The Essential Medical Billing and Coding Glossary

Medical billing and revenue cycle management can feel overwhelming with all the unfamiliar terms. But it doesn’t have to be!

This glossary is here to make things clear and simple. With straightforward explanations, you’ll have everything you need to navigate the essentials with confidence. Let’s dive in!

A

Accountable Care Organization (ACO)

A coordinated network of healthcare providers delivering care to Medicare patients. These organizations work to improve quality outcomes and reduce costs through efficient care delivery, sharing in savings achieved through better patient outcomes and resource management.

Account Number

A unique identifier assigned to patients that tracks financial transactions and medical records throughout their care. This number facilitates claims processing, ensures accurate billing, and maintains consistent patient identification across healthcare services.

Adjudication

The process of evaluating healthcare claims to determine appropriate payment. This includes verifying eligibility, reviewing medical necessity, applying benefit policies, and calculating payments based on contract terms and coverage guidelines.

Adjustment

A modification to patient account balances reflecting contractual agreements or billing corrections. These changes ensure accurate financial records, maintain compliance with payer agreements, and properly allocate payment responsibilities.

Advance Beneficiary Notice (ABN)

A Medicare form provided before delivering potentially non-covered services. This document informs patients about possible costs, documents their financial responsibility acceptance, and protects both providers and patients in billing situations.

Allowed Amount

The maximum payment an insurance plan will cover for healthcare services. This amount, typically negotiated between insurers and providers, determines both insurance payments and patient responsibility portions for covered services.

Appeals Process

A formal procedure for challenging denied or underpaid insurance claims. This includes submitting supporting documentation, meeting specific timeframes, and following multiple levels of review to secure appropriate payment for services.

B

Balance Billing

A billing practice where healthcare providers charge patients for the remaining balance after insurance payment. This includes the difference between the provider’s full charge and the insurance’s allowed amount, commonly occurring with out-of-network services.

Beneficiary

An individual who is entitled to receive healthcare benefits under an insurance policy or program. This includes primary subscribers and their dependents who are eligible for coverage under the specified insurance plan or government program.

Benefit Period

A defined timeframe during which insurance benefits are available to covered individuals. This period typically runs annually and includes specific start and end dates for deductibles, coverage limits, and benefit renewals.

Billable Service

Any healthcare procedure, treatment, or supply that can be legitimately charged to insurance or patients. These services must meet specific coding requirements and medical necessity criteria to qualify for reimbursement.

Brand-Name Drug

A pharmaceutical product marketed under a specific trademark-protected name by its manufacturer. These medications typically cost more than generic alternatives and may have different coverage levels under insurance plans.

Bundling

The practice of combining multiple healthcare services or procedures into a single billing code. This approach streamlines billing processes and often reflects standard treatment protocols for specific medical conditions.

C

Capitation

A payment model where providers receive a fixed amount per patient per month, regardless of services provided. This system encourages preventive care and efficient resource management while sharing financial risk between providers and insurers.

Case Management

A collaborative process of assessment, planning, and coordination of healthcare services to meet patient needs. This includes monitoring treatment progress, ensuring cost-effectiveness, and facilitating communication between providers and patients.

Certification Number

A unique identifier issued by insurance companies to verify authorization for specific medical services. This number serves as proof of approval and is required for claim submission to ensure proper reimbursement for provided services.

Clean Claim

A healthcare claim that contains all required information and can be processed without additional documentation. Clean claims meet all payer requirements, include proper coding, and contain no errors that would delay processing or payment.

Charge Entry

The process of inputting healthcare services and procedures into the billing system with appropriate codes and charges. This includes verifying accuracy of service documentation, applying correct fee schedules, and ensuring compliance with billing guidelines.

Charge Master

A comprehensive database maintained by healthcare providers that lists all billable items and their associated costs. This includes procedures, supplies, medications, and services, serving as the foundation for consistent and accurate medical billing.

Charge Reconciliation

The systematic process of comparing rendered services against entered charges to ensure billing accuracy and completeness. This includes reviewing documentation, verifying charge capture, and identifying any missing or incorrect entries for correction.

Chronic Care Management (CCM)

A Medicare program for coordinating care of patients with multiple chronic conditions. This includes regular monitoring, medication management, care plan updates, and coordination between healthcare providers to improve patient outcomes.

Claim

A formal request for payment submitted to insurance companies for healthcare services rendered. This includes patient information, service details, diagnosis codes, and procedure codes, following specific submission guidelines and requirements.

Claim Adjustment Reason Code (CARC)

Standardized codes used by insurance companies to explain why a claim payment was modified. These codes help providers understand payment decisions, identify billing issues, and determine appropriate follow-up actions for claim resolution or appeals.

Claim Denials

The rejection of payment for healthcare services by insurance companies. This occurs due to various factors including coding errors, lack of medical necessity, or coverage limitations, requiring analysis and appropriate corrective actions for resubmission.

Claim Rejection

An initial claim processing failure due to technical or data issues that prevents acceptance by the payer. These claims require correction of errors, missing information, or formatting issues before resubmission for proper processing.

Claim Submission

The process of transmitting healthcare claims to insurance payers for reimbursement. This includes verifying patient information, ensuring proper coding, meeting submission deadlines, and following payer-specific requirements for processing.

Clearinghouse

An intermediary organization that processes electronic healthcare claims, validating data and formatting before transmission to insurance payers. They help reduce errors, speed up processing, and improve claim acceptance rates.

CMS-1500 Form

The standard claim form required for billing outpatient medical services to insurance companies. This document includes patient information, service details, diagnosis codes, and other essential data for claim processing and payment.

Coding Errors

Mistakes in applying medical codes that can result in claim denials or incorrect payments. These include incorrect diagnosis codes, procedure codes, or modifiers that don’t accurately reflect the services provided or medical necessity.

Coinsurance

The percentage of healthcare costs that patients are responsible for paying after meeting their deductible. This amount is typically calculated as a percentage of the allowed amount for covered services under their insurance plan.

Concurrent Review

The ongoing evaluation of patient care during treatment to ensure medical necessity and appropriate level of care. This process helps manage healthcare costs while maintaining quality standards and coverage requirements.

Coordination of Benefits

The process of determining payment responsibilities when a patient has multiple insurance coverage. This includes establishing primary and secondary payers, preventing duplicate payments, and ensuring proper claim submission order.

Copay Maximizer

A benefit management program that strategically applies manufacturer copay assistance over the entire benefit year. This approach helps maximize the value of copay cards while ensuring consistent patient out-of-pocket costs and optimizing insurance coverage benefits.

Cost Sharing

The portion of healthcare costs divided between the insurance plan and the patient. This includes deductibles, copayments, and coinsurance, designed to share financial responsibility while encouraging appropriate utilization of healthcare services.

Covered Entity

An organization or individual required to comply with HIPAA privacy and security regulations. This includes healthcare providers, health plans, and clearinghouses that handle protected health information in electronic transactions.

CPT Code

Standardized numerical codes used to report medical, surgical, and diagnostic procedures to insurance payers. These codes ensure accurate billing, proper reimbursement, and consistent documentation of healthcare services across providers.

D

Deductible

The initial amount patients must pay for covered healthcare services before insurance benefits begin. This annual amount varies by plan type and resets each benefit year, affecting both patient responsibility and insurance payment timing.

Diagnosis Code

Standardized codes that identify specific medical conditions and reasons for treatment. These codes, such as ICD-10, are essential for claim processing, determining medical necessity, and ensuring appropriate healthcare service coverage.

Diagnostic Related Group (DRG)

A classification system that groups similar clinical conditions and procedures for payment purposes under Medicare. This system standardizes hospital payments based on diagnosis, treatment complexity, and resource utilization.

Downcoding

The practice of reducing a claim’s value by assigning a lower-level billing code than submitted. This often occurs during claim review when documentation doesn’t support the level of service initially billed.

Dual Eligibility

A status where patients qualify for both Medicare and Medicaid coverage. This combination provides comprehensive healthcare benefits, with specific coordination rules determining which program pays first for covered services.

E

Effective Date

The specific date when insurance coverage or policy changes become active. This date determines when benefits begin, when new rates apply, and when coverage modifications take effect, impacting both claims processing and patient responsibility.

Electronic Health Record (EHR)

A comprehensive digital system for maintaining patient health information. This includes medical history, treatments, medications, test results, and billing data, allowing for improved care coordination and efficient healthcare delivery.

Eligibility Verification

The process of checking a patient’s insurance coverage before providing services. This includes verifying benefits, coverage limits, authorization requirements, and patient financial responsibility to prevent billing issues.

Emergency Medical Treatment and Labor Act (EMTALA)

Federal legislation requiring hospitals to provide emergency medical treatment regardless of ability to pay. This law ensures access to emergency care and prohibits patient transfer or discharge based on financial status.

EMR (Electronic Medical Record)

A digital version of a patient’s medical chart containing clinical data from one practice. This includes visit notes, diagnoses, medications, and treatment plans, supporting clinical decision-making and care documentation.

Encounter

A documented interaction between a patient and healthcare provider. This includes direct patient care, consultations, and procedures, serving as the basis for clinical documentation and billing purposes.

Encounter Form

A standardized document capturing essential information about a patient visit. This includes diagnoses, procedures, charges, and other relevant details needed for accurate billing and clinical documentation.

Enrollee

An individual registered in a health insurance plan who is eligible for covered benefits. This includes primary subscribers and their dependents who meet the plan’s eligibility requirements for coverage.

Episode of Care

A defined period of treatment for a specific condition or procedure. This encompasses all related services, from initial diagnosis through completion of treatment, including follow-up care and outcomes monitoring.

Explanation of Benefits (EOB)

A detailed statement from insurers explaining how claims were processed. This document outlines covered services, applied payments, adjustments, and patient responsibility, helping both providers and patients understand claim outcomes.

F

Fee-for-Service (FFS)

A traditional payment model where healthcare providers bill separately for each service rendered. This approach allows detailed tracking of services but may encourage overutilization, as payment is based on quantity rather than quality of care.

Fee Schedule

A comprehensive listing of maximum allowable payments for medical services under specific insurance plans. This document establishes standardized pricing, helps prevent billing disputes, and serves as a reference for provider reimbursement rates.

Financial Class

A designation system that categorizes patients based on their primary payment source. This classification helps streamline billing processes, determine appropriate collection procedures, and manage accounts according to payer-specific requirements.

G

Global Period

A specified timeframe following a procedure during which all related follow-up care is included in the original payment. This period varies by procedure type and includes routine post-operative care, monitoring, and related medical services.

Guarantor

The person or entity legally responsible for paying a patient’s medical bills. This individual, often a parent or policyholder, assumes financial responsibility when the patient cannot pay or is not legally able to accept responsibility.

H

HCPCS Codes

Standardized coding system used primarily for billing Medicare and Medicaid services. These codes cover medical supplies, equipment, non-physician services, and procedures not included in the CPT coding system.

Health Maintenance Organization (HMO)

A managed care organization that provides health coverage through a network of contracted providers. Members must choose a primary care physician and obtain referrals for specialist care to receive maximum benefits.

Healthcare Common Procedure Coding System (HCPCS)

A comprehensive coding system that includes CPT codes and additional codes for supplies, materials, and non-physician services. This system ensures standardized billing for Medicare, Medicaid, and other health insurance programs.

HIPAA Compliance

Adherence to federal regulations protecting patient health information privacy and security. This includes implementing specific safeguards, policies, and procedures for handling protected health information in all forms.

Hospital-Based Billing

A billing methodology where services provided in hospital-affiliated settings generate both professional and facility fees. This approach accounts for overhead costs and resources used in hospital-based care delivery.

I

ICD-10 Code

A standardized international system of diagnostic codes used to classify diseases, symptoms, and medical conditions. These codes are essential for accurate medical billing, research, and tracking health trends across healthcare systems.

Insurance Claim

A formal request submitted to insurance companies for payment of covered medical services. This includes detailed documentation of services provided, diagnostic codes, procedure codes, and other required information to process payment.

L

Local Coverage Determination (LCD)

Regional policies established by Medicare contractors that specify coverage criteria for specific services. These determinations outline medical necessity requirements, documentation standards, and appropriate use guidelines for healthcare services.

M

Managed Care

A healthcare delivery system that controls costs through network providers and coordinated care strategies. This model includes pre-authorization requirements, utilization review, and negotiated provider rates to maintain quality while managing expenses.

Medical Necessity

The requirement that healthcare services are reasonable, necessary, and appropriate based on clinical standards. This determination affects insurance coverage and requires documentation supporting the need for specific treatments or procedures.

Medical Record Number

A unique identifier assigned to each patient’s medical record within a healthcare facility. This number ensures accurate tracking of patient information, facilitates record retrieval, and maintains continuity of care documentation.

N

National Provider Identifier (NPI)

A unique 10-digit identification number required for all healthcare providers in the United States. This standardized identifier is used for billing, claims processing, and other healthcare transactions to ensure accurate provider tracking and payment.

Non-Covered Service

Healthcare services that are not included in an insurance plan’s benefits package. These services require direct patient payment and may include experimental treatments, cosmetic procedures, or services deemed not medically necessary.

O

Out-of-Network Provider

A healthcare provider who has not contracted with a specific insurance plan. Using these providers typically results in higher out-of-pocket costs for patients and may require additional authorization or documentation for coverage.

Out-of-Pocket Maximum

The highest amount a patient must pay for covered healthcare services in a benefit year. Once reached, insurance covers 100% of eligible expenses, protecting patients from catastrophic healthcare costs.

Outlier Payment

Additional reimbursement provided for cases with extraordinarily high costs or lengthy stays. This payment system helps protect healthcare providers from significant financial losses on complex cases.

Outpatient Prospective Payment System (OPPS)

Medicare’s payment system for outpatient hospital services. This methodology groups similar services into payment categories and establishes predetermined rates based on service complexity and resource use.

Overpayment

Payments made in excess of the correct amount for healthcare services. These require identification, investigation, and appropriate refund processes to maintain compliance with billing regulations.

P

Patient Demographics

Essential patient information collected for healthcare administration and billing purposes. This includes personal details, contact information, insurance coverage, emergency contacts, and other data necessary for proper patient identification and billing.

Patient Responsibility

The financial portion that patients must pay for healthcare services. This includes deductibles, copayments, coinsurance, and charges for non-covered services, as determined by their insurance plan’s benefit structure.

Payor

Organizations or entities responsible for processing and paying healthcare claims. This includes insurance companies, government programs, and third-party administrators who manage healthcare benefits and process provider payments.

Payment Posting

The process of applying payments and adjustments to patient accounts. This includes reconciling insurance payments, patient payments, and contractual adjustments while maintaining accurate financial records and account balances.

Per Diem

A daily rate payment methodology for healthcare services, particularly in hospital settings. This fixed daily amount covers all services provided during a 24-hour period, regardless of the actual services delivered.

Practice Management System

Software that manages healthcare practice operations and workflow. This includes scheduling, billing, reporting, and patient information management tools designed to streamline administrative processes.

Pre-Certification

The process of obtaining advance approval for medical procedures or treatments. This review ensures services meet medical necessity criteria and helps prevent unexpected claim denials or payment reductions.

Premium

Regular payments made to maintain health insurance coverage. This amount is typically paid monthly and varies based on the type of plan, coverage level, and number of individuals covered.

Prior Authorization

Required approval from insurance companies before certain medical services are provided. This process helps ensure appropriate care and confirms coverage for specific treatments, procedures, or medications.

Q

Quality Payment Program (QPP)

A Medicare initiative that rewards healthcare providers for delivering high-quality, cost-efficient care. This program includes multiple tracks for participation and measures outcomes, clinical practice improvements, and resource utilization.

R

Reasonable and Customary Fee

The amount considered appropriate for medical services in a specific geographic area. This standard is used by insurance companies to determine reimbursement rates and evaluate the fairness of provider charges.

Relative Value Unit (RVU)

A standardized system for measuring the value of medical services based on physician work, practice expenses, and liability insurance costs. This metric helps determine fair compensation and compare services across specialties.

Remittance Advice (RA)

A detailed explanation from insurance companies showing how claims were processed. This document includes payment amounts, adjustments, denials, and reasons for decisions, helping providers manage accounts receivable effectively.

Revenue Cycle Management (RCM)

The comprehensive process of managing healthcare revenue from initial patient registration through final payment collection. This includes scheduling, coding, billing, collections, and analyzing financial performance metrics.

Risk Adjustment

A method of modifying healthcare payments based on patient population health status. This system ensures fair compensation for providers treating sicker patients and helps prevent adverse patient selection.

Risk-Based Payment

Healthcare reimbursement models where providers share financial responsibility for patient outcomes. These arrangements incentivize quality care and cost control through various risk-sharing mechanisms.

S

Secondary Insurance

Additional insurance coverage that pays for costs after the primary insurance has processed claims. This coordination of benefits helps reduce patient out-of-pocket expenses and provides more comprehensive coverage for medical services.

Self-Pay

A payment arrangement where patients are directly responsible for healthcare costs without insurance involvement. This includes establishing payment plans, determining discounts, and managing direct billing relationships with providers.

Shared Savings Program

A payment model where healthcare providers receive a portion of cost savings achieved through efficient care delivery. This approach incentivizes quality improvement while reducing unnecessary services and overall healthcare expenses.

Stop-Loss Insurance

Coverage that protects healthcare providers from excessive financial losses on high-cost claims. This insurance activates when patient care costs exceed predetermined thresholds, helping maintain financial stability for providers.

Subscriber

The primary person who holds an insurance policy and is responsible for premium payments. This individual typically enrolls dependents and maintains communication with the insurance company regarding coverage changes.

Subscriber ID

A unique identifier assigned to insurance policy holders for claims processing and benefit tracking. This number helps link family members’ coverage and ensures accurate application of insurance benefits.

Superbill

A comprehensive document that details all services provided during a patient visit. This includes diagnostic codes, procedure codes, charges, and other information necessary for insurance billing and payment processing.

Supplemental Insurance

Additional coverage that fills gaps in primary insurance plans. This may include coverage for deductibles, copayments, and services not included in the primary plan, providing more complete financial protection.

T

Tax Identification Number (TIN)

A unique identifier assigned by the IRS to healthcare providers for tax and billing purposes. This number is essential for claims submission, payment processing, and maintaining compliance with federal tax reporting requirements.

Telehealth Services

Healthcare services provided remotely through digital communication technologies. This includes video consultations, remote monitoring, and virtual care delivery platforms that expand access to medical care while maintaining quality standards.

Third-Party Administrator (TPA)

Organizations that process claims and manage benefits on behalf of insurance companies or self-funded plans. TPAs handle claims processing, utilization review, and other administrative functions to streamline healthcare operations.

Third-Party Payer

Entities responsible for covering healthcare costs other than the patient or provider. This includes insurance companies, government programs, and employers who provide health benefits to their employees.

Timely Filing

The required timeframe for submitting healthcare claims to insurance payers. These deadlines vary by payer and contract terms, with claims submitted after the deadline typically denied for payment consideration.

Total Adjusted Payment Amount (TAPA)

The final payment calculation after all contractual adjustments, denials, and modifications have been applied to a claim. This amount reflects the actual reimbursement due to the healthcare provider.

U

Unbundling

The practice of billing separately for services that should be billed together under a comprehensive code. This improper billing practice can result in higher reimbursement but may violate payer policies and compliance regulations.

Underpayment

A payment from an insurance company that is less than the expected contractual amount. This requires analysis to determine the cause, documentation review, and appropriate follow-up through the appeals or adjustment process.

Underwriting

The process of evaluating health risks to determine insurance coverage and premium rates. This assessment considers medical history, demographics, and other factors to establish appropriate insurance terms and conditions.

Upcoding

The inappropriate practice of assigning higher-level billing codes than warranted by the service provided. This can result in increased reimbursement but violates coding guidelines and may constitute healthcare fraud.

Usual, Customary, and Reasonable (UCR) Charges

Standard fees for medical services based on geographic location and market rates. These benchmarks help insurance companies determine appropriate reimbursement levels and evaluate provider charges for fairness.

Utilization Management

The evaluation and monitoring of healthcare services to ensure appropriate use and cost-effectiveness. This includes reviewing medical necessity, length of stay, and service intensity to optimize resource allocation.

Utilization Review

The assessment of healthcare services to determine medical necessity and appropriateness. This process helps control costs, maintain quality standards, and ensure compliance with insurance coverage requirements.

V

Value-Based Care

A healthcare delivery model that ties provider payments to patient outcomes and care quality rather than service volume. This approach promotes cost-effective treatment strategies, preventive care, and improved health outcomes through performance-based reimbursement.

Virtual Care

Healthcare services delivered through digital technologies and telecommunications platforms. This includes video consultations, remote monitoring, digital health apps, and other tools that enable healthcare delivery outside traditional settings.

W

Waiver of Liability

A legal document that releases healthcare providers from financial responsibility in specific situations. This includes scenarios where services may not be covered by insurance, protecting both providers and patients from unexpected costs.

Workers’ Compensation Coverage

Insurance that provides medical care and compensation for employees injured on the job. This coverage includes treatment costs, rehabilitation services, and lost wages, ensuring comprehensive care for work-related injuries and illnesses.

Work Relative Value Unit (wRVU)

A metric used to measure physician productivity and determine compensation based on service complexity and effort. This system accounts for time, skill, training, and intensity required to provide specific medical services.

Write-Off

The reduction or elimination of uncollectible charges from a patient’s account. This includes contractual adjustments, charity care, and bad debt that providers determine cannot or should not be collected based on specific circumstances.