What Is Medical Billing, US health care

Medical billing is the process of submitting and following up on claims to insurance companies in order to receive payment for services rendered by a health care provider. The same process is used for most insurance companies, whether they are private companies or government-owned.

Medical Billing Process The billing process is an interaction between a healthcare provider and the insurance company (payer). The interaction begins with the office visit: a doctor or their staff will typically create or update the patient's medical record. This record contains a summary of treatment and demographic information related to the patient. Upon the first visit, the provider will usually give the patient one or more diagnoses, in order to better coordinate and streamline his/her care. In the absence of a definitive diagnosis, the reason for the visit will be cited for the purpose of claims filing. The patient record contains highly personal information, the nature of illness, examination details, medication lists, diagnoses and suggested treatment.
The extent of the physical examination, the complexity of the medical decision making, and amount of background information (history) obtained from the patient are evaluated to determine the correct level of service that will be used to bill the insurance. The level of service, once determined by qualified staff, is translated into a five digit procedure code from the Current Procedural Terminology . The verbal diagnosis is translated into a numerical code as well, drawn from the International Classification of Diseases,Ninth Edition or ICD-10. These two codes, a CPT and an ICD-10, are equally important for claims processing.
Once the procedure and diagnosis codes are determined the biller will transmit the claim to the insurance company (payer). This is usually done electronically by formatting the claim as an ANSI 837 file and using Electornic Date Interchange to submit the claim file to the payer directly or via a clearinghouse. Historically claims were submitted using a paper form — in the case of professional (non-hospital) services, and for most payers, the CMS-1500 form was used. The CMS-1500 form is so name for its originator, the Centers for Medicare and Medicaid Services . To this day a sizable portion of medical claims get sent to payers using paper forms.
The insurance company (payer) processes medical billing claim. The insurance company has medical directors to review claims and evaluate their validity for payment, using a rubrics for patient eligibility, provider credentials, and medical necessity. Approved medical billing claims are reimbursed for a certain percentage of the billed services. Failed claims are rejected and notice is sent to provider.
Upon receiving the rejection message, the provider must decipher the message, reconcile it with the original claim, make required corrections, and resubmit the claim again. This exchange of claims and rejections may be repeated multiple times until a claim is paid in full or the provider relents and accepts an incomplete reimbursement.
The frequency of rejections, denials, and overpayments is high (often reaching 50%)(HBMA 7/07), mainly because of high complexity of claims and data entry errors.