Medical Billing and Coding Terminology

Medical billing and coding is vital to the healthcare industry. Without it, hospitals and doctors’ offices wouldn’t be able to request payment for services. If you’ve looked into joining the field, you’ve probably heard a few medical billing and coding terms over and over. But what do they mean, and how do they relate to the job?

This list is a beginner’s guide to medical billing and coding terms. The first section includes terminology used in both medical billing and medical coding. This is followed by some of the most common medical billing and coding abbreviations and acronyms.

In all, this list will give you a good start on what you need to know as a medical biller and coder. It should also help you as you navigate choosing a school and beginning your education in pursuit of this healthcare career. ­

Medical Billing and Coding Terminology

There are quite a few medical billing and coding terms that are important to know regardless of what function you are performing. Here are some of the most common.

Accept assignment

This term is used to indicate that the healthcare provider accepts the amount paid by the insurance company as full payment for the claim.

Adjusted claim

If a claim is modified, resulting in an overpayment or underpayment to a healthcare provider, this is referred to as an adjusted claim.

Allowed amount

This is the amount that insurance companies will actually pay or reimburse for a specific service or procedure. If the allowed amount is less than the overall cost, then the patient will usually be responsible for paying the balance.

Aging

This term refers to when an insurance claim or patient bill passes the 30-day mark without being paid.

Ancillary services

Services received by a patient while in the hospital — other than room and board — are called ancillary services. This includes diagnostic tests, prosthetics, physical therapy, and screening tests.

Appeal

If a health insurance plan does not pay for a service, the patient has a right to object to this denial via an appeal. Each health insurance company has its own process for handling patient appeals.

Applied to deductible (ATD)

Many health insurance plans require patients to meet a deductible before paying for a procedure or service. If any portion of a procedure or service falls into this category, it is listed on the patient’s insurance statement as “applied to deductible.”

Assignment of Benefits (AOB)

If you hear this term, it means the insurance company has successfully processed the claim. Good job! The Assignment of Benefits is payment that healthcare providers receive directly from insurance companies.

Authorization

Some insurance policies require patients to seek authorization before receiving a certain health-related service. This ensures that the service is covered, reducing the likelihood of the patient receiving a surprise bill.

Beneficiary

The beneficiary receives the benefits from a healthcare insurance plan. Sometimes the beneficiary is the actual holder of the plan and sometimes it’s his or her spouse or children.

Capitation

Health insurance companies can enter into a capitation agreement with a healthcare provider which is essentially a fixed payment amount for a specific patient over a specific period of time that covers a list of agreed upon services.

Carrier

The term carrier is used to reference a patient’s health insurance provider.

Category codes

There are three types of category codes. Category I codes are 5-digit CPT codes used to identify medical procedures and services. These are the most widely used. Category II codes are used to track performance measurement, and Category III codes are temporary codes used to collect data and denote experimental technologies and services.

Civilian Health and Medical Program of the Uniformed Services (CHAMPUS)

Now known as TRICARE, CHAMPUS is the federal health insurance coverage provided to members of the armed services. This includes active-duty personnel, reservists, retirees, and their families.

Clean claim

This is good term for medical billers and coders because it means that a medical claim is filed error-free and on time.

Clearinghouse

In healthcare, clearinghouses are electronic hubs used by healthcare agencies to submit electronic claims to insurance companies securely. This ensures that patients’ private health information is protected.

Coding

Coding is when you convert the physician’s documentation about a patient’s medical condition into medical codes. Then these codes are used to file a claim with the payer. This is the root of the whole billing process.

Co-insurance

Many insurance plans pay only a percentage of a particular procedure or service. The patient must pay the rest. The amount or percentage owed by the patient is known as his or her co-insurance.

Collection ratio

A healthcare agency’s collection ratio is the amount of money it has received as reimbursement for products and/or services versus how much is owed.

Contractual adjustment

It’s common for healthcare providers to enter into a contract with insurance companies, agreeing to write off or waive a portion of the money owed by a patient for a specific service. This is referred to as a contractual adjustment.

Coordination of benefits (COB)

If a patient has two health insurance plans, such as when covered by their employer and their spouse’s employer, a COB is used to determine which policy pays for what and in what amounts. When this occurs, one policy is considered primary and pays out first while the other is secondary and pays last.

Co-pay

If a patient is responsible for a portion of the office visit, this is listed as a co-pay under his or her health insurance policy.

Credentialing

Healthcare providers must be credentialed to provide services covered by insurance carriers. Research reveals that this process (assures the patient that they are being treated by provers whose qualifications, training, licensure, and ability to practice medicine are acceptable.”

Credit balance

If a patient’s account is overpaid, it shows up as a credit balance.

Crossover claim

When a patient has both Medicare and a secondary insurance, the claim is paid by Medicare first and then submitted to the secondary insurance. This is referred to as a crossover claim.

Current Procedural Terminology (CPT) codes

This is a 5-digit coding system used to assign codes to procedures performed by a physician. These are also sometimes referred to as service codes.

Date of Service (DOS)

The date the patient was seen by the healthcare service provider.

Day sheet

The day sheet summarizes the treatments, charges, and payments received on a specific day.

Deductible

You’re probably familiar with the word deductible from your own insurance. This is the amount that a patient is required to pay before his or her insurance kicks in.

Demographics

A patient’s demographics is required when filing a claim. This includes his or her age, race, and gender.

Downcoding

If an insurance company doesn’t receive adequate documentation in support of a particular level of service, it may decide to reduce that service to a lower level, thereby reducing provider reimbursement.

Duplicate coverage inquiry (DCI)

If an insurance company wants to know if another insurance company is providing coverage for a patient, they may submit a duplicate coverage inquiry.

Durable medical equipment (DME)

This medical billing and coding term refers to equipment patients use to complete their activities of daily living. This includes walkers, wheelchairs, hospital beds, and portable oxygen equipment.

Dx (diagnosis code)

Dx is short for diagnosis. This code is used when a medical professional determines the cause of a patient’s disease or illness.

E/M codes

There are Evaluation and Management codes within the CPT code system that are used to assess or evaluate a patient. These are signified as E/M and refer to codes 99201-99499.

Electronic claim

This probably seems pretty self-explanatory, but an electronic claim is a claim that is sent electronically to the payer.

Electronic funds transfer

Medical bills used to be paid by cash or check. Now you can pay them electronically via bank transfer, credit cards, and debit cards – all of which are electronic funds transfers.

Electronic medical records (EMR)

In days past, healthcare agencies kept paper medical records on each patient. Now these records are kept electronically.

Electronic remittance advice (ERA)

This form is sent from a health plan to the healthcare provider about a specific claim. It shares details about the contract agreement, benefit coverage, and the patient’s copays and co-insurance information.

Enrollee

If the patient is covered by health insurance, they are listed on the policy as the enrollee.

Explanation of Benefits (EOB)

The EOB is a statement sent from the health insurance plan to the patient describing the claims they’ve received, how much they’ll cover, and the patient’s anticipated portion of the bill.

Fee for service

A fee for service health plan is one where the insurance reimburses the provider for individual services or procedures performed on behalf of each patient.

Fee schedule

Each CPT treatment code has a pre-set cost to be paid to the service provider. That cost is listed on the fee schedule.

Financial responsibility

If a patient is responsible for paying a portion of the healthcare costs, those are referred to as being their financial responsibility.

Fiscal intermediary (FI)

This is someone who works for Medicare and processes claims.

Formulary

Insurance companies have lists of prescription drugs they are willing to pay to cover. This list is called a formulary.

Fraud

If a healthcare provider knowingly and intentionally submits a claim for a service or procedure that was not rendered, it is considered fraud. It is also considered fraud if the patient obtains services dishonestly.

Group name and number

Some patients have health plans as part of a group. An example of this is an employer-provided insurance policy or health insurance that is offered on behalf of a union or similar group. The group name and number are used to identify this group.

Guarantor

In some cases, someone other than the patient is responsible for health claim expenses not covered by insurance. This person is known as the guarantor.

Healthcare Common Procedure Coding System (HCPCS)

A standardized coding system used to submit healthcare claims. HCPCS Level I codes include the CPT codes and are used to submit claims for physician services. HCPCS Level II codes are used for non-physician healthcare products and services. HCPCS Level III codes are used by Medicare, Medicaid, and private insurers.

Healthcare providers

This is perhaps one of the most frequently used words in the medical billing and coding industry. Providers refers to any facility, hospital, or office that offers healthcare services to patients. Your doctor is a provider and so is your local emergency room.

Health Insurance Claim (HIC)

The Social Security Administration designates each Medicare beneficiary with a number. This number is used to process its claims.

Health Insurance Portability and Accountability Act (HIPAA)

The Health Insurance Portability and Accountability Act of 1996 is a federal law designed to protect a patient’s private health information. Under HIPAA, their medical data cannot be released or disclosed without their consent.

Health Maintenance Organization (HMO)

An HMO refers to a network of healthcare providers who agree to accept pre-determined amounts for specific services. If a patient has an HMO and goes outside this network, they will likely pay more as coverage for these providers is limited.

Health Savings Account (HSA)

If a patient has a health savings account, it means that they have deferred monies, tax-free, into an account that can be used to cover their yearly medical expenses. The 2022 maximums for an HSA are $3,650 for an individual and $7,300 for a family.

Hospice

The Hospice Foundation of America explains that hospice is “medical care to help someone with a terminal illness live as well as possible for as long as possible, increasing quality of life.” All of the dying patient’s needs are addressed, as well as the needs their family.

Indemnity

Indemnity is another name for a fee-for-service insurance policy.

In-network

If a provider is “in-network,” it means that they’ve signed a contract with the insurance company and agree to accept a pre-determined amount for the services rendered. A provider who is in-network is also commonly referred to as “participating.”

Inpatient

Patients who are admitted to the hospital for longer than 24 hours fall under this designation.

Intensive care

Patients who are severely injured or ill may require care above and beyond typical hospital care. They are often admitted into intensive care, providing them with more intensive monitoring and medical attention.

International Classification of Diseases (ICD codes)

ICD is short for “International Statistical Classification of Diseases and Health Related Problems.” Currently, healthcare providers are operating under the 10^th revision of this classification, which is referred to as ICD-10. There are about 68,000 codes within ICD-10 which are used to classify conditions, treatments, and procedures. These are the codes you’ll use as a biller and coder and they replace ICD-9, the ninth revision of this coding system.

Managed care plan

This type of insurance plan requires enrollees to use healthcare providers that contract with the insurance company, as long as it is not a medical emergency and they are within the coverage area.

Maximum out of pocket

Most insurance policies offer a maximum out of pocket amount, meaning that if the insured exceeds this amount, the insurance company will pick up the rest of the eligible medical expenses.

Medical billing specialist

A medical billing specialist fills claims to insurance companies so that the provider can be paid.

Medical coder

A medical coder is the person responsible for coding patient information. These codes are then used in claims made to payers.

Medical necessity

This medical billing and coding terminology refers to any service that is needed for treatment. It does not include services that are cosmetic or experimental.

Medical record number

Each patient is assigned his or her own medical record number. It’s similar to how each driver has his or her own designated driver’s license number.

Medical savings account

Some employers provide their employees medical savings accounts. These are tax exempt accounts used to reimburse employees after paying qualifying health-related bills.

Medical transcription

Some healthcare providers speak their patient notes and have them converted to writing. This is called medical transcription.

Medicare

Medicare is a government insurance program for people ages of 65 and over. Medicare can also expand to people with qualifying disabilities. This includes individuals with permanent kidney failure or Lou Gehrig’s disease. Medicare Part A is hospital coverage, Medicare Part B is coverage for outpatient visits, and Medicare Part D is prescription drug coverage.

Medicaid

Medicaid is a federal and state government insurance program for low income people and families.

Modifier

CPT codes use modifiers to provide even more information about a service provided.

NEC – Not Elsewhere Classifiable

An NEC code, which stands for “not elsewhere classifiable,” is used when no specific code exists for a particular condition. This is different from an NOS code (not otherwise specified) in that, with an NEC code, the condition is known it’s just that there is no code for it.

NOS – Not Otherwise Specified

This code is used when there isn’t enough information to provide a specific code at that time, but said information is likely to obtained in the future. This is different from an NEC (not elsewhere classifiable) code, which is used when a condition is known, yet has no corresponding code.

Out-of-network provider

If a provider does not have a contract with a specific insurance company, they are considered an out-of-network or non-participating provider.

Outpatient

The term outpatient refers to any service provided in which the patient was treated for 24 hours or less.

Participating

Participating is another word for in-network, meaning that a healthcare provider agrees to treat patients within a specific network.

Place of Service (POS)

Place of service (POS) codes are two-digit numerical codes which explain where services were provided. For example, a 01 code means that services were provided in a pharmacy. A code of 14 signifies services provided in a group home.

Preferred Provider Organization (PPO)

Like an HMO, a PPO also encourages patients to choose from within its network of healthcare providers. However, it is unlike an HMO in that a referral is not needed in order to see a specialist.

Protected Health Information (PHI)

Protected health information is essentially all of a patient’s information that is protected under the Health Insurance Portability and Accountability Act (HIPAA). The HIPAA Journal explains that information which falls under PHI includes “demographic data, medical histories, test results, insurance information, and other information used to identify a patient or provide healthcare services or healthcare coverage.”

Referral

Have you ever gone to your primary doctor and been sent on to a specialist? Your primary doctor provided a referral for the specialist. This is when providers recommend other providers with specialized skillsets.

Relative value units (RVUs)

This medical billing and coding term refers to a ranking system or scale that is used to determine physician payments. The RVU is determined by the physician’s time and effort for that specific service, whether any specialized equipment was needed, and any other necessary resources.

Scrubbing

Surprisingly, this doesn’t refer to wearing scrubs. Instead, scrubbing is the process of checking claims for inaccuracies and errors before sending them for processing. Claims can be rejected for errors, so scrubbing is an important step.

Unbundling

If more than one treatment code is submitted, even when it isn’t necessary, this is considered unbundling.

Upcoding

Healthcare providers who change a patient’s diagnosis code in an attempt to get a higher level of reimbursement are guilty of upcoding.

Additional Medical Billing and Coding Abbreviations and Acronyms

There are also a few additional medical billing and coding abbreviations and acronyms that you will need to know as well. Here are a few to consider:

• AMA – American Medical Association
• BCBS – Blue Cross Blue Shield
• CMS – Centers for Medicare and Medicaid Services
• CMS 1500 – Claim form used to submit claims to Medicare and Medicaid
• DOB – Date of birth
• GHP – Group health plan, i.e. insurance policies provided by employers
• HCFA – Health Care Financing Administration (now CMS)
• MAC – Medicare administrative contractor
• MSP – Medicare secondary payer
• N/C – Non-covered charge
• NPI – National provider identifier
• OIG – Office of Inspector General
• PCP – Primary care physician
• PEC – Pre-existing condition
• POS – Point-of-service plan
• SOF – Signature on file
• TAR – Treatment authorization request
• TIN – Tax identification number
• TOS – Type of service
• TPA – Third party administrator
• UPIN – Unique physician identification number

This list of medical billing and coding terms should give you a foundation as you begin your career training. There’s much more to learn as you join this exciting field! What’s one of your favorite medical billing and coding terms? Let us know in the comments!