Terminology used in medical billing and coding

Beneficiary: The beneficiary is the person who receives benefits and/or coverage under a healthcare plan. The beneficiary of an insurance plan may not be the person paying for the plan, as is the case for young children covered under their parents’ plans.
Clean Claim: This refers to a medical claim filed with a health insurance company that is free of errors and processed in a timely manner. Some providers may send claims to organizations that specialize in producing clean claims, like clearinghouses.

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Clearinghouse: Clearinghouses are facilities that review and correct medical claims as necessary before sending them to insurance companies for final processing. This meticulous editing process for claims is known in the medical billing industry as “scrubbing.”

Terminology used in medical billing and coding

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CMS 1500: The CMS 1500 is a paper medical claim form used for transmitting claims based on coverage by Medicare and Medicaid plans. Commercial insurance providers often require that providers use CMS 1500 forms to process their own paper claims.
Coding: Coding is the process of translating a physician’s documentation about a patient’s medical condition and health services rendered into medical codes that are then plugged into a claim for processing with an insurance company. Medical billing specialists must be familiar with many code sets in order to perform their job duties.


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Co-Insurance: The percentage of coverage that a patient is responsible for paying after an insurance company pays the portion agreed upon in a health plan. Co-insurance percentages vary depending on the health plan.
Contractual Adjustment: This refers to a binding agree between a provider, patient, and insurance company wherein the provider agrees to charges that it will write off on behalf of the patient. Contractual adjustments may occur when there is a discrepancy between what a provider charges for healthcare services and what an insurance company has decided to pay for that service.

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Coordination of Benefits (COB): COB occurs when a patient is covered by more than one insurance plan. In this situation one insurance company will become the primary carrier and all other companies will be considered secondary and tertiary carriers that may cover costs left after the primary carrier has paid.
Co-Pay: A patient’s co-pay is the amount that must be paid to a provider before they receive any treatment or services. Co-pays are separate from a deductible, and will vary depending on a person’s insurance plan.
Current Procedural Technology (CPT) Code: CPT codes represent treatments and procedures performed by a physician in a 5-digit format. CPT codes are entered together with ICD-9 codes that explain a patient’s diagnosis. Medical billing specialists will enter CPT codes into claims so insurance companies understand the nature of healthcare a patient received with a provider.
Crossover Claim: When claim information is sent from a primary insurance carrier to a secondary insurance carrier, or vice versa.
Deductible: The amount a patient must pay before an insurance carrier starts their healthcare coverage. Deductibles range in price according to terms set in a person’s health plan.
Durable Medical Equipment (DME): This refers to medical implements that can be reused such as stretchers, wheelchairs, canes, crutches, and bedpans.
Electronic Claim: A claim sent electronically to an insurance carrier from a provider’s billing software. The format of electronic claims must adhere to medical billing regulations set forth by the federal government.


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Electronic Medical Records (EMR): EMR is a digitized medical record for a patient managed by a provider onsite. EMRs may also be referred to as electronic health records (EHRs).
Explanation of Benefits (EOB): A document attached to a processed medical claim wherein the insurance company explains the services they will cover for a patient’s healthcare treatments. EOBs may also explain what is wrong with a claim if it’s denied.
Fraud: Providers, patients, or insurance companies may be found fraudulent if they are deliberately achieving their ends through misrepresentation, dishonesty, and general illegal activity. Medical billing specialists who deliberately enter incorrect or misleading information on claims may be charged with fraud.
Healthcare Financing Administration Common Procedure Coding System (HCPCS): HCPCS is a three-tier coding system used to explain services, devices, and diagnoses administered in the healthcare system. Medical billing specialists utilize codes in the HCPCS on a daily basis to file claims.
Health Insurance Claim: The unique number ascribed to an individual to identify them as a beneficiary of Medicare.
Health Insurance Portability and Accountability Act (HIPAA): HIPAA was a law passed in 1996 with an aim to improve the scope of healthcare services and establish regulations for securing healthcare records from unwanted parties.
Hospice: This refers to medical care and treatment for persons who are terminally ill.
ICD-9 Codes: ICD-9 codes are an international set of codes that represent diagnoses of patients’ medical conditions as determined by physicians. Medical billing specialists may translate a physician’s diagnoses into ICD-9 codes and then input those codes into a claim for processing.
ICD-10 Codes: ICD-10 codes are the updated international set of codes based on the preceding ICD-9 codes. ICD-10 codes are estimated to be mandatory in the American healthcare system by October 2014.
Inpatient: Inpatient care occurs when a person has a stay at a healthcare facility for more than 24 hours.
Intensive Care: Intensive care is the unit of a hospital reserved for patients that need immediate treatment and close monitoring by healthcare professionals for serious illnesses, conditions, and injuries.
Medicare Administrative Contractor (MAC): MACs are contract with the federal government to process Medicare claims.
Medical Coder: A medical coder is responsible for assigning various medical codes to services and healthcare plans described by a physician on a patient’s superbill.
Medical Transcription: The process of converting dictated or handwritten instructions, observations, and documentation into digital text formats.
Medicare: Medicare is a government insurance program started in 1965 to provide healthcare coverage for persons over 65 and eligible people with disabilities.
Medicaid: Medicaid is a joint federal and state assistance program started in 1965 to provide health insurance to lower-income persons. Both state and federal governments fund Medicaid programs, but each state is responsible for running its own version of Medicaid within the minimum requirements established by federal law.
Modifier: Modifiers are additions to CPT codes that explain alterations and modifications to an otherwise routine treatment, exam, or service
Out-of-Network: Out-of-network refers to providers outside of an established network of providers who contract with an insurance company to offer patients healthcare at a discounted rate. People who go to out-of-network providers typically have to pay more money to receive care.
Outpatient: This term refers to healthcare treatment that doesn’t require an overnight hospital stay, including a routine visit to a primary care doctor or a non-invasive surgery.
Primary Care Physician (PCP): The physician who provides the basic healthcare services for a patient and recommends additional care for more serious treatments as necessary.
Place of Service Code: A two-digit code used on claims to explain what type of provider performed healthcare services on a patient.
Preferred Provider Organization (PPO): A plan similar to an HMO whereby a patient can receive healthcare from providers within an established network set up by an insurance company.
Provider: A provider is the healthcare facility that administered healthcare to an individual. Physicians, clinics, and hospitals are all considered providers.
Secondary Insurance Claim: The claim filed with the secondary insurance company after the primary insurance company pays for their portion of healthcare costs.
Skilled Nursing Facility: These are facilities for the severely ill or elderly that provide specialized long-term care for recovering patients. Skilled nursing facilities are alternative healthcare establishments to extended hospital stays and may be covered by eligible patients’ insurance policies.
TRICARE: TRICARE is the federal health insurance plan for active service members, retired service members, and their families, in addition to survivors of service members. TRICARE was previously known as CHAMPUS.
UB04: A form used by providers for filing claims with insurance companies. The UB04 form has a format similar to that of the CMS 1500 form.
V-Codes: A codeset under ICD-9-CM used to organize healthcare services rendered for reasons other than illness or injury.
Worker’s Compensation: Worker’s compensation is paid by an employer when an employee becomes ill or injured while performing routine job duties. Most states have laws requiring that companies provide worker’s compensation.
Write-Off: This term refers to the discrepancy between a provider’s fee for healthcare services and the amount that an insurance company is willing to pay for those services that a patient is not responsible for. The write-off amount may be categorized as “not covered” amounts for billing purposes.

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