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Common Medical Billing Terminology Explained

Multiple medical billing terminologies are used in the medical bill and the associated insurance documents, which are confusing. The most commonly used medical billing terms that occur as part of patient bills are described below. You shall have a sound understanding of the medical billing terminology so that you know about the common billing facts and procedures on repeat. Medical billing services can never complete without using the billing terminologies during claim write-up. Even if you get a detailed medical bill, you can easily explain most of the billing terms to your medical staff and patients.

Medical Billing Terminology - Essential Part of Patient’s Bills

If you are a healthcare provider, then it is necessary for you to have an in-depth understanding of the common medical billing terminology. These terminologies are helpful to cater to every patient according to their active insurance plan. Moreover, having sound billing knowledge helps your medical team cover the mandatory steps for a successful medical billing process. The following are the most common billing terminologies that are seen as an integral part of every patient’s bills:

CLEARINGHOUSE

A third-party organization that acts as a billing provider. Its role in establishing the billing operation is different for both the provider and the payer. Clearinghouse is responsible for reviewing and making relevant claim edits before final submission to the payers as the result of a process known as “scrubbing.”

EXPLANATION OF BENEFITS (EOB)

EOB is not a bill but a document given to the patient by the insurers explaining how a submitted claim underwent the reimbursement procedure compared to the healthcare insurance coverage. It has the complete list of medical services forwarded by the provider for payment. It covers the codes that identify the medical procedures acquired by the patient. The healthcare treatment costs either appear under active insurance coverage or out-of-pocket charges.

CPT CODES

CPT stands for current procedural terminology. These codes are the medical procedures delivered to patients that appear in the form of codes.

ICD-10 CODES

ICD stands for the international classification of disease codes. These are the codes that present the reason behind every billed procedure. In addition, the ICD-10 and CPT codes help insurers to understand the actual healthcare services delivered to the patients. This saves the time and effort of the insurance company with accurate determination of insurance payments parallel to the acquired medical treatments.

BILLED AND ALLOWED AMOUNTS

After claims submission, a provider submits the bill for that healthcare service. That bill discloses the bill for every service. If the provider comes within your existing insurance plan, he may charge you more than the amount reimbursed by the payers. The fee that insurers shall pass to the providers as per the submitted claim and active insurance plan is called the allowed amount.

DEDUCTIBLE

The deductible is the set amount of money that you’re responsible for paying so that your insurance plan can cover the medical service in any given policy year.

COPAY

A copay is a fixed fee that a patient is responsible for paying for a medical service. Copays include medical services like tests, urgent visits, and emergency room influx.

COINSURANCE

Coinsurance is part of the patient deductible that indicates the percentage of the amount a patient needs to pay for any medical service.

COST-SHARING

Cost-sharing describes the fee you’re responsible for paying as per your active insurance policy. It includes coinsurance, copays, and deductibles.

OUT-OF-POCKET MAXIMUM

You need to pay the maximum amount for covered medical services in a certain policy year. On reaching the maximum limit of your out-of-pocket deductibles, your insurance plans get 100% accredited for the remainder of medical services at the end of a certain policy year. It’s essential to track your payments to acquire the total cost from the insurers.

INELIGIBLE SERVICES

Ineligible services are those that aren’t covered by your healthcare plan for a certain reason. The reason for an under-covered medical service is that it is excluded, bundled, or out-of-network.

BUNDLING

Every procedure contains a particular code. The procedure codes add up in the form of patient bills so the provider can get paid in total. The bundled codes must be paid altogether. It is also possible for you to find an EOB that is not paid separately because it is a service that was already paid by the insurance provider.

EXPERIMENTAL OR INVESTIGATIONAL SERVICE

An insurance payor can deny service for its reimbursement if it results in experimental or investigational patient outcomes. This indicates that medical practice still does not recognize the services provided. Or it can be any medical treatment that is unacceptable under FDA regulations.

MEDICAL NECESSITY

Insurers deny claims containing medical necessity that do not fall within the provider’s legal bounds. Insurers usually do not cover medical necessity due to a particular medical condition. So a medical provider always needs to demonstrate the necessity for such problematic healthcare treatments.

COORDINATION OF BENEFITS (COB)

Coordination of benefits is the process that medical insurers often use to determine the priority for each medical claim. This helps you determine each healthcare treatment’s value based on the primary or secondary medical requirements. Also, if a medical insurer deals with more than one health insurance policy.

APPEAL

It is the process of encouraging insurance companies to pay for denied medical claims. A claim appeal is initiated only if it is denied or rejected.

ASSIGNMENT OF BENEFITS (AOB)

Most insurers directly pay the medical provider for the healthcare services they have provided to their patient. The assignment of benefits always results in successful claim processing.

Conclusion

Medical billing services have a great role in determining the success of every claim reimbursement. At the same time, your practice shall stay knowledgeable about the medical billing terminology that your practice needs for better claim understanding. An insightful knowledge of the billing terms helps the medical practice distinguish every patient based on their insurance coverage.

Frequently Asked Questions

What is AP AR billing?

Accounts payable (AP) includes short-term liabilities and obligations for the medical services acquired. Accounts receivable (AR) is the amount the healthcare provider expects to acquire from insurers. AR means the total asset on the patient’s balance sheet.

What is the difference between AP and GL?

The difference is that accounts payable have the track of just debts and liabilities, while the general ledger tracks the incoming and outgoing revenue stream.

What is the full form of AR in medical billing?

Accounts Receivable (AR) is the amount a provider needs from the insurance companies for the medical care given to patients.