What is Medical Billing?

What is Medical Billing

Medical billing is the process of submitting and following up on claims with health insurance companies in order to receive payment for services rendered by a healthcare provider. It is an important part of the healthcare industry, as it ensures that healthcare providers are able to receive payment for the services they provide, and that patients are able to receive the necessary medical treatment without having to pay the full cost out-of-pocket.

The medical billing process begins when a healthcare provider offers treatment to a patient. The provider will then document the services that were provided, as well as any diagnoses, treatments, or procedures that were performed. This documentation is used to create a medical claim, which is then submitted to the patient's health insurance company.

Specialized software is used to process insurance claims, most often through Practice Management (PM) software systems. The Centers for Medicare and Medicaid Services (CMS) regulates insurance claims and has developed two standard forms that every insurance company uses, the CMS-1500 and the CMS-1450. The CMS-1450 is also known as the UB-04. The dental field uses an ADA claim form. The vast majority of claims are processed electronically, although occasionally paper claims may still be used in some situations. Electronic claims use a standard ANSI format, and while the claim forms/files are standardized to a degree, each insurance company has its own set of regulations for how claims are processed.

Once the health insurance company receives the claim, they will review it to determine if the services that were provided are covered under the patient's policy. If the services are covered, the insurance company will issue payment to the healthcare provider, typically in the form of a check or electronic transfer. If the services are not covered, the insurance company will deny the claim and the healthcare provider will be responsible for collecting payment from the patient.


In order to ensure the accuracy of the medical billing process, healthcare providers must keep detailed and accurate records of the services that they provide. This includes documenting any diagnoses, treatments, or procedures that were performed, as well as any medical supplies or medications that were used. These records must be kept in a secure and organized manner, as they may be needed in the event of an insurance audit or dispute.

In addition to processing insurance claims, medical billing can also extend to sending patient statements, handling patient inquires, collecting patient payments, and producing financial reports to track results. When including these additional tasks, medical billing is often referred to as Practice Management (PM) or Revenue Cycle Management (RCM).

Of course, this is only a simplified description of medical billing at a high level. There are many nuances to medical billing which are continuously changing. Some healthcare practices handle their billing “in-house” with their own staff, while it’s becoming more and more common for practices to outsource their billing and full Revenue Cycle Management to professional companies. Practices that outsource typically experience higher reimbursement rates, lower overhead, and ultimately more profits.

Get More Information