HCA 110 Module 6 Posting Payments and Reading a Remittance Example

Reading the Remittance: Posting Payments and Adjustments for Three Claims

Student Name

Health Care Administration Program, Aspen University

HCA 110: Insurance and Healthcare Reimbursement

Instructor Name

Month Day, Year

Reading the Remittance: Posting Payments and Adjustments for Three Claims

After a payer processes claims, it sends payment and a remittance advice that explains how each claim was paid, reduced or denied. Payment posting records these results in the practice's system so that each patient account shows what was paid, what was adjusted and what the patient owes. Careless posting hides denials, writes off money that should be pursued and bills patients incorrectly. This paper reads a composite remittance for three claims and shows how each line is posted.

What a Remittance Contains

An electronic remittance advice arrives as a standard transaction and is usually displayed in the practice management system as a readable report. For each claim and service line it shows the billed charge, the allowed amount, the paid amount and every adjustment, with a group code and a reason code explaining it. Group codes show who is responsible for an adjustment: CO for contractual obligation, meaning the provider absorbs it; PR for patient responsibility; OA for other adjustments; and PI for payer-initiated reductions (X12, n.d.).

The Three Claims

The table shows one line from each of three claims on a single commercial payer remittance dated in the same week.

Decoding the Adjustments

Reason code 45 means the charge exceeds the fee schedule or maximum allowable, and with group CO it is the contractual write-off the practice agreed to as an in-network provider. Reason code 1 is a deductible amount and reason code 3 a copayment, both with group PR, so they move to the patient's balance. Reason code 197 means precertification or authorization was absent, and with group CO the payer is saying the provider, not the patient, bears the loss unless the denial is corrected (X12, n.d.).

Posting Ms. A.'s Visit

For Ms. A., the specialist posts the $110 insurance payment, posts a $70 contractual adjustment and leaves $20 on her account as copay. If she paid the copay at the front desk, her balance is zero. The account now shows the full $200 charge fully resolved: $110 paid by insurance, $70 written off by contract and $20 paid by the patient.

Posting Mr. G.'s Visit

Mr. G.'s visit shows a zero payment, but it is not a denial. The payer allowed $130 and applied all of it to his deductible. The specialist posts a $0 payment, the $70 contractual adjustment, and transfers $130 to Mr. G.'s responsibility, then sends him a statement. Recognizing a zero-pay line caused by the deductible avoids wasted appeals. His statement should show the payer's allowed amount so he can see he is not being charged the full $200.

Posting Mrs. K.'s Lab Test

Mrs. K.'s line is the one most often mishandled. The payer denied the lab test because no authorization was on file. The specialist must not simply write off $85 as a contractual adjustment, and must not bill the patient, because a CO denial is the provider's responsibility under the contract. Instead, the line is posted as a denial with a zero payment and routed to the denial work queue. If the authorization was obtained but not entered on the claim, a corrected claim will likely be paid.

Reconciling the Deposit

The remittance total must match the payment actually received, whether an electronic funds transfer or a check. The specialist confirms that the sum of paid amounts equals the deposit and that no payment is posted twice. At month's end, the payments posted in the system are reconciled against the bank deposits. An unmatched deposit usually signals a remittance that was never posted. Payments that arrive without a remittance, or remittances without a payment, are logged in a suspense account and researched with the payer rather than guessed at.

What Posting Data Reveal

Posting data, read across many remittances, show how each payer behaves. A national study of physician remittances showed that payers deny claims at very different rates: fee-for-service Medicaid denied far more claims than fee-for-service Medicare, while private plans were similar to Medicare Advantage (Gottlieb et al., 2018). A practice that tracks its own denial reasons by payer can see which rules cause most losses and fix them upstream.

The Cost of Poor Posting

Posting mistakes are expensive. Denials written off as contractual adjustments disappear from reports, so the practice never learns it lost the money. Patients billed for contractual amounts complain, and some pay money they did not owe, which must then be refunded. Because billing and insurance-related work already absorbs a large share of revenue, estimated at up to 25.2% of professional revenue for emergency department visits in one study (Tseng et al., 2018), the practice cannot afford to redo posting work.

Patient Statements

Once insurance has paid, patient balances are billed. The statement should show the date and service, what the plan paid, any adjustment and what the patient owes, in plain language. Patients like Mr. G., who owe the full allowed amount because of a deductible, often call to ask why. A billing specialist who can explain the remittance calmly resolves most of these calls on the first try.

Credit Balances and Refunds

Posting sometimes creates a credit balance, when the practice has received more than it is owed. A patient may have paid an estimated amount at the visit that exceeded the final share, or a payer may have paid a claim twice. Credit balances must be researched and refunded to the right party within the time required by the contract or by law; for Medicare, identified overpayments must be reported and returned within set deadlines. The billing specialist reviews the credit balance report each month so that overpayments are not held.

Conclusion

Reading a remittance means pairing each group and reason code with the right action. Ms. A.'s copay, Mr. G.'s deductible and Mrs. K.'s missing authorization each looked similar on the report but required different postings. Careful posting keeps patient balances correct, sends true denials to follow-up and gives the practice the data to prevent the next one.

References

Gottlieb, J. D., Shapiro, A. H., & Dunn, A. (2018). The complexity of billing and paying for physician care. Health Affairs, 37(4), 619-626. https://doi.org/10.1377/hlthaff.2017.1325

Tseng, P., Kaplan, R. S., Richman, B. D., Shah, M. A., & Schulman, K. A. (2018). Administrative costs associated with physician billing and insurance-related activities at an academic health care system. JAMA, 319(7), 691-697. https://doi.org/10.1001/jama.2017.19148

X12. (n.d.). Claim adjustment reason codes. https://x12.org/codes/claim-adjustment-reason-codes