Member-Provider-Payer Interaction Lifecycle

Member-Provider-Payer Interaction Lifecycle

The healthcare claims lifecycle is a complex, multi-step process involving members (patients), providers (doctors, hospitals), and payers (insurance companies). Understanding this flow is essential for anyone working in health IT, revenue cycle management, or interoperability.

Phase 1: Member → Provider (Pre-Service)

Step 1: Member Seeks Care

The member schedules an appointment with a healthcare provider (PCP, specialist, hospital, urgent care, etc.).

Step 2: Insurance Verification

Before or at check-in, the provider's office verifies the member's insurance coverage:

• EDI 270 — The provider sends an Eligibility Inquiry to the payer
• EDI 271 — The payer responds with an Eligibility Response containing:
  • Coverage status (active/inactive)
  • Plan details and effective dates
  • Copay and deductible amounts
  • Prior authorization requirements
  • Remaining deductible and out-of-pocket amounts

Step 3: Prior Authorization (if required)

For services requiring pre-approval:

• EDI 278 — Provider submits a Prior Authorization Request
• Payer reviews clinical criteria and responds with approval, denial, or pend
• Under CMS's new FHIR mandates, this will transition to Da Vinci PAS (FHIR-based prior auth)

Step 4: Service Delivery

The provider delivers the medical service — office visit, surgery, diagnostic test, therapy, etc. Clinical documentation is captured in the provider's EHR.

Phase 2: Provider → Payer (Claims Submission)

Step 5: Claim Creation

The provider's billing team creates a claim with:

• Patient demographics and insurance information
• Diagnosis codes (ICD-10-CM)
• Procedure codes (CPT/HCPCS)
• Place of service, dates of service
• Rendering provider NPI
• Billed charges

Step 6: Claim Submission

• EDI 837P — Professional claims (physician, outpatient)
• EDI 837I — Institutional claims (hospital inpatient, outpatient facility)
• EDI 837D — Dental claims
• Claims typically route through a clearinghouse (e.g., Change Healthcare, Availity, Trizetto) which validates format and forwards to the correct payer

Step 7: Claims Adjudication

The payer processes the claim through its adjudication engine:

1. Intake — Claim received and logged
2. Validation — Format, required fields, duplicate check, timely filing
3. Eligibility — Was the member covered on the date of service?
4. Benefit determination — Is the service covered under the plan? Any exclusions?
5. Medical policy / clinical edits — Does the service meet medical necessity criteria?
6. Pricing — Apply contracted rates (fee schedule), allowed amounts
7. Coordination of Benefits (COB) — Is another payer responsible first?
8. Decision — Pay, deny, or pend the claim

Phase 3: Payer → Provider + Member (Payment & EOB)

Step 8: Payment to Provider

• EDI 835 — The payer sends an Electronic Remittance Advice (ERA) to the provider detailing:
  • Allowed amount
  • Amount paid by plan
  • Adjustment reason codes (CARCs/RARCs)
  • Patient responsibility (copay, coinsurance, deductible)
• EFT (Electronic Funds Transfer) — The payment is deposited into the provider's bank account

Step 9: Explanation of Benefits to Member

The payer sends the member an Explanation of Benefits (EOB) — a document (paper or digital) showing:

• Services received and dates
• Amount billed by the provider
• Amount the plan paid
• Amount the member owes (copay, coinsurance, deductible)
• Note: The EOB is not a bill — it's an informational statement

Step 10: Patient Billing

The provider sends the member a patient statement for any remaining balance:

• Copay amount
• Coinsurance (after deductible)
• Non-covered services
• The member pays the provider directly

Step 11: Appeals (if applicable)

If a claim is denied, the provider or member may file an appeal:

• Internal appeal to the payer (typically two levels)
• External review by an independent review organization (IRO)
• Timelines and processes are regulated by state and federal law

Summary: Transaction Flow

Member → Provider:     Eligibility check (270/271), Prior auth (278)
Provider → Payer:      Claim submission (837P/837I/837D)
Payer → Provider:      Payment + Remittance (835/ERA + EFT)
Payer → Member:        Explanation of Benefits (EOB)
Provider → Member:     Patient balance bill