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What is Medical Billing?

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The process of creating medical claims to submit to insurance companies in order to receive payment for medical services provided by providers and provider organizations is known as medical billing. Medical billing is an essential component of the healthcare revenue cycle because it makes sure that patients are charged fairly for their care and that providers are paid for their services.

How Medical Billing Works

Medical billing involves several steps and parties, such as patients, providers, billers, coders, and payers. Here is a brief overview of how medical billing works:

Patient Registration

The provider obtains the patient’s personal and insurance information, such as name, address, date of birth, and policy number, before or during the patient’s visit. The patient’s eligibility and benefits for the services they receive are confirmed using this information.

Charge capture

Following the patient visit, the provider records the diagnosis and course of care in the patient’s medical file. The diagnosis and procedures are then given standard codes by a medical coder using code sets like ICD-10-CM, CPT, and HCPCS Level II after reviewing the record. These codes are used to explain to the payer the medical necessity and worth of the services.

Submission of a claim

Using the coded data, the medical biller creates a claim, an electronic or paper document that includes all the necessary details about the patient, provider, and services. The payer is then contacted to request payment, either directly or through a clearinghouse.

Payment Processing

The payer reviews the claim and determines whether to approve or deny it based on their policies and contracts. If approved, the payer sends a payment to the provider along with an explanation of benefits (EOB) that details how the claim was processed. If denied, the payer sends a rejection notice with a reason code that explains why the claim was rejected.

Payment Posting

The medical biller then posts the payment or rejection to the provider’s account and updates the patient’s balance accordingly. The biller also reconciles any discrepancies between the expected and actual payment amounts and follows up on any outstanding or denied claims.

Patient Billing

The medical biller then prepares and sends a bill to the patient for any remaining amount that they owe after insurance. The bill may include copays, deductibles, coinsurance, or non-covered services. The biller also collects payments from the patient or arranges payment plans if needed.

Why Medical Billing is Important

Medical billing is important for both providers and patients, as it affects their financial health and satisfaction. Some of the benefits of medical billing are:

  • For Providers: Its helps providers maximize their revenue by ensuring that they receive accurate and timely payments for their services. It also helps them reduce errors, denials, and rework by following coding and billing guidelines and regulations. It also helps them improve their cash flow and financial stability by reducing accounts receivable and bad debt.
  • For Patients: Medical billing helps patients understand their financial responsibility and options for their healthcare. It also helps them avoid overpaying or underpaying for their care by ensuring that their insurance benefits are applied correctly. It also helps them resolve any billing issues or disputes with their provider or payer.


Medical billing is a difficult and important process with many steps and parties. It necessitates familiarity with payer guidelines, medical terminology, coding schemes, and billing software. Medical billing is essential to ensuring that patients are charged fairly for their care and that providers are compensated fairly for their services.


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