September 3, 2024

If you think that hospital billing is as simple as billing for your grocery items, you need to think again. It is a time-consuming and tedious process that requires attention. The slightest mistake can lead to financial losses and can damage your organization’s reputation. Alarmingly, 80% of hospital bills contain errors, costing the US billions of dollars.

It isn’t just challenging for the healthcare providers to understand it; it is challenging for the patients as well. In this article, we’ll understand hospital billing, how it works, and the common medical billing frauds. 

This guide has something for both healthcare providers who want to improve their medical billing processes and patients who want to make sense of their bills. So, without further ado, let’s jump into it.

What is Hospital Billing?

Hospital billing is a process of collecting money for the medical services provided to patients. It involves creating and submitting claims to insurance companies to receive reimbursements. Medical billing is a very sensitive process and requires keen attention to avoid medical billing and coding errors. A slight mistake can result in claim denial and huge financial losses.

Medical Billing Terms You Need To Know

Billing includes several terminologies that you might not be familiar with. New medical billers need to familiarize themselves with a glossary of billing terms to ensure accuracy. Here are some billing and insurance terms that patients and billers must know:

• Advance Beneficiary Notice: A document that informs the patients that they may be responsible for payment if a service isn’t covered.

• Accounts Receivable (AR): Any amount of money your patients owe you for medical services they rendered from you.

• ​Co-payment: A fixed fee a patient pays at the time of service, as determined by their insurance plan.

• CPT Codes: A 5-digit code used by medical professionals to describe medical services for billing purposes.

• Deductible: The amount a patient must pay out-of-pocket before their insurance begins to cover costs.

• Explanation of Benefits (EOB): An EOB is a statement from the insurer that tells total charges, provider payments, co-pays, and deductibles after claim processing.

• ICD-10 Codes: A system of diagnosis codes used to classify diseases, symptoms, and medical conditions for visits in healthcare billing.

• Modifier: A 2-digit code added to the CPT or HCPCS Level II code, which provides extra information about a medical procedure or service.

• Out-of-network Provider: A physician or healthcare provider who is not part of an insurance plan or is included in a doctor or hospital network.

• Superbill: An itemized invoice provided by a healthcare provider that outlines services rendered for patient reimbursement.

Read More: Future of Medical Billing with Artificial Intelligence

How Does Hospital Billing Work – 8-Step Hospital Billing Process

Now, coming to the main question, “How does hospital billing work?”. The procedures and processes are complex, and to enhance your understanding, we can divide the process into eight simple steps:

1. Patient Registration

The first step of the hospital billing process is patient registration. Once a patient steps into the hospital for medical treatment, all his information, including personal and insurance, will be recorded. It is crucial that this information is accurate and up-to-date to ensure there are no errors in the billing process.

2. Insurance Eligibility Check

Once the healthcare provider has access to a patient’s insurance information, they can check and verify the eligibility. It gives them information about the services that are covered under the insurance. Even for a regular patient, it is crucial for providers to verify the eligibility and ask for any changes in the insurance since the last visit. It helps avoid unexpected costs for both the hospital and the patient.

3. Medical Transcription Generation

The creation of medical transcription is the next step in the hospital medical billing process. It is a process in which a transcriptionist works closely with the caregiver to record/write everything coming out of his mouth. The purpose of writing all the details is to keep patient medical records up-to-date and ensure the accuracy of medical billing and claims.

4. Medical Billing & Coding

Once the transcription is created, healthcare providers must ensure that they translate the provided services into standardized codes. There are two types of codes:  

1. ICD codes
2. CPT codes 

These codes are used to inform insurance companies about the services rendered to patients. The accuracy of this process should be the top priority, as the slightest coding error can result in delayed reimbursements and can lead to legal penalties.

5. Claims Management

After providing healthcare services to the patients, a claim is generated and submitted to the payer. This claim includes all the necessary information required to get reimbursed quickly. 

The next step is to verify whether the patient’s insurance covers the provided services or not, and this time, it is done by the insurance company before claim processing. Once all details are verified, the claims are processed to determine the amount to be paid to the healthcare provider. The claims can also get denied, and in such a scenario, it is necessary to send a follow-up to learn the reasons for the claim and resubmit it.

6. Payment Posting

After successful claim approval, the insurance company sends the payment or EOB to the hospital. The received payment is recorded, and necessary adjustments are made to the patient’s account. It gives a clear picture of your finances that helps you improve your financial performance. What’s more, it helps healthcare providers know about any payment discrepancies.

7. Outstanding Patient Charges Check

We are heading towards the last few steps of how hospital billing works. These steps are basically verifying that there are no remaining charges. In this step, healthcare providers check for any outstanding charges left after getting payment from the insurance company. If any, the provider will send an invoice to the patient to pay the remaining amount.

8. Outstanding Payment Collection

After receiving a receipt from the healthcare provider, it is the duty of the patient to settle any remaining payments. If the patients don’t settle their due charges, the healthcare provider can reach out to the patient in order to get billed for the healthcare services provided.

Common Hospital Billing Mistakes To Avoid For Improving Revenue Cycle

The medical billing procedures and processes are complex, which leads to errors. These errors can result in claim denials and financial instability. Here are some of the most common medical billing errors that you must avoid in order to improve the revenue cycle:

1. Duplicate Billing

This type of billing error occurs when a patient is billed twice for the same service. It can be a human error or due to system failures. It leads to claim denial, and you can also face legal penalties.

2. Billing for Services Not Rendered

This billing error occurs when a provider bills patients for medical services and treatments that were never provided. This can occur intentionally as a form of fraud or accidentally due to clerical errors.

3. Unbundling

Unbundling occurs when certain services should be billed under a single medical code. However, the provider bills the patient separately for services in order to receive more money.

4. Upcoding

This is one of the most common types of hospital billing mistakes. It occurs when healthcare providers submit codes of more expensive services to the insurance company instead of the one provided to patients.

5. Undercoding

Undercoding is the opposite of upcoding. It occurs when the healthcare provider bills the patient for less expensive services than the actually provided services or when the codes do not fully reflect all the services provided. It can lead to huge financial losses for your healthcare organization. 

Read More: Top 7 Best Practices for Securing Patient Information

4 Benefits of Outsourcing Medical Billing Services

Outsourcing your medical billing services to a reliable third-party vendor offers you numerous benefits. It gives you access to a pool of medical billing experts and helps you focus on what you do best: Patient Care. Here are the top 4 benefits of outsourcing hospital billing services:

1. Focus on Patient Care

Healthcare professionals have to perform a range of administrative tasks that lead to burnout. It’s highly unlikely that they will be able to balance these duties with patient care. It leads to unmet patient expectations, thus reducing their chances of coming back.

Outsourcing medical billing services helps you alleviate the stress from your team. It empowers them to prioritize patient care and meet their needs, thus leading to improved patient experiences and retention rates.

2. Reduce Claim Denials

No healthcare provider wants a delay in reimbursement of the services provided to patients. However, an incompetent in-house team can lead to medical billing errors that can damage your reputation, slow the reimbursement process, or even claim denial. 

Medical billing outsourcing helps you hand over your hospital billing processes to a team of professionals. They help you eliminate medical billing errors, reduce claim denials, and maximize your reimbursements.

3. Faster Reimbursements

When you partner with top medical billing companies, there are fewer chances for errors. The fewer chances of errors means accurate claim submission and faster processing of claims. It results in faster reimbursement of the services provided to patients and improves cash flow. 

These service providers also utilize advanced technology and automated tools to streamline the billing process. These tools allow real-time error detection and correction that reduces the need for resubmissions of claims.

4. Data Security & Compliance

The healthcare rules and regulations continuously evolve, thus making it hard for an in-house team to maintain compliance. Third-party medical billing services providers keep themselves updated with changing international regulations and ensure HIPAA compliance. 

This compliance helps you avoid legal penalties and huge financial losses. Moreover, these providers protect your data at any cost to help you gain patient trust and give you peace of mind.

How Xeven Solutions Help You Improve Cash Flow With Hospital Billing Services

According to the Urban Institute report, 39% of the people owe less than $1,000, while the remaining 61% owe more, with 21% owing at least $5,000 to the hospitals. Xeven Solutions provides managed medical billing services to help you generate accurate claims and expedite the payment collections process. Our team of well-versed medical billing experts can help you reduce outstanding balances and improve cash flow to achieve financial stability.

About the Author: Taimoor Asghar

Taimoor Asghar is a Technical Content Writer with a passion for emerging technologies, continuously keeping himself updated with the latest industry and technological trends. He ensures that complex concepts are translated into informative pieces, catering to both experts and novices. He crafts engaging narratives through blogs, articles, and how-to guides that captivate audiences and inspire them to delve deeper into the ever-evolving world of tech innovation.