Quick Search

Sponsored
Ch. 03

Course 3: Medical Billing Terminology

This course will help you become familiar with the everyday vocabulary used by medical billing specialists and their peers. Medical billing and coding is a complex vocation that requires extensive knowledge of the healthcare system, medical terminology, and accounting, not to mention a vast suite of medical code sets. Understanding these subjects and the role that a medical billing specialist plays in them will bring you one step closer to starting a career in the field.

Because of the complexity of the medical billing field, it can be easy to feel overwhelmed by the subject matter at first glance. Let this extensive glossary of key medical billing terms serve as a reference to help you get a better grasp on the language of this field.

Check out the medical billing terminology definitions and explanations in the alphabetized list below:

A

Allowed Amount: The sum an insurance company will reimburse to cover a healthcare service or procedure. The patient typically pays the remaining balance if there is any amount left over after the allowed amount has been paid. This amount should not to be confused with co-pay or deductibles owed by a patient.

American Medical Association (AMA): The AMA is the largest organization of physicians in the U.S. dedicated to improving the quality of healthcare administered by providers across the country. The current procedural technology (CPT) code set is maintained and revised by the AMA in accordance with federal guidelines.

Aging: A formal medical billing term that refers to insurance claims that haven’t been paid or balances owed by patients overdue by more than 30 days. Aging claims may become denied if they aren’t filed in time with a health insurance company.

Ancillary Services: Any service administered in a hospital or other healthcare facility other than room and board, including biometrics tests, physical therapy, and physician consultations among other services.

Appeal: Appeal occurs when a patient or a provider tries to convince an insurance company to pay for healthcare after it has decided not to cover costs for someone on a claim. Medical billing specialists deal with appeals after a claim has been denied or rejected by an insurance company.

Applied to Deductible (ATD): This term refers to the amount of money a patient owes a provider that goes to paying their yearly deductible. A patient’s deductible is determined by their insurance plan and can range in price.

Assignment of Benefits (AOB): This term refers to insurance payments made directly to a healthcare provider for medical services received by the patient. Assignment of benefits occurs after a claim has been successfully processed with an insurance company.

Application Service Provider (ASP): ASP is a digital network that allows healthcare providers to access quality medical billing software and technologies without needing to purchase and maintain it themselves. Providers who use ASP typically pay a monthly fee to the company that maintains the billing software.

Authorization: This term refers to when a patient’s health insurance plan requires them to get permission from their insurance providers before receiving certain healthcare services. A patient may be denied coverage if they see a provider for a service that needed authorization without first consulting the insurance company.

B

Beneficiary: The beneficiary is the person who receives benefits and/or coverage under a healthcare plan. The beneficiary of an insurance plan may not be the person paying for the plan, as is the case for young children covered under their parents’ plans.

Blue Cross Blue Shield: Blue Cross Blue Shield is a federation of 38 health insurance companies in the U.S. (some of which are non-profit companies) that offer health insurance options to eligible persons in their area. Blue Cross Blue Shield offers healthcare plans to over 100 million people in the U.S.

C

Capitation: A fixed payment that a patient makes to a health insurance company or provider to recoup costs incurred from various healthcare services. A capitation is different from a deductible or co-pay.

Civilian Health and Medical Program of Uniform Services (CHAMPUS): CHAMPUS (now known as TRICARE) is the federal health insurance program for active and retired service members, their families, and the survivors of service members.

Charity Care: This type of care is administered at reduced or zero cost to patients who cannot afford healthcare. Providers may offer charity care at their discretion.

Clean Claim: This refers to a medical claim filed with a health insurance company that is free of errors and processed in a timely manner. Some providers may send claims to organizations that specialize in producing clean claims, like clearinghouses.

Clearinghouse: Clearinghouses are facilities that review and correct medical claims as necessary before sending them to insurance companies for final processing. This meticulous editing process for claims is known in the medical billing industry as “scrubbing.”

Centers for Medicare and Medicaid Services (CMS): The CMS is the federal entity that manages and administers healthcare coverage through Medicare and Medicaid. CMS coordinates with providers and enrollees to provide healthcare to over 100 million Americans.

CMS 1500: The CMS 1500 is a paper medical claim form used for transmitting claims based on coverage by Medicare and Medicaid plans. Commercial insurance providers often require that providers use CMS 1500 forms to process their own paper claims.

Coding: Coding is the process of translating a physician’s documentation about a patient’s medical condition and health services rendered into medical codes that are then plugged into a claim for processing with an insurance company. Medical billing specialists must be familiar with many code sets in order to perform their job duties.

COBRA Insurance: A federal program that allows a person terminated from their employer to retain health insurance they had with that employer for up to 18 months, or 36 months if the former employee is disabled.

Co-Insurance: The percentage of coverage that a patient is responsible for paying after an insurance company pays the portion agreed upon in a health plan. Co-insurance percentages vary depending on the health plan.

Collection Ratio: This refers to the ratio of payments received relative to the total amount owed to providers.

Contractual Adjustment: This refers to a binding agree between a provider, patient, and insurance company wherein the provider agrees to charges that it will write off on behalf of the patient. Contractual adjustments may occur when there is a discrepancy between what a provider charges for healthcare services and what an insurance company has decided to pay for that service.

Coordination of Benefits (COB): COB occurs when a patient is covered by more than one insurance plan. In this situation one insurance company will become the primary carrier and all other companies will be considered secondary and tertiary carriers that may cover costs left after the primary carrier has paid.

Co-Pay: A patient’s co-pay is the amount that must be paid to a provider before they receive any treatment or services. Co-pays are separate from a deductible, and will vary depending on a person’s insurance plan.

Current Procedural Technology (CPT) Code: CPT codes represent treatments and procedures performed by a physician in a 5-digit format. CPT codes are entered together with ICD-9 codes that explain a patient’s diagnosis. Medical billing specialists will enter CPT codes into claims so insurance companies understand the nature of healthcare a patient received with a provider.

Credentialing: The application process for a provider to coordinate with an insurance company. Once providers have become credentialed with an insurance company, they have the opportunity to work with that company in providing affordable healthcare to patients.

Credit Balance: Refers to the sum shown in the “balance” column of a billing statement that reflects the amount due for services rendered.

Crossover Claim: When claim information is sent from a primary insurance carrier to a secondary insurance carrier, or vice versa.

D

Date of Service (DOS): The date when a provider performed healthcare services and procedures.

Day Sheet: A document that summarizes the services, treatments, payments, and charges that a patient received on a given day.

Deductible: The amount a patient must pay before an insurance carrier starts their healthcare coverage. Deductibles range in price according to terms set in a person’s health plan.

Demographics: The patient’s information required for filing a claim, such as age, sex, address, and family information. An insurance company may deny a claim if it contains inaccurate demographics.

Durable Medical Equipment (DME): This refers to medical implements that can be reused such as stretchers, wheelchairs, canes, crutches, and bedpans.

Date of Birth (DOB): The exact date a patient was born.

Downcoding: Downcoding occurs when an insurance company finds there is insufficient evidence on a claim to prove that a provider performed coded medical services and so they reduce or remove those codes. Downcoding usually reduces the cost of a claim.

Duplicate Coverage Inquiry (DCI): A formal request typically submitted by an insurance carrier to determine if other health coverage exists for a patient.

Dx: The abbreviation for diagnosis codes, also known as ICD-9 codes.

E

Electronic Claim: A claim sent electronically to an insurance carrier from a provider’s billing software. The format of electronic claims must adhere to medical billing regulations set forth by the federal government.

Electronic Funds Transfer: A method of transferring money electronically from a patient’s bank account to a provider or an insurance carrier.

Evaluation and Management (E/M): E/M refers to the section of CPT codes most used by healthcare personnel to describe a patient’s medical needs.

Electronic Medical Records (EMR): EMR is a digitized medical record for a patient managed by a provider onsite. EMRs may also be referred to as electronic health records (EHRs).

Enrollee: A person covered by a health insurance plan.

Explanation of Benefits (EOB): A document attached to a processed medical claim wherein the insurance company explains the services they will cover for a patient’s healthcare treatments. EOBs may also explain what is wrong with a claim if it’s denied.

Electronic Remittance Advice (ERA): The digital version of EOB, which specifies the details of payments made on a claim either by an insurance company or required by the patient.

ERISA: Stands for the Employee Retirement Income Security Act of 1974. This act established guidelines and requirements for health and life insurance policies including appeals and disclosure of grievances.

F

Fee for Service: This refers to a type of health insurance wherein the provider is paid for every service they perform. People with fee-for-service plans typically can choose whatever hospitals and physicians they want to receive care in exchange for higher deductibles and co-pays.

Fee Schedule: A document that outlines the costs associated for each medical service designated by a CPT code.

Financial Responsibility: Whoever owes the healthcare provider money has financial responsibility for the services rendered. Insurance companies or patients themselves may be financially responsible for the costs associated with care, and these responsibilities are typically outlined in a healthcare plan contract.

Fiscal Intermediary (FI): The name for Medicare representatives who process Medicare claims.

Formulary: A table or list provided by an insurance carrier that explains what prescription drugs are covered under their health plans.

Fraud: Providers, patients, or insurance companies may be found fraudulent if they are deliberately achieving their ends through misrepresentation, dishonesty, and general illegal activity. Medical billing specialists who deliberately enter incorrect or misleading information on claims may be charged with fraud.

G

Group Health Plan (GPH): A plan provided by an employer to provide healthcare options to a large group of employees.

Group Name: The name of the group, insurance carrier, or insurance plan that covers a patient.

Group Number: A number given to a patient by their insurance carrier that identifies the group or plan under which they are covered.

Guarantor: The party paying for an insurance plan who is not the patient. Parents, for example, would be the guarantors for their children’s health insurance.

H

Healthcare Financing Administration: The former name for what is now the CMS.

Healthcare Financing Administration Common Procedure Coding System (HCPCS): HCPCS is a three-tier coding system used to explain services, devices, and diagnoses administered in the healthcare system. Medical billing specialists utilize codes in the HCPCS on a daily basis to file claims.

Healthcare Insurance: This is insurance offered to a group or an individual to cover costs associated with medical care and treatment. Those covered by healthcare insurance typically must pay a premium for their plans in addition to various co-pays and/or deductibles.

Healthcare Provider: These are the entities that offer healthcare services to patients, including hospitals, physicians, and private clinics, hospices, nursing homes, and other healthcare facilities.

Healthcare Reform Act: The major healthcare legislation passed in 2010 designed to make healthcare accessible and less expensive for more Americans.

Health Insurance Claim: The unique number ascribed to an individual to identify them as a beneficiary of Medicare.

Health Insurance Portability and Accountability Act (HIPAA): HIPAA was a law passed in 1996 with an aim to improve the scope of healthcare services and establish regulations for securing healthcare records from unwanted parties.

Health Maintenance Organization (HMO): HMOs are networks of healthcare providers that offer healthcare plans to people for medical services exclusively in their network.

Hospice: This refers to medical care and treatment for persons who are terminally ill.

I

ICD-9 Codes: ICD-9 codes are an international set of codes that represent diagnoses of patients’ medical conditions as determined by physicians. Medical billing specialists may translate a physician’s diagnoses into ICD-9 codes and then input those codes into a claim for processing.

ICD-10 Codes: ICD-10 codes are the updated international set of codes based on the preceding ICD-9 codes. ICD-10 codes are estimated to be mandatory in the American healthcare system by October 2014.

Incremental Nursing Charge: A fee for nursing services a patient is charged during the course of receiving healthcare.

Indemnity: A type of health insurance plan whereby a patient can receive care with any provider in exchange for higher deductibles and co-pays. Indemnity is also known as fee-for-service insurance.

In-Network: This term refers to a provider’s relationship with a health insurance company. A group of providers may contract with an insurance company to form a network of healthcare professionals that a person can choose from when enrolled in that insurance company’s health plan.

Inpatient: Inpatient care occurs when a person has a stay at a healthcare facility for more than 24 hours.

Independent Practice Association (IPA): The IPA is a professional organization of physicians who have a contract with an HMO.

Intensive Care: Intensive care is the unit of a hospital reserved for patients that need immediate treatment and close monitoring by healthcare professionals for serious illnesses, conditions, and injuries.

M

Medicare Administrative Contractor (MAC): MACs are contract with the federal government to process Medicare claims.

Managed Care Plan: A health insurance plan whereby patients can only receive coverage if they see providers who operate in the insurance company’s network.

Maximum Out of Pocket: The amount a patient is required to pay. After a patient reaches their maximum out of pocket, their healthcare costs should be covered by their plan.

Medical Assistant: An employee in the healthcare system such as a physian’s assistant or a nurse practitioner who perform duties in administration, nursing, and other ancillary care.

Medical Coder: A medical coder is responsible for assigning various medical codes to services and healthcare plans described by a physician on a patient’s superbill.

Medical Billing Specialist: A medical billing specialist is responsible for using information regarding services and treatments performed by a healthcare provider to complete a claim for filing with an insurance company so the provider can be paid.

Medical Necessity: This term refers to healthcare services or treatments that a patient requires to treat a serious medical condition or illness. This does not include cosmetic or investigative services.

Medical Record Number: A unique number ascribed to a person’s medical record so it can be differentiated from other medical records.

Medicare Secondary Payer: The insurance company that covers any remaining expenses after Medicare has paid for a patient’s coverage.

Medical Savings Account (MSA): An MSA is an optional health insurance payments plan whereby a person apportions part of their untaxed earnings to an account reserved for healthcare expenses. A person with an MSA can only contribute a certain amount of their earnings per year. Any unused funds in an MSA at the end of the year will roll over to the next.

Medical Transcription: The process of converting dictated or handwritten instructions, observations, and documentation into digital text formats.

Medicare: Medicare is a government insurance program started in 1965 to provide healthcare coverage for persons over 65 and eligible people with disabilities.

Medicare Coinsurance Days: Referring to 61st through 90th days of inpatient treatment, the law requires that patients pay for a portion of their healthcare during Medicare coinsurance days.

Medicare Donut Hole: This term refers to the discrepancy between the limits of healthcare insurance coverage and the Medicare Part D coverage limits for prescription drugs.  

Medicaid: Medicaid is a joint federal and state assistance program started in 1965 to provide health insurance to lower-income persons. Both state and federal governments fund Medicaid programs, but each state is responsible for running its own version of Medicaid within the minimum requirements established by federal law.

Medigap: Medigap is supplemental health insurance under Medicaid for eligible persons who need help covering co-pays, deductibles, and other large fees.

Modifier: Modifiers are additions to CPT codes that explain alterations and modifications to an otherwise routine treatment, exam, or service.

N

Non-Covered Charge (N/C): N/Cs are procedures and services not covered by a person’s health insurance plan.

Not Elsewhere Classifiable (NEC): A term used to describe a procedure or service that can’t be described within the available code set.

Network Provider: A provider within a health insurance company’s network that has contracted with the company to provide discounted services to a patient covered under the company’s plan.

Non-participation: This is when a provider refuses to accept Medicare payments as a sufficient amount for the services rendered to a patient.

Not Otherwise Specified (NOS): This term is used in ICD-9 codes to describe conditions with unspecified diagnoses.

National Provider Identifier (NPI) Number: A unique 10-digit number ascribed to every healthcare provider in the U.S. as mandated by HIPAA.

O

Office of Inspector General (OIG): The organization responsible for establishing guidelines and investigating fraud and misinformation within the healthcare industry. The OIG is part of the Department of Health and Human Services.

Out-of-Network: Out-of-network refers to providers outside of an established network of providers who contract with an insurance company to offer patients healthcare at a discounted rate. People who go to out-of-network providers typically have to pay more money to receive care.

Outpatient: This term refers to healthcare treatment that doesn’t require an overnight hospital stay, including a routine visit to a primary care doctor or a non-invasive surgery.

P

Palmetto GBA: A MAC based in Columbia, South Carolina that is also a subsidiary of Blue Cross Blue Shield.

Patient Responsibility: This refers to the amount a patient owes a provider after an insurance company pays for their portion of the medical expenses.

Primary Care Physician (PCP): The physician who provides the basic healthcare services for a patient and recommends additional care for more serious treatments as necessary.

Point of Service Plans: A plan whereby patients with HMO membership may receive care at non-HMO providers in exchange for a referral and paying a higher deductible.

Place of Service Code: A two-digit code used on claims to explain what type of provider performed healthcare services on a patient.

Preferred Provider Organization (PPO): A plan similar to an HMO whereby a patient can receive healthcare from providers within an established network set up by an insurance company.

Practice Management Software: Software used for scheduling, billing, and recordkeeping at a provider’s office.

Preauthorization: Some insurance plans require that a patient receive preauthorization from the insurance company prior to receiving certain medical services to make sure the company will cover expenses associated with those services.

Pre-Certification: A process similar to preauthorization whereby patients must check with insurance companies to see if a desired healthcare treatment or service is deemed medically necessary (and thus covered) by the company.

Pre-determination: A maximum sum as explained in a healthcare plan an insurance company will pay for certain services or treatments.

Pre-existing Condition (PEC): PEC is a medical condition a patient had before receiving coverage from an insurance company. A person might become ineligible for certain healthcare plans depending on the severity and length of their PEC.

Pre-exisiting Condition Exclusion: The existence of a PEC denies a person certain coverage in some health insurance plans.

Premium: The sum a person pays to an insurance company on a regular (usually monthly or yearly) basis to receive health insurance.

Privacy Rule: Standards for privacy regarding a patient’s medical history and all related events, treatments, and data as outlined by HIPAA.

Provider: A provider is the healthcare facility that administered healthcare to an individual. Physicians, clinics, and hospitals are all considered providers.

Provider Transaction Access Number (PTAN): This refers to a provider’s current legacy provider number with Medicare.

R

Referral: This is when a provider recommends another provider to a patient to receive specialized treatment.

Remittance Advice (R/A): The R/A is also known as the EOB, which is the document attached to a processed claim that explains the information regarding coverage and payments on a claim.

Responsible Party: The person who pays for a patient’s medical expenses, also known as the guarantor.

Revenue Code: A three-digit code used on medical bills that explains the kind of facility in which a patient received treatment.

Relative Value Amount (RVA): The median amount Medicare will repay a provider for certain services and treatments.

S

Scrubbing: A process by which insurance claims are checked for errors before being sent to an insurance company for final processing. Providers scrub claims in an attempt to reduce the number of denied or rejected claims.

Self-Referral: When a patient does their own research to find a provider and acts outside of their primary care physician’s referral.

Self-Pay: Payment made by the patient for healthcare at the time they receive it at a provider’s facilities.

Secondary Insurance Claim: The claim filed with the secondary insurance company after the primary insurance company pays for their portion of healthcare costs.

Secondary Procedure: This is when provider performs another procedure on a patient covered by a CPT code after first performing a different CPT procedure on them.

Security Standard: The security standard serves as the guidelines for policies and practices necessary to reduce security risks within the healthcare system. The security standard policies work in concert with the security guidelines set in place with the passage of HIPAA.

Skilled Nursing Facility: These are facilities for the severely ill or elderly that provide specialized long-term care for recovering patients. Skilled nursing facilities are alternative healthcare establishments to extended hospital stays and may be covered by eligible patients’ insurance policies.

Signature on File (SOF): A patient’s official signature on file for the purpose of billing and claims processing.

Software as a Service (SAAS): Medical billing software hosted off site by another company and only accessible with Internet access. SAAS is useful for providers who don’t want to maintain and update in-house medical billing software.

Specialist: A physician or medical assistant with expertise in a specific area of medicine. Oncologists, pediatricians, and neurologists are among the many specialists in the medical field.

Subscriber: The subscriber is the individual covered under a group policy. For instance, an employee of a company with a group health policy would be one of many subscribers on that policy.

Superbill: A document used by healthcare staff and physicians to write down information about a patient receiving care. The superbill can contain demographic information, insurance information, and especially any diagnoses or healthcare plans written by the physician. A medical billing specialist inputs the information on a patient’s superbill into a claim.

Supplemental Insurance: Supplemental insurance can be a secondary policy or another insurance company that covers a patient’s healthcare costs after receiving coverage from their primary insurance. Supplemental insurance policies typically help patients cover expensive deductibles and copays.

T

Treatment Authorization Request (TAR): A unique number the insurance company gives the provider for billing purposes. A provider must receive the insurance company’s TAR number before administering healthcare to a patient covered by the company.

Taxonomy Code: Medical billing specialists utilize this unique codeset for identifying a healthcare provider’s specialty field.

Term Date: The end date for an insurance policy contract, or the date after which a person no longer receives or is no longer eligible for health insurance with company. Term dates are typically determined on a case-by-case basis.

Tertiary Insurance Claim: A claim filed by a provider after they have filed claims for primary and secondary health insurance coverage on behalf of a patient. Tertiary insurance claims often cover the remaining healthcare costs such as deductibles and co-pays left over after the primary and secondary claims have been processed.

Third Party Administrator (TPA): The name for the organization or individual that manages healthcare group benefits, claims, and administrative duties on behalf of a group plan or a company with a group plan.

Tax Identification Number (TIN): A unique number a patient or a company may have to produce for billing purposes in order to receive healthcare from a provider. The TIN is also known as the employment identification number (EIN).

Triple Option Plan (TOP): Also referred to as the cafeteria plan, this plan gives an enrolled individual the options to choose between an HMO, a PPO, or a traditional point of service plan for their health insurance. Some companies offer triple option plans to their employees to accommodate the needs of a diverse staff.

Type of Service (TOS): A field on a claim for describing what kind of healthcare services or procedures a provider administered.

TRICARE: TRICARE is the federal health insurance plan for active service members, retired service members, and their families, in addition to survivors of service members. TRICARE was previously known as CHAMPUS.

U

UB04: A form used by providers for filing claims with insurance companies. The UB04 form has a format similar to that of the CMS 1500 form.

Unbundling: This term refers to the fraudulent practice of ascribing more than one code to a service or procedure on a superbill or claim form when only one is necessary.

Untimely Submission: Claims have a specific timeframe in which they can be sent off to an insurance company for processing. If a provider fails to file a claim with an insurance company in that timeframe, it is marked for untimely submission and will be denied by the company.

Upcoding: Upcoding is the fraudulent practice of ascribing a higher ICD-9 code to a healthcare procedure in an attempt to get more money than necessary from the insurance company or patient.

Unique Physician Identification Number (UPIN): A unique six-digit identification number given to physicians and other healthcare personnel, which has subsequently been replaced by a national provider identifier (NPI) number.

Usual Customary and Reasonable (UCR): The UCR is the amount of money stipulated in a contract that an insurance company agrees to pay for healthcare costs. After passing the UCR a patient is typically responsible for covering their healthcare costs.

Utilization Limit: The limit per year for coverage under certain available healthcare services for Medicare enrollees. Once a patient passes the utilization limit for a service, Medicare may no longer cover them.

Utilization Review (UR): An investigation or audit performed to optimize the number of inpatient and outpatient services a provider performs.

V

V-Codes: A codeset under ICD-9-CM used to organize healthcare services rendered for reasons other than illness or injury.

W

Worker’s Compensation: Worker’s compensation is paid by an employer when an employee becomes ill or injured while performing routine job duties. Most states have laws requiring that companies provide worker’s compensation.

Write-Off: This term refers to the discrepancy between a provider’s fee for healthcare services and the amount that an insurance company is willing to pay for those services that a patient is not responsible for. The write-off amount may be categorized as “not covered” amounts for billing purposes.

Medical Billing and Coding Online