What is Medical Billing?

Medical billing is simply stated as the process of communication between the medical provider and the insurance company. This is known as the billing cycle. The medical billing cycle can take in upwards of days to months to complete, and at times take several communications before resolution is reached.

The process begins with a patient visiting their medical provider. The patient’s medical record is then updated summarizing the diagnosis, treatment and any pertinent information. This information is then recorded electronically for future account updates.

From the patient record, an evaluation of care is determined and a five-digit procedure code is assigned from the procedural terminology database. The verbal diagnosis is also dictated in the record as an additional numerical code. These codes are used in claims during the medical billing process.

The next step in the medical billing process is to transmit these codes to the proper insurance company(ies). In most cases, this is done electronically using an ANSI 837 file and is transmitted directly to the company. This claim is then processed.

Medical claims adjusters or examiners usually process claims, but when higher dollars are involved sometimes a medical director will evaluate the validity of the claim. Once the claim is approved the medical provider is reimbursed based on a pre-negotiated percentage. Any rejected claims are sent back in the form of Explanation of Benefits or Electronic Remittance Advice.

If the provider receives a rejection during the medical billing process, they must review the message, reconcile, make corrections and resubmit the claim. This exchange might be repeated several times before full reimbursement is made. As trying as the rejection process may be, the provider has to show patience during this time.

The number of rejections, denials etc. has been known to reach as high as 50 percent. This is mainly because of the complexity of the medical billing and coding system. Another reason for this is insurance companies denial of services not covered under the policy. Proof comes into play here and one can usually see success in overturning the original decision of denial.