Medical billing

Medical billing is the process of creating and submitting medical claims to insurance companies, then following up on those claims to get the maximum payment for the provider.

Entities in medical billing

There are three main entities in medical billing: the patient, the provider and the insurance.

Insurance and its major types

Medical insurance is a type of coverage that helps pay for healthcare expenses. There are two major types:

1. Public insurance, like Medicare, Medicaid, Tricare etc.
2. Private insurance, like BCBS, Cigna, Aetna, UHC etc.

Beneficiary

A person or persons covered under a health insurance plan and eligible to receive services.

Primary care physician (PCP)

The physician who provides initial care and coordinates additional care when needed.

Inpatient and outpatient

If a patient stays in the hospital for more than 24 hours, the patient is considered an inpatient. Otherwise, the patient is an outpatient.

Hospice

Inpatient, outpatient or home healthcare for terminally ill patients.

Durable medical equipment

Medical supplies such as wheelchairs, oxygen, catheters, glucose monitors, crutches, walkers, etc.

Demographic form

A form used by healthcare facilities to collect a patient's personal details for registration and identification.

Medical record number (MRN)

A unique number assigned to a patient's medical record by the provider or healthcare facility, used to identify that record when required.

Social Security number (SSN)

A nine-digit number assigned by the U.S. Social Security Administration to citizens and eligible residents.

New patient

A patient is considered new if he or she has not received any professional services from the provider, or from another provider of the same specialty in the same group, within the last three years. Otherwise, the patient is considered established.

Copay

A set price (a portion of the bill) that a patient pays when visiting the doctor. The amount is set in the contract with the insurance and depends on the type of plan the patient holds.

Deductible

A fixed amount the patient has to pay before the insurance starts to pay. The amount is set in the contract with the insurance and depends on the type of plan the patient holds.

Coinsurance

The patient's share of the cost of covered healthcare services, calculated as a percentage of the allowed amount.

Premium

An upfront payment made by an individual or family to the insurance to keep a health insurance policy active.

Maximum out of pocket

The most a patient can be required to pay for covered expenses during the insurance plan year (copay + coinsurance + deductible).

Patient responsibility

The amount that is the patient's responsibility: the sum of the copay, coinsurance and deductible amounts. In most cases, patient responsibility = allowed amount − paid amount.

Patient billing

The process of notifying patients to pay their portion (patient responsibility).

Balance billing

Billing the patient for the difference between the billed amount and the allowed amount. In-network providers generally cannot do this, because the difference is a contractual adjustment (CO).

Medicare

A federal health insurance program for people age 65 or older. People younger than 65 with certain disabilities may also be eligible.

• Part A covers inpatient, skilled nursing and hospice.
• Part B covers outpatient.
• Part C covers the services in Part A and B, along with some additional services.
• Part D covers prescription drugs.

Medicaid

A joint federal and state program that helps cover medical costs for certain low-income people.

Tricare

A government-managed health insurance program for military members, their dependents, retirees and survivors.

Medigap

Medicare supplemental health insurance for Medicare beneficiaries. It may include payment of Medicare deductibles, coinsurance and balance bills, or other services not covered by Medicare.

Network provider

A healthcare provider contracted with an insurance company to provide care at a negotiated cost is called a network provider for that insurance.

Out-of-network (OON)

A provider that does not have a contract with the patient's insurance. Depending on the plan, payment may be lower or the service may not be covered at all.

Capitation

An agreement between a healthcare provider and an insurance in which the insurance pays a fixed sum to the provider to perform services for a certain number of patients (subscribers), in a certain region, for a certain time period.

Coordination of benefits

When a patient is covered by more than one insurance plan, one carrier is designated as primary and the other as secondary. This is called coordination of benefits.

Pre-existing condition

A medical condition that was diagnosed or treated within a certain period just before a patient's insurance coverage started.

Credentialing

The application process for a provider to participate with an insurance carrier.

Authorization and types

For certain medical treatments, the provider needs approval from the insurance company. This approval is known as authorization.

If the provider gets approval before performing the services, it is pre-authorization. If the provider gets approval after performing the services, for any reason, it is retro-authorization.

Referral

A recommendation from a primary care physician for a patient to receive medical services from another healthcare provider or specialist.

Eligibility verification

Checking that the patient's insurance is active on the date of service and what it covers, such as copay, deductible, coinsurance and authorization requirements, before the visit.

Procedure codes (CPT)

Special numbers or letters (5 digits) used by doctors and insurance companies to describe exactly what medical service was given to a patient.

Diagnosis code (Dx)

A standardized alphanumeric code used in healthcare to represent a specific disease, condition, injury or symptom.

Evaluation and Management (E/M) codes

The Evaluation and Management section of the CPT codes, from 99202 through 99499, most used by physicians to assess (or evaluate) a patient's treatment needs.

Modifier

Two characters, numeric or alphanumeric, reported with a CPT code to provide more information.

NPI (National Provider Identifier)

A unique 10-digit numeric identification number for healthcare providers.

TIN (Tax Identification Number)

The 9-digit number issued by the Internal Revenue Service (IRS) to companies and organizations for income tax purposes.

Taxonomy code

A unique ten-character alphanumeric administrative code used to identify the provider type and area of specialization of a healthcare provider.

NDC (National Drug Code)

A unique 10 to 11 digit, 3-segment (labeler, product and package code) numeric identifier assigned to each medicine intended for human use in the United States.

Rendering provider

The provider who attended, performed and rendered the service(s).

Referring physician

A physician (usually the PCP) who refers the patient to another physician or specialist for specialized treatment.

Billing physician

The physician whose name is used on the claim and to whom payments are issued.

Supervising physician

A physician who supervises services performed by a nurse practitioner or physician assistant under his or her supervision.

Locum tenens

A provider who temporarily fulfills the duties of another provider. For Medicare, this arrangement is limited to 60 days.

Billed amount

The amount charged for each service performed by the provider, and collectively the total charge value of the claim. It depends on the provider's fee schedule.

Allowed amount

The maximum reimbursement the member's health policy allows for a specific service to the provider.

Paid amount

The dollar amount paid by the insurance to the provider.

Adjustment

A change to the billed amount of a claim, such as a contractual reduction. It appears on the EOB or ERA with a group code (CO, PR or OA) and a reason code (CARC).

Write-off

An amount removed from a patient account because it will not be collected, for example the contractual adjustment (CO) amount.

ERA and EOB

An EOB (explanation of benefits) is a document from the insurance to the healthcare provider with information about payment, denial or how the claim was processed. The electronic version of the EOB is the ERA (electronic remittance advice).

Denial

When a claim goes through the insurance adjudication system and the insurance then refuses to pay it because of a mistake or problem, it is known as a denial.

Medical necessity

Services that are reasonable and needed to diagnose or treat a patient's condition. A payer can deny services it does not consider medically necessary (denial 50).

Rejection and its types

A rejection means the claim could not be processed as it is because of a problem. There are three types of rejection:

1. First level rejection: the claim is rejected by the clearing house because of a problem.
2. Second level rejection: the claim passes through the clearing house and is rejected by the insurance.
3. Direct rejection: the claim is submitted directly and the insurance rejects it.

Appeal

In medical billing, an appeal is a process to challenge the insurance's decision about a claim.

Timely filing limit (TFL)

The maximum time a payer allows to submit a claim after the date of service. A claim filed after the limit is usually denied (denial 29).

Clean claim

A claim submitted so perfectly that the insurance pays it without any rejection or denial.

Scrubbing

A process in which insurance claims are checked for errors before being sent to the insurance company for final processing. Providers scrub claims to reduce the number of denied or rejected claims.

Direct submission

When the billing company submits claims directly to the payer using its submitter number. It is mainly done for governmental payers.

Indirect submission

When claims are first submitted to a clearing house, which performs first-level testing and then forwards them to the respective payers. It is mainly done for commercial payers.

EDI (Electronic data interchange)

The electronic exchange of business information in a standardized format, allowing one company to send information to another electronically instead of on paper.

Electronic fund transfer (EFT)

An electronic transfer of money, removing the need for paper checks.

Day sheet

A summary of daily patient treatments, charges and payments received.