How Does Medical Billing and Coding Work? Step by Step Guide

Let’s face it, medical billing and medical coding may seem complex and complicated. Many wonder how does medical billing works, and what are the essential elements for medical billing? In truth, it is actually a simple process that involves steps or elements related to medical billing.   These essential elements for medical billing can help your practice generate more revenue while allowing you to effectively communicate and take care of your patients. These simple medical billing elements include patient registration, verifying or evaluating the financial responsibility of the patient, check-in and check-out procedures, verifying compliance with medical billing and medical coding, preparing and submitting claims, monitoring payer decisions on submitted claims, preparing patient billing or statements, managing payments, and collections.   Medical billing can be done in two ways, in-house medical billing and outsourced medical billing. But outsourcing medical billing is mostly preferred by doctors or physicians who are running their practice. But what does medical coding look like anyway? Let's dive right in!

Steps to Medical Billing Process and Procedures

Step 1: Patient Registration

As many doctors ask, ‘how does medical billing work?', the answer is quite simple. It can be explained in eight simple steps. The 1^st step is patient registration. When a patient calls to make an appointment for the first time, the front office desk pre-registers the patient for an appointment with the doctor. If the patient has already visited the practice, his or her information would already be available in the system and a file would already been generated.   In this scenario, the patient would only be required to state the reason for the visit. If the patient is visiting for the very first time, then the patient must provide all necessary personal information, along with medical insurance details. To verify a patient’s eligibility and identity, the patient would be required to present a valid form of identification and/or a valid insurance card.   This information would ensure that the patient is entitled to receive medical services from the healthcare provider. Patient registration is one of the most essential elements for medical billing.  Medical billing and coding features in practice management software can make patient registration convenient and simple.

Step 2:  Verifying or Evaluating Financial Responsibility of the Patient for Medical Billing

The financial responsibility and specifics of payment can be determined by medical services, which are covered or included in the patient’s insurance coverage. Each patient’s medical insurance coverage is different, and can vary depending on the patient’s age, policy type and insurance coverage payments, etc. Hospital administration or front desk office staff must verify each patient’s medical insurance and insurance coverage plans prior to a patient’s appointment.   Some insurance plans only cover certain medical procedures, services or prescription medications. If the patient’s insurance plan does not cover a procedure or medical service, then the front desk office staff must inform the patient of the medical services or procedures that are and are not covered, along with any co-payments the patient is liable for.

Step 3: Check-in and Check-out Procedures

Check-in and check-out procedures are one of the essential elements for medical billing. Patient registration and check-out are simple procedures, which are done when the patient arrives and leaves the practice.  These tasks can also be done through a patient kiosk as well. In some instances, patients can also fill out simple follow-up forms that maybe required for their visit. Or update important information, such as a phone number or email address. Medical billing and coding training online programs can help simplify this process.   Co-payments can be collected at the point of service, or after the services have been rendered. It is up to the discretion of the healthcare provider to determine if the patient pays the copay amount before or after his/her visit. Medical billing and coding features in practice management software can make patient registration more convenient and simpler. Once all the information about the patient is verified, the medical report of the patient is sent to the medical coder.   Certain medical billing and coding associate degrees are necessary to perform medical billing or coding proficiently. There are many medical billing and coding training online websites that can further guide you through the process of medical billing and coding. After a patient doctor visit is complete a report is generated. Once the medical report is sent to the medical coder, he or she can then review, analyze, abstract and summarize the medical information into accurate and precise useable medical codes.   This report can also include patient demographic information from the patient’s medical history, which is known as a superbill. The superbill has all the important necessary medical billing information about the medical procedures and services in a detailed format. This superbill also includes the name of the healthcare provider, the patient’s name, the medical procedures performed, along with the medical coding diagnosis for the procedures performed, and other relevant information. This information is important for the creation and submission of the claim. Once completed, a super bill generated and is generally transferred through the software to the medical biller.

Step 4: Verifying Compliance with Medical Billing and Medical Coding

One of the best medical billing and coding features includes taking the detailed information from the medical bill and sending it into the practice management software or into the medical billing software. This would also include the cost of the medical procedures in the medical claim form. Although a claim form is submitted and the full cost is not reimbursed to the payee, but instead the amount which is specified in the payer’s contract with the patient and the healthcare provider.   Once the medical claim is created, the medical biller is responsible for making sure that the claim meets all the standards of compliance, and the format. As per the medical billing and coding study guide, the accuracy of medical coding is left to the coder. The medical biller then reviews the codes and makes sure that the medical procedures are properly coded and that they are billable. The viability of whether the medical procedure is billable or not also depends upon the patient’s insurance plan, with the regulations established by the insurance payer.   Many doctors and physicians ask how does medical billing work? Is it good for my practice? Medical claims may vary in different formats but generally contain the same basic information.  Each medical claim contains patient information as well as medical coding for their procedures.  Patient information includes their demographic info and medical history. It also includes the medical procedures which are performed, which are coded in CPT or HCPCS codes. Each of these procedures is also linked with a diagnostic code (ICD code) that demonstrates the medical necessity.   The billing price for these procedures is also listed with the payer. Medical claims also have information regarding the healthcare provider and the type of facility where the medical services were performed. These are the essential elements for medical billing. As per guidelines given in the medical billing and coding description, medical billers must make sure that the medical bill meets all the standards of billing compliance and guidelines, which is given by the Health Insurance Portability and Accountability Act (HIPAA) of 1996.

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Step 5: Preparing and Submitting Claims

Under the Health Insurance Portability and Accountability Act (HIPAA) of 1996, all healthcare facilities must file medical claims electronically, except in certain circumstances. It is also important to understand that it is necessary for healthcare providers, clearinghouses and payers to be HIPAA compliant. Many medical billers may use manual claims, but this practice can have severe disadvantages, as manual claims can have human errors, and may take longer to be processed by payers.   By submitting your medical billing and coding electronically, you could save time and money and also reduce human errors within the medical billing process.  For third-party payers like Medicare or Medicaid, medical billers can submit their claims directly. If a claim is not submitted directly, it can be submitted through a clearinghouse. A clearinghouse is a third-party organization that receives medical claims from medical practices. The clearinghouse then scrubs the claims and sends the medical claims over to the payer.   Some payers require claims to be submitted in a very specific form. Clearinghouses ease the stress and burden of medical billers and practices by taking the relevant and important information and creating a claim in an appropriate form. For example, a practice can send ten claims to ten different payers, each with its own policy and guidelines. Rather than formatting each claim request to each specificity. A claim can simply be sent with only the relevant information to a clearinghouse. The clearinghouse then takes on the burden of reformatting those ten different medical claims and submitting them to the payor. It is one of the best and essential medical billing and coding features.

Step 6: Monitoring Payer Decisions on Submitted Claims

When the medical claim reaches the payer, it goes through the adjudication process where the payer reviews and evaluates the medical claim and decides whether the claim is valid or invalid. If the claim is valid, the payor then determines how much to reimburse the healthcare provider for the services rendered? A claim then goes through a second process called arbitration. In the case of arbitration, a payer evaluates a medical claim and decides whether the claim is valid or not. If the claim is valid, the payer issues payment according to the reimbursement amount to the healthcare provider.   A denied claim is a claim the payer refuses to pay or cannot process due to errors.  If the payer refuses to pay the claim it is generally due to three reasons.  One the medical procedure is not covered within the patient’s insurance coverage. Two there is a lapse in the patient’s insurance coverage. Three there is an error in the claim. If the claim is rejected, the medical biller can correct the claim by correcting any errors or mistakes and resubmit the claim again.

Step 7: Preparing Patient Billing or Statements

Once the medical biller receives the report from the payer regarding reimbursements, the medical biller creates a statement for the patient. The statement is a billing invoice that includes the details of the medical procedure performed. As soon as the payer agrees to pay the healthcare provider for the part of the services rendered on the claim, the remaining amount is collected from the patient.   In some cases, a medical biller may also include an Explanation of Benefits (EOB) with the statement. An EOB describes certain medical benefits. EOBs can help explain to patients why certain procedures were covered and others were not.

Step 8: Managing Payments and Collections

The last step in the medical billing process is to ensure that all claims are paid. Medical billers are responsible for promptly sending accurate medical claims and following up with the payors and patients whose claims are past due. Once the claims have been paid, this information is stored in the patient’s record.

Step 9: Final Words.

In the event a patient falls behind on their payments or does not pay the full amount, the medical biller is responsible for ensuring that the provider receives the adequate refund for their services. This may include direct contact with the patient and payer or sending follow-up claims.