EOB in Medical Billing

Revenue cycle management can feel like a maze of codes, adjustments, and terms that often confuse providers and patients. Misunderstandings about covered or denied services can lead to billing errors, claim denials, and delayed payments. Understanding the explanation of benefits simplifies this process and helps avoid costly mistakes.

What is EOB (Explanation of Benefits) in medical billing?

An EOB (Explanation of Benefits) is a crucial document in medical billing. It shows how an insurance claim was processed, breaking down:

• Services billed by the provider.
• Insurance coverage amounts.
• The patient’s financial responsibility.

The EOB ensures transparency, helping patients understand their financial responsibilities. It also assists providers in reconciling payments, tracking claims, and spotting errors early.

Why is the EOB important?

The EOB explains coverage, payments, and remaining financial responsibility. Here’s why it matters:

Transparency in billing

The EOB clearly outlines how a claim was processed, including what insurance covers, adjustments, and the patient’s share. This fosters trust between patients, providers, and payers.

Verification of claim accuracy

Providers and patients can cross-check the EOB for errors, overcharges, or missed coverage. Resolving mistakes early prevents payment delays and disputes.

Managing healthcare costs

For patients, the EOB details what they owe, helping them budget effectively. Providers use it to ensure payments align with billed services.

Supporting appeals and disputes

When a claim is denied, the EOB outlines the reason. This information helps providers file appeals or resubmit claims with accurate details.

Enhancing compliance

Reviewing EOBs ensures that billing aligns with payer guidelines. This minimizes compliance risks and avoids penalties.

Preventing fraud

EOBs help detect unauthorized charges or suspicious claims. Patients and providers can act quickly to report fraud, protecting healthcare resources.

Patient education

The EOB educates patients on insurance terms like deductibles, co-pays, and coverage limits, empowering informed decisions.

Supporting Revenue Cycle Management (RCM)

In RCM, EOBs track claim status, identify trends in payment issues, and ensure timely cash flow for providers.

Purpose of the Explanation of Benefits (EOB)

Document compliance and regulation

The EOB ensures compliance with healthcare laws and insurance regulations. It helps payers and providers maintain adherence to guidelines set by governing bodies such as CMS (Centers for Medicare & Medicaid Services).

Track service utilization

The EOB helps patients track the healthcare services they've used. This manages the annual benefits cap, ensuring that patients are aware of the total services they've received within a specific period.

Promote accountability

The EOB encourages accountability in the claims management system. Providers must justify the costs of services, while payers are required to explain how they arrived at payment amounts or denials.

Facilitate provider-patient communication

An EOB can serve as a starting point for discussions between patients and healthcare providers. They can talk about billing concerns or clarifications about services rendered. This promotes better understanding and resolution of issues.

Support tax preparation

For some patients, particularly those with high medical expenses, the EOB can help when preparing taxes, as it provides detailed information on paid services, which may be relevant for medical deductions.

Encourage proactive healthcare choices

By providing a breakdown of the costs for different services, the EOB aids patients in making more informed healthcare choices. This includes understanding the costs of certain treatments or services and potentially seeking alternatives or cost-effective options.

What are EOB codes in medical billing?

EOB codes are alphanumeric indicators used to explain claim adjustments, denials, and payments.

Types of EOB Codes

Claim Adjustment Reason Codes (CARCs)

These codes explain the reason for a claim or service line adjustment.

• CO-45: "The charge is higher than the contracted or allowable amount."
• PR-1: "Deductible amount applied to this service."
• CO-96: "Non-covered charges."
• PI-16: "Claim/service lacks information needed for adjudication."

Remittance Advice Remark Codes (RARCs)

RARCs provide further details about a claim adjustment or denial.

• M15: "Services or tests billed separately have been bundled because they are considered part of another service."
• N30: "The patient’s out-of-pocket maximum has been reached for this period."
• MA04: "Alert: Secondary payment cannot be processed without the primary Explanation of Benefits (EOB)."

Group Codes

Group codes indicate who is responsible for the payment or adjustment. They are always paired with a CARC.

• CO (Contractual Obligation): Indicates adjustments based on the provider’s contract with the payer.
• PR (Patient Responsibility): Amounts owed by the patient, such as co-pays or deductibles.
• PI (Payer Initiated): Adjustments made by the payer, often for processing errors.

Denial Codes

Denial codes specify why a claim was rejected.

• CO-11: "Diagnosis is inconsistent with the procedure."
• CO-22: "The procedure is considered experimental or investigational by the insurer."
• CO-204: "The service is not covered under the patient's insurance plan."

Types of EOB in medical billing

EOBs come in various forms depending on the type of service provided. Some common types include:

Standard EOB

Standard EOB details medical services rendered, the charges billed, the insurance adjustments, payments made, and the patient’s financial responsibility.

Pharmacy EOB

Pharmacy EOBs are specific to prescription drug claims. They list the medication dispensed, its cost, what the insurance covers, and any co-pays or deductibles the patient owes.

Dental EOB

Dental EOBs are tailored for dental procedures. They include information about covered services, frequency limits, and exclusions related to specific treatments like cleanings, fillings, or crowns.

Vision EOB

Vision EOBs focus on claims related to eye care. They provide details about exams, corrective lenses, or treatments covered under a vision plan.

Medicare EOB (Medicare Summary Notice - MSN)

Medicare EOB or MSN (Medicare Summary Notice) summarizes services billed to Medicare, what Medicare paid, and what the patient may owe.

Supplemental insurance EOB

This EOB is issued by secondary insurance when a claim is processed after the primary insurer. It details the amount covered by the secondary policy and any remaining patient responsibility.

Behavioral health EOB

These EOBs apply to claims for mental health and substance abuse treatment. They outline services like therapy, counseling, or inpatient programs.

Worker’s compensation EOB

This type of EOB is related to claims for work-related injuries or illnesses. It specifies the medical treatments covered under the worker’s compensation plan.

Specialty care EOB

Specialty care EOBs are associated with high-cost or specialized medical services such as oncology treatments, dialysis, or surgeries.

Out-of-network EOB

This EOB applies to claims submitted for services rendered by providers outside the insurance network. It explains reduced or denied coverage based on the insurance plan’s rules.

Difference between COB and EOB in medical billing

When a patient has multiple insurance plans, COB (Coordination of Benefits) determines the order in which these plans pay for medical services to avoid overpayment. It ensures that the total payments from all insurers do not exceed the cost of the service provided.

EOB is a statement from the insurance payer detailing how a medical claim was processed, including the amount paid by the insurer, any adjustments made, and the patient’s responsibility (e.g., co-pays or deductibles).

What is the difference between EOB and ERA?

The EOB is a paper document sent to the patient outlining claim details, payments, and the patient's responsibility. The ERA (Electronic Remittance Advice) is the digital version sent to healthcare providers, which can be integrated into their billing systems for faster payment reconciliation and reduced manual entry. Both serve the same purpose but are used in different contexts (paper for patients, digital for providers).

Example of an EOB

Patient information:

• Patient name: John Doe
• Policy number: 123456789
• Date of service: 10/15/2024
• Provider: ABC Medical Group

Claim summary:

• Total billed amount: $500.00
• Amount covered by insurance: $400.00
• Adjustments: -$50.00 (Contractual discount or network agreement)
• Amount paid by insurance: $350.00
• Amount patient owes: $150.00 (including $100 deductible and $50 co-pay)

Explanation:

• Covered services: The insurance covers 80% of the billed charges after the deductible.
• Reason for denial/adjustment: The $50 adjustment is due to the insurance company's agreement with the provider.
• Patient responsibility: The patient owes the remaining balance of $150, which includes a $100 deductible and a $50 co-pay for the service.

DISCLAIMER: The information on this site is for general purposes only and is not intended to serve as legal advice. Given the frequent changes in updates, PCH Health cannot guarantee that all the information on this site is 100% accurate. Should you have specific questions about any of the information on this site, feel free to write to us (marketing@pchhealth.global)