835 Health Care Claim Payment/Advice definition and related transactions
Once the claim is ready to be paid an 835 Health Care Claim Payment/Advice can be used in the following ways: Make the payment; Provide an Explanation of Benefits (EOB); Make a payment and send an Explanation of Benefits.
835 Health Care Claim Payment/Advice Purpose & Scope
A very good way to examine the 835 Health Care Claim Payment/Advice is to think of it as an explanation of benefits. What was paid and most importantly why. When a provider of service submits the claim (837) the responding 835 will detail the amount paid, how paid (EFT, ACH, Check). Included in the 835 Health Care Claim Payment/Advice is the breakdown of the payment. Was there a deductable, COINS, Co-pay etc? It also details any changes in the details of what was billed. In some instances a provider of service may have billed for 3 services, yet the 835 may have returned a different number of items. This is explained in the adjustment reason code that is returned. The discrepancy may be due to bundling, unbundling, or splitting of a claim. The key element is that the 835 Health Care Claim Payment/Advice will detail the information of what and why.
In many instances the claim is not paid for the amount billed. The 835 describes, in great detail how the payment is broken down. In some cases the amount of payment is lower than the billed amount. This can be the result of bundling, line or claim splitting, coinsurance, deductable and in some instances the paid amount can potentially be higher than the billed amount.
835 Health Care Claim Payment/Advice Related Transactions
Some important areas that, to some are not always clearly understood is that the 835 is not always on a one to one ratio with the 837. In fact it is possible to receive more than one 835 for a specific 837. It is important to remember that the insurance contract is between the insured and the insurance carrier. There does exist contractual relations between providers of service and insurance carrier; however the 835 generally represents the contract between the insured and the insurance carrier. For accounting purposes an insurance company may split payments for physical or calendar years. When the claim is submitted (837) there is not always a one to one relationship. A claim may be paid in multiple payments and this is fully described on the 835. One of the more common reasons for multiple 835’s submitted for an 837 is because the submitted claim spans policy dates. An example would be that a person is in the hospital, physical therapy etc. for a period of days. For this example we will assume the dates are June 28th through July 3rd. The policy renewal date for the insured is July 1st. In this example the payer would issue an 835 for the period up to and not including July 1st. They would then issue another 835 for the remaining period. The policy deductable is generally an annual amount. Therefore the deductable would have to be satisfied for the second section of the billed amount. The deductable may or may not be satisfied for the period from June 28th to July 1st. Conversely an 835 may be used to respond to multiple 837 submissions. The more common reason for this occurring is in response to prescription claim.