Understanding Medical Billing

The medical billing process involves the patient, the doctor, and the insurance company. Claims are submitted to insurance companies and followed up in order to receive payment from a healthcare provider. The medical billing process is uniform regardless of the insurance company being private or government-owned.

The Process

The process mostly warrants an interaction between the insurance company and the health provider. The health provider will update a client's medical file after each visit. The diagnosis is used and encoded by a medical biller. From the diagnosis and the encoding comes the billing record.

The billing record is then sent either to an intermediary source or goes directly to the insurance company. The use of an intermediary can be beneficial because they will 'edit' a claim if it does not meet the criteria stated by the insurance company. The insurance company processes the claim in order to make payment.

The process of payment involves a series of 'tests' conducted by the insurance company. The 'tests' cover patient eligibility for payment, provider credentials, and the necessity for medical assistance. If the series of test are passed, the insurance company pays the claim. If request is rejected, it is sent back to the health provider. The rejection must be resolved by the health provider or the patient with the insurance company (such as changing their status or package). This process may be repeated several times until the bill is paid in full. The occurrence of rejections, denials, and underpayments is of a high rate (almost 50%) because of processing errors and the intricacies of claims.

Payment

There are a large number of insurance companies and plans that patients have, so doctors must be familiar with all insurance carriers and the plans they provide. The health care provider is paid according to each contract with individualized fee schedules, billing rules, and addresses.

The original charge of a visit is reduced depending on the agreement made by the health care provider and insurance company. The price paid by the insurance company is called the allowable. An Explanation of Benefits (EOB) is given to the patient after the visit is paid for by the insurance company outlining the diagnosis, charge, and coverage by the insurance company.

The payment may be less if the patient has copay, deductible, or coinsurance. Depending on the rate of copay, the insurance company pays a certain amount (depending on the size of the bill) and the patient pays a set copay price. A patient will pay off their visit depending on the set number of their deductible and then the insurance would pay a portion of the charge. Coinsurance involves a specified number that the patient must pay. 'Participating' Medicare physicians receive 80% of the allowable payment from the insurance companies and the other 20% the patient will be responsible for. 'Nonparticipating' physicians receive 80% of the fee, but will charge the patient 15% or more on the scheduled amount