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The Basics of Medical Billing and Coding

Adam Uzialko
Adam Uzialko

Medical billing and coding is complicated, but it is critical to a practice's success.

  • It takes between 50 and 90 days after a claim is submitted for a medical practice to receive an insurance payment (excluding patient copays).
  • Healthcare providers usually don't receive the full amount they bill for and may receive as little as 50 cents on the dollar for each submitted claim.
  • Medical billers and coders should be certified by a well-respected organization such as the American Academy of Professional Coders (AAPC) or the American Health Information Management Association (AHIMA).

Billing is essential to any business, but few must contend with the challenges associated with medical billing. Healthcare organizations are required to navigate a labyrinth of insurance payers, patient copays and regulatory requirements, which often leads to lengthy periods between services rendered and payment. In addition, most providers receive just a fraction of the money they bill insurance companies, making it nigh impossible to estimate when revenue is coming in and how much a practice can expect to receive.

Medical billing is complicated, so understanding the process is important for medical practices, clinics, and hospitals of all sizes and specialties. This guide provides you with a basic understanding of medical coding and billing, how healthcare organizations typically handle the process, and how technological tools, such as electronic health records (EHR) software and practice management software, can automate some aspects of the billing process.

What is medical billing and coding?

Coding and billing are separate but related processes that are central to securing payment for services rendered by a healthcare provider. When a patient visits a practice, they are generally required to provide their insurance information before being seen by a doctor. The front office often runs an insurance eligibility check to confirm that the patient is covered for the medical services they will receive.

Once a patient's insurance has been verified and they have been checked in at the practice, the provider-patient encounter begins. During the exam, the doctor will create a patient note that includes diagnoses and any orders for medications, lab tests or additional procedures. Once the patient's visit is complete, the healthcare provider finalizes that note and pushes it to a medical coder.

Medical coding

Although the patient might be required to supply a copay to the practice, the medical billing process has just begun. To get paid, medical practices must submit claims to the patient's insurance provider. Claims are generated by taking the information the healthcare provider recorded in the patient's note, capturing the charges and assigning specific codes that correspond with the treatment the patient received. Codes generally come from three sources:

  • The 10th revision of the International Statistical Classification of Diseases and Related Health Problems (ICD-10), which is used to classify illnesses and diseases.
  • Current Procedural Terminology (CPT), which refers to specific medical services and procedures.
  • The Healthcare Common Procedure Coding Systems (HCPCS), which covers services and procedures not included within the CPT coding library.

Claims must be properly coded based on the services rendered during a patient encounter. The intent behind using codes to describe diagnoses, services and prescriptions is to provide a unified record that can be universally understood by healthcare facilities and insurers.

When a medical coder interprets a healthcare provider's notes, captures the charges and turns them into claims, they are creating what is known as a "superbill." Superbills contain patient information, the patient's medical history and all the coded claims associated with the encounter.

Medical billing

Once the superbill is generated, the coder hands it off to a medical biller. Billers are responsible for ensuring the superbill meets both legal and payer standards. Once a medical biller has reviewed the superbill and signed off on the claim, they generally submit the claim to a clearinghouse. Clearinghouses are third parties that "scrub" claims; that is, clearinghouses check the claim for common errors or formatting issues that often lead to rejection by payers. Since every payer has their own policies and preferences, these errors can vary depending on the insurance company ultimately responsible for paying the claim.

After checking and/or revising the claim, clearinghouses submit the claim to the payer. Payers then review the claim to determine whether it is compliant; this process is known as "claim adjudication." If the claim is accepted, the payer disburses some money (though not necessarily the full amount of the claim), which is sent to the healthcare provider (or the medical billing service that processes claims on the provider's behalf). If the claim is rejected, the payer sends it back to the healthcare provider or medical biller. Rejected claims can be revised and resubmitted to the payer for approval in a process known as "denial management."

Medical billing is a lengthy and challenging process

Naturally, this complicated process takes time. In fact, many medical practices don't see a dime (besides a patient's copay) for services rendered until up to 50 days after a claim has been submitted. In some cases, medical practices have outstanding claims for 90 days or longer. Further, once those claims are paid, a medical practice is not likely to receive the full amount it billed for in the claim.

"There's a lot of uncertainty as it relates to what services are being rendered and what exactly insurance will cover," said Dave Baxter, senior vice president at ACI Worldwide. "It's confusing. There's not a lot of clarity around what services were rendered, what insurance paid and when [a patient's] bill is due. From the provider's perspective … they're likely getting paid 50 cents on the dollar [for each claim they submitted]."

Healthcare providers, medical coders and medical billers have a tough job. There are numerous challenges with getting claims successfully adjudicated and paid. These roadblocks are baked into the system, and are obstacles that medical coders and billers must be wary of every time they manage a claim.

"There are many challenges in the billing process. It starts with eligibility. Many carriers say a patient is eligible when they may not be, which often results in claim denials," said Danielle Berlly, senior vice president of operations at Zwanger-Pesiri Radiology. "Sometimes, a carrier will pay a claim and later recoup the funds, saying they were not responsible. When this happens, it is often too late to bill the correct carrier … resulting in the practice not getting reimbursed."

Most other businesses do not have to contend with the realities of medical billing and coding. However, to operate a successful medical practice, there is no way around it. It's critical that your practice's staff can swiftly and effectively manage your revenue cycle. Otherwise, both your total revenue and cash flow will suffer.


Editor's note: Interested in outsourcing your revenue cycle management to a medical billing service? See our best picks. Fill out the questionnaire below to be contacted by our vendor partners for a consultation and quote.

Who is responsible for billing and coding at a medical office?

A successful coding and billing operation begins with experienced staff. Assembling a team of dedicated, knowledgeable medical coders and billers is a must for any healthcare organization. Who exactly is responsible for each step of the medical billing process?

  • Office staff: Staff members, particularly those responsible for patient registration, appointment-setting and insurance eligibility verification, are important components of the medical billing process. Their job is to capture accurate and up-to-date information about the patient and their insurance providers that medical billers rely on when submitting claims.
  • Healthcare provider: Doctors and nurses provide the clinical notes required for medical coders to generate claims and superbills. Accurate, easily understood notes make it easier for medical coders to generate claims that are likely to be accepted by payers on the first submission.
  • Medical coder: Professional medical coders are responsible for interpreting a provider's clinical notes to capture specific charges and then select the appropriate code associated with those diagnoses and procedures.
  • Medical billing specialist: Medical billers check to ensure claims comply with legal requirements and payer policies. They also add any relevant information about the patient and the encounter. Once a medical biller is finished reviewing each claim, they submit it to a clearinghouse for further scrubbing. Medical billers are also responsible for following up on unpaid claims and managing any claims denied by payers.

These roles might vary to a small degree across healthcare organizations. The process of each medical practice or hospital is somewhat unique, but, generally, medical billing is performed within this basic framework. The unique process in which each healthcare provider operates is known as their "workflow."

What certifications should medical coders and billers have?

If you're looking for a medical coder or biller to add to your team, your practice needs candidates that have the appropriate credentials. There are several medical billing specialist certificates out there, so knowing which ones demonstrate proven ability and a qualified skill set is essential to filling your open positions with top talent.

Groups like the American Academy of Professional Coders (AAPC) or the American Health Information Management Association (AHIMA) are among the most respected medical coding organizations. Certifications from these organizations offer valid attestations of a medical coder's ability.

What is outsourced revenue cycle management?

If hiring your own medical billing specialist or coding professional proves too expensive or difficult, you could outsource your revenue cycle management to a medical billing service.

Medical billing services remove the burden of managing the billing cycle from healthcare providers. Often, medical billing services offer electronic medical records and practice management software, meaning they can access the relevant data stored within those systems to prepare insurance claims and appeal denials.

"[Outsourcing] may be a useful solution for practices that, for various reasons, may not require a full-time medical billing staff in-house," said Joseph Glaser, a nuclear medicine physician at Zwanger-Pesiri Radiology. "This may also help when, even if there is a need for full-time services, there may be specialized issues that an outside expert may be able to help navigate, whether in a full-time capacity or in consultation for issues as they arise."

Every medical billing service is different. For example, some handle the entire revenue cycle from coding to denial management. Others only handle billing and leave the coding to the practice. Costs also vary depending on your practice's specialty, billing volume and dollar value of claims. Generally, medical billing services charge a percentage of monthly or annual collections secured on your behalf.

The best medical billing services work with your practice's billing and practice management software, allowing you to see their progress in real time. Since you are outsourcing your practice's revenue cycle management to a third party, transparency is critical. 

Medical billing is complex, but it doesn't have to be scary

Revenue cycle management is a complicated process that determines whether a healthcare provider sinks or swims. Since revenue and profitability are at stake, it's critical to get it right.

Hiring a medical billing specialist and professional coders can keep your in-house billing department rolling along smoothly. Another option is to partner with a proven medical billing service that maintains its own staff of professional coders and medical billing specialists.

Whichever method you choose, your goal should be to maximize collections and reduce the time claims spend in accounts receivable. It's easier said than done, but the goal is well within reach if you maintain good record-keeping and adhere to best practices.

Image Credit: cat-scape / Getty Images
Adam Uzialko
Adam Uzialko Staff
Adam Uzialko is a writer and editor at and Business News Daily. He has 7 years of professional experience with a focus on small businesses and startups. He has covered topics including digital marketing, SEO, business communications, and public policy. He has also written about emerging technologies and their intersection with business, including artificial intelligence, the Internet of Things, and blockchain.