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Glossary of Billing Terminology
Abstraction: The collection of information from the medical record via hard copy or electronic instrument.
Account Number: A number assigned to each patient’s episode of service that is used to identify the account and all charges and account activity.
Acute Care Facility: A health care facility that provides continuous professional Medicare to patients in an acute phase of illness.
All-inclusive Rate: A flat fee charged by a facility on a daily basis (per diem) or for a total stay. The all-inclusive reimbursement rate usually pertains to state psychiatric hospitals.
Ambulatory Surgery Center (ASC): Any distinct entity that operates exclusively for the purpose of providing surgical services to patients not requiring hospitalization.
Ancillary Services: Services, other than routine room and board charges, that are incidental to the hospital stay. These services include operating room, anesthesia, blood administration, pharmacy, radiology, laboratory, (medical, surgical, and central supplies), (physical, occupational, speech pathology and inhalation therapy) and other diagnostic services.
Assignment: An arrangement whereby a doctor, hospital, or medical equipment supplier agrees to accept the Medicare-approved amount as full payment for services covered by Medicare, less patient deductible and/or co-insurance.
Average Daily Census: The average number of inpatients maintained in the hospital for each day for a given period of time.
Average Length of Stay: The average number of days of service rendered to each patient during a given period of time.
Bad Debt: An account which management believes the debtor will not pay, even though the debtor may have the resources to pay.
Bankrupt: A person who is adjudged insolvent by a court and whose property is administered for and divided among his/her creditors under bankruptcy law.
Beneficiary: The person who is entitled to receive Medicare benefits and who maintains a health insurance claim number
Benefit Period (Spell of Illness): A period of time during which medical benefits are available to the patient. Under Medicare Part A, 60 full days of hospitalization plus 30 coinsurance days represent the benefit period. The period is renewed when the patient has not been in the hospital or skilled-nursing facility (SNF) for a period of 60 days.
Billing Cycle: The time elapsed from one billing statement to the next.
Birthday Rule: The coordination of benefits formula applied by some commercial insurances in processing health care claims. According to the Rule, if a dependant is covered by two insurances, the coverage provided by the individual whose birthday falls first within a calendar year is primary.
Black Lung Program: A federal workers compensation plan, administered by the U. S. Department of Labor, that provides coverage to employees not covered or inadequately covered under state workers compensation programs. All Medicare services for patients with diagnoses related to black lung are billed to the Department of Labor for reimbursement.
Capitation: A method of reimbursement where medical services are provided by a health plan for a fixed monthly fee.
Case Mix: The combination of diagnoses and medical and social care needs present in the population of a health care facility.
CHAMPUS (Civilian Health and Medical Program of the Uniformed Services) : A program that covers the health benefits for families of all uniformed services employees.
CHAMPVA (Civilian Health and Medical Program of the Veteran’s Administration): A program similar to CHAMPUS under which the insured must be a disabled veteran’s spouse or dependant or a survivor of those who died of service-related causes.
Clean Claim: For Medicare purposes, a claim that the fiscal intermediary (FI) does not need to investigate outside of the FI’s operation on a prepayment basis; a claim for which the intermediary receives, within seven days of a query, a definitive response that provides all the eligibility data necessary to process it; a claim that passes all electronic edits, a claim that is investigated on a post-payment basis, or a claim that is subject to medical review but is submitted with complete information attached or is forwarded simultaneously according to electronic media claims instructions.
Clinic: An outpatient facility that provides scheduled diagnostic, curative, rehabilitative and/or educational services for ambulatory patients.
Close and Return Report : A report provided by a collection agency which details accounts returned to the hospital as uncollectible.
Co-insurance: The portion or percentage of the Medicare-approved amount that a beneficiary is responsible for paying.
Coinsurance Days: Under hospital benefits, each day of hospitalization over 60 days, up to the 90th day, for which a coinsurance payment of 1/4 the inpatient hospital deductible must be made, along with payment equal to the deductible for covered days after the 90th day.
Common Working File: A prepayment claims validation and Medicare Part A/Part B benefit coordination system that uses localized data bases maintained by a host contractor that provides beneficiary entitlement and eligibility data.
Condition Code: A two-digit numeric code that is entered on the UB92 claim form to indicate that a condition applies to the bill that affects processing and payment of the claim. Condition codes indicate whether coverage exists under another insurance, whether the injury or illness is related to employment, whether the bill is an outlier or if medical necessity affects room assignment.
Contractual Allowance: The difference between the health care facility’s published rates and the cost deemed allowable by the third-party payor.
Coordination of Benefits (COB): The payment of insurance benefits, when more than one policy is involved, to meet the needs of the insured. A method of integrating benefits payable when there is more than one group insurance plan so that the insured’s benefits and the payment of insurance benefits from all sources do not exceed 100 percent of the allowed medical expenses.
CPT Codes: A list of medical codes, with descriptions, developed and maintained by the American Medical Association. The five digit coding system is used for reporting medical services and procedures performed by or under the direction of a physician.
Customary Charge: The median charge associated with a procedure code for a particular supplier.
Deductible: The amount of expense a beneficiary must pay before Medicare begins payment for covered services.
Denied Claims: A bill (claim) for services may be denied if the care represents a noncovered service, if the claim is technically deficient (e.g., documentation is not provided), if the care is furnished in an inappropriate setting, is not medically reasonable and necessary, or if the claim circumvents PPS.
Deposit: Money given to a health care facility, usually at the time of admission, to be applied against the patient’s total financial responsibility for services received.
Diagnosis-related Groups: (DRGs): The inpatient classification scheme used for Medicare’s hospital inpatient reimbursement system. Currently, 494 DRGs make up the inpatient classification system. The DRG system classifies patients based on principal diagnosis, surgical procedure, age, presence of comorbidities or complications, and other pertinent data.
Dialysis: A process by which dissolved substances are removed from a patient’s body by diffusion from one fluid compartment to another across a semi-permeable membrane. The two types of dialysis that are currently in common use are hemodialysis and peritoneal dialysis.
Direct Data Entry (DDE) System: The Medicare billing system which allows hospitals to key claims directly into the Florida Shared System for Medicare processing. The system may also be used to query the Common Working File for benefits and eligibility information.
Elective Admission: An admission category in which the health of the patient is not in jeopardy. These patients usually are scheduled for admission days or weeks in advance.
Emergency: An admission category in which the patient is in need of immediate medical care. For Medicare purposes, the patient would be threatened with loss of limb or life if not treated and/or admitted.
Employer Group Health Plan: Any health plan that is contributed to be an employer of 20 or more employees and that provides for medical care directly or through other methods.
End Stage Renal Disease: That state of renal impairment that appears irreversible and permanent, and requires a regular course of dialysis.
Explanation of Medicare Benefits (EOMB): A statement issued by Medicare to the beneficiary to explain how Medicare processed, paid or rejected a submitted claim. The statement also indicates any deductibles or co-insurance amounts that have been applied.
Extended Business Office (EBO): The process of outsourcing some or all business office functions to an outside company for assistance in billing and/or collection of patient accounts.
Form Locator (FL): An area on the UB92 designated for specific billing or coding data. Every FL accepts a given number of characters, alphabetic or numeric and symbols or spaces.
Group Health Plan: A plan that provides health care, either directly or indirectly, through insurance and is contributed to or sponsored by an employer.
HCFA 1500: The claim form required by Medicare and some other payors for billing physician services.
HCPCS (HCFA Common Procedure Coding System): Level 1 is a numeric coding system used by hospital outpatient departments and ASC’s to code ambulatory, lab, radiology, and other diagnostic services for Medicare billing. Level II is a national coding system, developed by HCFA, that contains alphanumeric codes for physician and non-physician services not included in the CPT-4 coding system, such as ambulance services, DME and prosthetic devices.
Health Care Financing Administration: (HCFA) The federal agency primarily responsible for administering the Medicare program and federal participation in the Medicaid program.
Health Maintenance Organization (HMO): A managed care plan that offers a menu of Healthcare services to its members by its preferred providers; usually, members prepay for the services to be received through monthly premiums.
Home Health Agency: A public or private agency that specializes in giving skilled nursing services and other therapeutic services, such as physical therapy, in the home.
ICD9-CM: (International Classification of Diseases, Ninth Revision, Clinical Modification) A statistical coding system used to report, compile and compare health care data, using numeric and alphanumeric codes, in order to assist in the evaluation, planning, delivery, reimbursement and quantifying of medical care.
Independent Practice Association (IPA): An HMO contracting directly with physicians who practice in their own private offices and are reimbursed on a fee-for-service basis.
Interim Bill: A bill that does not cover the complete hospital or SNF stay. An interim bill is used when the hospital is expecting to submit a series of inpatient claims after a minimum confinement of 30 days.
Intermediary: Part A contractor that performs Medicare administrative services for institutional providers (i.e., hospitals, SNFs, HHAs and hospices).
Intermediate Care Facility (ICF): A health care provider that furnished services to patients who do not require the degree of care provided by a hospital or SNF.
Invasive Procedure: Any procedure which clearly involves an incision, excision, amputation, introduction, endoscopy, repair, destruction, suture, or manipulation.
Late Charge: A charge that was received after the full claim has been final billed.
Lifetime Reserve Days: Medicare benefits allow for 60 lifetime reserve days for use after a benefit period (90 days) has been exhausted. The 60 days are not renewable.
Limiting Charge: The maximum amount a doctor may charge a Medicare beneficiary for a covered service if the doctor accepts assignment on the claim.
Managed Care: A risk-based contract and/or plan, usually lasting for one year intervals, between the health care provider and a health care purchaser; payment for anticipated services is usually based on monthly per capita premiums paid to the health care provider by the purchaser.
Medicaid: A health insurance program jointly funded by the federal government and the states to provide medical care to people who are unable to pay their own medical expenses.
Medically Reasonable and Necessary: A determination that items or services furnished, or to be furnished, to a patient are reasonable and necessary for the diagnosis or treatment of illness or injury, to improve the functioning of a malformed body member, or for the prevention of illness as provided in Medicare law and regulation as specified in the Social Security Act.
Medicare Compliance: As defined by Medicare, accepted sound medical, business or fiscal practices which do not directly or indirectly result in unnecessary costs to the Medicare program, improper reimbursement, or reimbursement for services that to not meet professionally recognized standards of care or which are medically not necessary. Examples of non-compliance.
include excessive charges, improper billing practices, billing Medicare as primary instead of other primary third-party carriers, and increasing charges for Medicare beneficiaries but not to other patients.
Medicare Secondary Payor (MSP): Specified circumstance when beneficiaries are covered by other third-party payors and Medicare is the secondary payor. MSP prohibits Medicare payment for items or services if payment has been made or can reasonably be expected to by made by another payor.
Medicare Medical Insurance: This is Part B of Medicare. It helps pay for medically necessary physician services and other outpatient services.
Medicare Hospital Insurance: This is Part A of Medicare. It helps pay for medically necessary inpatient care in a hospital, skilled nursing facility or psychiatric hospital, and for hospice and home health care.
Medigap Insurance: These policies are sold by private insurance companies. They are specifically designed to pay health care expenses either not covered or not fully covered by Medicare.
No-Fault Insurance: Insurance that pays for medical expenses for injuries sustained on the property or premises of the insured, or in the use, occupancy or operation of an automobile, regardless of who may have been responsible for causing the accident.
Non-patient Services: Services that are not rendered to a patient seen at the hospital. This typically refers to laboratory tests performed on samples sent to the hospital laboratory from an outside source for processing.
Nonpayment Claim: A claim submitted to the payor for which the provider does not expect payment. These claims are submitted to inform the payor of reimbursable periods of confinement or termination dates of care.
Observation Services: Those services furnished on a hospital’s premises, including use of a bed and periodic monitoring by a hospital’s nursing or other staff, which are reasonable and necessary to evaluate an outpatient’s condition or determine the need for a possible admission to the hospital as an inpatient.
Occurrence Code: A two-digit number and date used to report on the UB92 claim form that services are related to a specific type of accident, that the beneficiary or spouse is retired, the date on which the beneficiary was notified of the intent to bill for accommodations or procedures or the date physical, occupational, or speech-language pathology therapy treatments started.
Occurrence Span Code: A UB92 coding structure that identifies an event and dates that affect the payment of a claim.
Ombudsman: An individual assigned to a specific region who is a personal contact for beneficiary questions concerning Medicare.
Out-of-Pocket Limits: The maximum amount of health care charges for which a patient may be responsible within a specified time frame, e.g., $500 per calendar year.
Outlier: A case that is classified to a specific DRG but has an unusually long length of stay or exceptionally high costs as compared with other cases classified to the same DRG. A day outlier is paid on a per diem basis for the covered days in excess of the threshold length of stay criteria. A cost outlier is paid an amount in excess of the cut-off threshold for a given DRG.
Part A of Medicare: The hospital insurance portion of Medicare. It was established by Section 1811 of Title XVIII of the Social Security Act of 1965, as amended, and covers inpatient hospital care, skilled nursing facility care, some home health agency services, and hospice care.
Part B of Medicare: The supplementary or physician’s insurance portion of Medicare. It was established by Section 1831 of Title XVIII of the Social Security Act of l965, as amended, and covers services of physicians/other suppliers, outpatient care, medical equipment and supplies, and other medical services not covered by Part A.
Participating Physician: A physician who has signed an agreement to accept assignment on all Medicare claims.
Peer Review Organization: An organization that contracts with HCFA to conduct preadmission, pre-procedure and post discharge medical reviews and determine medical necessity, appropriateness and quality of certain inpatient and outpatient surgical procedures for which payment may be made in whole or in part under the Medicare program.
Per Diem: An all-inclusive prospective method of payment for health care services that includes all services received by a patient during one patient day.
Periodic Interim Payment (PIP): A payment method in which providers are reimbursed for services more quickly than other arrangements. Payments are bi-weekly based on a per inpatient day rate, calculated as the estimated cost minus projected deductibles and coinsurance payable by the beneficiary for the services provided.
Petty Cash: A fixed amount of cash set aside as daily working cash to pay for small purchases, and not necessarily recorded in the facilitys accounts payable.
Pre-existing Condition: A symptom that causes a person to seek diagnosis, care or treatment or for which medical advice or treatment was recommended or received by a physician within a certain time period before the effective date of medical insurance coverage. The pre-existing condition waiting period is the time the beneficiary must wait after buying health insurance before coverage begins for a condition that existed before coverage was obtained.
Precertification: The process of obtaining permission from the insurance carrier prior to performing a medical service.
Preferred Provider: A health care provider that has been approved by a health care purchaser (HMO, managed care plan, etc) to offer health care services to its members.
Primary Payor: The insurance company whose coverage of the insured individual takes precedence in the payment of a hospital or medical bill when two or more insurers may be responsible for paying the claim.
Principal Diagnosis Code: The code that identifies the condition established after study to be chiefly responsible for occasioning the patient’s visit to the facility for care.
Principal Procedure Code: A code that describes a procedure performed for the treatment of an illness or injury and not for diagnostic, testing or assessment purposes. The principal procedure is usually related to the principal diagnosis.
Professional Component: The charges associated with a professional service provided to a patient by a hospital-based physician.
Prospective Payment System (PPS): A predetermined set of formulas for making payment determinations based on Diagnosis Related Groups (DRGs).
Referenced Diagnostic Lab Services: Lab services such as tests performed on samples that are referred to the hospital laboratory for diagnostic work.
Referred Outpatient: A patient who is sent to a special diagnostic or therapeutic facility or to a hospital service department for the diagnosis and treatment of an illness or injury on an outpatient basis.
Release of Information: An authorization from the patient that allows the hospital to release to the insurer or other payor the admitting diagnosis for determining coverage eligibility, the final diagnosis and any procedures performed, as needed, to process a claim for reimbursement.
Remittance Advice: A statement, voucher or notice that a provider of services receives from Medicare to reflect finalized claims, either paid or denied.
Retrospective Review: A review conducted after services are provided to a patient, which is focused on determining the medical necessity, appropriateness of the setting, reasonableness, and quality of health care services provided.
Revenue Code: A three-digit code that identifies a specific accommodation or ancillary charge on the bill.
Screening Mammography Services: Radiological procedures provided to women for early detection of breast cancer. A physician must interpret the results of the procedure; no symptoms need to be present in order for a screening mammography to be covered, provided that frequency of service limitations are met.
Secondary Payor: The insurer who pays, according to its coverage guidelines, any residual balance remaining after another insurer pays the claim.
Skilled Nursing Facility (SNF): A specially qualified facility that has the staff and equipment to provide nursing care or rehabilitation services and other health related services.
Skilled Nursing Care: Daily care and other related services for inpatients who require medical or nursing care or rehabilitation services for injuries, disabilities or sickness, based on a written physician order certifying the need for such care.
Source of Admission: The source of emergency, elective and other types of admissions and outpatient services. The source can be a referral, a transfer or a newborn and is indicated by a single digit number in form locator 20 of the UB92 claim form.
Stop Loss: Coverage provided under a supplemental policy which provides additional benefits when maximum benefits under the primary policy have been exhausted.
Subrogation Clause: A contract clause that allows the substitution of one creditor for another, typically used in reference to insurance coverage.
Swing Bed: A bed used for acute or long-term care, depending on the patient’s need and the hospital’s level of occupancy. Swing beds typically are available in small and rural hospitals.
Technical Component: The part of a procedure or service that represents the costs of doing the procedure, excluding the physician’s work.
Third Party Payor: An insurer or individual other than the patient who is responsible for paying a health insurance claim.
Unique Physician Identification Number (UPIN): A number unique to each physician, assigned by HCFA to identify physicians and suppliers who provide medical services or supplies to Medicare beneficiaries.
UB92: The universal claim form used by all payors to process inpatient and non-physician outpatient health care charges.
Urgent: An admission category for patients who should be admitted as soon as a bed is available, within 24 to 48 hours.
Value Code: A code representing a dollar amount that is required for processing the claim so that a benefit determination can be made.
Victim of Violent Crime: A federally funded program which provides assistance and coverage for health related services to victims of violent crime, provided that certain conditions are met (e.g., the victim must not have been involved in a crime at the time, the victim must be willing to testify in court, etc.).
Workers Compensation: Payment for health-related services resulting from employment-related illness or injury. Usually self funded by the employer or funded through a third-party administrator.
Working Aged: Employed people aged 65 or over and people aged 65 or over with employed spouses of any age who have group health plan coverage because of their or their spouse’s current employment.
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