What is a Clearinghouse in Healthcare?

Touseef Riaz

November 24, 2021

clearinghouse in healthcare

In medical billing, clearinghouses play a vital role in increasing efficiency. They act as a middleman between the healthcare provider and the insurance payer. A healthcare provider can be a doctor, dentist, or any other physician. Clearinghouses are responsible for scrubbing the claim of errors, thus ensuring that the claims don’t get denied. They are basically the companies that transfer information from one party (healthcare provider) to the other (insurance provider).

Clearinghouses make sure that there are no errors and that the claims meet all the payer’s requirements. They process a number of medical claims or transactions in one go and update the clearinghouse dashboard regarding the payer’s response. Another benefit of clearinghouses would be their single interface, meaning one portal with data regarding all the insurance companies. Using a good clearinghouse also helps in reducing administrative costs. Clearinghouses help the healthcare providers to deal with one entity instead of dealing with multiple healthcare insurance providers. Note that, services of every clearinghouse are different. This article will give you an in-depth view of what to look for in a clearinghouse and how are they just the thing you need.


What are clearinghouses in Medical Billing?

Following are some of the major roles of a clearinghouse:

  1.       Ensures that there are no errors in the claim
  2.       Scrubs the claims of the errors.
  3.       Checks the procedural and diagnostic codes mentioned are correct.
  4.       Makes sure that each procedural code is used with the right diagnosis code.
  5.       Verifies that the claim being submitted meets all the payer requirements.


A clearinghouse directly deals with the third party (the insurance payer) and submits the claim. The acceptance or denial response received by the clearinghouse is then forwarded to the healthcare provider. Note that, the claims are sent electronically by the clearinghouse. There are a number of clearinghouses with a similar purpose; ensuring that the claims being submitted have no errors. Then forwarding those claims to the insurance payer for reimbursement for the services provided by the healthcare physician.


Benefits of a Clearinghouse:

Now the question might arrive, why do I need one?

The answer is quite simple, a clearinghouse increases the efficiency in medical billing and reduces the risk of error up to 2-3%. Keep in mind that for paper claims, the average error rate is up to 28%.

Following are some of the other benefits of clearinghouses:

            Increases efficiency (the errors in medical claims can be caught early)

            Scrubs the medical claims for errors, thus lesser denied claims.

            Decreases the reimbursement time (due to its rapid claim processing)

            With decreased time duration comes timely payments and an improved revenue cycle.

            Instead of submitting medical claims, one by one clearinghouse can submit them in a batch.

            EDI – Electronic Data Integration between payer’s and provider’s software. Resulting in better communication between the two.

            This integration can result in an improved relationship between the two parties (payer and the provider).


Why use a clearinghouse for medical billing?

There are a number of reasons for using a clearinghouse. Top of the list would be clean medical claims, hence maximized revenues. Not using a clearinghouse can have various disadvantages.


Disadvantages of not using a clearinghouse:

Yes, the claims can be submitted directly to the payer (without a clearinghouse). But there’s a catch, medical billing is a complex process. This means even a minor mistake (human error, typos, etc.) in the medical claim can result in denial. Moreover, it becomes a time-consuming process, putting an unnecessary burden on the medical billing staff. Some disadvantages of not using a clearinghouse also include scattered claim data (no centralization) and increased risk of errors.


How to choose a good clearinghouse?

A good clearinghouse reduces the risk of errors drastically, which is why certain aspects should be taken into consideration when choosing a good clearinghouse. Following are some of the factors:

  1.     Knowledgeable and Quick customer support

Waiting too long for a response result in unnecessary delays and lost payments. A clearinghouse should provide you with 24/7 inquiry options and timely responses. In your research period of finding a good clearinghouse, look for prompt responses (inquiry and acknowledgment). You can also test your clearinghouse by sending in some questions and testing the time duration of the response. Choose a clearinghouse with quick and responsive customer service.

  1.     Immediate claim responses

Choosing a clearinghouse for medical billing helps increase the efficiency of the whole process. After the claims (scrubbed of errors) have been completed, it merely takes minutes to submit the claim to the payer. Quick responses and lesser delays, improve your bond with the payer and avoid late payments.

  1.     Accurate, Efficient and actionable information regarding the claim

Delays in claims can cause your staff to spend more time tracking down the delayed 835s. With a clearinghouse that sends 835s and payments both in a limited timeframe. Saves your overall time in handling a high volume of medical billing claims. This helps the staff to post, identify, verify, process, and eliminate the payments. This complete process also eliminates duplicate work.

  1.     User-friendly Clearinghouse

A clearinghouse that offers a friendly interface, integrating your existing management processing software/s. Choose one with detailed reports, easy to customize, and with a minimal number of clicks required to get the work done. A user-friendly clearinghouse is easy to train the staff with, hence maximizing the potential of technology.

  1.     Complete integration with your interface

Clearinghouses (some) offer a number of solutions but unfortunately, sometimes they lack complete integration. Meaning, they still require using separate interfaces and logins. Choose a clearinghouse that integrates with your interface, completely.

  1. Printed Claim:

When choosing a clearinghouse, make sure that it can process and mail the printed claims to the payer (if required by the payers themselves).


  1. Affordable Clearinghouse:

When looking for a clearinghouse, see the packages offered by potential medical billing software vendors. Choose a clearinghouse that suits your budget. Ask them about the subscriptions and extra charges beforehand.

Note that, if your clearinghouse doesn’t meet all the above factors, your medical claims ultimately suffer.


Benefits of sending electronic claims (via clearinghouse):

Electronic claims have a number of benefits, following are some of the main benefits of sending electronic claims.

            Faster and quicker payments:

Automatically makes payments within the required timeline hence shorter payment cycles and increased revenues. The quicker the claims are submitted and accepted by the insurance provider, the faster they pay. Another benefit, as soon as the bill not covered by the insurance provider is presented to the patient, the faster payment can be collected (patient responsibility) and spent on making another patient’s health the better.

            Increased reimbursement rates

Clearinghouses check for errors in the claims to be submitted within a matter of minutes. The quicker claim responses increase the reimbursement rate.

            Increased revenues

Clearinghouse takes the burden off by reducing the time spent on manual claims (paper claims). Quicker submission, faster payments, hence, improved revenue cycle.

            Easily accessible and Accurate Data:

A clearinghouse provides you with a ‘go to’ place to keep all the data safe. And on the plus side, all the claims will be submitted in a single batch to all the insurance payers at once. Meaning no paperwork, no errors, and faster work. Plus, accurate data helps shorten the revenue cycle and make precise forecasts.

           Lesser claim denials.

Electronic claims (submit claims quicker without missing the deadlines) and scrub the errors in the medical claims resulting in lesser claim denials and increased reimbursements.



            Improved vendor relationships

Clearinghouses help improve the relationship between the vendor and the insurance payers or carriers.

            Fewer errors

A clearinghouse checks for errors before submitting the claim to the payer. The medical clearinghouse checks for typos or errors made during patient information collection and the data entry process. Therefore, with the help of the payer’s requirements data, the clearinghouse scrubs errors from the claim files and submits them to the payer.


With this automatic and 24/7 online access, clearinghouse help speed up the claim processing, with no delays, or wait time. Hence, simplifying the complete claim processing.


          HIPAA Compliance: 

Clearinghouses must comply with the HIPAA requirements, guidelines, and rules. Meaning, the sensitive health information’s privacy, and security are protected.


Process of Clearinghouse in Medical Billing:

Plain and simple, the following are the steps involved in the whole claim exchange:

  1. The claim files via medical billing software are converted into a file compliant with the clearinghouse.
  2. Each of the claim files is then uploaded onto the clearinghouse
  3. Claim scrubbing for the errors in claim files is done by the clearinghouse before submitting them to the payer
  4. Scrubbed claim files are then sent to the payer
  5. The insurance payer then goes through the claim and either accepts or rejects it (depending on the claim).
  6. The claim response is then updated in the clearinghouse about the errors found in the claim file. They are then added to the clearinghouse dashboard.


Problems solved by a clearinghouse:

Why would you want to get a clearinghouse? Following are some of the major problems solved by the clearinghouses.

  1. They are the experts:

Plain and simple, they know what they are doing. These medical billing clearinghouses are the industry experts. They know the ins and outs of claim processing and routing. They check the medical claim files in accordance with the payer’s requirements and scrub them off the errors.

  1. Quality Focused:

One of the major tasks of a clearinghouse is to scrub the errors from the medical claim files, reducing the processing time drastically. The scrubbing is done after the medical billing software processes the claim file. From checking for the correct codes (procedural and diagnosis codes) to ensure that the patient information is correct. This keeps the quality of claims in check and claim denials are reduced. Thus, an improved and streamlined RCM (revenue cycle management) and workflow.

  1. Better Communication:

As mentioned before, clearinghouses act as a middleman between the healthcare provider and the insurance payer or other necessary parties involved. Clearinghouses do what they do best, they know how to scrub the errors, how to dispute claims, what questions to ask, and what parties to communicate with in order to get the work done. The faster the problem gets resolved, the quicker payments and lesser denials. Thus, improving the relationship and communication between healthcare providers and the insurance payers.

  1. Streamline workflows:

With quicker processing and faster reimbursements, clearinghouses streamline the workflows by getting the work done earlier than the manual processing. Along with that, payments also get processed faster than before.


Clearinghouses: Functions

A clearinghouse must perform the following functions:

  1. Insurance Eligibility (pre-encounter)

Real-time and insurance eligibility verification batch mode is a must for a clearinghouse. It also identifies the co-pays and patient responsibility. It should be able to do a patient benefit check based on their demographics and insurance details (electronic patient ID and insurance details must be accurate).

  1. Patient Encounter

The coding of patient encounters with the provider must be compliant and be assisted by the clearinghouse. This increases the reimbursement rates, reduces denials and risk of audits. A list of claims edit rules must be provided by the clearinghouse. And the software (clearinghouse software) must have the ability to ‘learn’ and consistently make improvements based on previous experiences. 

  1. Back-end administration


          Submitting Claims

Clearinghouses are responsible for claim submission to all the payers. In an ideal situation, it’s an easy task but there might be some payers who are not set up for the submission of electronic claims.

For cases like this, clearinghouses can print the claims and they can be submitted to the payer/s directly.

          Interpreting and posting patient payments

Clearinghouses are directly connected to the insurance carriers so that the provider’s medical billing software receives the ERAs (electronic remittance advice). Hence interpreting and posting the payments automatically onto the patient account.

          Managing the denied claims

Preventing denials is the first step for managing medical claims. Clearinghouses (being the industry experts) keep themselves up to date regarding insurance payer’s changes in rules and regulations. Clearinghouses are also responsible for managing the denials, learning from past experiences, and addressing the root cause of the denials. Therefore, reducing the risk of denials.

          Billing the patient

After the patient’s responsibility is determined, charging them at the time of service is the best way.

          Reporting and analysis

After everything, the reports and actionable information is updated on the dashboard, identifying the errors to make necessary changes. Denial trends are also spotted by the clearinghouses.


Types of Clearinghouses:

Practice Insight clearinghouse software provides you with high-quality medical billing practices. Editing the claims in real-time, scrubbing the errors away, verifying claims, creating secondary claims, and submitting more clean claims. Another good example would be Simple Practice, but what clearinghouse does simple practice use? Enrollment, electronic claim filling, establishing connections with payers are some of the tasks supported by Simple Practice clearinghouse.



In total, a clearinghouse has way too many advantages no matter how much it cost. Do you know why? Because the time spent on printing, folding, submitting, or mailing the claim files is more compared to sending them electronically. Moreover, before submitting you can check the claims for any errors, manage the medical claims with respect to the payer’s requirements and then send them instantly. Hence, faster reimbursement rate and an improved revenue cycle. For more details please visit our website Ucontrol billing.

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