Medical Billing Glossary

Medical Billing Glossary: 120+ Terms Explained Simply

A medical billing glossary defines the terms you see on claims, remittances and payer letters. This searchable A-Z glossary explains more than 120 billing terms in plain English, with examples, so practice owners and their staff can follow what payers are saying.

Showing 124 terms

835 File

claims

Definition: Electronic Remittance Advice file showing payment details and adjustments.

837 File

claims

Definition: Electronic format for submitting healthcare claims to insurers.

Account Receivable (A/R)

Billing Process

Definition: Money owed to a healthcare provider for services rendered but not yet paid.

Accountable Care Organization (ACO)

value_based_care

Definition: Group of providers voluntarily coordinating care to improve quality and reduce costs.

Actuarial Value

insurance

Definition: The percentage of total average costs for covered benefits that a health plan will cover.

Adjudication

claims

Definition: The process by which an insurance company evaluates and determines payment for a claim.

Adjustment

Financial Terms

Definition: A reduction in the amount charged for a medical service, typically due to contractual agreements with insurance companies.

Advance Beneficiary Notice (ABN)

medicare_medicaid

Definition: Form notifying Medicare patients that services may not be covered.

Aging Report

Revenue Cycle

Definition: A report showing outstanding accounts receivable balances categorized by how long they have been unpaid.

Allowed Amount

Insurance Terms

Definition: The maximum amount an insurance company will reimburse for a covered service based on their fee schedule or contract.

Anti-Kickback Statute (AKS)

Compliance & Regulations

Definition: Federal criminal law prohibiting offering, paying, soliciting, or receiving remuneration to induce referrals of federal healthcare program business.

Appeal Process

Claims & Denials

Definition: The formal procedure for challenging an insurance company's claim denial or payment decision.

Assignment of Benefits

insurance

Definition: Patient authorization allowing insurance payments to be sent directly to the healthcare provider.

Authorization

Insurance Terms

Definition: Pre-approval from an insurance company required before certain medical services can be performed and covered.

Bad Debt

Financial Terms

Definition: Patient account balances that have been deemed uncollectible and written off.

Balance Billing

Financial Terms

Definition: Billing patients for the difference between provider charges and insurance payments.

Batch Posting

Billing Process

Definition: The process of posting multiple payments or adjustments simultaneously as a group.

Bundled Payment for Care Improvement (BPCI)

value_based_care

Definition: Medicare model paying single amount for episode of care.

Bundling

Medical Coding

Definition: When separate procedure codes are combined into a single, comprehensive code for billing purposes.

Capitation

insurance

Definition: A payment model where providers receive a fixed amount per patient per time period regardless of services provided.

Cash Collection Rate

rcm_metrics

Definition: Percentage of expected payments collected including both insurance and patient payments.

Charge Capture

Billing Process

Definition: The process of recording all billable services provided to patients to ensure proper billing.

Charge Description Master (CDM)

financial

Definition: Comprehensive listing of billable services, procedures, and supplies with charges.

Charge Entry

Billing Process

Definition: The process of recording billable services into the practice management system for claim generation.

Charity Care

financial

Definition: Free or discounted healthcare for low-income uninsured or underinsured patients.

Claim Adjustment Reason Code (CARC)

claims

Definition: Standardized codes explaining why claims were adjusted or denied.

Claim Denial

Claims & Denials

Definition: An insurance payer's refusal to pay for a submitted claim, either partially or in full.

Claim Rejection

Claims & Denials

Definition: A claim returned by a payer before processing due to technical errors or missing required information.

Claim Scrubbing

Claims & Denials

Definition: The automated process of reviewing claims for errors before submission to payers.

Clean Claim

Claims & Denials

Definition: A claim submitted to an insurance payer that contains no errors, omissions, or other issues that would prevent immediate processing.

Clean Claim Rate

Revenue Cycle

Definition: The percentage of claims that pass all edits and are accepted for payment without needing corrections.

Clearinghouse

Healthcare IT

Definition: An entity that receives and processes electronic healthcare transactions, translating them into formats required by payers.

CMS-1500

claims

Definition: Standard paper claim form for professional services.

Coinsurance

Financial Terms

Definition: The percentage of covered medical costs that a patient must pay after meeting their deductible.

Collection Rate

Financial Terms

Definition: The percentage of expected revenue that is actually collected, measuring effectiveness of collection efforts.

Compliance

Compliance & Regulations

Definition: Adhering to laws, regulations, and ethical standards in healthcare billing and coding practices.

Contractual Adjustment

financial

Definition: Difference between billed charges and contracted payment rates.

Coordination of Benefits (COB)

Insurance Terms

Definition: The process of determining which insurance plan pays first when a patient has coverage from multiple sources.

Copayment (Copay)

Financial Terms

Definition: A fixed dollar amount a patient pays for a covered service, usually collected at the time of service.

Cost to Collect

rcm_metrics

Definition: Amount spent on RCM operations per dollar of revenue collected.

CPT Code

Medical Coding

Definition: Current Procedural Terminology codes used to describe medical, surgical, and diagnostic services.

Credentialing

Practice Management

Definition: The process of verifying healthcare provider qualifications and obtaining approval to participate in insurance networks.

Detailed Explanation

Credentialing involves submitting detailed information about providers' education, training, licensure, certifications, work history, and malpractice coverage to insurance companies and hospitals. In our experience, credentialing typically takes 60 to 90 days, and it includes: primary source verification (contacting schools, boards, etc.), background checks, malpractice claims history review, and committee review. Providers must be credentialed before billing insurance companies as in-network providers. Plans re-credential providers on a regular cycle. Many payers pull your data from the CAQH Provider Data Portal (CAQH is now DataSpring). Incomplete or delayed credentialing prevents providers from being paid as in-network, forcing out-of-network rates or cash-only practice. Hospital credentialing is separate and required for admitting privileges.

Example

A new physician joins a practice. The practice administrator submits credentialing applications to 15 insurance companies with: medical school diploma, board certification, medical license, DEA certificate, malpractice insurance, work history, and references. Within about 90 days, the physician is credentialed with 12 payers and can begin billing as an in-network provider. The 3 slower payers take longer, during which the physician's services must be billed at out-of-network rates or credited back to patients.

Why It Matters

Incomplete or delayed credentialing directly impacts practice revenue. New providers cannot generate in-network revenue until credentialing is complete. Starting credentialing applications well before a provider's start date prevents revenue loss. Re-credentialing must be tracked and completed before expiration to prevent loss of in-network status. Many practices outsource credentialing to specialized firms due to its complexity and administrative burden. Credentialing errors or omissions can delay the process significantly.

Related Terms

CAQHPayer ContractingIn-Network ProviderProvider Enrollment

Crossover Claim

claims

Definition: A claim automatically transferred from Medicare to secondary insurance.

Days in A/R

Revenue Cycle

Definition: The average number of days it takes to collect payment after services are provided, a key metric for revenue cycle performance.

Deductible

Financial Terms

Definition: The amount a patient must pay out-of-pocket for covered healthcare services before their insurance begins to pay.

Denial Management

Claims & Denials

Definition: The process of investigating, correcting, and resubmitting denied insurance claims.

Denial Rate

rcm_metrics

Definition: Percentage of claims initially denied by payers.

Diagnosis-Related Group (DRG)

insurance

Definition: Medicare's payment classification system for inpatient hospital services grouping patients with similar conditions.

Downcoding

Medical Coding

Definition: When a payer reduces a claim to a lower-level code or service than what the provider billed.

Dual Eligible

insurance

Definition: Individuals qualified for both Medicare and Medicaid coverage simultaneously.

Electronic Data Interchange (EDI)

technology

Definition: Computer-to-computer exchange of business documents in standardized electronic format.

Electronic Health Record (EHR)

Healthcare IT

Definition: A digital version of a patient's medical chart containing comprehensive health information.

Electronic Remittance Advice (ERA)

claims

Definition: Electronic version of EOB sent to providers showing payment details.

Eligibility Verification

Billing Process

Definition: The process of confirming a patient's insurance coverage and benefits before providing services.

Encounter Form

Billing Process

Definition: A paper or electronic form listing common diagnosis and procedure codes used during patient encounters for charge capture.

EOB Code

Claims & Denials

Definition: Standardized codes on Explanation of Benefits/remittance advice explaining claim actions.

Evaluation and Management (E/M)

Medical Coding

Definition: CPT codes used for office visits, consultations, and other patient evaluation services.

Explanation of Benefits (EOB)

Insurance Terms

Definition: A statement from an insurance company explaining what medical services were paid and why.

Explanation of Payment (EOP)

Claims & Denials

Definition: A document showing how Medicare or other payers processed and paid claims, similar to EOB but from payer to provider.

False Claims Act

compliance

Definition: Federal law prohibiting submission of false or fraudulent claims to government programs.

Fee Schedule

Financial Terms

Definition: A complete listing of fees or charges for medical services provided by a healthcare facility or provider.

Fee-for-Service (FFS)

financial

Definition: Payment model where providers paid separately for each service.

First Pass Resolution Rate

Metrics

Definition: Percentage of claims paid on first submission without corrections, resubmissions, or appeals.

Global Period

Medical Coding

Definition: A time frame following surgery during which all related care is included in the surgical payment and cannot be separately billed.

HCC Coding

Coding

Definition: Hierarchical Condition Category coding used in risk adjustment for appropriate payment based on patient complexity.

HCPCS Code

Medical Coding

Definition: Healthcare Common Procedure Coding System - codes used to bill for products, supplies, and services not included in CPT.

Health Maintenance Organization (HMO)

insurance

Definition: Managed care plan requiring members to use network providers and obtain referrals for specialists.

HIPAA

Compliance & Regulations

Definition: Health Insurance Portability and Accountability Act - federal law protecting patient health information privacy and security.

ICD-10-CM

Coding

Definition: International Classification of Diseases, 10th Revision, Clinical Modification - the diagnosis coding system used in the United States.

Incident-to Billing

Billing Process

Definition: Medicare billing provision allowing services provided by non-physician practitioners to be billed under a supervising physician's NPI at higher rates.

J Code

coding

Definition: HCPCS codes for drugs administered by healthcare providers.

Local Coverage Determination (LCD)

medicare_medicaid

Definition: Regional Medicare coverage policy for specific services.

Maximum Out-of-Pocket (MOOP)

insurance

Definition: The maximum amount a patient must pay in cost-sharing during a coverage period.

Meaningful Use

Healthcare IT

Definition: Now called Promoting Interoperability - incentive program for adoption and meaningful use of certified EHR technology.

Medicaid

Insurance Terms

Definition: Joint federal and state health insurance program for low-income individuals and families.

Medicaid Expansion

medicare_medicaid

Definition: ACA provision allowing states to extend Medicaid to additional low-income adults.

Medical Necessity

Compliance & Regulations

Definition: The requirement that healthcare services must be appropriate, reasonable, and necessary for diagnosis or treatment.

Medicare

Insurance Terms

Definition: Federal health insurance program primarily for people 65 and older, plus certain disabled individuals.

Medicare Advantage (Part C)

medicare_medicaid

Definition: Private insurance plans approved by Medicare offering Part A and Part B benefits.

Medicare Part A

Insurance

Definition: Hospital insurance covering inpatient stays, skilled nursing, hospice, and some home health care.

Medicare Secondary Payer (MSP)

medicare_medicaid

Definition: Situation where Medicare pays secondary to other insurance.

Medicare Summary Notice (MSN)

Insurance Terms

Definition: The statement Medicare sends beneficiaries showing what was billed, what Medicare paid, and what the patient may owe.

MIPS

Compliance & Regulations

Definition: Merit-based Incentive Payment System - Medicare quality reporting and payment adjustment program.

Modifier

Medical Coding

Definition: Two-digit codes appended to CPT or HCPCS codes to provide additional information about a service.

Modifier 25

Medical Coding

Definition: A CPT modifier indicating a significant, separately identifiable evaluation and management service on the same day as another procedure.

Modifier 59

coding

Definition: Indicates distinct procedural service not normally reported together.

National Coverage Determination (NCD)

medicare_medicaid

Definition: Nationwide Medicare coverage policy for specific services.

National Provider Identifier (NPI)

Billing Process

Definition: A unique 10-digit identification number assigned to healthcare providers by CMS.

NCCI Edits

Medical Coding

Definition: National Correct Coding Initiative - Medicare coding edits preventing improper code combinations and unbundling.

Net Collection Rate

rcm_metrics

Definition: Percentage of expected payments actually collected.

Out-of-Network (OON)

Insurance Terms

Definition: Healthcare providers who do not have contracts with a patient's insurance company.

Overturn Rate

rcm_metrics

Definition: Percentage of denied claims successfully appealed and paid.

Patient Collection Rate

rcm_metrics

Definition: Percentage of patient responsibility amounts actually collected.

Patient Statement

Financial Terms

Definition: A bill sent to patients showing their financial responsibility for healthcare services after insurance processing.

Payer Contract

Practice Management

Definition: Legal agreements between healthcare providers and insurance companies defining reimbursement terms and requirements.

Payer ID

Claims

Definition: The code that tells a clearinghouse which insurance company should receive an electronic claim.

Payment Plan

Collections

Definition: Agreement allowing patients to pay medical bills in installments over time.

Payment Posting

Billing Process

Definition: The process of recording insurance and patient payments in the practice management system.

Place of Service (POS)

Medical Coding

Definition: A two-digit code on claims indicating where services were rendered.

Point of Service (POS) Collection

rcm_metrics

Definition: Payments collected from patients at time of visit.

Preferred Provider Organization (PPO)

insurance

Definition: Insurance plan offering flexibility to see any provider with higher benefits for in-network care.

Premium

insurance

Definition: The amount paid periodically to maintain health insurance coverage.

Primary Insurance

Insurance

Definition: The insurance policy that pays first when a patient has multiple insurance coverages.

Prior Authorization

Insurance

Definition: Approval required from insurance before certain services to ensure coverage and medical necessity.

RAC Audit

Compliance

Definition: Recovery Audit Contractor audit to identify and recover improper Medicare payments.

Refund

Financial Terms

Definition: Money returned to a patient or payer due to overpayment, duplicate payment, or other payment corrections.

Remittance Advice

Claims & Denials

Definition: A document from an insurance payer explaining how claims were processed and paid.

Revenue Code

claims

Definition: Three-digit code identifying hospital service department on UB-04 claims.

Revenue Cycle Management (RCM)

Revenue Cycle

Definition: The financial process healthcare providers use to track patient care from registration through final payment.

Revenue Leakage

Revenue Cycle

Definition: Lost revenue due to inefficiencies or errors in the revenue cycle process.

Risk Adjustment

value_based_care

Definition: Statistical process accounting for patient health status when comparing outcomes.

Robotic Process Automation (RPA)

technology

Definition: Technology automating repetitive administrative tasks in revenue cycle.

Self-Pay

Financial Terms

Definition: Patients who pay for healthcare services directly without using insurance.

Detailed Explanation

Self-pay patients include: uninsured individuals, patients with insurance who choose not to use it (sometimes services are cheaper cash-pay than through high-deductible insurance), patients receiving non-covered services, and international patients. Self-pay requires: verifying patient will pay out-of-pocket, providing cost estimates upfront, collecting payment at time of service (preferred) or establishing payment plans, offering prompt-pay discounts, and ensuring no prohibited dual-billing (if patient has insurance, can't balance bill and bill insurance). Self-pay rates are often discounted from full charges but higher than insurance contracted rates. Self-pay collection rates are much lower than insurance collections, requiring point-of-service collection and payment plans. Many practices struggle with self-pay patients due to unpredictable payment.

Example

A patient without insurance schedules a procedure costing $5,000 at standard rates. The practice offers a self-pay rate of $3,000 (60% of charges), a 10% discount for payment-in-full at service ($2,700), or a 6-month payment plan ($500/month). The patient chooses the payment plan, pays $500 deposit at time of service, and signs an agreement for monthly payments. This approach collects more reliably than sending bills after service.

Why It Matters

Self-pay patients create collection challenges, because balances are harder to collect after the visit. Pre-service estimates, payment plans, and point-of-service collection dramatically improve self-pay collections. Some practices require payment before service for elective procedures. Self-pay discounts must comply with payer contracts and fraud/abuse laws - different rates for insured versus uninsured patients are generally acceptable, but waiving cost-sharing for insured patients can violate Anti-Kickback Statute. Self-pay revenue is growing with high-deductible plans.

Related Terms

Patient ResponsibilityPayment PlanPrompt-Pay DiscountPatient Collections

Stark Law

Compliance & Regulations

Definition: Federal law prohibiting physician self-referral to entities with which they have financial relationships.

Surprise Billing

Compliance & Regulations

Definition: Unexpected medical bills received when patients unknowingly receive care from out-of-network providers.

Detailed Explanation

Surprise billing typically occurs in two scenarios: emergency care at an OON facility, or facility-based services (anesthesiology, radiology, pathology, etc.) provided by OON providers at in-network facilities. The No Surprises Act (2022) protects patients from surprise billing by: prohibiting balance billing in protected situations, establishing independent dispute resolution (IDR) processes for payment disputes, requiring good faith estimates for uninsured/self-pay patients, and allowing patients to consent to OON care when time permits. Protected services include: emergency services, ancillary services at in-network facilities, and air ambulance. Providers violating surprise billing protections face civil monetary penalties up to $10,000 per violation. The IDR process resolves payment disputes between providers and payers.

Example

A patient with Blue Cross has emergency appendicitis and is taken to an in-network hospital. The emergency physician and anesthesiologist are out-of-network with Blue Cross. Previously, the patient would receive surprise bills from these OON providers. Under the No Surprises Act, the patient is protected - they pay only their in-network cost-sharing, and the OON providers cannot balance bill. If the providers and Blue Cross dispute payment, they use the IDR process to resolve the amount owed.

Why It Matters

Surprise billing protections dramatically changed OON billing practices and revenue for certain specialties. Providers must understand when they cannot balance bill despite being OON. The IDR process is complex: each side pays an administrative fee, and the losing side pays the arbitrator's fee, so small disputes can be uneconomical. Good faith estimate requirements create new administrative burdens. Violations result in significant penalties. Many facility-based providers are joining networks or negotiating with hospitals to avoid surprise billing issues.

Related Terms

Balance BillingOut-of-NetworkNo Surprises ActIndependent Dispute Resolution

Telemedicine

operations

Definition: Remote healthcare services delivered via telecommunications technology.

Timely Filing

Claims & Denials

Definition: The deadline within which insurance claims must be submitted to payers for payment consideration.

Timely Filing Limit

Claims

Definition: Deadline by which insurance claims must be submitted, typically 90-365 days from date of service.

UB-04

Forms

Definition: Standard claim form used by institutional providers to bill for services, also known as CMS-1450.

Unbundling

Compliance & Regulations

Definition: The practice of billing separately for services that should be billed together as a single code, considered fraudulent if done intentionally.

Upcoding

Compliance & Regulations

Definition: The practice of billing a higher-level service code than what was actually provided or documented.

Usual, Customary, and Reasonable (UCR)

Financial Terms

Definition: A method used by insurance companies to determine payment amounts for out-of-network services.

Value-Based Care

value_based_care

Definition: Healthcare delivery model emphasizing quality and outcomes over volume.

Write-Off

Financial

Definition: Amount removed from account that will not be collected - contractual adjustments, bad debt, or charity care.

Related Medical Billing Resources

State Billing Laws

Filing deadlines and balance-billing rules for California, Illinois and Texas

Medical Billing FAQ

Answers for therapy and behavioral health practices

Need Help with Medical Billing?

Our billing team works with these terms every day. Let us handle your billing so you can focus on patient care.

Book a Free Consultation Call Billing Experts

Back to Resources