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How Does Medical Billing Work?

Medical billing for physicians is a fairly complicated financial process between healthcare providers and patients. That’s why healthcare providers hire professionals who are trained to manage medical finances and patient billing to represent their practice.

What is Revenue Cycle Management (RCM)?

Revenue Cycle Management (RCM) is a broad term describing the medical financial process, or medical billing. Normally, RCM is managed by professional medical billers and coders who have the credentials and training to oversee a medical practice’s revenue and cash flow. The process involves the use of electronic software that communicates with both the medical practice and insurance companies. Medical billers who are responsible for RCM must constantly update entries in this software, so they can assure the accuracy and timeliness of claims, resolve any issues, and overall, make sure revenue is closely monitored and accounted for.

8 Key Steps in the Medical Billing Process

Medical billing for patients’ treatments and services can be a complicated process. It can be quite difficult to understand how exactly it works. When deciding on how you want to handle medical billing, you can either manage it in-house or outsource it. Even if you outsource it, you will likely want to understand the process yourself so you have oversight over how your revenue is being handled. We’re here to help you understand how it works, by walking you through 8 steps involved in medical billing:

1. Register Patients

When accepting new patients, the patient must provide their personal information (name, address, date of birth, and reason for visit) and insurance information (policy and group number). The medical administrator or biller will save this information to the patient’s medical record. The medical biller must check to assure this new patient’s insurance company will cover the services they are getting from the doctor. If you are outsourcing billing, you will create the patient record and send it to the medical billing supplier as needed.

2. Check Insurance Plan for Financial Coverage

Once the medical biller has the patient’s insurance information, they will look into the specifics of the plan’s financial coverage. Then, they will determine whether or not the patient’s requested service is covered under their plan. This step is very important and must be done correctly, every time a patient visits. Every insurance plan is different. Some seemingly similar plans actually cover very different services and treatments. If the insurance company will not cover the requested service, the medical biller must let the patient know immediately. That way, the patient can decide whether or not they want to go through with it.

3. Patient Check Out & Medical Coding for Visit

After the patient has seen the doctor, they will check out with reception at the office. This is when the patient will pay their copay for the visit – depending on the insurance policy. After reception collects the patient’s dues, they will view the patient’s medical report, also known as the “superbill,” to see what procedures were done.

If medical billing is being handled in-house, the medical coder will translate the information on the superbill into a procedure or diagnosis “code” that can be sent to the insurance provider for billing. If the practice is using an outsourced medical biller, they will add that day’s medical procedure to the superbill. Then, they will send it to the medical biller through an easy-to-use integrated software. The biller will take it from there and create the insurance claim.

4. Prepare Insurance Claim

Next, the medical biller will prepare the insurance claim. They will take the correct medical codes and enter them into the billing software, which will show the entire cost of the medical procedure. Then, the biller will perform an analysis of the procedure and insurance policy. This will let them figure out how much the insurance provider must pay, depending on the patient’s policy.

Before sending the bill to the insurance company, it’s very important that the medical biller assures the claim is compliant in using correct coding, modifying coding, and formatting. If anything is inaccurate or incorrect, it’s possible the doctor will not get the money they are owed.

Every medical claim to go out to an insurance provider must include:

  • Patient information (demographics, medical history)
  • Procedures performed during visit (with correct coding)
  • Diagnosis codes 
  • Pricing for procedures
  • Provider’s National Provider Index number (NPI)
  • Health Insurance Portability and Accountability (HIPAA) compliance
  • Office of Inspector General (OIG) compliance
5. Submit Claim

As of 1996, any providers, clearing houses, and payers covered under HIPAA must submit claims electronically, rather than manually. The medical biller (no matter whether in-house or outsourced) will submit the claim to the insurance provider through medical billing software for payment. Each insurance company may have their own standards and guidelines for submitting claims. The medical biller needs to have a good understanding of the policies and procedures for submitting claims to each provider, in order to push the claim through successfully.

6. Adjudication

In the medical billing process, adjudication is the claim’s evaluation process by the insurance provider. Before paying, the insurance company will analyze the submitted claim and decide whether or not it is valid and compliant. The insurance provider will then deem the claim valid or invalid. Accordingly, they’ll accept or deny the claim.

A claim will be denied if the medical biller used the wrong coding for a procedure, or if patient information is incorrect or missing. That’s why it’s crucial to make sure you have a credentialed medical billing team handling every claim.  If the insurance provider accepts the claim as valid, they will calculate how much they owe the medical practice, depending on the patient’s policy terms.

Once accepted, the insurance provider will contact the medical biller with a report outlining the payment terms – including how much the provider will pay for the procedures and why. The biller will re-analyze this report to ensure accuracy and compliance with the patient’s policy. If everything is valid, they will give the insurance company the “green light” to cover their portion of the payment.

If anything is incorrect or in-compliant, the medical biller will file an appeal stating the insurance company owes more money to the medical practice. This process can take a while, depending on the specifics of the appeal. 

7. Generate Payment 

The medical biller will receive confirmation that the insurance company has covered their end of the payment for the procedure. The balance for the procedure will be zero, if the insurance provider was to cover it in full. If the patient owes a portion to the medical practice, the medical biller will issue their statement.

A medical biller may issue an Explanation of Benefits (EOB) to the patient as well. This can be helpful in explaining to the patient why they owe a remainder of the bill for the procedure, and why the insurance company didn’t cover it in full.

8. Follow Up

Once a patient pays their end of the bill, the biller is notified about the completed payment information and stores it in the patient’s records. If patients have outstanding bills, it’s the medical biller’s job to follow up with them to find out why they weren’t paid on time. They may call the patient frequently and send them follow-up bills (which may include late fees). If the bill is seriously overdue, they may be entitled to use a collection agency to ensure reimbursement.

3 Key Issues to Avoid in the Medical Billing Process

As we mentioned, Revenue Cycle Management (RCM) can be tricky. But at the same time, your practice’s health and revenue flow depends on quality medical billing. If you mismanage your RCM or your medical billing professional makes mistakes when filing claims, it can result in revenue loss, delays in reimbursement, or financial complications - which can hurt your practice. Be proactive and avoid common medical billing issues before they happen!

Here are the most common errors in the medical billing process and ways to avoid them:

Denied or Rejected Claims

Rejected claims is one of the most common issues that interferes with RCM for medical practices. This happens when the medical biller submits a claim with error (for instance, in coding or format). When this happens, your medical biller has the opportunity to resubmit the claim correctly, to make sure you get reimbursed on the service. However, medical billers never resubmit 65% of rejected claims!

When hiring your medical biller, make sure you choose a reliable source that will diligently and accurately submit claims. Talk to your prospective hires about what they might do if they were to get a rejected claim. Professional medical billers often work full-time to make sure claims get handled and returned accurately, which is one reason outsourcing is a good option.

Neglecting Coding Updates

Medical codes are usually updated annually, depending on the source that determines the code. For instance, the CPT (Current Procedural Terminology) updates their medical codes once a year. There are many other sources that also perform updates regularly. It is the job of the medical biller to learn these updates as they roll out, which can be time consuming. Medical billing companies typically have a system in place for adapting to these updates company-wide. Overlooking updates can result in financial errors and revenue loss on your end. Make sure your medical biller is always in the loop of the latest updates. Otherwise, hire a reliable, top-credentialed biller that builds update training into their practice. 

Forgetting to Review Analytics

Most medical billing software has built-in features that provide metrics and analytics for your medical billing and claims history. This can give you information such as

  • What percentage of your claims were accepted vs. denied
  • What factors contributed to denied claims
  • How much revenue (in dollars) was denied by insurance companies
  • Which services were denied

Make sure you review these analytics with your medical biller, to detect any poor performance areas and figure out a way to make improvements going forward. If you don't review this built-in feature, you could be throwing away hard-earned reimbursement money!

Learn More

Ready to find the best outsourced medical billier for your needs? Read about 9 steps for finding the best medical billing company.

Note that medical practices today are also benefiting from medical billing software, medical answering services, and VoIP phone systems for healthcare.

Are you in need of an outsourced medical biller? It can be difficult to do the research and make sure you're hiring the most qualified medical billing company. We help medical practices find the best fit for their medical billing needs, so they can avoid stressing about risks like billing errors. Connect with us today to see how we can help your practice thrive.

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