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

Medical Billing Process Step by Step

Updated Nov 03, 2023

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. The best you can do amid these challenges is to establish consistent workflows for your claims and reimbursement processes. This step-by-step guide can help with that.

1. Register the patient.

Whenever a new patient calls for a first appointment, your front-office staff will ask a series of questions about the patient’s demographics, health insurance information and other key background data. Collecting all this data is the first step of the medical billing process. 

Many guides to the medical billing process state that, once you’ve collected the patient’s information, you never need to register them again. Although you don’t need to ask a stream of questions to prior patients with every appointment, you should confirm your 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 This way, you can easily fix outdated contact and insurance information.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 rep, ask them if the patient’s coverage is valid and what benefits they receive. Inquire about deductibles and copays so you know how much to collect from the patient. 

TipBottom line

Don’t forget to check with the insurance rep about the patient’s deductibles, coverage and benefits.

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.

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. Clearly jot down the treatments, diagnoses, prescriptions and services you provide. Ideally, you’ll store this information in your electronic medical record 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. There are exceptions: In our review of athenaCollector, an outsourced billing company, we found that it requires you to keep an in-house medical biller to whom you’ll send your encounter notes.

5. Convert your medical script to ICD-10 and 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 quickly assess 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.

FYIDid you know

You have multiple highly rated medical billing services to choose from. You can learn more about the options we recommend in our review of AdvancedMD, our DrChrono review and our review of Kareo.

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. 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 fully automated software programs know exactly what to look for in your claims. 

FYIDid you know

Claim scrubbers are typically available through third-party medical billing services, though they are also accessible through some practice management systems.

Once your claims are scrubbed, it’s time to file them. 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 just 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 quickly refile your claims 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, though it can be costly and lengthy. 

If you instead see that your claim is denied because the insurer simply 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 non-reimbursed amount. Alternatively, if the patient has secondary insurance, you can submit a claim for the non-covered costs to their secondary plan.

9. Send patient statements.

If your claim submission results in a non-zero 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. Properly keeping tabs on your accounts receivable 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

According to a JAMA study, nearly 20% of Americans have medical debt in collections.

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. You’ll get paid regularly in small amounts instead of not at all, and your patient will be more likely to return. 

Max Freedman
Contributing Writer at
Max Freedman is a content writer who has written hundreds of articles about small business strategy and operations, with a focus on finance and HR topics. He's also published articles on payroll, small business funding, and content marketing. In addition to covering these business fundamentals, Max also writes about improving company culture, optimizing business social media pages, and choosing appropriate organizational structures for small businesses.
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