Visit www.pmbausa.com for expert guidance to launch your home-based medical
billing venture. Benefit from industry leaders' experience, comprehensive resources,
flexible home-based options, and dedicated support to ensure your success. Explore now
and start your journey as a medical billing entrepreneur.
Gain real-world experience and enhance your coding skills with CodersGrade's Medical Coding Internship. It's a unique opportunity to apply theoretical knowledge in practical settings, paving the way for a successful career in medical coding.
Points to consider to become Successful Medical Billing Entrepreneurship
Look no further! www.pmbausa.com has got you covered with 100% guidance
to kickstart your home-based medical billing business With PMBA USA's expert support and
resources, you'll be equipped with all the tools you need to succeed in this thriving industry. From
navigating billing codes to efficient claims processing, we'll guide you through every step of the
way. Why Choose PMBA USA? Industry Leaders: We are trusted leaders in healthcare education and
bring years of experience to the table. Comprehensive Resources: Explore our website for detailed
insights, blogs, and educational materials to keep you informed and ahead of the curve. Flexible
Options: Enjoy the flexibility of running your medical billing business from the comfort of your
home. Personalized Support: Our dedicated team is always ready to assist you, ensuring your journey
is smooth and successful. Starting your own medical billing business has never been more accessible
and rewarding. Don't miss this opportunity! Explore www.pmbausa.com now for more details and take
the first step towards becoming a successful medical billing entrepreneur.
“Becoming a Certified Professional Medical Biller (CPMB) opens the door to a
rewarding career where your dedication and skills can make a difference in
patients’ lives and healthcare organizations.”
FACT's - Insufficient awareness of your potential earnings creates
challenges in the planning phase when contemplating the establishment of a new
Source - 65 - Older Population Grows
Source Total Active Physicians
Health spending per person in the U.S. was $11,945 in 2020, which was over $4,000
more expensive than any other high-income nation. The average amount spent
on health per person in comparable countries ($5,736) is roughly half that of
Source Health Spending U.S Compare Countries
Total national health expenditures (constant dollars) were 30% higher in 2019 ($3,453
billion) than in 2009 ($2,658 billion).
$2,937 billion dollars spent for personal health care expenditures (2012 constant
11.0% Percentage of people under age 65 who had no health insurance-as on 2018
20.2% Percentage of people under age 65 who had Medicaid
65.3% Percentage of people under age 65 who had private health insurance
Source Health Care Expenditures
The market size, measured by revenue, of the Medical Claims Processing Services
industry is $5.1bn in 2023.
Medical Claims Processing Services United States
What is the biggest opportunity for growth in the Medical Claims Processing Services
industry in the US?
Demand for medical claims processing services comes from doctors’ offices and other
healthcare providers. As the number of physician visits grows, the number of
insurance claims rises and trickles down to create demand for the industry. The
number of physician visits is projected to grow in 2022, representing a potential
opportunity for the industry.
In 2020, the United States had an estimated population of 326 million individuals.
Most of those individuals had private health insurance or received health care
services under a federal program (such as Medicare or Medicaid). About 8.6% of the
U.S. population was uninsured.
Source IF10830 PDF
As of October 2021, the total Medicare enrollment is 63,964,675. Original Medicare
enrollment is 36,045,321, and Medicare Advantage and Other Health Plan enrollment is
Medicaid/CHIP enrollments- 83,195,041
Over 11 million individuals are dually eligible for Medicare and Medicaid, so are
counted in the enrollment figures for both programs.
Source Medicaid Childrens Helath Insurance Program Chip
The global medical billing outsourcing market is expected to grow from $2.17 billion
in 2021 to $13.56 billion in 2022 at a compound annual growth rate (CAGR) of 11.5%.
The growth is mainly due to the companies resuming their operations and adapting to
the new normal while recovering from the COVID-19 impact, which had earlier led to
restrictive containment measures involving social distancing, remote working, and
the closure of commercial activities that resulted in operational challenges. The
market is expected to reach $20.98 billion in 2026 at a CAGR of 11.5%.
It is estimated that, in the US, 80% of medical bills contain errors.
Medical Billing Outsourcing Global Market Report
Equifax, a credit agency firm, found in its audit that the hospital bills ranging
above $10,000 have an average error amount of $1,300.It is also estimated that
doctors lose around $125 billion each year due to poor billing practices in the USA.
77% OF PROVIDERS SAY COLLECTING ANY PAYMENT TAKES MORE THAN A MONTH
ANALYSIS | BY ALEXANDRA WILSON PECCI |
Patient Collections Takes Over a Month for Most Providers revenue cycle
74% of millennials would switch providers for a better heathcare payment experience.
Currently, 75% of providers still use paper statements and manual processes
primarily for collection.
Revenue Cycle Management Best Practices
The Department of Health and Human Services’ Office of Inspector General audited
diagnosis codes for strokes as part of an investigation into codes that are at a
high risk of being miscoded. The result was that the Centers for Medicare & Medicaid
Services made an estimated $14.4 million in inaccurate payments in 2015 and 2016.
In the realm of healthcare, a provider encompasses more than just physicians; it
includes all individuals delivering healthcare services. This diverse group
incorporates ambulance services, biofeedback technicians, social workers, as well as
professionals like dentists, chiropractors, optometrists, podiatrists, and
psychologists. Additionally, doctors specializing in various fields, ranging from
pediatrics to geriatrics, neurology to urology, are also considered providers. Other
entities like suppliers of durable medical equipment such as walkers and
wheelchairs, specialists in hearing aids and prosthetic limbs, and establishments
like nursing homes and hospices also fall under the category of providers, not to
“With the Certified Professional Medical Biller (CPMB) certification, you can pave
your path to a fulfilling career, where every claim you process contributes to the
smooth functioning of the healthcare system.”
Medical billing service charges can vary depending on the fee structure chosen by the
healthcare provider and the billing company. Let’s elaborate on each method with
With determination and effort, you can accomplish this by…
Complete training and certification in 3-4 months
Invest $10,000 to start
Networking, advertising skills
Accuracy in work
In 3-4 months’ time, YOU COULD BE MAKING MONEY!
Sample-Projected Income per month (Percentage Billing)
** Assumption: Clinic collection per month is $50,000
HOW IT WORKS
PMBA provides Comprehensive Medical coding and medical billing training and
PMBA assist you to develop website, marketing material, SEO, required
PMBA provides required HIPAA forms, guidance for Medical Billing Software,
clearing house, scrubbing tools.
Medical Coding and Billing Auditing as per requirement
Medical Biller Qualities:
Sarah, the Exemplary Medical Biller: A Closer Look at Her Qualities
In the dynamic world of medical billing, Sarah stands out as a shining example of a
skilled and dedicated professional. Her exceptional qualities make her an invaluable
asset to any healthcare organization. Let’s explore some of the qualities that set
Communication Skills: Sarah interacts with various stakeholders
daily, including patients, insurance companies, and healthcare providers. Her
ability to communicate effectively ensures smooth coordination and timely resolution
of billing-related matters.
Problem Solver: Sarah encounters complex billing issues regularly,
such as claim denials and discrepancies. Her problem-solving skills enable her to
identify root causes, strategize solutions, and navigate through challenges
Analytical: As a Medical Biller, Sarah must review and interpret
medical codes, insurance policies, and billing guidelines. Her analytical mindset
helps her accurately assess claims and optimize revenue for the healthcare facility.
Attention to Detail: Sarah knows the significance of precision in
medical billing. She meticulously reviews each claim, ensuring all required
information is accurate and complete to prevent claim rejections.
Integrity: Sarah upholds a high level of integrity in her work. She
adheres to ethical standards, protecting patient privacy, and ensuring transparency
in billing practices.
Technical Skills: Sarah is well-versed in using medical billing
software and electronic health records (EHR) systems. Her technical proficiency
streamlines the billing process and enhances efficiency.
Autonomous: Sarah is a self-driven individual who takes ownership of
her work. She efficiently manages her tasks, meets deadlines, and seeks solutions
independently when challenges arise.
Multi-Tasking: Working in a fast-paced environment, Sarah handles multiple billing
tasks simultaneously. Her ability to multitask ensures she meets the demands of the
healthcare facility efficiently.
Through Sarah’s exceptional qualities as a Medical Biller, she contributes
significantly to the financial health of the healthcare facility. Her effective
communication, problem-solving abilities, attention to detail, and technical
expertise make her an invaluable asset in the medical billing department.
“Preparing for Launch: Estimating Startup Expenses in Medical
Medical Billing Business Challenges:
Medical billing businesses face some challenges in the ever-evolving healthcare
landscape. Some of the key challenges like coding regulations and updates, insurance
denials, paper work, software updates, privacy and security concerns etc
In conclusion,venturing into the world of medical billing offers a
path to independence and empowerment. As you navigate the challenges and
complexities of this dynamic field, remember that your dedication, knowledge, and
passion will be the driving forces behind your success. Embrace the opportunity to
be an independent force, shaping the future of healthcare revenue management. With
every claim processed and every financial challenge overcome, you’ll be making a
meaningful difference in the lives of patients, healthcare providers, and your own
entrepreneurial journey. So, take that leap, chart your course, and let your medical
billing business soar to new heights of triumph and fulfillment. Be the catalyst of
change and the architect of your own destiny – an independent force in the world of
DISCLAIMER: The calculations presented here are designed to assist
you in estimating potential profitability for
your medical billing and practice management business. It is important to note that
these projection tools are not a guarantee or statement of income. They are offered
as a reference to explore the business opportunity.
While we cannot assure you of achieving any specific income level, we have seen
success stories from satisfied PMBA students and observed industry averages in the
medical billing field. These suggest that a well-informed and dedicated medical
billing business has the potential to generate substantial income, whether operating
on a part-time or full-time basis.
The income you earn will be influenced by various factors, such as the number of
clients you secure, the frequency and volume of claims submitted for each client,
and the pricing strategy you adopt for your billing services. Your marketing efforts
and business acumen will significantly shape these factors. PMBA equips you with
essential tools, including software, training, marketing materials, and support, to
aid in your success. Nevertheless, your financial results primarily depend on your
personal efforts, akin to any business venture. As with any investment, there are
inherent risks and rewards associated with running your own medical billing and
practice management business.
Click here to download the Becoming a Health Claims Assistance
As the healthcare sector continues its overall growth, the demand for healthcare
support occupations is expected to expand as well.
According to the U.S. Bureau of Labor Statistics (BLS), the employment of medical
secretaries, which includes medical billing and coding specialists, is projected to
experience an 8% increase from 2021 to 2031. This growth indicates a rising need for
skilled professionals who can efficiently handle medical billing and coding tasks in
the healthcare industry. As the landscape of healthcare evolves, these specialized
professionals play a vital role in ensuring accurate and streamlined billing
processes, contributing significantly to the overall efficiency of healthcare
facilities. With such promising prospects, pursuing a career in medical billing and
coding can lead to rewarding opportunities and a stable future in the healthcare
According to the Bureau of Labor Statistics (BLS), as of May 2021, medical
secretaries, regardless of experience levels, earned a median annual wage of
$47,150. This figure indicates that half of the workforce in this occupation earned
more than this amount, while the other half earned less.
It is important to note that the salary for medical secretaries can vary
significantly based on several factors, including geographic location, the type of
healthcare facility or office they work in, and the amount of work experience they
have accumulated. These variables can have a notable impact on the overall
compensation for individuals in this role.
For more detailed and up-to-date information on medical secretary salaries, I
recommend referring to the Bureau of Labor Statistics (BLS) website ( www.bls.gov ) or other reputable salary data websites that provide
region-specific and industry-specific wage data.
Is a Career in Medical Billing and Coding a Good Fit for You?
Consider asking yourself the following questions to assess whether a career in
medical billing and coding aligns well with your strengths and preferences:
If you find yourself answering “yes” to all of the questions above, it indicates that
you may be well-suited for a rewarding career in medical billing and coding. Your
strengths in following guidelines, handling technology, maintaining patient
confidentiality, and engaging in effective communication make you a valuable
candidate for success in this field.
As stated by the Bureau of Labor Statistics (BLS), essential qualities for medical
1. Decision-making skills, enabling them to analyze diagnoses and medical records to
select the most appropriate codes for patients’ medical records Source :
2. Organizational skills, which are indispensable for accurately recording and coding
patient data. Source : www.bls.gov
3. Good communication and interpersonal abilities, particularly valuable during
high-stress situations like handling billing discrepancies or dealing with rejected
insurance claims. Source : www.bls.gov
4. Writing skills, encompassing grammar, professionalism, and accuracy, are
significant assets to develop for effective email communications that are often part
of this role. Source : www.bls.gov
Developing and honing these qualities can contribute to a successful career as a
medical secretary, facilitating efficient medical record keeping and communication
within the healthcare setting.
What is a Health Claims Assistance Professional?
A Health Claims Assistance Professional, also sometimes referred to as the Patient
Advocate, is someone who is experienced in the medical billing/health insurance
industry that helps the public with any or more of the following listed below:
A Health Claims Assistance Professional is responsible for the accurate and timely
adjudication of medical claims and can process claims using practice management
software. Processing of claim forms and adjudication for allocation of deductibles
and co-pays, co-insurance maximums and provider reimbursements are the main
responsibilities of a medical claims processor. In addition, follows adjudication
policies and procedures to ensure proper payment of claims.
Should have a basic knowledge of using a computer and be able to perform data entry
A health claims professional is a person who specializes in processing and managing
health insurance claims. They play a crucial role in the healthcare industry,
ensuring that medical claims are processed accurately, efficiently, and in
compliance with the relevant rules and regulations. Their responsibilities may
Claims Processing: Health claims professionals receive and review
medical claims submitted by healthcare providers or policyholders. They verify the
accuracy and completeness of the information provided, including patient details,
diagnosis codes, and procedure codes.
Coding and Billing:Health claims professionals use medical coding
systems (such as ICD-10 and CPT) to translate medical procedures and diagnoses into
standardized codes. These codes are essential for insurance reimbursement and
Claims Adjudication:After reviewing the claims and verifying their
accuracy, health claims professionals determine the appropriate reimbursement amount
based on the insurance policy coverage and the allowed benefits.
Communication:They may communicate with healthcare providers,
policyholders, or insurance company representatives to gather additional information
or clarify claim-related queries.
Regulatory Compliance:Health claims professionals must stay updated
with the latest healthcare regulations and insurance policies to ensure compliance
with industry standards.
Claims Resolution: In cases where a claim is denied or not fully
reimbursed, health claims professionals may work to resolve issues, appeal denied
claims, or reprocess claims with corrected information.
Record Keeping:Accurate and organized record-keeping is vital in
claims processing. Health claims professionals maintain detailed records of all
processed claims and related interactions.
Fraud Detection:They may also be involved in identifying potential
fraudulent activities, such as false claims or billing discrepancies.
While licensing or certification is not mandatory for a medical claims processor,
individuals looking to establish their own medical claims processing business should
be aware of certain obligations. It is essential to file for a business license,
similar to any other type of business. Additionally, depending on the state’s
regulations, obtaining insurance coverage and bonding might be necessary.
Prospective entrepreneurs interested in starting a medical claims processing business
should seek guidance from their state governments to understand the specific
requirements and regulations governing this type of venture. Being informed about
the necessary steps ensures compliance and helps establish a successful and legally
compliant medical claims processing business.
Experience and Training:
You cannot operate this type of business without medical billing and health insurance
experience and/or training. If you have no experience in this field, I recommend
taking CPMB certification . If you prefer online classes, the Professional Medical
Billers Association offers classes at www.pmbausa.com . If you are not experienced
with Medicare and Medicare Advantage, it is imperative to become so! You must know
Medicare deductibles, Medicare premium rates, and how Original Medicare differs from
Medicare Advantage, as well as the role of a Medigap plan.
To become a health claims professional, individuals often need a strong understanding
of medical terminology, coding systems (ICD-10, CPT, HCPCS), and health insurance
procedures. Many professionals acquire certifications like Certified Professional
Coder (CPC) or Certified Coding Specialist (CCS) from organizations like the
American Academy of Professional Coders (AAPC) or the American Health Information
Management Association (AHIMA).
Health claims professionals work in various healthcare settings, including hospitals,
clinics, insurance companies, and third-party billing organizations. Their accurate
and efficient processing of health insurance claims is essential for the smooth
functioning of the healthcare system and ensuring that patients receive the
appropriate benefits from their insurance coverage.
PMBA offers Comprehensive Medical Coding and Medical Billing Training with AAPC CPC
Exam Preparation and CPMB Certification.
Starting Fresh or Adding to Your Current Services:
Health claims assistance services can be offered as a standalone business or as an
additional service to an existing medical billing business. The demand for medical
billers and claims assistance services has been increasing, especially during
ongoing healthcare crises or times of significant changes in healthcare regulations
Starting a New Health Claims Assistance Home-Based Business
If you are registering your business name as a sole-proprietor, you may either use
your social security number as your tax-id #, or register for a separate tax id#
with your state.
Consult an attorney with any legal questions you may have regarding registering your
business name in your state.
If claim submissions will be a service you offer, check with your state to see if you
are required to register with your state’s Department of Banking and Finance, as
certain states require ‘third-party billing services’ to be registered with such.
If you are registering as a Limited Liability Company, there are many websites that
offer these services ex: www.legalzoom.com or you may be able to register as an LLC
directly online with your state’s business website. You may also incorporate at the
above listed website. If you incorporate, your tax guidelines will be different than
those of other business entities, so I recommend guidance from an attorney if
choosing this type of business entity.
Items/Supplies Needed to Get Started:
To get started as a health claims professional, you’ll need certain items and
supplies to perform your job efficiently and effectively. Here’s a list of essential
As you establish yourself as a health claims professional, you may also need to adapt
and expand your resources based on the specific needs of your clients and the
healthcare industry’s evolving demands. It’s crucial to stay informed about industry
updates and maintain a high standard of accuracy and professionalism in your work.
PMBA will provide the Medical Billing Services Website.
Having a well-developed and informative website is highly beneficial when starting as
a healthcare claims professional. An informative website serves as your online
presence and can be a powerful tool to attract potential clients, showcase your
expertise, and provide essential information about your services. Here are some
reasons why a website is important for a healthcare claims professional:
Your Potential Clients:
As a health claims professional, your potential clients can include individuals,
healthcare providers, and healthcare facilities who need assistance with various
aspects of medical billing and claims processing. Here are the potential clients you
When targeting potential clients, it’s essential to tailor your marketing efforts and
services to address their specific needs. Highlighting your expertise in dealing
with unpaid medical bills, claim denials, appeals, and other related challenges will
be crucial in attracting and retaining clients. Building a strong reputation for
providing reliable and effective health claims assistance will lead to increased
referrals and a loyal client base.
Remember to tailor your marketing efforts to your target audience and continuously
track the effectiveness of each strategy to refine your approach over time. Building
a strong online and offline presence will help establish your health claims
professional services and attract potential clients.
Authorization to act as patient advocate:
You will need to obtain an authorization from the patient to act as their patient
advocate. This will be a form signed by the patient you will need to fax/send to the
physician’s office and/ or insurance company to speak on their behalf.
Fee for Service:
Health Claims Assistance Professionals may charge as little as 15-20-$30 per hour,
while some can charge greater than $150 per hour.
Before quoting a fee, it is important to obtain the details of the patient’s specific
health claim/insurance problem/s or needs. Never quote a fee until you are aware of
the client’s need and work involved in each case!
You can quote an hourly fee or a per project fee. If your services will be needed on
a long-term basis, say if the client wants you to handle all medical bills and EOBs
they receive on a daily basis, you will need to negotiate a fee for such.
It is crucial not to over-charge seniors. Many are on a fixed, limited income and do
not have the financial resources others may have, yet they may be the ones who need
you the most!
I suggest offering a free consultation to get your’ foot in the door’
If a client wishes to hire you, you must get a signed contract outlining the specific
services/fees pertaining to each client. You may have an attorney look over your
contract. See sample contract # 1 below. The below is strictly a sample. You may use
it; tweak it, to suit your needs!
If your are comfortable charging a retainer fee up front-let the client know there
will be an ‘up-front’ fee amount required (for example if you believe it will take 2
hours to complete the assignment-you may request half of the amount before you begin
the task and the remaining due balance upon completion of the task)
Client Data Sheet
If you are hired by a client, you will need the client to complete a client data
sheet, much like a patient registration form.
The advice given in this guide is not legal advice. If you need legal advice, you
should contact an attorney. For tax advice, contact an accountant.
You may use the sample contracts presented in this guide. Feel free to add, delete,
or change text to suit your needs.
Fees you will charge may vary by project or service performed, as well as by the
state you are providing services in.
Note: A Health Claims Assistance Professionalshould possess
fundamental computer skills, including data entry capabilities. Since most claims
are received via email, it is crucial for potential claims processors to be
proficient in opening or downloading email attachments and uploading forms as
necessary. Familiarity with data entry software commonly used by medical claims
processors is advantageous for job qualifications. Medisoft is a prominent example
of such software, extensively utilized in the healthcare industry for billing and
Moreover, a proficient Health Claims Assistance Professionalshould
have the ability to print standardized claim forms that can be customized to meet
specific requirements. The use of medical billing and claims processing software
aids in tracking and managing insurance claims and facilitates accurate billing with
the appropriate CPT and ICD codes. Mastering these computer skills and software
applications enables efficient and accurate claims processing for medical claims
Healthcare continues to be one of the most rapidly expanding industries, offering
numerous opportunities for job seekers. If patient care doesn’t align with your
interests, you can still embark on a fulfilling career in the thriving healthcare
field by becoming a Certified Professional Medical Biller.
Free online resources that can be valuable:
1. Centers for Medicare & Medicaid Services (CMS) – Healthcare Common
Procedure Coding System (HCPCS):The CMS website provides access to the
HCPCS, a standardized coding system used for medical services, supplies, and
equipment. This resource helps medical billers assign appropriate codes to ensure
accurate billing. URL: Medicare Coding MedHCPCSGenInfo
2. American Medical Association (AMA) – Current Procedural Terminology (CPT)®
Code Set:The AMA offers the CPT code set, which is widely used for
reporting medical procedures and services. The CPT codes facilitate proper billing
and reimbursement in medical claims processing. URL: Practice Management
3. National Center for Health Statistics (NCHS) – International
Classification of Diseases (ICD):NCHS provides access to the
International Classification of Diseases (ICD) coding system, used for classifying
and reporting diagnoses and diseases. Accurate ICD coding is crucial for medical
billers to ensure proper reimbursement. URL C.D.C
4. CMS – Medicare Learning Network (MLN) Matters Articles: The MLN
Matters articles contain valuable information on Medicare billing guidelines,
policies, and updates. These resources are particularly useful for medical billers
dealing with Medicare claims. URL: Medicare Learning Network MLN
5. American Academy of Professional Coders (AAPC) – Healthcare Business
Monthly:AAPC offers a free monthly publication that covers various
topics related to medical coding and billing. It provides insights, best practices,
and industry updates. URL: HelathCare Business Monthly
6. HealthIT.gov – Health Information Technology Resources for
Providers: HealthIT.gov provides resources on health information
technology, including electronic health records (EHR) systems and related tools.
Familiarity with EHR systems is essential for efficient medical billing.
7. Healthcare Financial Management Association (HFMA) Webinars and
Podcasts:HFMA offers free webinars and podcasts on healthcare finance
and revenue cycle management, including medical billing and claims processing
topics. URL: Education Podcasts
8. American Health Information Management Association (AHIMA) Free
Resources:AHIMA provides a collection of free resources, including
articles, webinars, and toolkits related to health information management, medical
coding, and billing.
9. HHS Office for Civil Rights (OCR) – HIPAA for Professionals:
The HHS OCR offers a dedicated webpage with comprehensive information on HIPAA
regulations and compliance guidelines for healthcare professionals, including
medical billers. This resource helps medical billers understand their
responsibilities under HIPAA and how to protect patient information. URL: Hipaa For Professionals.
10. U.S. Department of Health & Human Services (HHS) – HIPAA Privacy Rule:
The HHS provides a comprehensive guide to the HIPAA Privacy Rule, which
sets standards for the protection of individually identifiable health information.
Medical billers can understand the requirements for safeguarding patient data. URL:
Hipaa For Professionals Privacy
Thank you and enjoy!
Should you have any questions, please feel free to email me at email@example.com
President-Professional Medical Billers Association USA
Disclaimer: The information provided in this article is for general informational
purposes only and should not be construed as professional/legal advice. Readers are
encouraged to seek individualized guidance from qualified professionals in the
relevant field. The author and PMBA are not liable for any actions taken based on
the information presented in this article. All views expressed are solely those of
the author and do not necessarily reflect the views of the website
Click here to download Medical Billing Terminology Guide
It is not advisable to routinely waive copayments because most insurance companies do
not tolerate this practice. If the provider is audited, the federal government can
assess penalties for not collecting copayments for patients seen under the Medicare
program. However, if copayments are waived on a case-by-case basis, as in a courtesy
discount, there should not be any problems with commercial insurance carriers or
Medicare. Generally, deductibles and copayments should be collected at the time of
Co-insurance refers to the portion of medical costs that is shared between the
policyholder (the insured individual) and the insurance company after the deductible
has been met. In health insurance, a deductible is the specified amount that the
insured person must pay out of pocket before the insurance coverage begins to
contribute to the expenses.
Insurance coverage is $10,000
Accepted Coinsurance Policy: 20/80
Insurance agrees to pay $8,000 and patient needs to pay $2,000.
Before his visit, insured person should make sure his doctor was in the plan network*
so he could get the most coverage and pay less out of his own pocket. If visits a
provider outside his plan network, he may pay more.
A typical auto insurance policy, for example, may carry a $400 deductible.
If the owner of that car accidentally hits another car while parking and both drivers
agree the damage is minimal, he or she would pay the $400 repair bill out of his or
her own pocket.
Insurance companies would not encourage a claim for such minor damages.
The next time, if the accident happens, insurance starts paying as the deductible has
In a similar way, patients who visit the emergency room for a minor injury or
procedure would have to pay out of pocket until they have reached the level of the
If their medical expenses on a visit to the hospital would exceed the deductible,
then the insurance company would pay the total charges minus the deductible.
An out-of-pocket expense is a non-reimbursable expense paid by a patient. This could
include any medical benefits that health plan doesn’t consider “covered services.”
Out of pocket means, the costs borne by the member that are not covered by the
Medicare:is the largest health insurance payer in the United States.
It is a federally funded program legislated by the entity known as CMS (Centers for
Medicare and Medicaid Services).
Abuse:An act that directly or indirectly results in unnecessary
reimbursement without defined intent.
Advanced Beneficiary Notice:The Advanced Beneficiary Notice (ABN) is
a report given to Medicare beneficiaries to let the patient know that Medicare is
not likely to pay for certain services. The notice must be given to the patient
before services are performed. CMS has modified its form and given explicit
instructions how the form should be completed. According to regulations, providers
include physicians, institutions such as outpatient hospitals, practitioners and
suppliers paid under Part B, and hospice providers and religious non-medical health
care institutions (RNHCIs) paid exclusively under Part A. The ABN form must be
verbally reviewed with the beneficiary or their representative before they sign it.
Once completed and the form is signed, a copy is given to the beneficiary or
representative. In all cases, the notifier must retain the original notice on file.
These forms are not required in emergency or urgent care situations.
Approved charges:0020Fee that Medicare decides the medical service
is worth, which may or may not be the same as the actual amount billed. The patient
may or may not be responsible for the difference.
Assignment For Medicare, an agreement in which a patient assigns to
the physician the right to receive payment from the fiscal intermediary. Under this
agreement, the physician must agree to accept the program payment as payment in full
except for 20% or the reasonable (allowed or approved) charge and the deductible.
Benefit period Period of time for which payments for Medicare
inpatient hospital benefits are available. A benefit period begins the first day an
enrollee is given inpatient hospital care (nursing care or rehabilitation services)
by a qualified provider and ends when the enrollee has not been an inpatient for 60
consecutive days. For disability insurance, it is the maximum amount of time that
benefits will be paid to the injured or ill person for a disability.
Beneficiary:The term “Medicare beneficiary” refers to an individual
who is eligible to receive benefits from the Medicare program. Medicare is a
federally funded health insurance program in the United States that primarily
provides coverage for individuals who are aged 65 and older, as well as certain
younger individuals with specific disabilities or qualifying medical conditions.
Coinsurance:Co-insurance refers to the portion of medical costs that
is shared between the policyholder (the insured individual) and the insurance
company after the deductible has been met. In health insurance, a deductible is the
specified amount that the insured person must pay out of pocket before the insurance
coverage begins to contribute to the expenses.
Once the policyholder has paid the deductible amount, co-insurance comes into effect.
It is expressed as a percentage, indicating the proportion of the medical costs that
the insurance company and the insured individual will share. For example, if the
co-insurance is 20%, the insurance company will pay 80% of the eligible medical
expenses, while the policyholder will be responsible for paying the remaining 20%.
Here’s an example to illustrate how co-insurance works:
Let’s say John has a health insurance plan with a $1,000 deductible and a
co-insurance rate of 20%. He incurs medical expenses of $5,000 during the coverage
Step 1: John pays the $1,000 deductible out of pocket first.
Step 2: After meeting the deductible, the co-insurance kicks in. The insurance
company will cover 80% of the remaining $4,000 in medical expenses, which amounts to
Step 3: John is responsible for paying the remaining 20% co-insurance, which is $800.
In this scenario, the total amount paid for medical expenses is $1,000 (deductible) +
$800 (co-insurance) = $1,800. The insurance company paid $3,200.
Co-insurance helps share the financial burden of healthcare costs between the insured
individual and the insurer, making healthcare more affordable and accessible. It is
important for policyholders to understand their co-insurance rate and the terms of
their health insurance policy to budget and plan for potential out-of-pocket
expenses when seeking medical care.
Crossover claim Bill for services rendered to a patient receiving
benefits simultaneously from Medicare and Medicaid. Medicare pays first and then
determines the amounts of unmet Medicare deductible and coinsurance to be paid by
Co-payment:A fixed amount paid by the policyholder at the time of
receiving medical services, typically for office visits or prescriptions.
Coordination of Benefits (COB):The process of determining which
insurance plan is primary and secondary when an individual is covered under multiple
Clearinghouse:An electronic intermediary between healthcare
providers and payors that processes and forwards medical claims to insurance
companies for payment.
CMS-1500 Form:The standard paper claim form used to submit medical
claims for services provided to Medicare and Medicaid beneficiaries.
Deductible:The amount that the policyholder must pay out-of-pocket
before the insurance company starts covering medical expenses.
Diagnosis-Related Group (DRG)The DRG abbreviation stands for
Diagnosis-Related Group. DRGs are used as a patient classification system to relate
the reason a patient was seen in a hospital to the costs incurred by the hospital in
the care of the patient. Patients are classified into Diagnostic, Demographic, and
Therapeutic groups to analyze resource needs. Hospitals receive money for each case
that falls into a specific DRG that is a preset reimbursement amount for that DRG.
Disabled:For purposes of enrollment under Medicare, individuals
younger than 65 years of age who have been entitled to disability benefits under the
Social Security Act or the railroad retirement system for at least 24 months are
considered disabled and are entitled to Medicare.
Effective Date:The date on which an insurance policy or coverage
Exclusion:A specific medical condition, treatment, or service that
is not covered by an insurance policy.
Explanation of Benefits (EOB):A statement sent by an insurance
company to a policyholder, detailing the costs, services, and payments related to a
Fee-for-Service: A payment model in which healthcare providers are
paid for each service or procedure they deliver.
Formulary:A list of prescription drugs that are covered by an
End-stage renal diseaseIndividuals who have chronic kidney disease
requiring dialysis or kidney transplant are considered to have ESRD. To qualify for
Medicare coverage, an individual must be fully or currently insured under Social
Security or the railroad retirement system or be the dependent of an insured person.
Eligibility for Medicare coverage begins with the third month at the beginning of a
course of renal dialysis. Coverage may begin sooner if the patient participates in a
self-care dialysis training program or receives a kidney transplant without
Fiscal intermediary (FI)An organization under contract to the
government that handles claims under Medicare part a from hospitals, skilled nursing
facilities, and home health agencies. Also known as fiscal agent, fiscal carrier,
and claims processor.
Fraud:Intentional deception made for personal gain. Fraud is a
crime, and a civil law violation.
Health Care Financing Administration (HCFA) Health Care Financing
Administration, (pronounced “HICK-fah”). The preferred term is now Centers for
Medicare & Medicaid Services (CMS), an agency of the US Dept. of HHS that
administers Medicare, the federal part of Medicaid and oversees Medicare’s health
financing; HCFA establishes standards for medical providers that require compliance
to meet certification requirements.
Hospice : A public agency or private organization primarily engaged
in providing pain relief, symptom management, and supportive services to terminally
ill patients and their families.
Health Maintenance Organization (HMO):A type of managed care
organization that provides healthcare services through a network of doctors,
hospitals, and other healthcare providers.
Hospital insurance:Known as Medicare Part A. A program providing
basic protection against the costs of hospital and related post-hospital services
for individuals eligible under the Medicare program.
Intermediate care facilities (ICFs):Institutions furnishing
health-related care and services to individuals who do not require the degree of
care provided by hospitals or nursing facilities.
In-network Provider:A healthcare provider who has a contract with an
insurance company to provide services at negotiated rates to policyholders.
Limiting charge: A percentage limit on fees, specified by the
legislation, that nonparticipating physicians may bill Medicare beneficiaries above
the fee schedule amount.
Medical necessity:Criteria used by insurance companies when making
decisions to limit or deny payment in which medical services or procedures must be
justified by the patient’s symptoms and diagnosis.
Medicare:A nationwide health insurance program for persons aged 65
years and older and certain disabled or blind persons regardless of income,
administered by CMS. Local Social Security offices take applications and supply
information about the program.
Medicare/Medicaid (Medi-Medi):Refers to an individual who receives
medical and/or disability benefits from both Medicare and Medicaid programs.
Sometimes referred to as a Medi-Medi case.
Medicare secondary payer (MSP): Primary insurance plan of a Medicare
beneficiary that must pay for any medical care or services first before Medicare is
sent a claim.
Medicare summary notice: Document received by the patient explaining
amount charged, Medicare approved, deductible, and coinsurance for medical services
Medical Necessity:The criteria that must be met for a healthcare
service or treatment to be covered by an insurance plan
Medigap : A specialized insurance policy device for the Medicare
beneficiary that covers the deductible and copayment amounts typically not covered
under the main Medicare policy written by a nongovernmental third-party payer. Also
known as Medifill.
National provider identifier (NPI):A Medicare lifetime 10-digit
number issued to providers.
Nonparticipating physician (Nonpar):A provider who does not have a
signed agreement with Medicare and has an option regarding assignment. The physician
may not accept assignment for all services or has the option of accepting assignment
for some services and collecting fees from the patient for other services performed
at the same time and place.
Original Medicare: Original Medicare is fee-for-service coverage
under which the government pays health care providers directly for a patient’s Part
A and/or Part B benefits.
Out-of-network Provider:A healthcare provider who does not have
a contract with an insurance company and may result in higher outof-pocket costs
for the policyholder.
Nursing facility :A specially qualified facility that has the staff
and equipment to provide skilled nursing care and related services for patients who
need medical or nursing care or rehabilitation services. Formerly known as skilled
Participating physician (Par) :A physician who contracts with an HMO
or other insurance company to provide services. A physician who has agreed to accept
a plans payment for services to subscribers (e.g., some Blue plans). 80% of
practicing American physicians are participating physicians.
Peer review organization (PRO)A group of practicing physicians paid
by the federal government to review hospital care of Medicare patients regarding
effectiveness and efficiency.
Premium :A monthly fee that enrollees pay for Medicare part B
medical insurance. This fee is updated annually to reflect changes in program costs.
Pre-authorization:The process of obtaining approval from an
insurance company before receiving certain medical services or treatments.
Prospective payment system (PPS) :A method of payment for Medicare
hospital insurance based on DRGs (a fixed dollar amount for a principal diagnosis).
Qui tam actionAn action to recover a penalty, brought by an informer
in a situation in which one portion of the recovery goes to the informer and the
other portion to the state or government.
Reasonable fee A charge is considered reasonable if it is deemed
acceptable after peer review even though it does not meet the customary or
prevailing criteria. This would include unusual circumstances or complications
requiring additional time, skill, or experience in connection with a particular
service or procedure.
Relative value unit (RVU):Individual building block of RBRVS
(resource-based relative value scale). For each service, there are three RVUs: for
work, practice expenses, and the cost of professional liability insurance.
Remittance advice (RA) An explanation of services periodically
issued to recipients or providers on whose behalf claims have been paid by the
Medicare or Medicaid program. Also known in some programs as an Explanation of
Resource-based relative value scale (RBRVS) :A system that ranks
physician services by units; a Medicare fee schedule.
Respite care : Short-term hospice inpatient stay that may be
necessary to give temporary relief to the person regularly assist with the care of
Supplemental Security Income (SSI): A program of income support for
low-income aged, blind, and disabled persons established by Title XVI of the Social
Supplementary Medical Insurance (SMI):Part B – medical benefits of
Volume performance standard Desired growth rate for spending on Medicare Part B
physician services, set each year by Congress.
Third-Party Administrator (TPA):An organization that manages claims
and administrative services on behalf of self-insured employers or insurance
Underwriting:The process of evaluating an individual’s risk profile
to determine their eligibility for insurance coverage and the associated premium
Workers’ compensation (WC) insuranceA contract that ensures a person
against on-the-job injury or illness. The employer pays the premium for his or her
Utilization Review:The process of evaluating the necessity,
appropriaten ess, and efficiency of medical services.
UB-04 Form: The standard claim form used by hospitals and healthcare
facilities to bill for inpatient and outpatient services.
Disclaimer: The information provided in this article is for general
informational purposes only and should not be construed as professional/legal
advice. Readers are encouraged to seek individualized guidance from qualified
professionals in the relevant field. The author and PMBA are not liable for any
actions taken based on the information presented in this article. All views
expressed are solely those of the author and do not necessarily reflect the views of
In the intricate world of healthcare finance, accounts receivable (AR) plays a
role in ensuring the financial stability of healthcare providers. Medical accounts
receivable refers to the outstanding reimbursement owed to providers for the
and services they have rendered, whether the responsibility falls on the patient or
their insurance company. It is crucial for healthcare providers to manage their
receivable effectively to maintain a healthy revenue cycle and ensure the financial
viability of their practice. This essay explores the significance of accounts
in the healthcare industry, the challenges it poses, and the strategies to optimize
Click here to download Accounts Receivable Guide
AR callingin medical billing refers to the process of contacting
insurance companies, patients, or other payers to follow up on outstanding claims
that have not been paid or have been denied. It is a crucial step in the revenue
cycle management (RCM) process, occurring after the initial claim submission and
When a claim remains unpaid or is denied, it becomes part of the accounts receivable
(AR) of the medical practice. AR calling involves proactive efforts to resolve these
outstanding claims and ensure timely and accurate reimbursement for the services
rendered by the healthcare provider.
The responsibilities of AR calling in medical billing include:
Claim Analysis:AR specialists review the details of the denied or
unpaid claim, verifying that all required information, including patient details,
diagnosis codes, procedure codes, and supporting documentation, is correct and
Follow-up with Insurance Companies:AR specialists contact insurance
companies to inquire about the status of the claim and the reasons for the denial or
non-payment. They may request additional information or clarification to address any
Patient Communication:In cases where the patient is responsible for
a portion of the payment, AR calling may involve contacting the patient to discuss
outstanding balances, co-pays, co-insurance, or deductibles. They provide
information about the claim status and payment options to facilitate prompt
Resolving Claim Issues:Based on the information gathered during
follow-up, AR specialists take appropriate actions to address claim issues. This may
include resubmitting corrected claims, appealing denied claims, or addressing any
other issues that are preventing timely payment.
Documentation and Record-keeping: Throughout the AR calling process,
thorough documentation of all interactions with insurance companies, patients, and
other payers is essential for accurate tracking and efficient resolution of claims.
Reporting and Analysis:AR specialists maintain records of AR aging,
tracking the length of time each claim has been outstanding. They generate reports
to analyze trends, identify recurring issues, and implement strategies for improving
the overall AR performance.
Understanding Medical Accounts Receivable:
Accounts receivable in the medical context encompass the money owed to
healthcare providers for the healthcare services they have provided to patients.
When healthcare providers bill a patient or their insurance company for services
rendered, it gives rise to an accounts receivable. It is important to note that
although ARs represent outstanding payments, they do not qualify as assets in
the traditional sense.
The longer an account goes unpaid for services rendered, the more likely it
is that an account will never be paid.
Providers categorize accounts receivable based on their age, usually in the
following time frames:
Charge entry errors and patient information inaccuracies on submitted claims lead to
claim denial and lengthened AR cycles.
Challenges Faced by Healthcare Providers:One of the most significant challenges faced
by healthcare providers is the collection of reimbursements within a reasonable time
frame. The longer an AR goes unpaid, the higher the risk of non-payment altogether.
According to industry statistics, after 120 days, healthcare providers
can expect to receive only ten cents per dollar owed. This
highlights the urgency for timely and efficient AR management to avoid revenue
leakage and financial losses.
Moreover, managing accounts receivable can be complex and time-consuming for
healthcare providers. The process involves dealing with insurance companies, claims
denials, appeals, and patient billing inquiries. It requires constant monitoring and
follow-up to ensure that outstanding payments are collected promptly.
Optimizing Revenue Management:
Effective management of medical accounts receivable is crucial for healthcare
providers to maintain a steady cash flow and financial stability. To optimize
revenue management, healthcare providers should implement the following strategies:
Timely Billing: Promptly bill patients and insurance companies after
providing healthcare services to minimize delays in reimbursement.
Clear Communication:Ensure clear and transparent communication with
patients regarding their financial responsibilities and payment options.
Proactive Follow-Up:Implement a systematic follow-up process to
track unpaid claims and address any issues or denials promptly.
Denials Management: Invest in denials management software or
services to identify and address claim denials efficiently, reducing the risk of
Patient Engagement: Engage with patients to educate them about their
insurance coverage, co-pays, and deductibles, fostering a better understanding of
their financial responsibilities.
Regular Reporting:Generate regular reports to analyze the aging of
accounts receivable and identify areas for improvement in the revenue cycle.
Medical accounts receivable forms the backbone of healthcare revenue management,
representing the outstanding reimbursements owed to healthcare providers for the
services they deliver. Efficient management of accounts receivable is essential to
maintain a healthy revenue cycle, avoid revenue leakage, and ensure the financial
viability of healthcare practices. By implementing proactive strategies, engaging
patients, and maintaining clear communication with payers, healthcare providers can
optimize their revenue management and continue providing quality care to their
patients. It is through effective accounts receivable management that the healthcare
industry can maintain its financial health and continue serving the needs of
The AR cycle is the final segment of the revenue cycle. Issues that may occur
throughout the revenue cycle, even as early as collecting patients’ personal and
insurance information, threaten the success of both.
Since the enactment of the Affordable Care Act (ACA) in 2010, many Americans have
opted for high-deductible health insurance plans as a means to lower their monthly
premiums. While this choice has provided cost-saving benefits for policyholders, it
has also resulted in an increase in out-of-pocket expenses for patients when they
seek medical care. As a consequence, medical providers have experienced a surge in
patients responsible for a higher percentage of their medical bills.
For healthcare providers, this shift in patient insurance coverage has led to
significant challenges in managing their accounts receivable (AR) processes. In the
past, when patients had lower deductibles and insurance covered a larger portion of
the medical expenses, providers could more readily rely on timely reimbursements
from insurance companies. However, with the rise in high-deductible plans, the
burden of recouping reimbursements has shifted from insurance companies to
individual patients, placing additional strain on providers’ revenue management
Calculating – “Days in AR”
Calculating Days in Accounts Receivable (AR) is a vital financial metric for
healthcare providers, helping them assess the efficiency of their revenue cycle and
understand the average time it takes to collect outstanding payments from patients
and insurance companies. To calculate Days in AR, follow these steps:
Step 1: Compute the Average Daily Charges for the Past Several Months
To begin, add up the total charges posted for the last six months. For example, let’s
assume the sum of charges for the past six months is $180,000. Next, determine the
total number of days in those six months. If each month had 30 days, then the total
number of days would be 180 (6 months * 30 days per month).
Now, divide the total charges ($180,000) by the total number of days (180) to
calculate the average daily charges. In this case, the average daily charges would
be $1,000 ($180,000 / 180 days).
Step 2: Divide the Total Accounts Receivable by the Average Daily Charges
Next, determine the total accounts receivable balance at a specific point in time.
Let’s assume the total accounts receivable is $60,000.
Now, divide the total accounts receivable ($60,000) by the average daily charges
($1,000) to calculate the Days in AR. In this example, the Days in AR would be 60
days ($60,000 / $1,000).
Interpreting the Result:The calculated Days in AR (60 days)
represents the average number of days it takes for the healthcare provider to
collect outstanding payments from patients and insurance companies. In this case,
the provider takes an average of 60 days to receive payment for services rendered.
A lower number of Days in AR indicates that the provider’s revenue cycle is
efficient, and outstanding payments are being collected promptly. Conversely, a
higher number of Days in AR suggests that the revenue cycle may be experiencing
delays in payment collection, potentially leading to cash flow challenges and
impacting the financial health of the healthcare practice.
Monitoring Days in AR regularly enables healthcare providers to identify areas for
improvement in their revenue management processes, enhance collection efforts, and
maintain a financially stable practice. By implementing effective accounts
receivable management strategies, providers can strive to reduce Days in AR and
optimize their revenue cycle for sustainable financial success.
Monitoring the percentage of A/R that has aged beyond 90 and 120 days is a
fundamental component of effective revenue cycle management for medical practices.
It provides key insights into the aging of outstanding receivables and helps assess
the practice’s ability to collect payments in a timely manner.
Example-2: AR Days
A/R Days = (Accounts receivable ÷ Annual revenue) x Number of days in the
Accounts receivable for a pediatric clinic is $100,000 and its (Account
receivable/total charges) X 365 days is $600,000. Then the A/R days for this clinic
A/R Days = ($100,000 accounts receivable ÷ $600,000) x 365 days = 60.8 Accounts
Calculating – “Aging Buckets”
The percent of accounts receivable in each “aging bucket” is a crucial metric used by
healthcare providers to assess the efficiency of their billing departments and the
effectiveness of their accounts receivable management. Aging buckets typically
categorize outstanding accounts receivable based on the number of days since the
invoice or claim was issued. The standard aging buckets are often segmented as
follows: 0-30 days, 31-60 days, 61-90 days, 91-120 days, and over 120 days.
To calculate the percent of accounts receivable in each aging bucket, healthcare
providers generate a report that shows the dollar amount of outstanding AR in each
bucket. This report helps them visualize the distribution of outstanding payments
across different timeframes.
To convert each aging bucket to a percentage of the total accounts receivable, follow
Sum up the dollar amounts of AR in each aging bucket. For example, let’s assume the
total AR in each aging bucket is as follows:
Calculate the total accounts receivable by adding up the AR amounts in all aging
Total AR = $50,000 + $20,000 + $15,000 + $10,000 + $5,000 = $100,000
Convert each aging bucket to a percentage of the total AR:
Total Dollar Amount of Denied Claims ÷ Total Dollar Amount of Submitted Claims
FPRR: The First Pass Resolution Rate (FPRR) is a critical
performance metric used to assess the efficiency and effectiveness of a medical
practice’s Revenue Cycle Management (RCM) process. It measures the percentage of
claims that are successfully paid by the insurance company on the first submission,
without the need for resubmission or appeal.
A high FPRR indicates that the RCM process is streamlined, accurate, and
well-managed, resulting in a higher proportion of claims being paid promptly and
correctly. On the other hand, a low FPRR suggests inefficiencies or errors in the
billing, coding, or claims submission process, leading to claim denials or delays in
To calculate the First Pass Resolution Rate, use the following formula:
FPRR = (Number of claims paid on the first pass / Total number of claims submitted)
For example, if a medical practice submitted 100 claims to insurance companies, and
85 of those claims were successfully paid on the first submission without any need
for resubmission, the FPRR would be:
FPRR = (85 / 100) * 100 = 85%
A high-performance FPRR is typically considered to be 90% or higher. This means that
90% or more of the claims are successfully paid on the first submission. Achieving a
high FPRR is crucial for optimizing revenue cycle operations and ensuring prompt
reimbursement for services provided.
Importance of FPRR:
GCR:The Gross Collection Ratio (GCR) is a significant financial
metric used in medical billing to assess the efficiency and profitability of a
healthcare practice. It measures the percentage of total payments received by the
practice relative to the total charge amount allowed for the services rendered
during a specific time period.
GCR is a critical indicator of how effectively the practice is able to collect the
fees it is entitled to receive from insurance companies and patients. It helps
identify how well the practice is performing in terms of revenue generation and
To calculate the Gross Collection Ratio, use the following formula:
GCR = (Total Payment amount / Total Charge Amount) * 100%
For example, if a practice billed a total of $100,000 for services rendered during a
specific time period, and they received $80,000 in payments from insurance companies
and patients, the GCR would be:
GCR = ($80,000 / $100,000) * 100% = 80%
A higher GCR indicates that the practice is able to collect a larger percentage of
the fees it is allowed to charge for services. This suggests that the practice is
performing well in terms of reimbursement and revenue collection.
On the other hand, a lower GCR may indicate potential issues in the revenue cycle,
such as claim denials, delayed payments, or write-offs. A lower GCR could also be a
result of contracted fee schedules with insurance companies that allow for lower
It is important to note that GCR can vary among different healthcare practices due to
factors such as the type of services offered, insurance contracts, fee schedules,
patient demographics, and billing practices. Therefore, GCR is best used as an
internal benchmark to monitor the practice’s financial performance over time, rather
than comparing it with industry benchmarks or other practices.
Importance of GCR:
Monitoring the Gross Collection Ratio is crucial for medical practices to understand
their financial health and the effectiveness of their revenue collection efforts. A
high GCR indicates that the practice is successful in obtaining reimbursement for
the services it provides, contributing to better financial stability and
By regularly tracking GCR, medical practices can identify trends and areas for
improvement in their revenue cycle management. Analyzing GCR alongside other
financial metrics allows practices to implement strategies to optimize revenue
collection, improve the efficiency of billing processes, and enhance overall
NCR:Net Collection Ratio helps to measure the overall health of the
billing and collection process.
It is helpful to determine the efficiency of the practice by measuring reimbursement
amount over the allowed amount.
To calculate the Net Collection Ratio (NCR), follow these steps:
Step 1: Determine the Total Charge Amount – This is the total amount that the medical
practice has billed for the services rendered during a specific time period.
Step 2: Calculate the Contractual Adjustments – Contractual adjustments are the
reductions in the total charge amount that result from contractual agreements with
insurance companies or other adjustments made during the billing process.
Step 3: Subtract Contractual Adjustments from Total Charge Amount – Subtract the
contractual adjustments from the total charge amount to get the adjusted charge
Step 4: Determine the Total Payment Amount – This is the total amount that the
medical practice has received in payments from insurance companies and patients for
the services rendered during the same time period.
Step 5: Calculate the Net Collection Ratio – Divide the total payment amount by the
adjusted charge amount and multiply by 100 to get the NCR as a percentage.
NCR Calculation: (Total Payment Amount / (Total Charge Amount – Contractual
Adjustments)) * 100
Total Charge Amount: $100,000
Contractual Adjustments: $20,000
Total Payment Amount: $78,000
Adjusted Charge Amount = Total Charge Amount – Contractual Adjustments
= $100,000 – $20,000
Net Collection Ratio = (Total Payment Amount / Adjusted Charge Amount) * 100
= ($78,000 / $80,000) * 100
In this example, the Net Collection Ratio is 97.5%, which indicates that the medical
practice is collecting 97.5% of the total allowed amount for services rendered. An
NCR of 98% or greater is considered a high-performance level, while an NCR below 90%
is indicative of poor performance in terms of revenue collection efficiency.
CPV:Collection Per Visit (CPV) for a specific time period, follow
Step 1: Determine the Total Reimbursements – This is the total amount of money the
medical practice has received in reimbursements from insurance companies and
patients for all the services rendered during the specified time period.
Step 2: Determine the Total Visits – This is the total number of patient visits or
appointments the medical practice has had during the same time period.
Step 3: Calculate the Collection Per Visit – Divide the total reimbursements by the
total visits to get the Collection Per Visit.
Collection Per Visit Calculation: Total Reimbursements / Total Visits
Total Reimbursements: $50,000
Total Visits: 500
Collection Per Visit = Total Reimbursements / Total Visits
= $50,000 / 500
= $100 per visit
In this example, the Collection Per Visit is $100, which means that on average, the
medical practice collects $100 for each patient visit or appointment during the
specified time period.
Analyzing the Collection Per Visit helps the medical practice in the following ways:
Measuring Profitability: CPV allows the practice to determine how much revenue is
generated per patient visit, helping to assess the financial health of the practice.
Benchmarking Against Industry Standards: By comparing the CPV with industry standards
and other same-specialty practices in the same area, the practice can gauge its
financial performance and identify areas for improvement.
Identifying Profitable Appointments: CPV helps in determining the most profitable
appointments or cases, enabling the practice to prioritize similar cases to generate
Strategic Decision-Making: Analyzing CPV helps in making informed decisions on how to
increase revenue, such as focusing on high-profit appointments or identifying areas
where efficiency can be improved.
Monitoring CPV regularly and striving to increase it can lead to improved financial
performance and increased profitability for the medical practice.
Please note that the accuracy and relevance of the Collection Per Visit metric depend
on the completeness and accuracy of the data used for calculation. It is essential
to ensure that the data used in the calculation is reliable and up-to-date to get
meaningful insights into the practice’s financial performance.
Contractual Variance:Contractual Variance is the amount that is paid
less by the insurance company as per the contract.
Contractual Variance Calculation: Contracted Rate – Insurance Allowed Amount
Contracted Rate: $50.00
Insurance Allowed Amount: $35.00
Contractual Variance = Contracted Rate – Insurance Allowed Amount
= $50.00 – $35.00
Key Reasons Medical Practices Lose Money
Medical practices can experience financial losses due to several key reasons that
hinder their revenue cycle management (RCM) process. These reasons highlight the
importance of implementing comprehensive policies, procedures, and internal
oversight controls to ensure efficient and effective financial operations. Some of
the key reasons medical practices lose money include:
Failure to Collect Patient Co-pay and Co-insurance:
When medical practices do not prioritize or effectively collect patient co-pays and
co-insurance at the time of service, it can lead to a significant revenue leak.
Neglecting to collect these payments upfront can result in delayed or missed
payments, impacting the practice’s cash flow.
Not Having the Right Team to Manage the RCM Process:
Inadequate staffing or lack of expertise in revenue cycle management can lead to
inefficiencies, errors, and delayed reimbursement. A well-trained and experienced
team is essential for effective billing, coding, claims submission, and follow-up,
maximizing revenue collection.
Failure to Manage Denials Effectively:
Denials from insurance companies can occur for various reasons, such as incomplete or
incorrect information on claims. Failing to address and appeal denials in a timely
manner can result in lost revenue and increased administrative costs.
Incorrectly writing off patient balances without thorough investigation or attempts
at collection can lead to unnecessary revenue loss. Proper tracking and follow-up on
outstanding balances are crucial to avoid unjustified write-offs.
Insufficient Focus on Patient Collections:
Medical practices must proactively address patient collections by establishing clear
and transparent financial policies, providing payment options, and offering
financial assistance when needed. Failure to prioritize patient collections can lead
to significant outstanding balances.
Not Having a Proper Insurance Eligibility Verification Process:
Lack of a robust insurance eligibility verification process can result in billing
errors, claim rejections, and delayed payments. Verifying patients’ insurance
coverage before providing services helps avoid potential denials and financial
Not Using a Claims Edits System:
A claims edits system can identify coding errors, missing information, or billing
discrepancies before claims are submitted. Without such a system, practices risk
increased claim rejections and delayed reimbursements.
Coding errors, whether undercoding or overcoding, can lead to claim denials and
potential compliance issues. Accurate and precise coding is essential for proper
reimbursement and revenue optimization.
Failure to Keep Pace with Patient Consumerism Demands:
As patients become more informed and proactive in managing their healthcare expenses,
medical practices must adapt to meet their demands. Practices that do not provide
transparent pricing, patient portals for billing inquiries, or convenient payment
options may lose patients and revenue.
Failure to Measure Key Performance Indicators (KPIs) Consistently:
Regularly monitoring and analyzing financial performance through KPIs is crucial for
identifying areas of improvement in the revenue cycle. Practices that do not
consistently measure and act upon KPIs may miss opportunities to optimize revenue
and reduce losses.
Addressing the key reasons medical practices lose money requires a proactive and
systematic approach to revenue cycle management. By implementing comprehensive
policies, efficient internal controls, and a dedicated team, practices can optimize
their revenue cycle, minimize financial losses, and ensure a sustainable financial
future. Regularly evaluating performance metrics and adapting to patient consumerism
demands are also vital for staying financially viable in the ever-evolving
The Differences Between Denied, Pended, and Paid.
Some common reasons for claim denials include:
Service Not Covered: The insurance program may not cover the
specific service or treatment rendered to the patient. In such cases, the claim will
be denied as the insurance policy does not provide reimbursement for that particular
Coding Errors: :Coding to the highest level of specificity is the
best way to reduce denials. A diagnosis must be coded to the absolute highest level
for that code the maximum number of digits for the code being used
Duplicate Claim:If a claim is submitted for the same service or
treatment more than once, it will be considered a duplicate claim and will be denied
by the insurance company.
Lack of Prior Approval:Certain medical services or procedures
require prior approval from the insurance company before they can be covered. If the
required prior approval is not obtained, the claim will be denied.
Invalid or Inconsistent Data: If the information provided in the
claim is incorrect, incomplete, or inconsistent, the insurance company may deny the
claim. This can include errors in patient demographics, diagnosis codes, procedure
codes, or billing codes.
Timely Filing Limit Exceeded:Insurance companies often have specific
timeframes within which claims must be submitted. If the claim is not filed within
the allowed time limit, it will be denied as untimely.
Non-Covered Diagnosis or Procedure: Certain diagnoses or procedures
may not be covered under the patient’s insurance policy. If the claim is related to
a non-covered diagnosis or procedure, it will be denied.
Coordination of Benefits (COB) Issues:: If the patient has multiple
insurance policies, the claim may be denied due to coordination of benefits issues.
This occurs when the primary insurance has not been billed first, or the secondary
insurance information is incorrect.
Missing or Inadequate Documentation:If the claim lacks the necessary
supporting documentation, such as medical records or evidence of medical necessity,
it may be denied.
Lapsed or Inactive Insurance Policy:If the patient’s insurance
policy has lapsed or become inactive, the claim will be denied as there is no active
coverage for the services provided.
When a claim is denied, the medical billing team must review the reason for denial
and take appropriate actions to rectify the issue. This may involve appealing the
denial with additional documentation, correcting errors, obtaining prior approvals,
or resubmitting the claim with the correct information. Effective denial management
is crucial for medical practices to optimize revenue and ensure proper reimbursement
for the services they provide to patients.
A claim may be pended if it contains erroneous information, does not match requires
manual review to be resolved.
Some common reasons to pend a claim are:
Medical claims play a crucial role in the financial well-being of healthcare
organizations. Submitting precise and error-free claims is of utmost importance to
ensure a provider’s financial health and operational efficiency. According to a
report from the *Kaiser Family Foundation URL : KFF claims
that are submitted as out-of-network (OON) are denied approximately 18
percent of the time. This underscores the significance of staying
in-network with insurance providers to minimize claim denials and maximize
Moreover, a report published by the *American Hospital Association (AHA) in December
2020 URL : aha.org revealed some concerning trends. The report
stated that a staggering 89% of hospitalsand health systems
experienced an increase in claim denials over the past three years. Even more
alarming, 51%of these entities reported that the increase in claim
denials was considered “significant.” Such denials can significantly impact a
provider’s revenue cycle, leading to financial strain and hindering the ability to
deliver quality patient care.
To address these challenges, healthcare organizations must prioritize accurate claims
submission and robust denial management strategies. Staying informed about the
latest industry trends and implementing effective billing practices can help reduce
claim denials, streamline revenue cycles, and ensure a stable financial foundation
for providers in the ever-changing healthcare landscape.
First you need to learn the following:/p>
1. Claim Adjustment Group Codes – CO, CR, OA, PI, and PR
2. CARC – Claim Adjustment Reason Codes
3. RARC – Remittance Advice Reason Codes
Resource: Code Look up
Use the Code Lookup to find the narrative for ANSI Claim Adjustment Reason Codes
(CARC) and Remittance Advice Remark Codes (RARC)
Contractual Obligation (CO):Insurance companies utilize the CO code
to attribute financial responsibility to medical providers based on the terms
outlined in their payer contracts. Typically, healthcare organizations absorb the
balances of such claims.
Corrections and Reversal (CR):This code indicates that health plan
companies have made corrections or reversed a claim that was previously adjudicated.
They employ the CR code alongside PR, CO, or OA to highlight updated information.
Other Adjustment (OA): Health plan organizations resort to this
group code when no other code aligns with the criteria for the adjustment.
Payer Initiated Reductions (PI): Payers use this code when they
believe that the adjustment should not be the responsibility of the client.
Patient Responsibility (PR):Denials accompanied by the code PR
allocate financial responsibility to patients or their secondary insurance
providers. PR amounts encompass deductibles, copays, and coinsurance.
Source: Claim Adjustment Reason Codes
When an insurance company cannot process a healthcare claim, they assign specific
codes. To address denials and resubmit a claim, it is vital to comprehend the reason
for the denial. Payers provide an Explanation of Benefits (EOB) or Electronic
Remittance Advice (ERA) to explain the denial’s cause. ERAs contain various codes
representing different claim statuses. Understanding these denial codes helps
identify missing or unnecessary information and determine the necessary next steps
for correct claim processing.
These codes describe why a claim or service line was paid differently than it was
Common Claim Denial Codes:
CO-04:The procedure code is inconsistent with the modifier used.
Usage: Refer to the 835 Healthcare Policy Identification Segment (loop 2110 Service
Payment Information REF), if present.
Start: 01/01/1995 | Last Modified: 03/01/2020
Example: In medical billing, a procedure code is a specific code that represents a
medical service or treatment provided to a patient. Procedure codes are used to
communicate the services rendered to insurance companies or payers for billing and
reimbursement purposes. A modifier, on the other hand, is an additional code that
provides extra information about the procedure, such as additional details or
specific circumstances related to the service.
Example: Let’s consider a scenario where a medical provider performs a surgical
procedure to remove a mole from a patient’s skin. The procedure code used for this
service is “CPT code 11400 – Excision of benign lesion, except skin tag (unless
listed elsewhere), trunk, arms, or legs; lesion diameter 0.5 cm or less.”
Now, let’s assume that the patient had multiple moles removed during the same
surgical session. In this case, the provider may need to use a modifier to indicate
that multiple procedures were performed. The modifier used for this purpose is
“Modifier 51 – Multiple Procedures.”
Problem: If the medical biller or coder assigns the wrong modifier or fails to
include the modifier altogether, it can lead to an inconsistency between the
procedure code and the modifier used. For example, if the biller submits the claim
with “CPT code 11400” without the appropriate modifier 51, the insurance company may
interpret it as a single procedure instead of multiple procedures.
Solution: To resolve this issue and ensure accurate billing, the healthcare provider
should review the documentation thoroughly and assign the appropriate modifier(s)
according to the services rendered. In the example above, the provider should
include “Modifier 51” to indicate that multiple mole removals were performed during
the same surgical session.
CO-05– The procedure code/type of bill is inconsistent with the
place of service. Usage: Refer to the 835 Healthcare Policy Identification Segment
(loop 2110 Service Payment Information REF), if present.
Start: 01/01/1995 | Last Modified: 03/01/2018
Example: Example: Let’s consider a scenario where a patient undergoes a surgical
procedure, such as a knee arthroscopy, which is represented by “CPT code 29881 –
Arthroscopy, knee, surgical; with meniscectomy (medial or lateral, including any
meniscal shaving) (separate procedure).” This procedure code is typically associated
with an outpatient facility setting.
Now, if the biller submits the claim with a type of bill indicating an inpatient
setting, such as a hospital admission for the procedure, it would create an
inconsistency between the procedure code and the place of service. In this case, the
procedure code (29881) is consistent with an outpatient service, but the type of
bill indicates an inpatient service.
However, upon reviewing the patient’s date of birth in the patient’s record, it is
discovered that the patient is 25 years old, not within the age range specified for
the flu vaccine procedure code (6-35 months of age). This presents an inconsistency
between the procedure code and the patient’s age.
CO-07The procedure/revenue code is inconsistent with the patient’s
gender. Usage: Refer to the 835 Healthcare Policy Identification Segment (loop 2110
Service Payment Information REF), if present.
Start: 01/01/1995 | Last Modified: 07/01/2017
Example: Let’s consider a scenario where a female patient undergoes a mammogram,
which is a procedure to screen for breast cancer. The appropriate procedure code
used for this service is “CPT code 77067 – Screening mammography, bilateral (2-view
study of each breast).”
Now, if the biller submits the claim with the incorrect gender for the patient, such
as male, it would create an inconsistency between the procedure code and the
patient’s gender. In this case, the procedure code (77067) is consistent with a
female patient, but the patient’s gender is recorded as male.
CO-09:The diagnosis is inconsistent with the patient’s age. Usage:
Refer to the 835 Healthcare Policy Identification Segment (loop 2110 Service Payment
Information REF), if present.
Example: A 30-year-old female patient visits a dermatologist for a skin rash and
itching. The healthcare provider diagnoses the patient with “Diaper Dermatitis
(ICD-10 code L22)” based on the symptoms and examination.
However, upon reviewing the patient’s date of birth in the medical record, it becomes
evident that the patient is a 30-year-old adult, and diaper dermatitis is a
condition primarily affecting infants and toddlers.
CO-11:The diagnosis is inconsistent with the procedure. Usage: Refer
to the 835 Healthcare Policy Identification Segment (loop 2110 Service Payment
Information REF), if present.
Example: A patient visits a healthcare provider with symptoms of knee pain and
limited mobility. The healthcare provider mistakenly diagnoses the patient with
“Osteoarthritis of the hip (ICD-10 code M16.0)” instead of the correct diagnosis for
the patient’s knee condition.
Subsequently, the healthcare provider performs a knee arthroscopy procedure
(procedure code CPT 29881) to examine and treat the patient’s knee joint.
Problem: In this example, the diagnosis “Osteoarthritis of the hip” is inconsistent
with the procedure of knee arthroscopy. The medical service performed (knee
arthroscopy) is not directly related to the patient’s diagnosed condition of hip
In the dynamic world of medical billing,ensuring accuracy and
fairness in financial transactions is paramount. As healthcare professionals, we
understand the importance of issuing refunds when necessary, ensuring transparency
and trust with our patients and insurance partners.
Refunds of payments within the healthcare system may arise for various reasons,
including patient overpayments, insurance company over-reimbursements, or erroneous
copayment collections. As custodians of financial integrity, it is our duty to
handle such situations with diligence and efficiency.
The statute provides a definition for overpayment, stating that it
refers to a payment made to an individual or entity without entitlement. This can
occur in various scenarios, such as billing for services that were not actually
provided, offering medically unnecessary services, billing at a higher code than the
services delivered, violating the Stark Laws by providing services inappropriately,
or delivering services of insufficient quality.
Scenario:A patient, John, visits a physician’s office for a medical
procedure. The office collects the necessary payment at the time of service, and
John pays the specified amount of $200. However, due to a system error, the payment
is inadvertently recorded twice, resulting in an overpayment of $200.
Step 1 – Immediate Notification: Upon discovering the overpayment, the office must
promptly notify John about the error. Open communication is vital to maintain
transparency and assure John that the situation is being addressed.
Step 2 – Patient’s Choice: The office offers John two options for resolving the
overpayment. He can either have the $200 applied as a credit toward his next visit
or choose to receive a refund check for the overpayment amount.
Step 3 – Insurance Overpayment: In another scenario, the office receives an insurance
payment for a patient’s visit, but the insurance company inadvertently overpays the
claim by $100. The medical office specialist reviews the claim to ensure there are
no errors from their end.
Step 4 – Contacting the Insurance Company: After verifying the claim, the medical
office specialist reaches out to the insurance company to understand the reason
behind the overpayment. If it is confirmed that the overpayment was made in error,
the insurance company will initiate the process of reprocessing the claim.
Step 5 – Request for Return of Overpayment: Alongside reprocessing the claim, the
insurance company also sends a formal request to the physician’s office, asking for
the return of the $100 overpayment.
Step 6 – Handling Mistaken Overpayment Check: In some cases, the physician’s office
may receive a mistaken overpayment check from the insurance company. To rectify the
error, the office voids the check and promptly sends it back to the insurance
Step 7 – Appeals Process: In rare instances, a claim may be denied, leading to a
potential overpayment situation. In such cases, the office has the option to appeal
the denied claim by submitting additional clinical and pertinent information to the
insurance carrier. This process aims to overturn the denial and resolve any
Refunds in the context of medical billing and insurance occur when overpayments are
made by either the insurance payer or the patient. Let’s explain this with an
Imagine a patient named Sarah visits a healthcare provider for a medical procedure.
Sarah has both primary and secondary insurance coverage. After the visit, the
healthcare provider submits the claim to both insurance companies, as is common
practice. Unexpectedly, both insurance companies process the claim and pay the full
amount, resulting in an overpayment for the services provided.
Overpayment by Insurance Companies:
Sarah’s primary insurance pays $500 for the medical procedure, and her secondary
insurance also pays $500 for the same service. This means the healthcare provider
received a total payment of $1000 for a service that should have only been
Overpayments as payments made by Medicare:
Other reason Common Reasons for Overpayment:
Imagine a radiology practice that provides professional X-ray interpretations for a
clinic or an independent diagnostic testing facility (IDTF). The radiologists in the
practice interpret X-ray images and generate reports, which are then billed to
insurance companies for reimbursement. For professional services like X-ray
interpretations, a CPT code with a 26 modifier should be appended to indicate that
only the professional service was provided, not the technical component of
performing the actual X-ray.
Error in CPT Code Usage:
In this example, the radiology practice mistakenly bills the insurance companies
using the CPT code for the global service, which includes both the professional
interpretation and the technical component of performing the X-ray. Without
appending the 26 modifier to indicate that only the professional interpretation was
provided, the claim is processed as a global payment.
Impact of the Error:
As a result of not appending the 26 modifier, the insurance companies process the
claims and generate payments based on the global service rates. The global payment
includes reimbursement for both the professional interpretation and the technical
component, even though the practice did not perform the X-rays themselves. This
leads to significantly higher payment amounts compared to what the practice should
have received for providing just the professional service.
Potential Replication of the Error:
If the radiology practice continues to submit claims without the correct 26 modifier,
this error may be replicated numerous times for various patients and
interpretations. Over time, the practice may inadvertently receive much higher
payments for services they did not actually provide.
Identifying the Cause:
The error may arise due to various reasons, such as a problem in the billing system
where the modifier is not automatically appended, or it could be a data entry error
caused by insufficient staff training in proper coding procedures.
Once the radiology practice becomes aware of this issue, they must take corrective
action immediately. This involves identifying the root cause of the problem,
ensuring staff members are properly trained in coding procedures, and updating their
billing system to include the necessary 26 modifier for professional
Issuing a Refund:
Once the healthcare provider becomes aware of the overpayment, they must issue a
refund to one of the insurance companies to correct the situation. However, before
doing so, they must conduct a thorough review of the claim and the payments received
to ensure accuracy and avoid any potential errors.
Overpayment Refunds to Insurance
When dealing with an overpayment issue from an insurance provider, follow these steps
to address and resolve the situation:
Verify the Overpayment:
Before taking any action, thoroughly review the payment received from the insurance
provider to determine if it indeed constitutes an overpayment. Cross-reference the
payment with the details of the claim and the services provided.
If you believe there is an overpayment, reach out to the insurance provider to ask
for a clarification of the calculated sum and the claim processing. Request them to
provide a breakdown of the payment and the reasoning behind it.
Request Corrected Processing:
Once the overpayment is confirmed, ask the insurance provider to reprocess the claim
with the correct and accurate amount.
Initiate the Refund Request:
The insurance provider may request a refund for the overpaid amount. Ensure you
receive a written record of this refund request to avoid any misunderstandings in
Issue the Refund:
After receiving the written refund request, issue a refund to the insurance provider.
Prepare a check for the refund amount and send it to the insurance provider’s
Addressing Incorrect Payments:If the entire payment made by the
insurance provider was faulty (for example, payment made for services not availed by
the patient), void the check and explain the payment status to the provider. Provide
necessary documentation or notes to support your claim, such as stating that the
patient never visited the office for the particular service.
Sending the Refund Check:
Ensure that the check is accurately assigned to the refund request and appropriately
labeled. If you are unsure of the insurance provider’s address, send the check to
their claims department and mark the envelope with ‘Attention: Overpayments.’
****Please take note that each insurance company has its own specific rules regarding
the process of refunding overpayments. In the case of the Anthem Blue Cross Provider
Agreement, section 2.8 deals with adjustments for incorrect payments. If the
healthcare provider receives an excessive or mistaken payment, which could result
from various reasons such as billing errors, miscoding, or other billing mistakes,
they are required to promptly inform Anthem or the relevant Plan. The provider must
then reimburse the appropriate entity within thirty (30) days. Anthem or the Plan
has the option to recover the overpayment through remittance adjustment or other
recovery actions, as outlined in the provider manual.
It’s important to note that in this agreement, Anthem’s policy is particularly
stringent, as they require refunding within 30 days of identifying an overpayment.
This policy is even more aggressive compared to the standard 60-day requirement set
by Medicare and Medicaid for overpayment refunds. Healthcare providers working with
Anthem must adhere to these guidelines to ensure compliance with the agreement and
to manage overpayment issues in a timely and efficient manner.
Appeal Process:In some cases, the insurance payer may request a
refund from the healthcare provider. However, if the provider’s records and
documentation do not align with the payer’s claim, the provider may need to appeal
the refund request. This situation can arise due to discrepancies in paperwork or
coding errors. The appeal process involves submitting additional documentation or
clarifications to support the original payment.
Patient Overpayment Scenario:
Now, let’s consider the situation where a patient, Sarah, makes an overpayment to the
physician’s office for her medical services.
Overpayment by the Patient:
After Sarah receives medical treatment, she mistakenly makes an extra payment to the
physician’s office, resulting in an overpayment on her account.
Checking the Patient’s Account:
The physician’s office must carefully review Sarah’s account to confirm the
overpayment and check if she has any outstanding balances.
Applying the Refund:
If Sarah has outstanding payments on her account, the physician’s office will
typically apply the refund to the amount owed first. This helps to clear any
existing balances before issuing any remaining refund amount to Sarah.
In both cases, whether it’s an overpayment by insurance companies or patients, it’s
essential for healthcare providers to conduct thorough reviews and handle refunds
accurately to maintain transparent financial practices and avoid potential billing
When a claim is rejected, it means that errors are identified before the claim
undergoes processing. In such cases, the insurance company sends the claim back to
the healthcare provider, requesting corrections to be made. The purpose is to enable
the corrected claim to be resubmitted and, hopefully, receive payment.
One common reason for claim rejection is when there is a discrepancy between the
ICD-10-CM diagnosis code and the submitted CPT procedure code. For instance, if a
patient visits the doctor with Strep throat, but the claim includes a procedure code
for wart removal, it would likely lead to questions and result in the claim being
A denied claim refers to a claim that has undergone processing by the insurance payer
but is marked as ineligible for payment. The denial usually arises from issues
related to the coverage contract or other errors that were detected after the claim
processing. The insurance payer provides an explanation for the denial in such
cases. Generally, denied claims can be appealed, but the reprocessing of appealed
claims often takes a significant amount of time.
It is crucial to understand that when a claim is rejected or denied, it implies that
the healthcare provider did not receive reimbursement for the services rendered. If
a physician’s office experiences a high number of rejected or denied claims, it can
lead to cash flow challenges for the business. Consequently, healthcare providers
aim to submit accurate and error-free claims during the initial filing to ensure
prompt and regular reimbursement.
A denied claim refers to a claim that has been processed and the insurer has found it
to be not payable. Denied claims can usually be corrected and/or appealed for
A rejected claim has not been processed so it cannot be appealed. Instead, rejected
claims need to be researched, corrected and resubmitted.
The frequency of rejections, denials, and over payments may be high (often reaching
50%), mainly because of high complexity of claims and/or errors due to similarities
in diagnosis’ and their corresponding codes. This number may also be high due to
insurance companies denying certain services that they do not cover (or think they
can get away without covering) in which case small adjustments are made and the
claim is re-sent. Depending on the denial, filing an appeal with the appropriate
documentation and proof can successfully overturn the original decision.
In conclusion, irrespective of the payer, be it Medicare, Medicaid, commercial
insurance, HMO, PPPO, or an out-of-network claim, it is imperative for your practice
to refund any overpayment received, regardless of whether the payer explicitly
requests it. The refund should be made within the timeframes specified in the
contract or within 60 days or fewer. Adhering to these refund obligations ensures
your practice remains compliant with billing guidelines and minimizes the risk of
legal issues, helping to maintain a smooth and reputable healthcare operation.
Source: Medicare Program Reporting and Returning Overpayments
Self Disclosure Overpayment Packet.pdf
Every claim denied by the insurance company cannot be appealed. So first segregate
the denied claims according to their appealing eligibility.
When encountering medical billing disputes, the most efficient initial step in the
appeals process involves placing a phone call to the payer. By doing so, you can
directly communicate with a representative to discuss the issue at hand and explore
potential resolutions. If the matter cannot be resolved through the call, seek
guidance from the representative on how to initiate the formal appeal or
Especially when dealing with commercial payers, they might provide a reconsideration
form on their website, which healthcare providers can utilize to challenge a payment
decision in a more structured manner.
Opting for a phone call as the first approach is advantageous for several reasons.
Firstly, writing appeal letters takes time, and it further extends the timeline when
the recipient needs to read the letter, verify the argument, and then take action to
correct the claim. On the other hand, making a phone call allows for direct
interaction, expediting the process and potentially achieving a prompt resolution.
If the issue at hand is straightforward and uncomplicated, a simple phone call to the
payer might be sufficient to have the claim sent back for correction without the
need for formal written communication. This approach not only saves time and
resources but also showcases the importance of clear and concise communication in
resolving medical billing discrepancies efficiently.
By proactively engaging with payers through phone calls and utilizing online tools
like reconsideration forms, healthcare providers can take proactive steps to address
medical billing disputes, ensuring timely resolution and proper reimbursement for
the services they provide to patients.
Before discussing the claim with you, the provider representative — the person
employed by the payer to work with you regarding disputes —verifies your need to
When contacting the provider representative, you can explain the reason for the claim
issue, and the representative can review the claim and the contract to determine the
necessary action. If necessary, they can then send the claim back to the processor
with instructions for reprocessing.
Example: Imagine a ABC healthcare provider, ABC Medical Clinic,
submits a batch of insurance claims to various insurance companies for services
provided to their patients. Among these claims, some are denied by the insurance
companies for different reasons. Now, the clinic needs to segregate these denied
claims according to their appealing eligibility.
Denied Claim 1:
Patient: John Smith
Date of Service: July 15, 2023
Reason for Denial: The insurance company states that the procedure code billed is not
covered under John’s insurance plan.
Appealing Eligibility: This denied claim can be appealed, as the clinic has proper
documentation and evidence to support that the procedure performed was medically
necessary for John’s condition.
Denied Claim 2:
Patient: Mary Johnson
Date of Service: August 5, 2023
Reason for Denial: The insurance company states that Mary’s policy has lapsed, and
the services provided are not covered.
Appealing Eligibility: This denied claim cannot be appealed, as Mary’s policy was not
active at the time of service, and the clinic cannot provide any evidence to prove
Denied Claim 3:
Patient: Robert Anderson
Date of Service: September 10, 2023
Reason for Denial: The insurance company states that the diagnosis code billed does
not match the procedure code submitted.
Appealing Eligibility: This denied claim can be appealed if the clinic can provide
additional supporting documentation to prove that the diagnosis and procedure were
accurately coded and appropriately billed.
Denied Claim 4:
Patient: Susan Lee
Date of Service: October 20, 2023
Reason for Denial: The insurance company states that the claim was submitted after
the allowed filing deadline.
Appealing Eligibility: This denied claim cannot be appealed, as it was rejected due
to a late submission, and the clinic cannot provide valid reasons or extenuating
circumstances for the delay.
Why Claims Are Denied:
**Prevent denials in the first place.
Note:Arrange the appeals according to their value. The greater the
amount of the claim, greater is the chance for it to get paid.
ABC Medical Center has submitted several insurance claims for services provided to
different patients. Among these claims, some have been denied by the insurance
company. Now, the medical center needs to prioritize and arrange the appeals based
on the value of each claim. The general principle is that higher-value claims have a
greater chance of getting paid upon appeal.
Arranging the Appeals:
Based on the value of each denied claim, ABC Medical Center decides to prioritize and
arrange the appeals as follows:
Denied Claim 2 – Mary Johnson:
Denied Claim 3 – Robert Anderson:
Denied Claim 1 – John Smith:
Denied Claim 4 – Susan Lee:
By prioritizing the appeals based on the value of the claims, ABC Medical Center can
effectively allocate its resources and efforts to pursue the higher-value claims
first, increasing the chances of recovering significant reimbursements and
maximizing its revenue.
What information should be included in the appeal letter?
Appeal letters may vary depending on the specific type of appeal, but there are
essential details that should be included in the letter to avoid any future
complications. These details consist of:
There are 5 levels of appeals (Medicare Only)
Appealing a denied claim or an incorrectly paid claim, for those carriers that are
contracted with the Provider, can be very extensive and time consuming, hence make
sure clean claims are submitted. Examples of denials are:
(1) Timely Filing
(3) Medically Necessary
(4) Payment less than the contracted amount
(5) Retroactive Denials
Appeal letters – standard appeals for denials related to invalid code, incorrect
subscriber name, or incorrect modifier, which can be found on payer websites. These
should include essential details like the type and date of service for efficient
processing. However, for denials related to medical necessity, a customized appeal
letter might be necessary, where referencing ICD-10-CM/CPT/CMS guidelines or the
payer’s guidelines could expedite the claim processing. Failing to provide all
required information in the appeal letter could prolong the process, creating
additional work for the billing team.
Create a spreadsheet with information about each appeal: date each appeal is
submitted, payer to whom each appeal is sent, filing requirements of each payer
Example: ABC Medical Center has received multiple claim denials from different payers
and needs to keep track of each appeal they submit. They decide to create a
spreadsheet to manage the appeal process efficiently.
1. Appeal Date: This column records the date on which each appeal is submitted to the
2. Payer Name: Here, ABC Medical Center mentions the name of the insurance company or
payer to whom the appeal is sent.
3. Filing Requirements: In this column, they note the specific filing requirements of
each payer, such as appeal forms, specific documentation, or guidelines that must be
In this example, ABC Medical Center can easily track each appeal they submit,
including the date, the payer it’s sent to, and the specific filing requirements of
each payer. This organized approach helps them stay on top of their appeal process,
ensuring that all necessary information is provided to the payers for prompt
consideration and resolution.
Visit CMS Formsfor Medicare Level-1 Appeal form
All levels appeal forms - Forms Publication Mailing
SourceRedetermination Appeals Process
JB Claims Denials
Medicare Claims Appeal
The Professional Medical Billers Association has achieved Full Accreditation by meeting all of the IAO's Requirements.