What is Medical Billing?

What is Medical Billing?

While it may seem like a visit to the doctor is a one-on-one interaction, it’s actually just one portion of a very large and complex system of info and payment. The patient typically only directly interacts with one person or provider- but their office visit is actually a piece to the three-party puzzle that makes up medical billing.

The first piece of this puzzle is the patient. The second is the provider, which includes emergency rooms, hospitals, physical therapists, outpatient facilities, physicians, and any other place that performs medical services. The final piece to this puzzle is the insurance company/payor.

The purpose of the medical biller is to negotiate/arrange payment between the three parties. They work to make sure that the provider is adequately compensated for services by billing the patient and the insurance providers. This is done because healthcare providers should not be expected to offer their services for free.

In order to perform these services, the medical biller gathers all info regarding the patient and the procedures that are done and compiles that into a statement for the insurance provider. This statement is known as a claim and contains demographic info on the patient, his/her medical history, and insurance coverage, as well as a report that explains the procedures that were done and the reasoning behind them.


Health insurance is a form of insurance that protects an individual against medical expenses. Basically, individuals who have health insurance will pay what is known as a premium in order to be protected against any potential medical costs.

There are several forms of health insurance, such as:

  • Indemnity: also known as “pay-for-service” insurance, the patient is able to choose their provider. Typically, this insurance will cost more, but it ensures flexibility for the individual. As costs of healthcare rises, this type of insurance is less common.
  • Managed Care Organizations: also known as MCO, this is an umbrella term that includes Preferred Provider Organizations and Healthcare Maintenance Organizations. With this type of insurance, the patient has fewer options of providers, but premiums and deductibles are typically lower. In the USA, this is the most common type of health insurance.

Insurance Claims

Claims are created in the overlap between medical billing and medical coding. A medical biller takes the procedure/diagnosis codes that are used by the coders to create the claims.

The procedure codes come from one of the two coding systems: CPT (Current Procedure Terminology) or HCPCS (Healthcare Common Procedure Coding System). They tell the payer the services that were provided by the healthcare professional. Diagnosis codes are found in the ICD (International Classification of Diseases) prove that a particular procedure was medically necessary. Basically, the procedure codes explain what was done during the visit and the diagnosis codes explain why a procedure was used.

The medical biller adds in the info about the patient and their visit as well as the cost of the procedures performed to the claim. At this point, the claim contains the what, why, who, when, and how much.

Once the claim is complete, the biller checks to make sure it is compliant. This process is quite complicated and a biller must understand what a claim allows so that the payer is able to evaluate the procedure and determine how much they are going to pay the provider. If the payer approves the claim, it will be sent back to the biller with the approved amount. Then, the biller will take the balance and send it to the patient.

Medical Biller Daily Activities

Now that you have an idea of the overall process of medical billing, let’s take a closer look at the daily activities of a medical biller:

  • Patient Interaction: when a patient is treated by a medical professional, he/she will be given a bill for services. This bill is created by the medical biller by evaluating the balance that the patient has after the amount covered by insurance and the patient’s co-pay is deducted. In addition, the biller works with the medical records of patients. A coder uses medical reports to translate medical records into codes and the biller extracts the info from the medical records and insurance coverage to create the bills.
  • Computer Interaction: these days, with modern technology, nearly every medical office has some type of software to keep up with patients, schedule visits, and store important medical info. This software typically helps ensure that the practice runs smoothly.
  • Claim Creation: the biggest part of the day in a medical biller’s life is creation and processing of medical claims. A medical biller must be familiar with the types of claims that are accepted by an insurance payer and adjust their creation of claims accordingly. In addition, billers typically work closely with the insurance companies to help make the claim process more streamlined. Billers need to always make sure that claims are compliant. After all, each and every claim sent out by a biller should be clean, containing no errors so that it can be processed quickly by the payer and the provider is reimbursed as soon as possible.
  • Notification/Communication: medical billers are always in communication with insurance companies, medical providers, and even patients. Since the biller is the point of contact for the process of reimbursement, they have to follow up with all of the pieces to the puzzle. In addition, billers communicate with patients regarding their bill and issue Explanation of Benefits to the patients which explain the procedures that are/are not covered and why. Billers also need to keep in touch with patients about paying their medical bills. If a patient has a delinquent medical bill, the biller may have to pass it on to a debt collection company.

As you can see, medical treatment is not a one-on-one interaction between the patient and the medical provider. This is just one piece to the complex puzzle of information and payment processes.


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