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Dan Murdoch

October 11, 2023
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Understanding Medical Billing Terminology: A Complete Guide

Understanding Medical Billing Terminology: A Complete Guide

Medical billing can seem like a labyrinth of codes, terms, and processes that might be challenging to navigate for both patients and healthcare providers. Understanding this terminology is crucial for those involved in healthcare services, medical billing, and coding. This guide will demystify common medical billing terms and provide insights into their significance.

  1. Accounts Receivable (AR): The balance of money due to the provider for services delivered.
  2. Adjudication: The medical claim decision-making process once the claim reaches the insurance payer.
  3. Advance Beneficiary Notice of Non-coverage (ABN): A document that informs the patient they may be financially liable for the costs if insurance denies the claim.
  4. Aging Bucket or AR Aging: Insurance claims that haven’t been paid or patient balances overdue more than 30 days.
  5. Allowed Amount: The maximum dollar amount an insurance company will allow a provider to collect for an eligible healthcare service.
  6. Applied to Deductible (ATD): The amount the patient must pay before the insurance company starts paying.
  7. Assignment of Benefits (AOB): Insurance payments that are paid directly to the provider for services performed.
  8. Authorization: A process when a patient needs permission from the insurance payer before receiving certain treatments.
  9. Authorization Number: A number indicating the treatment or service has been approved by insurance.
  10. Bundling (or Code Bundling): Listing two or more healthcare services under one billing code.
  11. Claim Adjustment Reason Codes (CARCs): Reason codes explain why a payment was adjusted.
  12. Clearinghouse: An intermediary that transmits secure, HIPAA-compliant electronic medical claims to payers.
  13. Charge Entry: The process of entering medical billing information and assigning codes to file a claim.
  14. Claim Adjustment Group Codes: Alpha character codes that assign the responsibility of a claim adjustment.
  15. Claim Scrubbing: A process ensuring medical claims are error-free before submission.
  16. CMS-1500 02/12 Form: A claim form used to submit claims to insurance payers.
  17. Coordination of Benefits: When a patient is covered by more than one insurance plan.
  18. Co-insurance: The amount a patient pays the provider once their insurance has paid its part.
  19. Co-payment (Co-pay): A fixed fee the patient pays for received services or treatment.
  20. Credentialing: Verifying a doctor’s credentials and ensuring they have the required licenses and skills.
  21. Current Procedural Terminology (CPT®) Code: Codes that describe medical, surgical, or diagnostic procedures.
  22. Date of Service (DOS): The treatment date.
  23. Diagnosis Code (ICD-10): Medical codes describing the condition and diagnoses of patients.
  24. Denied Claim: A claim processed but not paid by the insurance company.
  25. Electronic Claim 837P (Professional) Transaction: A standard format to transmit electronic healthcare claims.
  26. Effective Date: The date when insurance coverage begins.
  27. EDI Enrollment: The process of enrolling with a clearinghouse and/or individual payers for electronic claims.
  28. Electronic Data Interchange (EDI): A link between the billing system and insurance company.
  29. Electronic Funds Transfer (EFT): Direct deposit where insurance claim payments are sent to a bank account.
  30. Electronic Remittance Advice (ERA): An electronic transaction providing claim information.
  31. Eligibility and Verification: Checking insurance data accuracy and determining patient costs.
  32. Evaluation and Management (E/M) Codes: CPT® codes used for billing services for patient visits.
  33. Explanation of Benefits (EOB): A statement listing charges and payments after processing a claim.
  34. Fee Schedule: States what an insurance company is willing to pay for provider services.
  35. Global Period: A period after surgery where certain follow-up procedures are included in the original surgery code.
  36. Guarantor: The person responsible for paying the bill.
  37. Healthcare Common Procedure Coding System (HCPCS) Codes: Codes used for billing Medicare and Medicaid patients.
  38. HIPAA: Law focusing on confidentiality, integrity, and availability of protected health information.
  39. ICD-10 Codes: Codes describing patient conditions and diagnoses, and inpatient procedures.
  40. Local Coverage Determination (LCD): Decisions made by a Medicare Administrative Contractor.
  41. Medicare Administrative Contractor (MAC): A private insurer processing claims for Medicare beneficiaries.
  42. Medicare Advantage Plans: Alternative to traditional Medicare plans offered through private insurance.
  43. Medicare Beneficiary Identifier (MBI): An 11-character number on the Medicare card.
  44. Medically Necessary: Services or supplies needed to diagnose or treat according to accepted standards.
  45. Modifier: Added to codes to provide additional information for processing a claim.
  46. National Correct Coding Initiative (NCCI) Edits: Edits preventing incorrect use of procedure codes.
  47. National Coverage Determination (NCD): Determines if Medicare will pay for an item or service.
  48. National Provider Identifier (NPI): A unique 10-digit number issued to healthcare providers.
  49. Place of Service (POS) Codes: Indicate where services were performed.
  50. Pre-existing Condition: A medical condition present before insurance coverage began.
  51. Premium: Monthly fee for insurance coverage.
  52. Provider: An individual or facility providing healthcare services.
  53. Rejection: A claim not processed by insurance due to errors.
  54. Remittance Advice: Details of payment from insurance to the provider.
  55. Secondary Insurance: Another insurance policy in addition to the primary one.
  56. Self-pay: Payment made directly by the patient.
  57. Tertiary Insurance: Third layer of insurance, used after primary and secondary.
  58. Third-party Administrator: An organization managing health insurance claims.
  59. Usual, Customary, and Reasonable (UCR): The amount providers charge for services in a given geographic area.
  60. Verification of Benefits: Determining insurance coverage details.

The world of medical billing encompasses a myriad of terms and processes that keep the healthcare system running efficiently. Understanding these terms is pivotal for providers to ensure proper billing and for patients to know their financial responsibilities.

While this guide provides a detailed overview of medical billing terminology, always refer to the specific guidelines set by insurance companies and regulatory bodies to ensure compliance and accuracy. It's also essential to stay updated, as the healthcare field is continually evolving, and so are its terminologies and practices.

Whether you're a healthcare provider, a medical biller, or a patient, having a clear grasp of these terms will enable smoother communication and facilitate a better understanding of the healthcare financial process.

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