What is Medical Billing?

It’s common for a patient to experience healthcare interventions in different settings, such as physicians’ offices, hospitals and outpatient centers. If you’re planning to pursue a career in medical billing, it’s important to understand the significant differences in the way medical claims are processed in professional vs. institutional healthcare settings. 

Professional billing is the billing for claims generated for work performed by physicians, suppliers or other non-institutional healthcare providers. This encompasses both outpatient and inpatient medical services. Medicare, Medicaid and most health insurance companies accept electronic claims as their primary billing method, and the billing form used is the 837-P, which is the electronic version of the standard CMS-1500 form.

Institutional billing covers the charges related to interventions and administrative services during a patient’s stay in an institutional setting, such as a hospital or skilled nursing facility. Services delivered in these settings may include laboratory or radiology services, or the use of equipment and supplies. Institutional charges are billed using a UB-40 form, or its electronic counterpart, the 837-I.

While the name medical billing implies that it only involves the billing process, medical billing actually begins as soon as a patient checks into a care facility. To help you understand the medical billing process, this step-by-step guide explains how it is often performed along with a brief explanation of what happens at each step:

During patient registration, also known as check-in, a medical biller collects basic information about the patient, such as their name and address, and asks the patient for their insurance coverage information. This insurance information is collected up front in order to be verified.

After checking the patient into the care facility, the medical biller ensures that the insurance information is correct. Then, they determine whether or not the patient’s procedure is eligible to be covered by their insurance.

During the intake process, demographic information is also collected from the patient. This includes information about the patient's age, sex, race and any other relevant factors. Some of this patient information may be relevant to the procedure in question, or it may be collected for statistical analysis by insurance or government entities or the care facility itself.

After gathering demographic information, the medical biller works with a medical coder to obtain medical records. These medical records are passed on to relevant parties who need to access specific information about the patient’s medical history.

Once all the information about the patient has been gathered, the charge entry process begins. Charge entry involves assigning a dollar amount to the patient account based on the procedures performed during their stay at the care facility. This results in a claim that will be sent to the insurance company.

After being scrubbed of any errors, the claim is sent to the insurer to determine what will be covered by each party. If the claim is rejected for any reason, the medical biller will update the record and note the reason for the rejection.

Once the claim has been submitted and paid, the payment is posted by the medical biller. The payment is logged within medical billing software in order to provide a view of the care facility’s finances. This process also helps catch medical errors by adding another step where the payment amount must be viewed by additional parties for greater accuracy.

To ensure timely payment, medical billers reach out to paying parties in order to collect any owed payments (also referred to as accounts receivable). This may involve contacting a patient for payment or reaching out to an insurance company to confirm receipt.

In the event that a payer – whether they be a patient or an insurance company – refuses to pay, the process enters a denial management phase. During this portion of the process, the biller performs root cause analysis to determine whether the denial of payment is valid and files an appeal of the denial.

Finally, once the billing process is complete, the biller creates a report that provides key metrics to the care facility. These metrics will likely include elements such as the payment received, procedure performed and the total number of adjustments in the claims process.

Medical billing and coding often overlap and both are essential to one another, but the two practices are also distinct in several ways. Medical coding is the process of identifying the procedures being performed by gathering billable information from the patient’s medical record and assigning a code to each.

Medical codes, once assigned to a procedure, carry a specific cost and are also easily identifiable by insurance agencies as a covered or uncovered procedure. This is where the process transitions over to the medical biller for final billing.

The medical billing process uses the procedure codes provided by a medical coder to create an insurance claim or bill the patient. Put into simpler terms, the medical coder builds a list of what needs to be paid, then the medical biller determines who will pay for which procedures and submits the bill accordingly. A medical biller's responsibilities also include any follow-up needed for payment and correcting any rejected claims.

Medical billers are responsible for gathering insurance and demographic information from a patient, filing medical billing insurance claims and patient bills, following up on those items if necessary and creating a report on the overall billing process for the care facility managers to analyze.

Medical billers are also responsible for correcting rejected claims, which are claims that an insurance company sends back to the care facility because of one or more errors on the document itself. This differs from a denied claim ─ though the terms are sometimes used interchangeably ─ which is a claim that the insurance company or patient refuses to pay based on certain grounds. These denied claims can be appealed, which often falls into the list of medical biller responsibilities.

There are 2 stages to the medical billing process – front-end and back-end.

Front-end billing processes are patient-facing procedures that occur before the patient’s encounter with a medical professional. This stage involves the front office staff of a physician’s office or outpatient facility when the patient checks in, registers or pre-registers for a procedure. Insurance claim processing actually begins when the patient contacts the provider’s office to schedule an appointment or register at the hospital. The front-end staff typically will collect the patient’s demographic and insurance information at this stage, confirm the information they may already have on file, or have the patient complete a registration form. At this stage an encounter form, or superbill, is generated to communicate information about the services provided during the patient encounter.

Front-end medical staff need to be well-versed in the “payer mix” of their organizations – that is, they need to be familiar with the various insurance plans the organization accepts and how to verify the patient’s insurance eligibility.

After the healthcare provider has seen the patient and the patient has checked out, the billing process resumes in the back office. Back-end medical billing involves more complex tasks required for the accurate and timely management of medical claims and reimbursement. Back-end billing staff perform many functions that are crucial to revenue cycle management.

Charge entry staff enter charges for the services and procedures that were performed into the practice management system, pulling information from the superbill and amending the information with any up-front payments collected from the patient. After the charges and payments are entered, back-end billing staff create the claim, which may involve compiling charges, revenue codes, current procedural terminology, HCPCS Level II and ICD-10 codes. In a process called claim scrubbing, the back-end medical biller “scrubs” the claim to be sure all diagnosis, procedure and modifier codes are present and accurate, and that the required patient, provider and visit information is complete. This process is often assisted by scrubbing software that can identify and correct any errors that could result in the denial of a claim. Once the claim is prepared and scrubbed, it is submitted electronically to the payer.

One potential benefit of becoming a medical biller is the projected job growth for this occupation. The U.S. Bureau of Labor Statistics (BLS) projects employment of medical records specialists, a category that includes medical billers, to grow 7% from 2021 to 2031, with about 14,900 job openings projected for medical records specialists each year, on average, over this period.¹ This growth is projected on a national level and local growth will vary by location. This projection is not specific to DeVry University graduates and may include earners at all stages of their careers.

A career in medical billing may be right for you if you are interested in working in a healthcare setting and gain satisfaction from seeing that people receive the best possible care, but aren’t interested in hands-on work with patients.