Medical billing is a fundamental and critical component of healthcare and essential for healthcare providers to perform correctly to receive timely payment for their services. The purpose of this short guide is to help demystify the medical billing process, share the specific steps and challenges to do it correctly and explore how the medical billing system is evolving.
The Medical Billing Process
What, then, is medical billing? Basically, it involves a set of procedures through which healthcare providers – be they hospitals, clinics, skilled nursing facilities, or smaller individual physician practices – submit claims (and follow up) with health insurance companies to make sure payment reimbursements for services rendered are received. While it sounds like a straightforward process, it can take up a large amount of time of the administrative staff of a healthcare business. Medical billing isn’t just printing a bill and mailing it; rather, various coding steps need to be taken so that the procedures that were rendered are correctly identified and the accurate billable amounts are requested. That said, medical billing inevitably leads to the need for claims management, as they are often denied by payors. We will explore this in greater depth below.
Medical Billing vs. Medical Coding
Often intertwined and confused as the same, medical billing and medical coding are different. In actuality, they are two distinct parts of the healthcare payment process. Medical coding refers to the specific codes for diagnoses and procedures that billers in the industry use to create claims and to bill patients. While medical coders focus on accurately describing the provided medical services, billers work to make sure these descriptions translate into revenue for the business.
The Medical Billing Process
So, what are these specific steps in the billing process? Let’s take a quick look at each from collecting patient details, to claim submission, to denial management and more.
Patient Registration
The first step means getting the patient details down right including insurance information and medical history, both essential for accurate billing. In addition to insurance info and medical history, patients will need to complete and sign various forms. As these are important medical issues with possible legal ramifications, consenting to treatment and acknowledging the receipt of privacy notices such as HIPAA is necessary. Of course, a smooth and efficient registration process also has a big impact on how the patient feels about the medical provider and the likelihood of returning for services; it can affect the overall experience of the patient. Doing it right can ease stress and build trust between the parties.
Insurance Verification and Authorization
We’ve all been through this process. Before medical professionals even get into the basics of medical service, their most likely question is: Who is your insurance provider? Healthcare staff must verify that the patient’s insurance coverage is accepted by them (and is active) to make sure the procedures being performed are covered under their specific plan.
Verifying insurance coverage is typically done by phone or also through an insurance company’s online eligibility verification tool. This can speed up and simplify the steps. Healthcare staff will want to make sure that the dates are correct in terms of coverage, what the copays and deductibles are, if the patient also has what’s known as coinsurance responsibility and if the patient’s benefits cover the service, particularly if it’s a specialty. Also of importance is where the service will actually take place.
Charge Capture and Medical Coding
After the service is provided to the patient, healthcare providers will record the services by using specific medical codes, which are crucial for the billing process.
For instance, Medicare, which, of course, is the immense federal health insurance program and one of the largest payors for medical services in the country, has a substantial “Code List“that it maintains and updates annually. This list, named the Current Procedural Terminology (CPT)/Healthcare Common Procedure Coding System (HCPCS) identifies all the items and services included in what they call certain “designated health services” or DHS categories. This list also includes services that could also qualify for certain exceptions. Interestingly, Medicare even provides a website where the public can look up the price for certain procedures, such as outpatient ones. Here, one can compare the national average prices of hospital outpatient departments and ambulatory surgical centers.
Claim Submission and Payment Posting
Once the healthcare services are rendered and the claims are coded, it’s time for these to be submitted to the insurance company for payment reimbursement. With the claim (hopefully) approved, payments are posted to the account, and any and all discrepancies are reconciled.
Denial Management
Of course, not all claims will be simply green-lighted. In fact, many claims will be denied outright and may not even be accepted once resubmitted. While it’s difficult to get data on such denial rates as this information is not typically shared with the public, the news outlet ProPublica published a 2023 article that noted that, on the whole, insurance companies denied approximately 10-20% of all claims they received. (The overall rate could vary from plan to plan or not reflect the different types of medical procedures and services rendered.) Needless to say, denied claims are best avoided as handling them correctly and efficiently will help maintain a healthcare company’s cash flow and maximize its revenue cycle management.
Patient Billing and Collections
Finally, any balances that are indeed not covered by the insurance company will be billed to the patient. This step may also involve an unfortunate collections process for any past-due accounts.
Challenges in the Medical Billing Process
The medical billing cycle can be fraught with challenges. One of the main ones is errors that are simply incorrect codes or outdated ones. Staying abreast of this data is important. Claim denials can be another challenge in the medical billing process as it is an ongoing and intricate “dance” with insurance payors for approvals.
Each step in the process can potentially delay any payment due to the medical facility, and if it’s an ongoing issue, it can even affect the financial stability of the healthcare practice overall. As is often the case in the healthcare industry, changes in regulations can add another layer of complexity to what is considered an already complicated process. Being on top of any shifts in the law is key and can be made easier with the help of an outside firm with relevant expertise, such as an accounting business with experience in the healthcare sector.
Advantages of Streamlined Medical Billing
Using the right technology can often help in billing processes. Specifically, to have efficient billing systems (and consistent positive results), advanced medical billing software can automate many of the routine and tedious tasks involved. As we’ve mentioned in previous articles, the right tech can help reduce burdens on healthcare administrative staff, which can give them time to focus their energies on patient care. This, of course, flows through to the bottom line with lower billing error rates, improved cash flow, and greater patient satisfaction from clearer communication and concise billing statements. It’s a win-win.
Role of Medical Billing Services and Forecast
Healthcare companies can even fully turn over these medical billing responsibilities to outside providers, basically an outsourced medical billing service company. The great thing about these services is that they can handle everything from the initial claim creation to managing the overall revenue cycle process. Such expertise might be what a healthcare entity chooses rather than going the route of a more cost-prohibitive system that would need to be developed in-house. Indeed, the medical billing industry is large and growing, with skilled medical billers in high demand. It’s a field that continues to expand and become even more specialized as newer technologies and methods develop.
Looking Ahead
Medical billing is more than just creating and issuing invoices; it’s about following an intricate process for the sustainability of a healthcare business – and the care they provide. As healthcare continues to evolve, staying informed of relevant regulatory and technological changes (and turning to outside assistance when needed) can make medical billing a streamlined and highly accurate process.
