How to File Medical Claims

What are medical claims?

Medical claims are invoices that a medical services provider submits to insurers so they’ll be reimbursed for their patients’ services and procedures. The invoice could include the following details:

• Visit summary
• Diagnosis
• Treatment
• Prescriptions
• Any medical devices or supplies used to treat them
• Follow-up treatments (such as therapy)
• Medical transportation
• Special assistance 

A medical claim also includes relevant medical codes assigned to various diagnoses, procedures and services; the names and details of the attending physician or healthcare practitioner (such as a therapist or social worker); and the total charge for that visit. 

If an insurance company or clearinghouse denies your claims, the medical service provider will need to gather more information and begin an appeals process, potentially revising a claim with supporting evidence or rewriting it.

What information does a medical claim file contain?

Each medical claim has two parts: the claim header and the claim details.

• Claim header: A claim header summarizes the claim. It includes protected health information, like the patient’s date of birth, gender and ZIP code. Additional details include the primary diagnosis code, the diagnosis-related group, inpatient procedures (if any), the name of the patient’s insurance provider, the National Provider Identifier (NPI) for the doctor and healthcare facility, and the total charge for the visit.
• Claim details: Claim details make up the body of the bill. These details include the procedure code and the corresponding diagnosis code, the date of the visit, and the National Drug Code, if applicable. This section also contains the doctor’s NPI number and the total charge for the medical services provided.

How does the medical claims payment process work?

The medical claims billing and payment process follows these steps: 

1. Providers submit an invoice. A medical provider, such as a physician, submits an invoice to their billing department. In the billing department, the invoice is appended with the appropriate ICD-10 diagnosis and CPT treatment codes (and code modifiers, if necessary).
2. A superbill is created. A billing specialist documents summaries of a patient’s visit with applicable diagnosis and treatment codes on a superbill — a detailed invoice outlining the services the patient received. Some physicians will check or circle the diagnosis and treatment codes directly on the superbill.
3. The invoice is checked for errors. Medical billing specialists typically use medical billing software to check the superbill and insurance information for flaws, such as code mistakes or formatting errors.
4. An electronic claim is created. Billing personnel generate an electronic claim and submit it to a third-party medical claims clearinghouse or directly to an insurance provider.
5. Denials are investigated. If there are problems with the bill, the medical billing specialist follows up to find out what went wrong. If they find an obvious error, they may correct and resubmit the bill. If a claim is denied, billing personnel may need to submit an appeal with supporting evidence to the payer.
6. The payer sends remittance. The payer sends remittance to the medical provider; a remittance advice statement from the insurer usually accompanies the remittance and serves as a receipt. In cases of patient responsibility, such as copays and coinsurance, the supplier sends the patient a statement.
7. Unpaid claims are investigated. Unpaid delinquent accounts are turned over to a collections agency, or other debt collection measures may begin. 

What is a medical claims clearinghouse?

A medical claims clearinghouse is a third-party intermediary between a doctor’s billing department and the insurance company. After the medical billing department submits a claim, the medical clearinghouse uses special software to scrub, standardize and screen the claim before sending it to the payer.

A medical claims clearinghouse checks a submitted claim for medical billing and coding errors, formatting, HIPAA standards and more. It may correct the claim, ask the medical services provider for more information, or return the claim for further revisions.

Which forms are used for medical claims?

While filing medical claims, you’ll encounter the following forms: 

• CMS-1500, UB-04 and CMS 1450: The CMS-1500 and UB-04 are forms used to process medical claims. CMS-1500 forms are used for noninstitutional healthcare facilities, such as private practices. The UB-04 and CMS-1450 forms are variations of the CMS-1500 that are used by institutional healthcare facilities, such as hospitals.
• 835 and 837: Form 837 or EDI (the claim’s electronic record) is the medical claim prepared for reimbursement. Form 835 is the receipt, where the insurer paraphrases the claim and either accepts or denies it. It may take weeks, if not months, for the billing department to receive the reimbursement in their bank account.
• EOB, EFT and ERA: Once insurers process your medical claims, you’ll receive one or more of the following:
  • The explanation of benefits (EOB) is the document that tells you the medical claim was processed. Details include which healthcare provider processed it, what it was for, whether it was approved and for how much. 
  • Electronic funds transfer (EFT) is where the insurer wires the remittance directly to the provider’s bank account.
  • Electronic remittance advice (ERA) is the electronic version of the EOB. If the claim is approved, an ERA often accompanies the EFT.

What could go wrong with a medical claim?

Most bills are accepted the first time they’re submitted. The average denial rate for medical practices is only about 5 percent. You can increase your chances of acceptance with these four medical billing tips and best practices:

• Check the patient’s details. Are the patient’s name, address and policy number correct? Most claims are rejected because the patient’s identifiers are incomplete or misspelled.
• Use quality medical software. Use quality software to check and process medical claims. Humans tend to make errors, but software is more accurate. Use medical records management software to generate custom forms, and check those forms for coding or other errors before you submit them to the insurer.
• Train staff. Coding updates and HIPAA regulations change frequently. Keep your staff trained and updated on these changes.
• Stay abreast of trends. Regularly follow medical journal reports on why denials occur.

Why are claims rejected? 

Even if medical claims undergo multiple checks for formatting, coding or other errors, the payer may still reject them or ask for adjustments. Payers typically reject claims for one of three reasons.

• Administrative errors: The claim has incomplete information, a data mismatch or typos.
• Coding errors: Incorrect diagnoses or treatment codes are found.
• Documentation errors: There could be a missing provider signature, a missing or incorrect date, illegible documentation, or illegible provider signatures without signature logs.

The payer may also reject a claim if a patient uses an out-of-network provider, fails to obtain preauthorization, or has expired coverage. The insurer may also deem the medical service unnecessary or judge that the patient should have received less-expensive treatment. 

Some medical claims errors, usually administrative, are found during the clearinghouse check. Others, especially documentation errors, are detected in the last stage when inspected by the insurer. 

Reason codes and insurance adjustments

If an insurer sends an adjusted reimbursement that’s different from the amount billed, it will contain specific codes.

• Claim adjustment reason codes explain why a claim was paid differently than billed.
• Remittance advice remark codes provide an additional explanation for the adjustments described by the claim adjustment reason code.

How do you appeal a denied claim?

Each insurance company has its own appeals process. Some ask that the provider complete and sign a form. Others may accept a letter of appeal with supporting evidence and provide further instructions. Some providers may direct you to their online appeal process, where you’ll likely upload additional information. 

Medicare and government payers typically direct you to standard appeal forms, such as the CMS-20027 Medicare Redetermination Request Form.

Successful claims adjudication involves five steps:

1. Confirm that the claim contains no duplicate charges.
2. Ensure that the claim contains all relevant details, with no typographical errors, illegible content or inaccurate data.
3. Check for correct codes with no contradictions or inconsistencies.
4. Confirm that the doctor and clinic location are in the insurer’s network and that the patient is a member with an active insurance plan.
5. Inspect whether the billed items are medically necessary, in line with industry best practices, and safe for the patient. Ensure that insurance benefits cover the services the patient received.

Best billing software for filing medical claims

The best medical billing services can help you file accurate claims and get paid sooner. Here are a few of our favorites. 

AdvancedMD

AdvancedMD’s extremely customizable medical billing software boasts extensive code libraries and smooth clearinghouse integration. It offers free, 24/7 customer support and a self-service customer portal called Hub, where users can ask and answer questions. Our review of AdvancedMD details the platform’s claim scrubbing and remittance review features.

athenahealth

athenahealth has impressive features, including automatic billing rule updates and the ability to compare billing data and financial and clinical outcomes with those of other similar medical practices. It boasts an intuitive, easy-to-learn platform and customizable reporting. Our athenahealth review explains how this platform offers medical providers feedback on optimizing their practices. 

CareCloud

CareCloud includes three service tiers and sub-tiered payment packages to accommodate various budgets and practice priorities. One of CareCloud’s most impressive features is its claims scrubbing. It leverages a billing engine called CollectiveIQ, which helps to remove patient-identifying info before submission to increase first-pass claim rates. Read our CareCloud review to learn more.

DrChrono

DrChrono is a budget-friendly option that efficiently manages the entire billing process. It boasts a first-pass claim rate of 96 percent, and practices will appreciate that denied claims are handled directly by DrChrono’s billers and coders. Our review of DrChrono explains how practices can track claim progress via the platform’s live claims feed and review billing dashboards for financial insights.  

Tebra

Tebra is known for its versatility in working with billing partners across different specialties. It’s also praised for its user-friendly design, which requires minimal training and nests essential features in a single screen. The billing application includes a claims-scrubbing rules engine that uses feedback from Tebra’s extensive client network and tools to alert practices to inaccuracies. Read our review of Tebra for pricing and additional information.

Successful claims processing 

According to Thorsten Wirkes, former vice president of insurance operations at Oscar, claims processing success involves more than just processing claims from point A to point B. 

“[It’s about] accuracy (did we pay the right price for the right services?), timeliness (did we process claims quickly?), and cost efficiency (did we process claims automatically?),” Wirkes said. “If any of these goals aren’t met, it can cause headaches for all parties.”

Sean Peek contributed to this article. The source interview was conducted for a previous version of this article.