Undoubtedly, at some point in your career as a medical practice owner, you’ve received something known as an Explanation of Benefits (EOB). Naturally, it’s fairly easy to feel a bit perplexed by some of the numbers and terms included in one of these documents, but it’s not just beneficial to understand how EOBs work – it’s actually paramount for any chance of achieving financial stability within your practice.

Put simply, these offer insights into how insurance claims are being processed and the necessary payments get determined. Throughout this article, we’ll be providing a bit of background information on this topic as well as including a couple of examples to demonstrate what specific details you might find within an EOB. 

Let’s kick things off with a more detailed explanation of what EOBs actually are:

What Is An EOB Statement & What Role Does It Play In Your Medical Billing Process?

In essence, an EOB is simply a detailed statement that a patient’s health insurance company sends to your practice after you’ve rendered any kind of health services.

Just think of it as a kind of itemized final bill that gives a transparent breakdown of how any particular claim has been processed, including things such as what costs were or were not covered and what remaining financial responsibilities you or your patient might still have.

How EOBs Are Generated by Insurance Companies

As you’ll already know from past experience, you need to submit a claim to a patient’s insurance company in order to get paid for any health care services you’ve rendered, providing that the treatments are covered by their health insurance plan/health plan, of course.

Next, The insurance company is going to evaluate this claim and generate an explanation of insurance benefits for your practice which, as mentioned, contains a few different components. To recap, this includes some basic insurance information like the allowed amount, the patient’s financial responsibility, and if any adjustments were made during the processing of the claim.

We’ll break down a few of these terms with more specific details later on in the article, though.

Why Are EOBs So Significant?

In simple terms, it’s mainly because of the transparency they provide. It goes without saying that transparency is a notable cornerstone of the healthcare industry at large, and EOBs ultimately play a huge role in upholding this.

The additional information they provide doesn’t just help your practice stay organized, either – they also massively help patients by giving them a clear breakdown of some of the financial aspects of their healthcare services.

Patients need all the reassurance they can get when it comes to their medical treatments, so this kind of transparency generally goes a long way for them and helps them make more informed decisions regarding their medical care and financial commitments.

Decoding EOB Components

As touched on earlier, there are a few separate parts to an EOB that collectively make up an overview of any given healthcare transaction. These components include things like:

1. Patient Information

Specific details of the patient that has been receiving medical treatments.

2. Provider Details

Information regarding your healthcare facility or the professional who actually provided the services.

3. Service Codes

Specific CPT codes that represent which medical services you’ve provided so that the treatments and procedures can be identified properly.

4. Dates of Service

Which dates the medical services were administered.

Clarifying a Few EOB Terms

EOBs are often written with quite specific jargon, so becoming familiar with the following terms is crucial for properly understanding them:

1. Billed Amount

This is the initial charge that’s submitted by the healthcare provider for the services you’ve rendered.

2. Allowed Amount

Allowed amounts are highly important, meaning the amount that’s agreed upon between the insurance company and your medical practice, ultimately representing the maximum the insurer will cover for the services.

3. Deductible

A predetermined amount of money that the patient needs to pay out-of-pocket before the insurance company actually starts covering costs. This is highly important for the patient to understand, so ensure they’re aware of this before they receive treatment.

4. Coinsurance

This is a percentage of the allowed amount that the patient needs to pay, typically after the deductible has been met first, though.

Empowering Small Practices

As previously stated, EOBs, while generally promoting transparency, can be pretty complicated to break down and make sense of for both you and your patients. To combat some of these complications, it’s highly recommended you partner with a third-party medical billing company such as PMN!

Whether it’s identifying any discrepancies that might appear between billed and allowed amounts or generally just advocating for accurate reimbursements, PMN has over 20+ years of experience aiding small medical practices with their billing processes to ensure your practice stays financially healthy.

Aside from dealing with any issues with insurance companies, PMN are also proficient when it comes to transparent communication with your patients, ultimately clarifying any EOB-related queries they might have to boost your patient-provider relationships.

If you’re interested in hearing more about PMNs services (including additional billing services such as A/R management and coding audits), get in touch with them today by calling (949) 215-5055 or visiting their office in Laguna Hills, Orange County, California.

FAQs

What is a Health Reimbursement Account (HRA)?

In essence, HRAs are employer-funded spending accounts that can help mitigate some of the medical expenses beyond what insurance pays for. It also works alongside insurance plans, and when using it for eligible healthcare costs, you’ll also receive an EOB from your insurer that details how the HRA funds were actually used.

Are There Any Technology Solutions That Can Assist With EOB Management?

Yes! Unfortunately, though, some of these solutions are not only expensive but complicated to operate also. As a result, you’re better off partnering with a medical billing service that can provide streamlined access to EOB processing tools and can properly integrate them with your other practice management systems.