How Do Claims Clearinghouses Work?

Posted by Smart Data Solutions on February 17th, 2020
Smart Data Solutions

What is a Claims Clearinghouse?

A medical claims clearinghouse is a centralized establishment that collects, classifies, and distributes medical claims to the appropriate parties. Essentially, they’re the middlemen between the healthcare providers and insurance payers.

 Why Do Providers and Payers Use Clearinghouses?

There are several reasons why a provider would utilize a claims clearinghouse as a part of their process. The clearinghouses can overcome compatibility issues between the provider’s billing software and the payer’s billing software.  Attempting to send the insurance payer a bill through an incompatible software program could cause the claim to be denied and sent back to the provider, completely holding up the entire process.

Clearinghouses can also take a lot of the pain out of the claims and payment processing between provider and payer.  Without clearinghouses, each provider would need to establish their own connection directly to each payer. Likewise, each payer would need to build thousands of connections to connect to each provider.  Through the use of clearinghouses the connections are consolidated resulting in the payers only having to deal with the direct connections back to their clearinghouse rather than multiple connections to other destinations.

Clearinghouses can also reduce errors and costly delays due to reprocessing.  Claim data can be validated on the fly and any known errors can immediately be identified and brought back to the provider for correction and resubmission.

How Does a Clearinghouse Work?

Each Payer is identified via their electronic data interchange (EDI) number.  The providers submit claims to the payers’ ID which acts as an address for clearinghouses to know where to send the claims data. In some cases, the payer and the provider may use the same clearinghouse or they may use different clearinghouses.  When a payer uses a different clearinghouse than the provider, the claim is sent to the provider’s clearinghouse who references the ID, finds the appropriate clearinghouse for that payer, and relays the transaction. Clearinghouses manage these interchanges streamlining the interactions for both the providers and the payers.

An Analogy to Help Understand the Clearinghouse Process

Sometimes the best way to describe something is with a relatable analogy. We’ve come up with this one to help understand how the clearinghouse process works from beginning to end.

  1. Bob and Karen both have cell phones
  2. To call Karen, Bob just has to dial Karen’s phone number.
  3. If Bob and Karen use the same phone company, their phone company just routes the call internally between their 2 customers.
  4. If Bob and Karen use 2 different phone carriers, Bob dials Karen’s phone number.  Bob’s phone company sees that Karen’s phone number is handled by another phone company, so the call is routed over to Karen’s phone company who connects the call to Karen’s phone.

Obviously this is just an example, but the process is similar to how the claims routing process works, just replacing phone calls with medical claims.

Benefits of Using an Electronic Claims Clearinghouse

There are many benefits to submitting claims electronically through a clearinghouse:

Smart Data Solutions’ Clearinghouse Procedure

Smart Data Solutions is both an inbound clearinghouse for payers and an outbound clearinghouse for providers.  As an outbound clearinghouse, we accept claims from providers and send them downstream to the payer destinations.  As an inbound clearinghouse, we collect the claims from the various providers submitting to the payer and consolidate that into a single data stream for the payer to accept.

We have built countless connections to streamline the interaction between providers and payers. Additionally, we provide much more than just clearinghouse processes such as data capture solutions, AI-enhanced toolsets, customized workflow solutions, and a highly-trained professional team to provide a seamless gateway to our clients.  For more information, fill out this brief form and you will be contacted as soon as possible.

Notify of

Inline Feedbacks
View all comments

Recent Articles

View All 

Helping Providers Build Resilience and Navigate the ...

It has been a month and still we continue to navigate the aftermath of the recent cyberattack on Change Healthcare. According to ...
Read Article

Will Your Claims Get Through Despite the Disruption?

Addressing Concerns and Providing Clarity to Health Plans and TPAs In the wake of the recent cyber security incident, the ...
Read Article

From Hours to Minutes: AI Cleans Up Muddled Medical Records

Medical records play a vital role in our shared healthcare ecosystem. Just as physicians rely on a patient’s accurate medical ...
Read Article

Why handle the heavy lifting of your claims workflow when a smart team enhanced by AI can?

Achieve peace of mind, reduced costs, and greater process efficiency by automating and consolidating your data workflow.

Start Customizing Your Solution