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What is Medical Billing?

Medical billing can be done through automatic electronic programs, but the bills are still often checked by a person for accuracy.
An Explanation of Benefits shows the copay and deductible amounts that are an insurance policy holder's responsibility.
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  • Written By: Koren Allen
  • Edited By: Bronwyn Harris
  • Last Modified Date: 22 October 2014
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Medical billing is the process by which doctors and hospitals receive payment from health insurance companies. It also involves resolving any disputes and following up on claims that have been delayed or rejected. Medical billing is a complex series of procedures that require a great deal of time by skilled professionals. In fact, large hospitals often have an entire department dedicated to billing. The medical billing process is vital to any health care organization; hospitals and medical practices cannot operate without payments from insurance companies.

When you visit a doctor's office or a hospital, a detailed record is kept of any tests, procedures, or examinations that are performed in the treatment of your condition. Any diagnoses made by the medical staff are also noted. This is your medical record, and it provides information necessary to the billing process. After you provide your insurance information to the doctor's office or hospital, the medical billing cycle begins.

Before a bill is submitted to an insurance company for payment, it must be coded. During coding, each service or procedure must be given an alphanumeric code based on a standardized system. In the U.S., procedures are given a code based on the Current Procedural Terminology (CPT) manual, and diagnoses are coded using the International Classification of Diseases (ICD-9) manual.

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Some electronic medical billing programs can assign these codes automatically, by pulling information directly from the medical record; however, the bill is often checked manually by a staff person to ensure accuracy. After the coding process is finalized, the bill is transmitted to the insurance company. This is normally done electronically, but in some cases a bill may be sent via fax or standard mail.

When the insurance company receives the claim from the doctor, the information is reviewed to determine whether the patient was covered at the time of service, and whether the treatment is appropriate for the diagnosis submitted. If the procedure or treatment falls within standard and customary treatment for that condition, it is considered medically necessary and the bill is approved for payment. The payment amount will depend on the allowed amount, which varies depending on your particular policy and whether or not your doctor is on a list of network providers.

Next, the insurance company will either send the appropriate payment electronically to the health care provider, or send a notice of denial if the claim has not met the standards for payment. In either case, the patient will also be notified of the result of the claim. This is usually done via a letter called Explanation of Benefits (EOB) letter, which details the amount that was paid and the portion of the bill that is the patient's responsibility. The EOB letter will also give a reason for denial if payment was not made.

If the insurance company denies payment, the health care provider will review the claim to determine if it has errors or missing information, make corrections, and resubmit the claim for payment. Medical coding is a very complex process and data entry errors are fairly common; a claim may be resubmitted to the insurance company several times before it is finally paid.

Once the insurance company has paid, the health care provider will then send a bill to the patient for any remaining balance, such as a deductible or unpaid co-pay. Each provider has their own policies about collecting payments from patients. The medical billing department may attempt to collect money from the patient for several years, although many larger hospitals turn old debts over to a collection agency, which frees the billing clerks to concentrate on current billing.

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Discuss this Article

anon313890
Post 4

Information like this is increasingly important as more people are having to wade into the abyss - the management of their own healthcare costs. --Randy C.

mutsy
Post 2

@Oasis11 -I heard that typing speed is important in order to get into medical billing training. There are companies that offer medical billing jobs but most medical billing jobs that they offer are for experienced medical billing professionals.

The best thing to do is to find national associations related to this industry and they could tell you about the accredited schools along with the standard training required.

They can also give you salary information and information on potential jobs. That is what I do when I am interested in a field because if you go directly to a school’s site they are only going to try to sell you on taking classes with them but a national association will educate you on what you need to look for in the right program. They are usually very objective in their advice.

oasis11
Post 1

I know that medical billing jobs are on the rise. I had a friend that was considering this profession because she wants to work in a field that is growing and eventually wants to work from home.

The medical billing training is not long and most programs can be completed in about 18 months. It is really important to seek a medical billing school that is accredited and that has a good job placement program.

My friend told me that many of these programs offer externships so that you can get actual working experience in the field before you graduate. She says that most hospitals will not hire people to work from home until they have at least three years of medical insurance billing experience so this is not a job that you can easily work from home with.

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