Medical Billing Glossary

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Whether you’re an experienced biller or brand new to the role, these 15 commonly used terms will help you choose a Medical Billing system that meets your needs—and take advantage of its best features. 

Allowed amount

The maximum amount an insurance company will pay for a covered healthcare service. It is also known as an “eligible expense” or “negotiated rate.” If a provider charges more than the allowed amount, the patient typically pays the balance beyond what the insurance company pays.

Central Billing Office (CBO)

The consolidation of all billing functions for multiple offices or locations into one central unit.

Claim denial

When a claim is denied by an insurance company, it’s usually due to one or more of the following: incorrect patient demographic information, inaccurate diagnosis or procedure codes, the patient is ineligible for insurance, incorrect insurance information, the service is deemed medically unnecessary by the insurance company, or failure to get required pre-authorization before the procedure.

Clearinghouse

For medical billing, it’s a third-party who forwards claims information from providers to insurance company payers. The clearinghouse also performs “claims scrubbing” —making sure the CPT (procedural) and diagnosis (ICD-10) codes are valid and that the two codes are in sync. For example, a clearinghouse would flag a claim with a CPT code for an appendectomy and an ICD-10 code for migraines. After claims scrubbing, the clearinghouse securely transmits the claim to the insurance company payer.

Crossover claim

When a claim is sent from a primary insurance carrier to a secondary carrier, or vice versa.

Current Procedural Terminology (CPT) codes

CPT codes are maintained by the American Medical Association (AMA) and used to describe tests, surgeries, evaluations, and other medical procedures performed by a healthcare provider. CPT codes tell the insurance company payer what procedures are being billed. The AMA updates the CPT code set each year, releasing new, revised, and deleted codes, as well as changes to CPT coding guidelines.

Electronic Remittance Allowance (ERA)

An explanation from insurance company or health plan payer to the provider about a claim payment. An ERA explains how a health plan has adjusted claim charges based on factors such as benefits coverage, expected copayments and coinsurance, contract agreements, and secondary coverage. If a claim is denied, it also provides an explanation of why the claim was denied.

Electronic Fund Transfer (EFT)

The electronic message used by insurance companies or health plans to instruct a financial institution to electronically transfer funds to a provider’s account to pay for health care services. An EFT includes information such as the date of payment, amount being paid, routing numbers, and name, identification, and bank accounts of the payer and payee.

Explanation of Benefits (EOB)

A statement from the insurance company providing details about a processed claim. It explains what portion of the claim was paid to the provider and what portion, if any, is the patient’s responsibility.

HCFA 1500 (CMS 1500) Form

The official form used by the Health Care Financing Administration to bill healthcare claims for health insurance coverage through Medicare, Tricare, group health care, or other forms of insurance. Originally developed by The Centers for Medicare and Medicaid (CMS), it has become the standard form used by all insurance carriers. It is similar to the UB-04 (CMS 1450) form (described below).

ICD-10 Codes

The ICD-10-CM (International Classification of Diseases, Tenth Revision, Clinical Modification) codes are the alphanumeric codes used by providers to identify and classify all healthcare diagnoses in the U.S. Every disease, disorder, injury, infection, and symptom has its own ICD-10 code. ICD-10-CM codes are based on the International Classification of Diseases, which is published by the World Health Organization (WHO).

Online bill pay

For healthcare purposes, online bill payment is a secure electronic service that allows patients to pay healthcare bills without having to write checks and mail them. Online bill payment is usually tied to a credit card or bank account from which funds are withdrawn electronically for payment of one-time or recurring bills.

Payer

Usually the patient’s insurance company or health plan. If the patient is without coverage, the payer is the patient.

Superbills

The purpose of a superbill is to break down a patient’s bill to make it easier for an insurance company/health plan payer to properly review, process, and pay the claim. It includes an itemized list of all healthcare services provided to a patient. It also contains additional information about the patient visit including practice information, CPT codesICD-10 codes, referring doctor, and more. It lists the individual items, costs, and codes for each exam, treatment, or procedure.

UB 04 (CMS 1450) form

The UB-04 uniform billing form is the standard claim form for all major insurance companies and Medicare. It can be used by any institutional provider for the billing of medical and mental health claims. Developed by the Centers for Medicare and Medicaid (CMS), it is now used by all insurance companies. It is similar to the HCFA 1500 (CMS 1500) form (described above).

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