Guide to the Medical Billing Process: 10 Steps, Types & Careers

What is Medical Billing?

Medical billing is a critical process within the healthcare industry, ensuring that healthcare providers are accurately compensated for the services they offer. This process involves compiling claims, coding medical procedures, submitting claims to insurance companies, and managing payments and follow-ups.

Billing in healthcare facilitates the healthcare provider’s ability to deliver continuous, quality medical care while ensuring that patients can access care without overwhelming financial burdens. This blog explores the steps, factors, and various career opportunities within the field, helping clarify the path for those interested in this essential healthcare role.

Medical Billing Process: 10 Key Steps to Success

The healthcare billing process is a structured series of tasks designed to maximize claim acceptance rates, reduce errors, and streamline revenue collection. Each of these steps works in tandem to improve billing efficiency.

1. Patient Registration

Patient registration is the first and one of the most crucial steps in the medical billing and claims processes. During this stage, accurate data collection is essential. Healthcare providers gather demographic details like full name, date of birth, address, and emergency contacts. Additionally, they obtain insurance information, such as the policy number, plan details, and any secondary insurance coverage if applicable. The goal is to create a comprehensive patient profile that will serve as the foundation for the entire billing process.

An efficient patient registration system uses digital forms or electronic health records (EHRs) to minimize errors and speed up data entry. Proper registration can prevent future issues by ensuring that all information is accurate from the outset. Any mistakes or omissions at this stage can lead to claim rejections and time-consuming corrections later in the billing cycle. Patient registration can also involve checking if the patient has outstanding balances from previous visits, which helps the billing team manage the patient’s account and avoid compounding debt.

2. Insurance Verification

Insurance coverage verification is essential for ensuring that services are covered before the patient receives treatment. This involves contacting the insurance company to verify the policy’s effective dates, the type of plan, and covered services. Additionally, verification includes checking for preauthorization requirements, which may be necessary for certain procedures or treatments. Neglecting preauthorization can lead to claim denials or reduced reimbursement.

3. Patient Encounter Documentation

Documenting the patient encounter accurately is critical because it serves as the official record of the services provided. Healthcare providers capture details of the patient’s symptoms, diagnoses, procedures, and any other pertinent information from the visit. This documentation informs not only the coding and billing process but also continuity of care, as future providers may rely on this record to understand the patient’s medical history.

4. Medical Coding

Medical coding translates the details of a patient’s encounter into standardized codes used for billing and insurance claims. Coders use the International Classification of Diseases (ICD) codes for diagnoses, the Current Procedural Terminology (CPT) codes for procedures, and the Healthcare Common Procedure Coding System (HCPCS) for additional services or equipment. Coding precision is essential because errors or omissions can result in claim rejections, delayed payments, or even compliance issues.

5. Charge Entry

Charge entry is where each service provided to the patient is assigned a specific charge amount in the billing system. This step involves adding all billable items, including procedures, consultations, equipment, and medications. Accurate charge entry ensures that patients are neither overcharged nor undercharged, which impacts both patient satisfaction and the provider’s financial health.

6. Claim Submission

Submitting claims to the insurance company is a pivotal step. Claims must be sent on time and must be error-free to maximize reimbursement efficiency. Medical billing staff often use standard claim forms, such as the CMS-1500 for outpatient services or the UB-04 for hospital billing. Properly formatted and error-free claims help prevent rejections or delays in the reimbursement process.

7. Adjudication

During the adjudication process, insurance companies assess the submitted claim to determine coverage eligibility and the amount payable to the provider. They evaluate the claim based on the patient’s policy, checking for medical necessity and compliance with insurer guidelines. Depending on the adjudication results, the claim may be approved, partially approved, or denied.

If denied, the insurer provides an Explanation of Benefits (EOB), which outlines the reasons for denial and patient responsibility. A clear understanding of the adjudication process is essential for medical billers, as it enables them to interpret EOBs and address issues that could lead to claim rejections. Familiarity with insurer-specific requirements and common denial codes can help billing teams reduce the frequency of denied claims.

8. Patient Billing

After adjudication, any remaining charges are billed to the patient. This involves generating an invoice or statement that details the balance due, due dates, and payment methods. Medical billing teams must communicate clearly with patients about their financial obligations and address any questions about the charges.

9. Follow-Up and Appeal

Follow-up and appeal processes are necessary when a claim is denied or underpaid. This step involves investigating the cause of the denial, such as coding errors, lack of preauthorization, or medical necessity issues. Billers may need to communicate with the insurance company to provide additional documentation or clarify any misunderstandings that led to the initial denial.

10. Collections and Payment Posting

Collections and payment posting mark the final steps of the billing process. When payments are received from insurers or patients, they are posted to the patient’s account, updating the balance. Payment posting must be accurate, as any discrepancies could lead to patient dissatisfaction or billing inaccuracies.

For unpaid balances, accounts may be sent to collections after a set period, often accompanied by reminder statements or calls. Effective collections strategies are essential for maintaining financial stability. Some providers utilize automated payment reminders or partner with collection agencies to manage delinquent accounts while upholding ethical billing practices.

Other Important Factors in Healthcare Billing

Medical billing goes beyond basic steps and involves several key factors that impact accuracy, compliance, and efficiency.

Claim Forms

Different types of claim forms are used depending on the nature of the provider and the services offered. For instance, the CMS-1500 is commonly used by individual practitioners, while the UB-04 is utilized by hospitals and larger institutions. Familiarity with these forms is critical for medical billers, as errors in form selection or completion can result in delayed payments or claim denials. Learn more about medical billing claim forms.

Medical Procedure Codes

Coding systems provide standardized language for describing patient diagnoses, procedures, and services, ensuring that providers and payers communicate accurately. Key coding systems include:

• ICD (International Classification of Diseases) – Used for coding diagnoses, this system provides specific codes for each health condition.
• CPT (Current Procedural Terminology) – Primarily used to code services and procedures provided by physicians.
• HCPCS (Healthcare Common Procedure Coding System) – Used for supplies, equipment, and some additional services.

Each system requires training to master, as accurate coding is necessary for claim acceptance and reimbursement. Read our blog for more on CPT and other coding systems.

Legal Compliance

Medical billing specialists must be aware of United States legal standards for the healthcare industry, such as HIPAA and the No Surprises Act, which influence the process.

• HIPAA (Health Insurance Portability and Accountability Act)– Protects patient health information and mandates privacy standards. Non-compliance can lead to fines, legal issues, and compromised patient trust.
• No Surprises Act– This law addresses the issue of unexpected billing, primarily for out-of-network services. It protects patients from excessive charges and requires transparency about potential costs.

Revenue Cycle Management (RCM)

RCM is a holistic approach to managing a healthcare provider’s income. Healthcare billing is a component of RCM, focusing on efficient claim processing, minimizing denials, and ensuring timely payment collection. Strong RCM processes are essential for financial stability, enabling providers to maintain uninterrupted care for patients.

Electronic Medical Records (EMR) & Electronic Health Records (EHR)

EMR and EHR systems store and manage patient data digitally. EMRs are often used within a single healthcare practice, while EHRs provide a broader view across various healthcare providers. Both systems enhance patient data accessibility, simplify billing and coding, and contribute to improved care coordination.

Certification

Professional certification in medical billing, such as the Certified Professional Biller (CPB) or Certified Coding Specialist (CCS), provides evidence of expertise and commitment to the profession. Certifications may cover areas such as procedural and diagnostic coding, compliance, and billing technology. Read more about certifications.

Types of Medical Billing

Understanding the different types of healthcare billing can help clarify the varying functions within the field.

Front-End vs. Back-End Billing

• Front-End Billing – Front-end billing involves tasks like patient registration, insurance verification, and initial claim submission. It is critical for establishing accurate information at the beginning of the billing process, reducing errors and claim denials.
• Back-End Billing – Involves activities that occur after claims submission, such as follow-up, collections, and payment posting. Back-end billing ensures that all claim-related issues are resolved and payments are secured.

Professional vs. Institutional Billing

• Professional Billing – Focuses on individual providers, covering services rendered by doctors, therapists, and other healthcare practitioners. Professional billing often involves the CMS-1500 claim form.
• Institutional Billing – Used by healthcare facilities like hospitals, nursing homes, and outpatient facilities. Institutional billing is more complex and typically involves the UB-04 form to bill for services rendered by multiple healthcare professionals and for facility-related charges.

Closed, Open, and Isolated Billing

• Closed Billing – Applies to systems where patient data is only accessible within a specific provider network. Closed billing is common in health maintenance organizations (HMOs) and similar setups.
• Open Billing – Allows data to be shared between different providers and facilities, improving care coordination and simplifying the billing process.
• Isolated Billing – Used in rare cases or specific healthcare setups where access to patient data is restricted due to technical or administrative limitations.

Considering a Career in Medical Billing?

Healthcare billing offers a rewarding and stable career path within healthcare. Professionals in this field ensure the smooth financial operation of healthcare providers, making it easier for patients to access necessary services. For those interested, the profession offers opportunities to work in various healthcare settings, from small practices to large hospital systems. This field is an excellent career choice for detail-oriented individuals who enjoy problem-solving and navigating administrative processes where medical and billing intersect.

To succeed, aspiring medical billers should develop strong analytical skills, knowledge of coding systems, and an understanding of compliance laws.

Start Your Journey in Medical Billing Today

Bryant & Stratton College has a Medical Billing and Coding Diploma that can give you the training for entry-level positions in this field, as well as an associate degree in Medical Reimbursement & Coding for increased preparation and education. Both programs are available online and on-campus, giving you flexibility as you seek training in medical billing and coding. Request information today about our medical billing and coding program and see how easy it would be to start your training in this in-demand field.