What is a healthcare clearinghouse?

If you’ve used insurance at a doctor, a healthcare clearinghouse was likely involved.

But most people – even in healthcare – don’t know what a clearinghouse is.

This guide covers what clearinghouses do, who needs one, and why they matter.

What a healthcare clearinghouse does

A clearinghouse helps healthcare providers exchange billing data with payers. Payers include insurance companies, Medicare, and Medicaid.

When your doctor checks your insurance before a visit, that’s a billing transaction – called an eligibility check.

Other common billing transactions include:

• Claims – a provider asking a payer to pay for their part of a service’s costs

• Remittances (remits) – a provider receiving payment details or denials from a payer

• Claim status checks – a provider checking if a claim was received, processed, or delayed

The clearinghouse sits in the middle. It checks the data, keeps it secure, and gets it to the right place.

The jobs of a clearinghouse

The clearinghouse has two main jobs:

• Connect providers to payers

• Ensure both sides use X12 EDI, the data format required by HIPAA

HIPAA is a federal law that protects healthcare data. It requires that certain billing transactions – like claims and eligibility checks – use the X12 format.

Without X12, every payer would use a different format. Providers would have to use different formats for different payers. Providers would need custom logic for each one. Billing at scale wouldn’t work.

Connecting providers to payers

In theory, a provider could connect to each payer directly. Some, like large hospital systems, do.

Most don’t. It doesn’t scale.

Even though they all use X12, every payer works differently. Each has its own setup, protocols, and quirks. Connecting to payers takes time and technical skill. Most providers don’t have the staff for it.

That’s where a clearinghouse comes in. They’ve already built payer connections – lots of them – and they keep them running.

But most providers don’t connect directly to a clearinghouse either. Integrating with a clearinghouse still takes engineering work. Most providers don’t have a dev team.

Instead, they use a billing platform that connects to the clearinghouse for them. These platforms can take different shapes:

• Revenue Cycle Management (RCM) – Software that manages all billing tasks for a provider, including ones that don’t directly involve a payer. That full set of tasks is called RCM.

• Electronic Health Record (EHR) – Software that stores patient data. They may also help with scheduling and other services.

• Provider group – An organization that supports independent providers. They may help providers manage billing and share infrastructure.

Handling X12

Clearinghouses don’t just move data between providers and payers. They make sure it’s valid X12.

That process includes:

• Routing – Sending data to the right payer or provider based on transaction data

• Translation – Converting common data formats like JSON to X12

• Validation – Checking for required X12 fields and formatting

• Delivery – Sending over the right transport protocol

• Parsing – Turning raw X12 payer responses back into usable data

Some clearinghouses give you raw EDI and expect you to handle it. Others – like Stedi – may also let you use JSON and handle the EDI layer for you.

HIPAA compliance

Healthcare billing data includes protected health information (PHI) – data like names or insurance IDs that can identify patients. Every system that sends, receives, or stores PHI must follow HIPAA rules.

To comply with HIPAA, the clearinghouse must:

• Encrypt data in transit and at rest

• Control who can access the data

• Keep audit logs for every transaction

This matters. It means billing platforms don’t need to build these systems from scratch. The clearinghouse does it by default.

Why your clearinghouse matters

Most providers don’t deal with clearinghouses directly. Their billing platform does it for them.

But if you’re building a billing platform, your clearinghouse is critical.

If you scale, you’ll need it to handle millions of transactions across thousands of providers.

If the clearinghouse breaks, your providers can’t properly bill. That means delays, phone calls, lost revenue, and stress.

The problem with legacy clearinghouses

Billing platforms work with many providers. To scale, they need to write software that automates healthcare transactions. They can't afford the staff – or time – to call payers or use manual payer portals. So they hire developers.

But most legacy clearinghouses weren't built for developers. They have:

• Poorly documented APIs

• Cryptic error messages

• Frequent outages with no updates

• Slow, unhelpful support

A lack of support

Healthcare transactions are already hard to automate. Most devs don’t know X12. Transactions can fail in strange ways. Error codes don't help. Payers go down without warning. Payer docs don’t match actual responses. And every payer works differently.

When issues hit, you need a clearinghouse that can help. In most cases, they don’t. You submit a ticket, wait days for a reply – then get a boilerplate answer that doesn’t work.

If it’s urgent, you’re on your own. Your team has to scramble to create temporary fixes or call payers themselves.

The right clearinghouse fixes all that. They give you fast, responsive support. Instead of slowing you down, they speed you up and help you scale.

A clearinghouse for developers

If you're building an RCM, EHR, or provider platform, we built Stedi for you. We're an API-first, developer-friendly clearinghouse that helps you move fast and scale.

Don't take our word for it. See it for yourself. Contact us to set up a demo.