What is the Role of a Clearinghouse in Medical Billing?

Medical Billing and claim processing are very complicated for any healthcare facility. Different facilities utilize a variety of medical billing software to generate their claims. Then, they forward them to the insurance carriers for claim reimbursement.

We know that every state and even every insurance carrier within a state has its own rules and regulations. Traditionally, we used to employ USPS for forwarding the claims. So, the job calls for more manpower and attention to deal with all this.

Here, a Clearinghouse in healthcare acts as a middleman between medical providers and insurance payers nowadays.

In this article, we will see;

  • How is a medical clearinghouse solving the piece of the puzzle in claim scrubbing?
  • What are the major roles and benefits of clearing houses in healthcare?

Let’s dwell on more details!

What is a Clearinghouse in Healthcare?

A Clearinghouse is a bridge between the provider and the payer. It forwards the electronic claims to the payer and checks out the medical billing errors for the providers in the submitted claims.

A healthcare facility deals with several types of medical claims. For example,

  • Pharmacy claims
  • Dental claims
  • DME claims
  • In-patient facility claims
  • Out-patient medical claims

Clearinghouse in healthcare is the discipline for assuring the faster claim processing task. Whenever a clearinghouse receives a medical bill, it immediately starts claim scrubbing. After completing its process, it forwards a clear and complete reimbursement claim to payers. In other words, the clearinghouse in healthcare facilities provides financial security. For this they streamline the medical billing and coding process, enabling faster right information to be placed in the right place.

What else does a Clearinghouse Do During Claim Scrubbing?

Along with the generation of electronic claims in a digital format, a clearing house does several other duties as well. It minimizes medical billing errors and follows a systematic procedure for doing so. A clearinghouse in healthcare plays its role by fulfilling all these tasks.

  • Patients’ Pre-authentication

Check before the appointment if the insurance company covers the services the patient has asked for. Also, a medical clearinghouse verifies other details as well.

  • Electronic Remittance Advice (ERA)

It’s an electronically modified form of EOB (Explanation of Benefits). This means, a clearinghouse uses this approach and auto-updates the payment and adjustments.

  • Claim Status Records & Reporting

Once the billing house delivers the medical bills to their clearinghouse, it forwards them to respective insurance payers. Here, it manages all the payer edits and regulations as insurance company rules vary to some extent from state to state. Forwarding the claim is one of its duties only. The real job it does is to stay up-to-date with the current status of submitted claims.

  • Rejection Analysis for Denied Claims

A claim is usually rejected either by the clearinghouse or the payers due to errors. A clearinghouse in healthcare performs in-depth rejection analysis before resubmitting a rejected claim.

There is a myriad of reasons why a clearinghouse claim may be rejected. For illustration, the rejected claim possesses an out-of-state zip code. The patient’s or provider’s zip code must be accurate. It must always correspond to the state in which the patient resides or the provider practices. The clearinghouse can deny such a claim if the zip code is incorrect.

What Happens When You Go Direct Without Clearinghouse Services?

It’s good to trust a clearinghouse for its reliable claim-scrubbing process. But, medical billing experts in healthcare can also go with the direct claim submission option. Since some large insurance payers among US healthcare plan providers do their claim processing, thereby a medical provider can directly submit the claim without depending on a clearinghouse service.

This direct claim submission option provides two commendable benefits to providers.

  1. First, it sets them free from depending on a middleman for the job.
  2. Second, this proves to be a money-saving course of action as you do not have to pay recurring fees. This implies that the claim submission is free.

Here, a query immediately pop-up in everyone’s mind, “If providers can submit claims by themselves then why choose a clearinghouse for this?”

Here is the detailed answer for clearing your mind!

Drawbacks of Submitting Claims without a Medical Clearinghouse

  1. We frequently encounter human errors in medical claims, say,
  • Data entry mistakes
  • Typo’s
  • Omissions, etc.

Direct claim submission on a payer’s portal demands manually re-keying data transactions again and again. Moreover, you have to follow the same process every time you visit a payer’s website for submitting a new claim. So, the probability of facing any human error automatically rises.

  1. Medical billing Experts bear the burden of many tasks required for billing. They have to get expertise in various transmission methods. This compelled them to memorize many things, such as;
  • Logins and passwords
  • File names and locations
  • Carrier’s cryptic errors (most frequently occurring)
  • Claim status reports

This depicts that medical billing experts already have a huge burden on their shoulders. Thus, reporting and submitting claims to different entities (insurance payers) will be an additional duty for them.

  1. Without involving a clearinghouse, healthcare personnel will face a lack of data centralization. The medical billing process goes through several steps. The billers get initial data from the facility’s front desk and then from the attending provider. The process doesn’t end there. The data circulates between medical billing and coding staff members. After that, a claim is generated. So, medical claims files and data stored at different locations are not easy to manage.
  2. What if you require additional software components? In that case, you have to pay regular software support charges. So, direct claim submission may include hidden costs.

Overall, the Revenue Cycle may suffer from direct claim submission without a medical clearinghouse service. Therefore, it is not a good choice when your facility has to face;

  • More Lost Claims
  • Time Wastage
  • Frustration and Exhaustion
  • More Medical Billing Errors
  • Increased Claim Denials
  • Revenue Delays

Potential Benefits of Clearinghouse for Claim Submission

Do you know?

The normal error ratio for paper claims is 28%. But thanks to the services of a clearinghouse in healthcare as it can reduce that to 2-3% only.

This simple analytical data reflects the significant role play of clearinghouses in healthcare. It not only assists in medical billing. Alongside, it is favored for the numerous benefits it offers.

  1. Efficient medical clearinghouse services permit you to submit claims within a day or week. Being an electronic platform, it can process claims in seconds and minutes. In other words, it has decreased the revenue time.
  2. It helps you attain a higher ratio of claim acceptance and only fewer denials.
  3. A clearinghouse in healthcare enables you with a service of submitting claims at once in a batch.
  4. It minimizes human errors as its digital software is easy, plain, and simple.
  5. It guarantees the establishment of a healthy relationship between providers and payers.
  6. A medical clearinghouse can give more accurate revenue forecasts.
  7. As compared to traditional paper claims, electronic claims via clearinghouses are less costly. So, a medical clearinghouse is introducing a money-saving pathway in healthcare. Additionally, it offers multiple advanced benefits. One of these benefits is online access to claims. It means, via clearinghouse the respective personnel has real-time support for claims day and night.


A clearinghouse in healthcare provides advanced but desirable features for the claim processing. Its role in streamlining the medical billing activities of a facility is worth its weight in gold. Any facility must hire the best medical clearinghouse services provider to assist them in their financial matters with their experience and unmatched expertise.

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