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Missing Payments & Underpayments: Remittance Advices and Your Pharmacy

Do you know when you can expect payment from third party payors for prescription claims? According to a Net-Rx study of 2,187 NCPDP’s over a 6-month period, 86.1% of claims are paid within 15 to 30 days after the promise to pay was issued (Peterkin, 2021). Whether the funds are received by paper check or electronically deposited into the pharmacy’s bank account, they are usually delivered along with an explanation about the payment. This can come in many formats, such as Remittance Advices (RA), Electronic Remittance Advices (ERA), Explanation of Benefits (EOB), Explanation of Payments (EOP), Electronic Data Interchanges (EDI), 835 Files, or 5010 Files (Stuhlmeyer, 2020).

Third Party Payor Study Chart jpg

But the complexity does not end there, each third-party payer can have different formats and details such as, claim types and adjustment codes.  With all this complexity, remittance advices can quickly become extremely challenging to decipher. It is not surprising that pharmacies can sometimes fail to identify underpayments, or worse, miss non-payments of a bulk of claims in their entirety!   

The remittance advice is an explanation of the payment , and outlines payment details such as check number, check date, check amount, the specific prescription(s) included in the payment, and details of any adjustments made to an individual claim or the final payment amount. Depending on how many prescriptions are included in a payment, remittance advices could potentially contain hundreds or thousands of lines of details .

It is important for pharmacies to review the corresponding remittance advice for each payment and reconcile with the claim adjudicated within their dispensing software. Only, through this reconciliation process, can pharmacies identify missing payments or short payments  and if needed, follow up with the third-party payers to determine when payment can be expected. Often, the remittance advice will include adjustment codes describing the reason behind the short payment or adjustment. However, the coding used is not universal across all third-party payers and can be vague or misleading. 

The picture below is an example of what an electronic remittance advice may look like. Imagine trying to decipher this to find unpaid claims!

Electronic Remittance Advice 1

Remittance advices can be complicated and directly impact a pharmacy’s ability to successfully reconcile claims . Consistently tracking adjudicated claims, reimbursements, and incoming payments, knowing how to identify missing payments, short payments, and adjustments, and who to reach out to for clarification is a great start to optimal reimbursement. Technology can also be leveraged, as there are many software solutions specific to pharmacy reconciliation available. Utilizing technology is quicker, easier, and reliable.  A robust reconciliation solution can provide a clear picture of claims and payment data along with intuitive reporting allowing for improved management of pharmacy reimbursement and a deeper understanding of your pharmacy’s financial status.

Now, isn’t a report like this much easier to decipher?

Electronic Remittance Advice 2

Below are some examples of the reconciliation support Net-Rx offers to pharmacies under all class of trades:

Net-Rx works directly with Central Pay companies and over 110 third-party payers to normalize and load reimbursement data to the Net-Rx RecRx web portal, converting it into easy-to-read formats.

Net-Rx works with dispensing software systems to load adjudicated claims data, and by using analytics, matches claims to electronic remittance advices, providing the pharmacy insight into its third-party payment status and identifying un-paid prescription claims.    

Net-Rx’s Fee & Adjustment report allows pharmacies to easily identify adjustments made to payments from third-party insurance claims, such as DIR fees or takebacks.

As discussed, the explanation of payment is complicated and comes in a variety of forms with a variety of codes, making reconciliation a difficult and time-consuming task, even though identifying missing payments and underpayments is critical to a pharmacy’s bottom line. Fortunately, there are solutions to help clarify the data and turn it into actionable insights.


For more information about how Net-Rx can help your pharmacy understand Remittance advice and other reconciliation needs, contact us today or call 1-866-336-3879.

Read more articles that cover topics such as Understanding DIR Fees and Short-Cycle Rules.

Author:

Dawn Talley
Senior Data Quality Analyst, Payments
Joined Net-Rx in February 2013

Dawn has over a decade of experience working in Retail, Medical, and Long Term Care Pharmacies. She is a Nationally Certified Pharmacy Technician, and she has worked for a Pharmacy Benefit Manager. She was hired as an Account Analyst and with her willingness to learn new things, she was promoted to the Data Team.

Dawn works with payers to obtain corrected and missing files so the pharmacy can reconcile through Net-Rx and focus on other parts of their business.  She appreciates the connections she’s made with pharmacies as they navigate their business with Net-Rx, and she prides herself on being someone people can count on.

Dawn lives in Vancouver, WA with her family and pups, Nugget and Fiona. In her free time, she’s reading, cross stitching or painting, and planning her next trip.

References

Peterkin, M. (2021, August). Net-Rx Claims Payment Study. 

What is an Electronic Remittance advice (ERA)?  Retrieved from tempdev.com: https://www.tempdev.com/glossary/what-is-an-electronic-remittance-advice-era/