Medical billing is the process of submitting and following up on claims to insurance companies in order to receive payment for services rendered by a healthcare provider. The same process is used for most insurance companies, whether they are private companies or government-owned. Medical billers are strongly encouraged, but not required by law to become certified by taking an exam such as the Certified Medical Reimbursement Specialist Exam (CMRS Exam).
The medical billing process is an interaction between a healthcare provider and the insurance company (payer). The interaction begins with the office visit: A doctor or their staff will typically create or update the patient’s medical record. This record contains a summary of treatment and demographic information (patients name, address, social security number, home telephone number, work telephone number, policy identity number for the respective insurance held by the patient).
If the patient is a minor then guarantor information of a parent or an adult related to the patient will be appended. Upon the first visit, the provider will usually give the patient one or more diagnoses in order to better coordinate and streamline their care. In the absence of a definitive diagnosis, the reason for the visit will be cited for the purpose of claims filing. The patient record contains highly personal information, including the nature of the illness, examination details, medication lists, diagnoses, and suggested treatment.
The extent of the physical examination, the complexity of the medical decision making and the background information (history) obtained from the patient are evaluated to determine the correct level of service that will be used to bill the insurance company. The level of service, once determined by qualified staff is translated into a standardized five digit procedure code drawn from the Current Procedural Terminology database. The verbal diagnosis is translated into a numerical code as well, drawn from a similar standardized ICD-9-CM database. These two codes, a CPT and an ICD-9-CM, are equally important for claims processing.
Once the procedure and diagnosis codes are determined, the medical biller will transmit the claim to the insurance company (payer). This is usually done electronically by formatting the claim as an ANSI 837 file and using Electronic Data Interchange to submit the claim file to the payer directly or via a clearinghouse. Historically, claims were submitted using a paper form; in the case of professional (non-hospital) services and for most payers the CMS-1500 form or HICF (Health Insurance Claim Form)was and is still commonly used. The CMS-1500 form is so named for its originator, the Centers for Medicare and Medicaid Services. To this day about 30% of medical claims get sent to payers using paper forms which are either manually entered or entered using automated recognition or OCR software.
The insurance company (payer) processes the claims usually by medical claims examiners or medical claims adjusters. For higher dollar amount claims, the insurance company has medical directors review the claims and evaluate their validity for payment using rubrics(procedure) for patient eligibility, provider credentials, and medical necessity. Approved claims are reimbursed for a certain percentage of the billed services. These rates are pre-negotiated between the health care provider and the insurance company. Failed claims are rejected and notice is sent to provider. Most commonly, rejected claims are returned to providers in the form of Explanation of Benefits (EOB’s) or Remittance Advice.
Upon receiving the rejection message the provider must decipher the message, reconcile it with the original claim, make required corrections and resubmit the claim. This exchange of claims and rejections may be repeated multiple times until a claim is paid in full, or the provider relents and accepts an incomplete reimbursement.
The frequency of rejections, denials, and over payments is high (often reaching 50%) (HBMA 7/07), mainly because of high complexity of claims and/or errors due to similarities in diagnosis’ and their corresponding codes. This number may also be high due to insurance companies denying certain services that they do not cover (or think they can get away without covering) in which case small adjustments are made and the claim is re-sent.