactions on the payments network, allowing GHP to achieve 60 percent provider adoption instantly. GHP also leveraged a customized, multi-touch provider adoption plan to increase provider education and adoption of electronic transactions. GHP further announced that providers who did not register for ERA/EFT by a certain date would no longer have the option of receiving GHP payments by paper check.

Eliminate inefficiency. GHP eliminated the inefficiencies associated with paper processes by handling all payment process elements and all compliance efforts on one platform. This move reduced payment errors and relieved provider confusion by enabling GHP providers to reconcile every payment received from GHP. The ERA/EFT transaction contains the payment transaction and the remittance transaction simultaneously generated and reconciled at the point of origination on the payments network. The ERA/EFT transaction also includes the TRN Re-association Trace Number, in accordance with CAQH CORE Phase III Operating Rules.Today, GHP delivers 98 percent of all dollar volume and 91 percent of all transactions for provider payments via ERA/EFT.

Lessons Learned

The stagnant state of ERA/EFT adoption and its effects are felt throughout the industry by organizations of all sizes and types. Lessons learned from GHP’s implementation include three key considerations and related strategies that other organizations adopt and replicate to achieve similar positive results.

Provider adoption of ERA/EFT. Change is hard for any organization. Changing the way providers receive payments from health plans and government payers can have huge impacts for provider organizations as a whole, but especially in the area of revenue. It is up to insurers to help their provider networks adopt ERA/EFT transactions and ensure they have the tools necessary to make that transition successful. With this in mind, a the apporach to provider adoption initiative must holistic and not solely based on one-off marketing pieces sent to providers on a quarterly basis.

To be truly effective, ERA/EFT outreach to providers must be included with every provider communication and touchpoint. Arguably, the most important touchpoint might be the statement insert included with every paper check, which must have clear instructions on how to enroll. Essentially, the insert tells providers that this payment could be easier with ERA/EFT. In addition to the insert, GHP rolled out an omnichannel campaign with letters, calls, and emails to raise providers awareness of the new payment channel and prompt them to enroll for ERA/EFT.

The enrollment process also should be simple. If the process is manual, paper-based, and time-consuming, providers likley will abandon enrollment before completing the application. GHP helped its adoption rates by allowing providers to self-enroll electronically through a free, easy-to-use registration site. Providers who needed help were able to reach a call center solely dedicated ERA/EFT enrollment and next steps.

But provider adoption does not end when the provider enrolls. Providers will ask questions and want to make changes involving complex and time-sensitive issues that need to be addressed by the insurer—for example, regarding how transactions are routed to their bank accounts or clearinghouses. It is crucial for a health plan to offer ongoing support for the complexities that come with ERA/EFT payments to help providers effectively manage the necessary changes to their processes. By having the financial management processes in place prior to launch, health plans can avoid provider confusion and frustration in not being able to easily make a change.

Payment reporting is another key consideration that may be categorized as only “nice-to-have” when scoping out provider needs. Health plans may assume it’s the providers’ responsibility to understand their payment data, but a health plan can make it much easier for providers by offering a free portal with robust reporting on the incoming payment data. Such a portal will offer full transparency and visibility as a benefit to providers and allow insurers to offer self-service tools, thereby reducing calls and emails to their support team.

Centralized management of all payments. Previously, GHP’s bifurcated and disparate processes for ERA/EFT and submission of paper checks to providers had limited the health plan’s visibility into the full scope of provider payments, making it difficult for the health plan to manage escalations. The decision to have all payments to providers on one platform has allowed GHP to eliminate duplicate processes, reduce transaction handoffs, and increase payment visibility. Most important, there is a single point of accountability for every step of provider payment process. If an issue arises, there is only point of contact for a resolution for both GHP and its provider networks. Within that point of contact, there must be multiple teams with specific concentrations and the necessary tools and procedures to handle escalations. Ownership of the end-to-end process is important to maintain provider trust and ensure the success of the ERA/EFT initiative at a payer organization.

A payment network devoted to health care had the added benefit of connecting GHP to providers who already received ERA/EFT from other health plans before any outreach even began, thereby significantly cutting down on the costs to engage and enroll a large portion of GHP’s provider network.

Security and compliance. Payments to providers cross both the healthcare and financial industries, and as such are among the most highly regulated and scrutinized transactions in the United States, being subject to stringent HIPAA laws in particular. If not handled properly, health plans can open their organizations to risks of data breaches and penalties from noncompliance.

The biggest downfall for any healthcare organization’s security program is to assume that being compliant is enough to protect the organization from a breach. Security and compliance are not the same thing. Although some compliance frameworks do a good job of raising awareness and creating a baseline of security for organizations to follow, simply checking off the box on compliance does not mean an organization is secure. Health plans must understand the difference between security and compliance and develop a security program that couples a strong compliance plan with a thorough and intelligent security agenda.

Over the past decade, GHP has more than doubled its size, creating the challenge of keeping up with the rapid growth, which is due in part to the involvement in individual and Medicaid markets. Having implemented an effective payment process for providers has been an important step for GHP, providing a basis for the health plan to move forward in its ongoing efforts to develop innovative ways to improve the member experience.


a. Atluri, V., Cordina, J., Mango, P., and Velamoor, S., “How Tech-Enabled Consumers Are Reordering the Healthcare Landscape,” McKinsey & Company, November 2016.
b. The Physicians Foundation, 2016 Survey of America’s Physicians: Practice Patterns & Perspectives, September 2016; Peckham, C., 2017 Physician Lifestyle Report, Medscape, 2017
c. LHK Partners, “Provider Healthcare Payments Survey 2016,” Trends in Healthcare Payments Seventh Annual Report: 2016, 2017.


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