American Medical Billing Association

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Reimbursement Specialist certification
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What is medical billing?

Medical billing is a payment process within the United States healthcare system. This process involves a medical biller submitting, and following up on, claims with health insurance companies in order to receive payment for services rendered. Such services can include treatments and investigations. The same process is used for most insurance companies, whether they are private companies or government sponsored programs like Medicare and Medicaid. Medical coding reports indicate the diagnosis and treatment, to which prices are applied accordingly. Medical billers are encouraged, but not required by law, to become certified by taking an exam, such as the CMRS Exam (Certified Medical Reimbursement Specialist). Certification schools are intended to provide a theoretical education for students entering the medical billing field. Some community colleges in the United States offer certificates, or even associate degrees, in the medical billing field. Those seeking advancement may be cross-trained in medical coding, transcription, auditing, or credentialing.


For several decades, medical billing was done almost entirely on paper. However, with the advent of medical practice management software, also known as health information systems, it has become possible to efficiently manage large amounts of claims electronically. Many software companies have aspired to provide medical billing software to this particularly lucrative segment of the market. Due to the rapidly changing requirements by U.S. health insurance companies, several aspects of medical billing and medical office management have created the necessity for specialized training. Medical office personnel may obtain CMRS certification through the American Medical Billing Association and be awarded a certification credential to reflect professional status.

Medical Billing Process

The medical billing process is an interaction between a healthcare provider, a medical biller, and the insurance company (payer). The entirety of this interaction is known as the billing cycle and sometimes referred to as Revenue Cycle Management. Revenue Cycle Management involves managing claims, billing, and payment.  This process can take anywhere from several days to several months to complete.  It can also require several interactions before a resolution is reached. The relationship between a healthcare provider > medical biller > and insurance company is comparable to a service vendor > collections intermediary > payer, respectively. Healthcare providers are contracted with insurance companies to provide healthcare services for an agreed upon amount. The interaction begins with the office visit: a physician or their staff will typically create or update the patient's medical record.  After the doctor sees the patient, the diagnosis and procedure codes are assigned. These codes assist the insurance company in determining coverage and medical necessity of the services. Once the procedure and diagnosis codes are determined, the medical biller will transmit the claim to the insurance company (payer).  The insurance company (payer) processes the claims utilizing medical claims examiners or medical claims adjusters. For higher dollar claims, the insurance company has medical directors review the claims and evaluate their validity for payment.  Approved claims are reimbursed for a certain percentage of the billed services. These rates are pre-negotiated between the healthcare provider and the insurance company. Failed claims are denied or rejected, and notice is sent to provider. Most commonly, denied or rejected claims are returned to providers in the form of Explanation of Benefits (EOB) or Electronic Remittance Advice.  Upon receiving the denial, the medical biller must decipher the message, reconcile it with the original claim, make required corrections and resubmit the claim. This exchange of claims and denials may be repeated multiple times until a claim is paid in full, or the healthcare provider relents and accepts an incomplete reimbursement.  There is a difference between a “denied” and a “rejected” claim, although the terms are commonly interchanged. A denied claim refers to a claim that has been processed and the insurer has found it to be not payable. A denied claim can usually be corrected and/or appealed for reconsideration. Insurers have to tell you why they’ve denied your claim and they have to let you know how you can dispute their decisions.  A rejected claim refers to a claim that has not been processed by the insurer due to a fatal error in the information provided. Common causes for a claim rejection include when personal information is inaccurate (i.e.: name and identification number do not match) or errors in information provided (i.e.: truncated procedure code, invalid diagnosis codes, etc.) A rejected claim has not been processed so it cannot be appealed. Instead, rejected claims need to be researched, corrected and resubmitted.

Electronic billing

A practice that has interactions with the patient must now under HIPAA send most billing claims for services via electronic means. Prior to actually performing service and billing a patient, the healthcare provider may use software to check the eligibility of the patient for the intended services with the patient's insurance company. This process uses the same standards and technologies as an electronic claims transmission with small changes to the transmission format.  A response to an eligibility request is returned by the payer through a direct electronic connection or more commonly their website. Most practice management/billing software’s will automate this transmission, hiding the process from the user. The payer will ultimately respond showing the line-items of the claim that will be paid or denied; if paid, the amount; and if denied, the reason.


In order to be clear on the payment of a medical billing claim, the healthcare provider or medical biller must have complete knowledge of different insurance plans that insurance companies are offering, and the laws and regulations that preside over them. Large insurance companies can have up to 15 different plans contracted with one provider. When providers agree to accept an insurance company’s plan, the contractual agreement includes many details including fee schedules which dictate what the insurance company will pay the provider for covered procedures and other rules such as timely filing guidelines.  Providers typically charge more for services than what has been negotiated by the physician and the insurance company, so the expected payment from the insurance company for services is reduced. The amount that is paid by the insurance is known as the allowable amount.  For example, although a doctor may charge $80.00 for an office visit, the insurance may only allow $50.00, and so a $30.00 reduction (known as a "provider write off" or "contractual adjustment") would be assessed.  After payment has been made, a provider will typically receive an Explanation of Benefits (EOB) or Electronic Remittance Advice (ERA) along with the payment from the insurance company that outlines these transactions. The insurance payment is further reduced if the patient has a copaydeductible, or a coinsurance. If the patient in the previous example had a $5.00 copay, the physician would be paid $45.00 by the insurance company. The physician is then responsible for collecting the out-of-pocket expense from the patient. If the patient had a $500.00 deductible, the contracted amount of $50.00 would not be paid by the insurance company. Instead, this amount would be the patient's responsibility to pay, and subsequent charges would also be the patient's responsibility, until their expenses totaled $500.00. At that point, the deductible is met, and the insurance would issue payment for future services.  A coinsurance is a percentage of the allowed amount that the patient must pay. It is most often applied to surgical and/or diagnostic procedures. Using the above example, a coinsurance of 20% would have the patient owing $10.00 and the insurance company owing $40.00.  Steps have been taken in recent years to make the billing process clearer for patients.  Additionally, as the Consumer-Driven healthcare movement gains momentum, payers and providers are exploring new ways to integrate patients into the medical billing process in a clearer, more straightforward manner.

Medical billing services

In many cases, particularly as a practice grows, providers outsource their medical billing to a third party known as a medical billing company. One goal of these entities is to reduce the amount of paperwork for a medical staff and to increase efficiency, providing the practice with the ability to grow. The billing services that can be outsourced include: regular invoicing, insurance verification, collections assistance, referral coordination and reimbursement tracking.   Healthcare billing outsourcing has gained popularity because it has shown a potential to reduce costs and to allow physicians to address all of the challenges they face daily without having to deal with the daily administrative tasks that consume time.  Medical billing regulations are complex and often change. Keeping your staff up to date with the latest billing rules can be difficult and time-consuming, which often leads to errors. Another main objective for a medical billing company is to use its expertise and coding knowledge to maximize insurance payments. It is the responsibility of the chosen medical billing service to ensure that the billing process is completed in a way that will maximize payments and reduce denials. Payment posting is an important part of the medical billing process.

What is a medical coder?

A medical coder assigns numeric codes to represent diagnoses and procedures, describe patient treatment and delineate fees for health services, based on an official classification system (e.g., CPT-4, ICD-9/10, HCPC). Medical Coders are responsible for evaluating documentation to assure correct code selection for compliance with federal regulations and insurance requirements. Medical coders work in hospitals, insurance companies, and physician offices under the supervision of the health information manager or chief fiscal officer. Some medical coders are self-employed and contract for their services. Their work is used by risk managers, utilization reviewers, quality assurance experts, case managers, clinical managers, and other healthcare providers.

What is ICD?

ICD is the International Classification of Diseases and is the foundation for the identification of health trends and statistics globally, and the international standard for reporting diseases and health conditions. It is the diagnostic classification standard for all clinical and research purposes. ICD defines the universe of diseases, disorders, injuries and other related health conditions, listed in a comprehensive, hierarchical fashion that allows for: 
- easy storage, retrieval and analysis of health information for evidenced-based decision-making;
- sharing and comparing health information between hospitals, regions, settings and countries; and
- data comparisons in the same location across different time periods.

Uses include monitoring of the incidence and prevalence of diseases, observing reimbursements and resource allocation trends, and keeping track of safety and quality guidelines. They also include the counting of deaths as well as diseases, injuries, symptoms, reasons for encounter, factors that influence health status, and external causes of disease.  ICD-10 is the most recent version, with ICD-11 expected in 2018.

What is CPT?

The CPT® (Current Procedural Terminology) coding system offers doctors across the country a uniform process for coding medical services that streamlines reporting and increases accuracy and efficiency. For more than 5 decades, physicians and other health care professionals have relied on CPT to communicate with colleagues, patients, hospitals and insurers about the procedures they have performed.

CPT descriptive terms and identifying codes currently serve a wide variety of important functions. This system of terminology is the most widely accepted medical nomenclature used to report medical procedures and services under public and private health insurance programs. CPT is also used for administrative management purposes such as claims processing and developing guidelines for medical care review.

The uniform language is also applicable to medical education and research by providing a useful basis for local, regional and national utilization comparisons.

CPT® is a registered trademark of the American Medical Association. Copyright American Medical Association. All rights reserved.

What is HCPCS?

The Healthcare Common procedure Coding System (HCPCS) is divided into two principal subsystems, referred to as level I and level II of the HCPCS.

Level I of the HCPCS is comprised of Current Procedural Terminology (CPT-4) , a numeric coding system maintained by the American Medical Association (AMA). The CPT-4 is a uniform coding system consisting of descriptive terms and identifying codes that are used primarily to identify medical services and procedures furnished by physicians and other health care professionals. These health care professionals use the CPT-4 to identify services and procedures for which they bill public or private health insurance programs. Level I of the HCPCS, the CPT-4 codes, does not include codes needed to separately report medical items or services that are regularly billed by suppliers other than physicians.

Issues related to the application of Level I HCPCS codes (CPT-4) for physicians will be referred to the AMA. See Related Links Outside CMS below. CPT® is a registered trademark of the American Medical Association. Copyright American Medical Association. All rights reserved.

Level II of the HCPCS is a standardized coding system that is used primarily to identify products, supplies, and services not included in the CPT-4 codes, such as ambulance services and durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) when used outside a physician's office. Because Medicare and other insurers cover a variety of services, supplies, and equipment that are not identified by CPT-4 codes, the level II HCPCS codes were established for submitting claims for these items.

What is CDT?

The purpose of the CDT Code (Code on Dental Procedures and Nomenclature) is to achieve uniformity, consistency and specificity in accurately documenting dental treatment. One use of the CDT Code is to provide for the efficient processing of dental claims, and another is to populate an Electronic Health Record.

On August 17, 2000 the CDT Code was named as a HIPAA standard code set. Any claim submitted on a HIPAA standard electronic dental claim must use dental procedure codes from the version of the CDT Code in effect on the date of service. The CDT Code is also used on paper dental claims, and the ADA's paper claim form data content reflects the HIPAA electronic standard.

What is NDC?

The Drug Listing Act of 1972 requires registered drug establishments to provide the Food and Drug Administration (FDA) with a current list of all drugs manufactured, prepared, propagated, compounded, or processed by it for commercial distribution.  (See Section 510 of the Federal Food, Drug, and Cosmetic Act (Act) (21 U.S.C. § 360)). Drug products are identified and reported using a unique, three-segment number, called the National Drug Code (NDC), which serves as a universal product identifier for drugs. FDA publishes the listed NDC numbers and the information submitted as part of the listing information in the NDC Directory which is updated daily.

The information submitted as part of the listing process, the NDC number, and the NDC Directory are used in the implementation and enforcement of the Act.

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