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What are the Two Most Common Types of Medical Billing?

What are the Two Most Common Types of Medical Billing?

Let's face it, guys, medical billing often becomes a real head-scratcher for healthcare providers. And getting them accepted by the insurance companies feels like chasing your own shadow - a never-ending run.  No matter if you are a small practice, an individual service provider, or a large hospital, getting money for the treatments is a real headache. As we move further with this blog, we have divided the article into two sections. 1- Types of medical billing 2- Types of medical billing systems So, without any further delay, let’s jump straight to the main point.  However first, let’s discuss

What Is Medical Billing? 

Medical billing is simply the process of creating and submitting bills or invoices for the healthcare treatments patients receive.  These bills in healthcare are claims, which include CPT codes, cost of services & patient information.  Now moving to the types of medical bills, time to discuss the two common types of medical bills.

1- Professional Billing

For everyone starting their career as a medical biller, it is important to know what is professional billing and what are the ins and outs of professional billing. Simply said, professional billing refers to the billing done for individual practitioners or individual physicians' practices.  Such as physicians, surgeons, therapists, etc. Characteristics that set professional billing apart:
  • Professional billing often associates with non-facility-based services.
  • It primarily utilizes CMS-1500 forms.
  • Specialists in professional billing have to be familiar with coding systems as well.
  • While some companies accept electronic claim filing in professional billing, some still prefer filing paper claims.
  • Billers use 837-P for electronic claims, which is CMS 1500 form’s electronic version.

2- Institutional Billing

Specialists handling institutional billing are responsible for billing for various healthcare facilities. Such as rehabilitation centers, healthcare facilities, and hospitals. Institutional billing mostly involves billing for laboratory services, equipment usage, imaging services, etc. Some unique traits of Institutional billing include:
  • The UB-04 is the standard claim form used for institutional billing.
  • For electronic claims, billers use the 837-I form.
  • Institutional billers have to look after billing and collections, while the medical coders do the coding. 

Medical Billing Systems 

Medical billing systems keep track of and handle patient payments. There are 3 different types of billing systems in healthcare, each offering unique features and advantages.

  • Closed Medical Billing Systems

Closed medical billing systems are software solutions that handle billing, invoicing, and payment processing for healthcare providers. These systems are widely used in the healthcare industry today and are the most common type of billing system. Once these systems are installed, no changes or additions can be made to them. Moreover, closed medical billing systems contain fixed information that remains the same over time. Using this type of system is simple: the user inputs data into the software and generates an invoice by printing it out. Small medical practices and individual doctors who handle their own laboratory billing, collections, and accounts receivable processes prefer these billing systems. However, one major drawback of these systems is that they don't allow for sharing of data or communication between healthcare providers and patients.

  • Open Medical Billing Systems

These medical billing systems on the other hand offer flexibility by allowing changes and updates as needed. They require more maintenance but provide greater adaptability. In addition, Open medical billing systems can accommodate customizations and modifications, enabling healthcare providers to tailor the system to their specific needs and workflows. With these systems, healthcare facilities can accept claims from out-of-network providers. Claims are submitted electronically through their HMO or PPO network, requiring minimal intervention from a third-party administrator (TPA). Additionally, open systems also allow institutions to integrate with other software programs, ensuring proper tracking and documentation of all processes.

  • Isolated Medical Billing Systems

Isolated medical billing systems are independent software programs that cater to specific types of patients, such as specialists or specific age groups, and handle only one type of insurance. They lack integration with other systems, hindering data coordination and analysis. Small hospitals and clinics that specialize in one type of patient, like fertility clinics commonly use these systems. In this system, all patients are treated equally, regardless of their insurance or payment abilities. These stand-alone software programs handle only one type of insurance and provider, such as a hospital or doctor's office. Moreover, they are not connected to other systems or applications, so data needs to be manually entered into other software for analysis. This makes it challenging to keep track of information and ensure everything is up-to-date.

Wrapping Up

Picture navigating the complex world of medical billing, where every step has its unique challenge!? If you are a healthcare provider, you know this too well. But fear not, with this guide to the types of medical billing and medical billing systems, you can easily navigate all challenges and ensure smooth running operations and improved reimbursement processes.   So, are you ready to unlock the secrets of successful medical billing? We’d love to hear from you in the comments.

ICD-10-CM Coding Guidelines 2025

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