Difference Between an EOB and an ERA in Medical Billing; Explained!
There are two documents issued following claim processing. Both contain the same information. They come from the same source. But they perform entirely different functions; one for the provider, one for the client.
Confusion about their interchangeability is one of the subtler errors that a medical billing staff can make, and its implications go beyond what you might expect.
Effective revenue cycle management relies on proper processing of both documents. The ERA for posting, reconciliation, as well as denial management on the provider's end, and the EOB for communicating with the patients.
If any of these documents isn't managed properly, it will manifest itself in posting errors, underpayment issues, and patients' misunderstanding of their bills.
Let's see how the two documents operate and differ:
What Is an EOB in Medical Billing?
Explanation of Benefits (EOB) is a statement generated by the insurance company after the claim is processed. It explains which services have been billed, what was paid by the insurance, what kind of adjustments have been made, and what does the patient still owe.
This document is not a bill. People often mix up the two documents which results in additional questions related to billing. This is because EOB is just an explanation of what has happened.
It informs the patient how his insurance processed the claim and whether there is something left to be paid. The format differs between various payers. There is no universal template for EOB since all EOBs contain the same information.
What Is an ERA in Medical Billing?
ERA stands for Electronic Remittance Advice, and it is the standardized electronic transmission in HIPAA EDI 835 format that the insurance payer sends directly to the healthcare provider after adjudicating the claim.
It has all the claim information that the EOB has but is designed for processing by the billing software rather than the patient.
This is the actual file used to manage claims. ERA can be integrated into practice management software, which allows for automated payment posting, denial recognition, and contractual payment verification.
Providers using ERA save five minutes per transaction compared to manually posting the EOB data based on UHIN research. This is because they use their saved five minutes for hundreds of transactions each week.
What Is the Difference Between an EOB and an ERA?
The main point of differentiation is in audience and purpose. The EOB is directed to the patient to inform them about the benefits, while the ERA is directed to the provider's billing system to facilitate posting, denial management, and reconciliation processes.
Here is the brief comparison:
| Feature | ERA | EOB |
| Sent to | Provider/billing department | Patient |
| Format | Electronic format (HIPAA EDI 835) | Paper or digital PDF |
| Purpose | Posting and reconciliation | Patient benefit explanation |
| Automation | Integrates with billing software | Not used for billing reconciliation |
| Standardization | Fully standardized format | Varies by payer |
| Denial management | Yes | No |
Operating the billing process with paper EOBs rather than ERAs takes more time, generates more posting errors, and makes the reconciliation process much more difficult. It is possible but inefficient.
How Do EOBs and ERAs Work Together in the Billing Process?
Both the EOBs and ERAs are created simultaneously following claim adjudication, one for the patient and the other for the provider, and both must be dealt with simultaneously in order for the billing process to run smoothly.
The process itself is relatively simple. The claim is submitted using EDI 837. It gets processed by the payer who creates an ERA and an EOB.
The ERA goes into the billing system and automatically applies the payment while noting any denied lines and creating a reconciliation report. The EOB goes out to the patient either by mail or through the payer's portal where the patient can access their information about what is covered and what isn't.
When the ERA goes through without problems and the EOB is accurate, then the patient statement is properly balanced and there is no need for further action on the part of the provider regarding their AR.
When there is an issue with either the ERA or when the ERA is not being used and payments are being reconstructed manually from EOBs, then things slow down.
Why Does a Medical Billing Company Handle ERA and EOB Management More Effectively?
A specialist medical billing company manages ERA and EOB processing at the systems level, including ERA posting automation, contractual payment verification for each remittance, and workflow that routes EOB inquiry resolution to billing, while keeping AR processes intact.
Those practices who do this in-house, lacking an established workflow, normally have greater ERA posting errors and less ERA underpayments found.
ERA-integrated and EOB-managing infrastructure of a medical billing company provides the results that cannot be replicated by individual practice billing staff, especially those dealing with a large number of claims.
Elara Healthcare Services provides total revenue cycle management that covers ERA posting, EOB processing, denial management, and underpayment tracking, which are aimed at ensuring that all revenue dollars are protected during the entire billing cycle.
Contact us to learn where your present process is falling short.