California claims administrators are legally obligated to compliantly accept and process workers’ compensation e-bills. With Senate Bill 863 in October 2012, the state of California adopted laws requiring employers to accept electronic claims for payment of medical services.
The California Division of Workers’ Compensation Medical Billing and Payment Guide and Electronic Medical Billing and Payment Companion Guide outlines strict e-billing rules and responsibilities for providers and claims administrators. According to the guides, claims administrators must:
- Accept electronic bills from medical providers
- Return acknowledgements of receipt of electronic bills within two business days of receipt of electronically submitted bills, and
- Return electronic explanations of review (EORs) within fifteen working days of receipt of electronically submitted bills.
Electronic billing regulations apply to medical treatment (CMS-1500), pharmacy (NCPDP), institutional (UB-04) and dental bills.
The California DWC provides two free resources outlining comprehensive e-billing rules and responsibilities for health care providers and claims administrators:
- The Medical Billing and Payment Guide compares the rules for paper versus electronic medical treatment bills.
- The Electronic Medical Billing and Payment Companion Guide supplements and explains California’s electronic standards and requirements for all bill types in the workers’ compensation system.
For electronically submitted bills with itemized services charged at or below the maximum amount allowed by the official medical fee schedule, Labor Code 4603.4 requires employers to remit payments within 15 working days of receipt of the electronically submitted bills. Most e-billing is handled by third-party EDI agents, such as daisybill, who have developed the technology necessary to convert treatment information into electronic files and compliantly process them.
Per the DWC, there are three main steps required to compliantly submit and process electronic bills.
Step 1: 837 Electronic Bill + 275 Supporting Documentation
First, a provider creates and electronically transmits a complete bill to the claims administrator.
A complete electronic bill is comprised of two parts:
- Treatment information. The data that normally populates a CMS 1500 or other paper billing form is converted into an electronic file known as an 837. Rather than being submitted on a paper form via the mail, the bill information is sent electronically to the claims administrator.
- Supporting documentation. The required workers’ compensation-specific supporting documentation, such as the PR-2 or DLSR, is sent to the claims administrator in PDF format in a separate file known as a 275 file.
Step 2: 277 Acknowledgment
Once a complete electronic bill is received, the claims administrator must review the bill and return an acknowledgement to the provider.
This mandatory acknowledgement is known as a 277.
The 277 acknowledgement alerts the provider of two possible outcomes:
- The bill is accepted for adjudication or processing.
- The bill is rejected and will not be adjudicated or processed.
An accepted 277 acknowledgement documents that the claims administrator received the bill and that the bill will be processed—this is like receiving a certified return receipt in the mail.
A rejected 277 acknowledgement means the claims administrator will not process the bill. Per the DWC regulations, there are seven reasons why a claims administrator may return a rejection acknowledgement; described in the table below:
Reason for Rejection |
Description |
Invalid Form or Format |
A provider’s electronic billing agent, or EDI agent, is responsible for converting the information that normally populates a paper billing form into an electronic file known as an 837. Claims administrators can reject electronic bills that are sent in the wrong electronic format. |
Missing Information |
This is one of the most straightforward rejections. Claims administrators reject electronic bills if the provider fails to provide their EDI agent with required patient or treatment information. |
Invalid Data |
Claims administrators can reject bills when the information transmitted via the 837 is not valid. Typographical errors or data discrepancies are often to blame for this rejection. Examples could include the use of invalid diagnosis or CPT codes, or when a biller accidentally switches the date of service and date of injury. |
Missing Attachments |
The bill submitter has the option to send the required supporting documentation (275 file) via fax or email. In such cases, a claims administrator will change the bill status to “pending” for up to five days while they wait for any required documentation that is sent separately from the bill itself. If proper documentation is not received in that time, the claims administrator may reject the bill. |
Missing Required Documents |
In addition to the 837 billing file, every compliant electronic bill for workers’ comp must include a PDF of the required supporting documentation, such as the PR-2 or DLSR form. These required documents accompany the electronic bill in a separate 275 file. If supporting documentation required by a particular CPT code is missing, the bill will be rejected. |
Injured Workers’ Claim of Injury is Denied |
This rejection occurs when the claims administrator denies liability for the injury. |
No Coverage by the Claims Administrator |
If the claims administrator cannot find or match the claim number of an electronic bill to a claim in their system, the bill may be rejected. The claims administrator may place the bill in “pending” status for up to five days while they attempt to match the billed claim information with the claims administrator’s claim information. For this rejection, most likely the bill was submitted to the wrong claims administrator. |
Compliance acknowledgments benefit everyone. The claims administrator must send the provider a specific rejection acknowledgment explaining the reason for the rejection so the provider can correct the error and resubmit the bill. This shortens the revenue cycle for rejected bills is significantly shortened by alerting providers to bill errors. Instead of waiting for weeks as a bill crawls through the postal service, resubmission of corrected electronic bills is as simple as one click of the mouse. In turn, claims administrators are more likely to receive clean, compliant bills.
If a bill is rejected by mistake, daisyBill encourages providers to check their bills for errors before resubmitting with our Checklist for Rejected Bills. daisyBill clients can also alert us using the ‘Report Error’ button. Our compliance team will investigate.
Step 3: 835 Electronic Explanation of Review
Within 15 working days from receipt of an accepted electronic bill, the claims administrator must send the provider an electronic EOR—much faster than the whopping 30 calendar days allowed to claims administrators to remit a paper EOR after receipt of a paper bill. This electronic EOR is known as an 835 file and will only be received for bills that were accepted by the claims administrator in Step 2.
If a claims administrator doesn’t fully reimburse for services or incorrectly denies payment, providers can file an appeal with the claims administrator. For more information on Filing a Request for Second Review, please review daisyBill’s articles on the Disputed Payment Appeal Process and Reasons to File a Request for Second Review.
Behind the Scenes
Generally speaking, providers and claims administrators cannot transmit or receive the various required electronic files—the 837, 275, 277, and 835—that underpin electronic billing, so each hires a third party like daisyBill to manage electronic billing on their behalf. These third parties, known as EDI agents, help providers compliantly submit and process electronic bills according to the three steps outlined above.
As an EDI agent hired by a provider, daisyBill submits compliant e-bills (837s) with supporting documents (275s) to the EDI agent hired by a claims administrator. The claims administrator’s EDI agent, in turn, sends daisyBill either the accepted or rejected acknowledgements (277s) and sends daisyBill electronic EORs (835s) for compliant bills.
Additional Information
California Labor Code Section 4603.4
Division of Workers’ Compensation Medical Billing and Payment Guide
Division of Workers’ Compensation Electronic Medical Billing and Payment Companion Guide
Division of Workers’ Compensation e-Billing Website
Division of Workers’ Compensation e-Billing FAQs
daisyBill Resources
Webinar: e-Billing for Workers’ Compensation
daisyBill Solution
Thousands of workers’ comp professionals across the state use daisyBill’s Revenue Cycle Management software to compliantly process electronic bills. To learn more, schedule a no-pressure demo with one of our billing experts.