receives compensation from some of the companies listed on this page. Advertising Disclosure
BDC Hamburger Icon


BDC Logo
Search Icon
Updated May 01, 2024

Medical Billing Process Step by Step

The medical billing process can be complicated. Follow this step-by-step process to ensure you do it correctly.

author image
Max Freedman, Senior Analyst & Expert on Business Operations
Verified CheckEditor Verified
Verified Check
Editor Verified
A editor verified this analysis to ensure it meets our standards for accuracy, expertise and integrity.

Table of Contents

Open row

The medical billing process can be frustrating. Converting your patient notes to numbered claims can introduce human error and insurers can be strict about how claims are formatted for approval. Even if your claims are approved, insurers rarely pay immediately.

Below, find our step-by-step guide to efficient medical billing for your practice.

The 10 steps in the medical billing process

To stay on top of the medical billing cycle, you need to establish consistent workflows for your claims and reimbursement processes. To do that, follow these 10 steps.

1. Register the patient.

As we explain in our best medical billing tips article, your front office staff will ask a series of questions about the patient’s demographics, health insurance information and other key background data whenever a new patient calls for a first appointment. Collecting all this data is the first step of the medical billing process for all healthcare providers. 

After you’ve done this the first time, you shouldn’t need to do it again. However, when you do hear from them in the future, make sure your front office team confirms their most recent records. This way, you can easily fix outdated contact and insurance information.

2. Verify the patient’s insurance.

Insurance verification can be quite simple. After collecting the patient’s insurance information, contact the patient’s insurer to confirm the data.

Typically, a patient’s insurance card will include a phone number that you can call to verify the data. When you reach an insurance representative, ask them if the patient’s coverage is valid and what benefits they receive. Inquire about deductibles, copays, coverage and benefits so that you know how much to collect from the patient. 

In some cases, a patient’s insurance plan won’t entirely cover your services. If the patient has secondary insurance, you should contact the secondary insurer to see whether they’ll pick up the remainder of the bill. Otherwise, you’ll need to alert the patient to their financial responsibility, ideally before their appointment. This way, they can cancel if your costs are beyond their budget.

TipBottom line
Check if a patient has gap insurance from their employer as this can cover costs not included in the primary insurance.

3. Record notes diligently during your patient encounter.

You’ll need to take notes during or immediately after the patient’s visit for medical coding. Jot down the treatments, diagnoses, prescriptions and services you provide clearly. Ideally, you’ll store this information in your electronic medical record (EMR) system. 

4. Send your encounter notes to your medical billing team.

Once you’ve completed your encounter notes, convert them to a formal medical script to make sure other people can read your notes.

If you’ve voice-recorded any of your notes without using voice-to-text tools, you’ll need to transcribe them before sending them to your medical billing team. Chances are you won’t have the time to do this yourself, so you might delegate the work to your front office staff. Alternatively, you can outsource this work to a medical transcription service. 

If you handle all your billing in-house, you’ll send your medical script to your front office staff. If you outsource your medical billing, you’ll typically send your script to your third-party billing service.

5. Convert your medical script to ICD-10 and Current Procedural Terminology (CPT) codes.

Eventually, your medical scripts will find their way to medical coders. These experts translate your treatments, diagnoses, prescriptions and other key information into standardized ICD-10 and CPT codes. Insurers then use these codes to assess quickly whether they’ll reimburse your services based on the patient’s health plan. These codes will eventually go into a medical claim alongside your charges and the patient’s demographic information.

Some practices hire in-house coders to work full time on claims coding. Others outsource their medical coding needs to third-party medical billing services. This choice often requires a cost-benefit analysis. Medical billing and coding are quite time-consuming and error-prone, but the percentage of your collections you’ll pay for outsourced billing can be high.

Did You Know?Did you know
There are two types of treatment codes used on medical scripts. Level 1 codes use CPT-4 codes, have five digits and deal with physician services. Level 2 codes start with either an A or a V followed by four digits and are for nonphysician services and supplies.

6. Add charges to your medical claims.

Although medical services are standardized through codes, the fees aren’t standardized. You’ll need to enter your charges in your claims when generating invoices. For example, if you charge $300 for primary care visits, you’ll list $300 alongside the CPT code for primary care visits in your claims.

If your patient is responsible for covering any part of your services, you must indicate the amount the insurer will cover alongside your charges. This way, payers know how much to deduct from their reimbursements so you don’t get paid twice for the same service.

7. Scrub and file your claims.

Given all the codes and numbers that go into claims, errors are frequent. With claim scrubbers on your side, you can catch most, if not all, of these errors before you file your claims. These

FYIDid you know
Typically, claim scrubbers are available through third-party medical billing services, although they are also accessible through some practice management systems.

Once your claims are scrubbed, it’s time to submit your patients’ medical insurance claims.

If your patients are on Medicare or Medicaid, you can typically file your claims directly with these government payers. If you have strong relationships with one to three payers, you may find direct filing easier. In all other cases, going through a clearinghouse is best. These third-party organizations will take your scrubbed claims and reformat them for the appropriate payer. This way, you won’t face rejected claims because you submitted a claim in one payer’s format to another payer.

8. Keep an eye on payer adjudication.

Once the payer receives your claim, the adjudication process begins. Through this process, the payer decides how much, if any, of the claim you’ll be reimbursed for and whether your claim will be approved, rejected or denied. Rejections often result from errors in coding rather than a payer’s decision not to reimburse you. Your rejections will often come with instructions on how to rectify your errors. With these instructions, you can refile your claims quickly and (hopefully) be reimbursed.

Of course, even if your claims are squeaky clean, insurers can deny them. In this case, your billing team should review the payer’s decision, which will often be detailed, for potential inaccuracies. If you spot any errors, you can begin the appeals process, although it can be costly and lengthy. 

Instead, if you see that your claim is denied because the insurer doesn’t cover your services, you have two options. You can alert the patient to the denial and indicate that they now owe you the nonreimbursed amount. Alternatively, if the patient has secondary insurance, you can submit a claim for the noncovered costs to their secondary plan.

Bottom LineBottom line
If a clearinghouse or insurer denies your claim, you may have to revise and resubmit your claim with additional supporting evidence or rewrite it in its entirety.

9. Send patient statements.

If your claim submission results in a nonzero balance for a patient who doesn’t have secondary insurance, you must send the patient a statement detailing their charges. You should also send an explanation of benefits detailing what the patient does and doesn’t get with their insurance plan. This way, they know why they still owe you money despite having insurance. 

Alongside your patient statements, you should send payment instructions and due dates. You can also include information on how the patient can appeal the claim denial if they feel so inclined. Often, medical practices or their outsourced billing teams manage denials, but the patient may still want to file appeals on their own.

10. Pursue payment.

If your claim was approved, you’ll pursue payer reimbursement. Keep in mind that much time can pass between claims approval and reimbursement. Keeping tabs on your accounts receivable properly will help you know which claims have gone too long without being paid. You should follow up on these claims until you receive payment.

For denied claims, payment responsibility lies with the patient. Your medical billing team should follow up with the patient until they pay. In the rare event that the patient continues not to pay, you may want to consider sending the patient to a debt collection agency.

Did You Know?Did you know
About 19.8 percent of Americans have medical debt in collections, according to the American Cancer Society.

Sending a patient to collections should be a last resort. Healthcare is often expensive, so try to sympathize with the patient. A long-term monthly payment plan that puts the patient’s debts within their budget can be a good option and may help you gain a reputation for good customer relationship management with your patients. You’ll get paid regularly in small amounts instead of not at all and your patient will be more likely to return. 

Best medical billing software

You have multiple highly rated medical billing services to choose from. Below, read summaries of five of the leading platforms followed by a link to a full review of each.


athenahealth offers a robust medical billing system for medical practices. After medical billing information has been uploaded to the system, it scrubs all claims within a few seconds for faster payment turnaround. You benefit from a refund if the service doesn’t manage 95 percent of medical denials within 10 business days. Users struggling to achieve high levels of acceptance also receive on-platform help in replicating the top practices’ performances.

Read our latest athenahealth review


DrChrono’s EMR integrates patient chart data into its billing module and automatically captures charges during patient encounters with the option to add CPT and ICD-10 codes. We also liked the billing module on the platform with its live claims feed showing a real-time overview of claim status, payments and adjustments. Practices on the Apollo Plus package benefit from access to DrChrono’s in-house billing team which has an average 96 percent clean claims rate and a 48-hour turnaround on denials.

Read our complete DrChrono review.

Tebra (formerly Kareo)

Tebra’s Parallels app collects and stores data in a billing workflow and makes the review of patient insurance details, claims dates, medical codes and diagnoses easier. We loved the TriZetto claim scrubbing feature and the Track Claims Status tool for tracking payments that are due and overdue as well as identifying rejected claims. The Apply Payment function is also very useful in generating patient statements and bills if they still owe money after insurance reimbursements have been applied to their account.

Read our comprehensive Tebra review.


CareCloud’s advanced billing modules are easy to use and feature several tabs for unbilled visits, book patient appointments and more. For unbilled visits, medical teams can see which patients have been checked out but remain unbilled. When charts are signed off and go to the billing team, CareCloud’s CollectiveIQ claims scrubber cleans all claims prior to going to the clearing house. Their impressive Concierge outsources your medical billing services and the company claims that this will increase practice collections by 7 percent.

Read our detailed CareCloud review.


The billing platform on AdvancedMD is impressive. Integrated with both TriZetto and Waystar clearinghouse (fees included in your monthly tariff) and containing CPT and ICD-10 codes, in-house teams can submit their claims for payment directly or use their certified billers and claim scrubbing software (96 percent first-pass rate reported). There is a handy integration with payment services processors for taking patient copays and card transactions during appointments.

Read our latest review of AdvancedMD.

Mark Fairlie contributed to this article.

author image
Max Freedman, Senior Analyst & Expert on Business Operations
For almost a decade, Max Freedman has been a trusted advisor for entrepreneurs and business owners, providing practical insights to kickstart and elevate their ventures. With hands-on experience in small business management, he offers authentic perspectives on crucial business areas that run the gamut from marketing strategies to employee health insurance. Freedman's guidance is grounded in the real world and based on his years working in and leading operations for small business workplaces. Whether advising on financial statements, retirement plans or e-commerce tactics, his expertise and genuine passion for empowering business owners make him an invaluable resource in the entrepreneurial landscape.
BDC Logo

Get Weekly 5-Minute Business Advice

B. newsletter is your digest of bite-sized news, thought & brand leadership, and entertainment. All in one email.

Back to top