Insurance Payments, Reconciliation, Patient Billing, Compliance & Audits

Managing insurance payments, reconciliation, patient billing, and compliance is essential for the financial health and legal integrity of your practice. By effectively handling insurance payments, posting payments accurately, reconciling accounts, billing patients properly, and adhering to regulatory standards, you can ensure a smooth and compliant billing process.

Managing Insurance Payments, Reconciliation, Patient Billing & Compliance

Receive Payment & Reconcile Accounts

  1. Payments:
    • Electronic Funds Transfer (EFT):
      • Payments are deposited directly into your practice’s bank account.
      • Faster and more secure than paper checks.
      • Set up EFT through your insurance payers’ portals.
    • Paper Checks:
      • Payments are mailed to your practice.
      • Ensure timely deposit and accurate posting to patient accounts.
  2. Post Payments to Patient Accounts:
    • Automated Posting:
      • Use practice management or billing software that supports automated posting of EFT and electronic remittance advice (ERA).
    • Manual Posting:
      • For paper checks, manually enter payment details into your billing system.
      • Include date of payment, payer information, and amount.
  3. Reconciliation:
    • Match Payments to Claims:
      • Regularly reconcile received payments with billed amounts.
      • Compare ERAs and paper remittance advices to the original claims submitted.
    • Address Discrepancies:
      • Identify and resolve discrepancies such as underpayments, overpayments, or misapplied payments.
    • Documentation:
      • Keep detailed records of all reconciliations for auditing and compliance purposes.
  4. Correcting Rejected Claims:
    • Identify Rejection Reasons:
      • Review the rejection codes provided on the ERA or EOB.
    • Correct Errors:
      • Address the specific issues causing the rejection (e.g., incorrect coding, missing information).
    • Resubmit Claims:
      • Correct and resubmit the claims promptly.
      • Include any additional documentation required by the payer.

Patient Billing

  1. Patient Statements:
    • Generate Statements:
      • After insurance has paid its portion, generate patient statements for any remaining balance such as copayments, deductibles, or coinsurance.
    • Itemized Billing:
      • Provide itemized statements showing services rendered, insurance payments, and the remaining balance due.
    • Clear Communication:
      • Clearly explain the charges and the patient’s responsibility.
      • Include payment due dates and payment options.
  2. Payment Plans:
    • Offer Flexible Options:
      • Provide payment plans or financing options if patients are unable to pay their balance in full.
    • Plan Terms:
      • Clearly define the terms of the payment plans, including the amount of each installment and the duration of the plan.
    • Automatic Payments:
      • Offer automatic payment options to simplify the process for patients and reduce the risk of missed payments.

Compliance & Audits

  1. Regulatory Compliance:
    • HIPAA Compliance:
      • Ensure all billing practices adhere to the Health Insurance Portability and Accountability Act (HIPAA) standards for patient privacy and security.
      • Implement safeguards for electronic patient information.
    • Billing Standards:
      • Follow federal and state regulations for medical billing, including the use of standardized coding systems (ICD-10, CPT/HCPCS).
      • Stay informed about changes in billing regulations and payer policies.
  2. Internal Audits:
    • Regular Audits:
      • Conduct regular internal audits of your billing processes to ensure compliance and identify areas for improvement.
    • Audit Areas:
      • Focus on key areas such as coding accuracy, claims submission, payment posting, and patient billing.
    • Corrective Actions:
      • Implement corrective actions based on audit findings to address any issues and improve overall billing efficiency.
    • Documentation:
      • Keep detailed records of audit findings and corrective actions taken.

Understanding & Managing Insurance Payments

Explanation of Payment (EOP)

The Explanation of Payment (EOP) is a critical document in the medical billing process. It provides detailed information about how a claim was processed by the payer, including what was paid, what was not paid, and why.


  1. Payment Verification: Ensures that the payments received match the amounts expected for the services provided.
  2. Claim Reconciliation: Helps reconcile payments with submitted claims to identify any discrepancies.
  3. Billing Accuracy: Assists in determining patient responsibility, such as copayments, deductibles, and coinsurance.
  4. Denial Management: Identifies reasons for denials or partial payments, allowing for timely corrections and resubmissions.
  5. Financial Reporting: Provides essential data for financial analysis and reporting.

Critical Components of an EOP

  1. Patient Information:
    • Patient’s name, ID number, and date of service.
  2. Provider Information:
    • Provider’s name, NPI, and service location.
  3. Claim Information:
    • Claim number, date of submission, and service codes (CPT/HCPCS).
  4. Service Description:
    • Description of the services provided, including procedure codes and associated charges.
  5. Payment Details:
    • Amount billed, allowed amount, paid amount, and patient responsibility (copayment, deductible, coinsurance).
  6. Adjustment Codes:
    • Codes and descriptions explaining any adjustments, denials, or reductions in payment.
  7. Reason Codes:
    • Explanation of why certain charges were denied or adjusted, based on standard reason codes.
  8. Patient Balance:
    • The remaining balance that the patient is responsible for paying.

Locating an EOP

  1. Electronic Remittance Advice (ERA):
    • Where: Typically accessed through your practice management or billing software, or via the payer’s online portal.
    • How: Set up electronic remittance advice with payers to receive ERAs directly.
  2. Paper EOPs:
    • Where: Mailed to the provider’s office address.
    • How: Open and review the EOPs received with physical mail.

Actions to Take with an EOP

  1. Review the EOP:
    • Ensure all information is accurate and matches the services provided.
    • Verify payment amounts and patient responsibility.
  2. Reconcile Payments:
    • Match the payments listed on the EOP with deposits in your practice’s bank account.
    • Adjust patient accounts accordingly based on the EOP information.
  3. Address Denials and Adjustments:
    • Investigate any denials or adjustments.
    • Correct errors and resubmit claims if necessary.
  4. Communicate with Patients:
    • Send statements to patients for any remaining balance after insurance payment.
    • Provide explanations for patient responsibility amounts.

Setting Up Electronic Payments (EFT) with Major Insurance Companies

  1. Aetna:
  2. BlueCross BlueShield (BCBS):
  3. Cigna:
  4. UnitedHealthcare:

Difference Between an EOP, EOB & ERA

Understanding the differences between an Explanation of Payment (EOP), Explanation of Benefits (EOB), and Electronic Remittance Advice (ERA) is crucial for managing healthcare billing and payments. Each of these documents provides essential information about claims processing, payments, and patient responsibilities.

Explanation of Payment (EOP)


  • An EOP is a statement sent to healthcare providers detailing the payment for services rendered. It is issued by insurance companies to outline how a claim was processed and the payment details.


  • To provide providers with information on how their claims were adjudicated, including payments, adjustments, denials, and patient responsibilities.

Key Components:

  1. Provider Information: Name, NPI, and service location.
  2. Patient Information: Name, ID number, and date of service.
  3. Claim Details: Claim number, service codes, and billed amounts.
  4. Payment Information: Amount paid by the insurer, adjustments, and patient responsibility.
  5. Reason Codes: Explanation for any adjustments or denials.


  • Providers use EOPs to reconcile payments received with billed amounts and to update patient accounts.

Explanation of Benefits (EOB)


  • An EOB is a statement sent to patients from their insurance company after a claim has been processed. It explains what medical treatments and services were covered and the payment details.


  • To inform patients about the claims processed on their behalf, including what the insurance covered and what the patient may owe.

Key Components:

  1. Patient Information: Name, ID number, and date of service.
  2. Provider Information: Name and service location.
  3. Service Details: Description of services provided, CPT/HCPCS codes, and charges.
  4. Insurance Payment: Amount paid by the insurance, any adjustments, and the patient’s responsibility (copayment, deductible, coinsurance).
  5. Reason Codes: Explanation for any non-covered services or adjustments.


  • Patients use EOBs to understand their financial responsibility and to verify that the services and payments match their medical bills.

Electronic Remittance Advice (ERA)


  • An ERA is an electronic version of the EOP sent to healthcare providers. It provides detailed information about claims processing and payments in a standardized electronic format.


  • To streamline the payment reconciliation process by providing detailed, standardized payment information electronically.

Key Components:

  1. Provider Information: Name, NPI, and service location.
  2. Patient Information: Name, ID number, and date of service.
  3. Claim Details: Claim number, service codes, and billed amounts.
  4. Payment Information: Amount paid, adjustments, and patient responsibility.
  5. Reason Codes: Explanation for any adjustments or denials.


  • Providers use ERAs to automate the reconciliation process, reducing manual entry errors and speeding up payment posting.

Comparison & Use Cases

FormatPaper or electronicPaper or electronicElectronic
PurposeDetails payment processing for providersExplains claim processing to patientsStreamlines electronic payment processing
Key InformationPayment details, adjustments, patient responsibilityCoverage details, patient responsibility, adjustmentsPayment details, adjustments, patient responsibility
UsageReconciliation and updating patient accountsPatient understanding and verificationAutomated reconciliation and payment posting

How to Read an EOP/EOB/ERA

Steps to Read These Documents:

  1. Verify Patient Information:
    • Ensure the document pertains to the correct patient.
  2. Check Service Dates:
    • Confirm the dates of service match the dates services were provided.
  3. Review Service Descriptions:
    • Ensure the services listed were actually performed.
  4. Payment Details:
    • Verify the payment amounts, adjustments, and patient responsibility.
  5. Adjustment and Reason Codes:
    • Understand any adjustments made and the reasons for denials or partial payments.
  6. Patient Responsibility:
    • Identify the patient’s financial responsibility and update their account accordingly.

Understanding the differences between EOPs, EOBs, and ERAs is essential for effective billing and payment reconciliation. Each document serves a unique purpose and provides critical information for providers and patients. By leveraging electronic payment systems and properly managing these documents, healthcare providers can ensure efficient financial operations and patient account management.

  1. Payment Information:
    • Verify the total amount paid and the services covered.
    • Check for any discrepancies between billed and paid amounts.
  2. Adjustment and Denial Codes:
    • Review adjustment codes to understand why certain amounts were not paid.
    • Follow up on denial codes to correct and resubmit claims.
  3. Patient Responsibility:
    • Identify the patient’s portion of the payment, including copayments, deductibles, and coinsurance.
    • Update patient accounts and issue statements for any outstanding balances.
  4. Ensure Full Payment:
    • Compare the allowed amount to the billed amount to ensure the correct reimbursement.
    • If underpaid, investigate and rectify the cause.

Understanding and managing EOPs, setting up electronic payments, and handling EOBs/ERAs effectively are crucial for efficient medical billing. By ensuring accurate reconciliation, addressing denials promptly, and maintaining clear communication with patients, you can optimize your practice’s financial health.

Determining Full Payment, Patient Deductibles & Cost-Sharing

Determining if You Were Paid in Full

To determine if you were paid in full for a service, you need to carefully review the Explanation of Payment (EOP), Explanation of Benefits (EOB), or Electronic Remittance Advice (ERA). Here’s how to do it:

  1. Review the EOP/EOB/ERA:
    • Payment Amount: Check the amount paid by the insurance company.
    • Allowed Amount: Ensure the amount paid matches the allowed amount as per your contract with the payer.
    • Adjustment Codes: Review any adjustment codes and descriptions to understand any reductions or denials.
    • Patient Responsibility: Look for information on the patient’s portion, such as co-pays, deductibles, or co-insurance.
  2. Compare Billed Amount to Paid Amount:
    • Billed Amount: The total amount you billed for the services provided.
    • Allowed Amount: The amount the payer has agreed to pay for the service, which may be less than the billed amount.
    • Patient Responsibility: The portion the patient is responsible for, which can include co-pays, deductibles, and co-insurance.
  3. Example Calculation:
    • Billed Amount: $150
    • Allowed Amount: $120
    • Insurance Payment: $90
    • Patient Responsibility: $30 (co-insurance)
    If the insurance payment and patient responsibility together match the allowed amount, you have been paid in full.

Determining Patient Deductibles & Cost-Share

  1. Check EOP/EOB/ERA for Patient Responsibility:
    • Deductible: The amount the patient must pay out-of-pocket before insurance begins to cover services. If the deductible has not been met, the patient will owe this amount.
    • Co-pay: A fixed amount the patient pays for a specific service at the time of the visit.
    • Co-insurance: A percentage of the cost of the service that the patient pays after the deductible is met.
  2. Verify with Insurance Provider:
    • Use the payer’s provider portal or contact their customer service to verify the patient’s deductible status and co-insurance details.
  3. Example of Patient Cost-Share:
    • Total Cost of Service: $200
    • Deductible Met: No, patient owes $100 deductible
    • Co-insurance Rate: 20%
    • Allowed Amount after Deductible: $100
    • Patient Co-insurance: $20
    • Total Patient Responsibility: $120

Continue Learning

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Insurance Payments, Reconciliation

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All content contains personal experiences and is not intended to provide medical advice. For personalized medical guidance, please consult with a qualified healthcare professional. The author and associated entities assume no liability for actions taken based on the content herein.