Billing & Payment Services

Glossary of Billing Terms

Guide to Reading & Understanding Your Bill

Account Number - Number assigned to the patient's account by the hospital for documentation and billing purposes.

Adjustment/Contractual Adjustment - Part of the bill that the hospital does not charge the patient because of agreements they have with the patient's insurance company.

Admitting Diagnosis - The initial medical reason for the patient's condition.

Advance Beneficiary Notice (ABN) - A notice the hospital gives the patient before they receive services when Medicare is not expected to pay for some or all of the services. The notice is given so that the patient may decide whether to have the treatment and how to pay for it if Medicare denies the charges. ABNs apply to patients with traditional Medicare only.

Advance Directive - A written document, such as a living will or durable power of attorney that says how the patient wants medical decisions to be made if they lose the ability to make decisions for themselves.

Ambulatory Care - Outpatient services.

Ambulatory Care Charge - These fees support the doctor's outpatient hospital practice and are in addition to the doctor's charge. Charges are for services like outpatient nursing care, appointments, receptionists, medical records, housekeeping and facilities operations.

APC (Ambulatory Payment Classification) - A Medicare payment system for grouping and classifying similar outpatient services and procedures so Medicare can pay all hospitals the same amount.

Assignment - An agreement the patient signs that allows his or her insurance to pay the doctor or hospital directly.

Appeal - A process by which the patient, their doctor, or the hospital can object to the health plan's decision not to pay for medical services.

Applied to Deductible - Part of the bill the insurance company requires the patient to pay the hospital. See also deductible.

Assignment of Benefits - The doctor or hospital agrees to accept payment from an insurance company first and then bill the patient for any after-insurance balances. See also benefit.

Authorization Number - A reference number indicating that the patient's treatment has been approved by insurance. Also called a certification number or prior-authorization number. See also preadmission approval/certification.

Beneficiary - Someone who is covered under an insurance policy or plan.

Beneficiary/Patient Liability - The portion patients must pay out-of-pocket for medical services, including co-payments, co-insurance, and deductibles. This is in addition to the portion paid by insurance.

Benefit - The amount insurance pays for medical services.

Billed Charges - The total charges that hospitals send to insurance companies/patients prior to any negotiated contracts or discounts being applied.

Birthday Rule - This rule states that the plan of the parent whose date of birth (month and day) falls earlier in the calendar year is the primary plan for dependent children. For example, if the mother's birth date is June 10 and the father's birth date is April 23, the father's plan would be primary. If both parents have the same birth date, the health plan in effect for the longer period of time will be primary. This rule is approved by the National Association of Insurance Commissioners (NAIC).

Centers for Medicare and Medicaid (CMS) - The federal agency that operates the Medicare program and works with states to manage the Medicaid program (referred to as AHCCCS in Arizona).

Certificate of Coverage (COC) - A description of the healthcare coverage included in an insurance company's plan. The certificate of coverage is required by state laws and explains the healthcare coverage provided under the contract issued to the patient's employer.

Charity Care - Free or reduced-fee health care for patients who have financial hardship.

Children's Health Insurance Program (CHIP) - A federal program jointly funded by states and the federal government, which provides medical insurance coverage for children not covered by state Medicaid-funded programs.

Claim - the medical bill the hospital sends to the insurance company on behalf of the patient.

Clinic - An area in a hospital or separate building that provides medical care to regularly scheduled or walk-in patients for non-emergency care.

Coding - Classification of the hospital/doctor's services and supplies into a set of predetermined numbers/codes for the purpose of billing.

Coding of Claims - A process through which diagnoses and procedures from the patient's medical record are translated into numbers (codes) that computers can process for payment.

Co-Insurance - A type of cost sharing where the patient and insurance company share payment of the approved charge for covered services after payment of the deductible by the patient.

Co-Insurance Days - Medicare coverage from day 61 to day 90 of continuous inpatient hospital stay. The patient is responsible for paying for a portion of those days. After the 90th day, the patient enters their lifetime reserve days.

Collection Agency - A business that contracts with the hospital to collect money from patients for unpaid bills.

Consolidated Omnibus Budget Reconciliation Act (COBRA) - A federal law that mandates employers with 20 or more eligible employees to provide continued health insurance under their group plan to terminated employees and their dependents. COBRA generally provides continued health insurance coverage for up to 18 or 36 months. COBRA beneficiaries may be required to pay 100 percent of the premium plus an administrative fee.

Coordinated Coverage - Integrating benefits payable under more than one health insurance (for example, Medicare and retiree health benefits). Coordinated coverage is usually arranged so the insured benefits from all sources do not exceed 100 percent of allowable (discounted) medical charges. Coordinated coverage may require patients to pay some deductible or co-insurance.

Coordination of Benefits (COB) - The method for determining which insurance company is primarily responsible for payment when a patient is covered under more than one insurance plan. The insured's total benefits do not exceed 100% of the medical expenses.

Co-pay - A fixed dollar amount that a patient must pay out-of-pocket. This is often associated with an office visit or emergency room visit. For example $5, $10, or $25.

Covered Days - Days of the hospital stay that insurance company pays for in full or in part.

Date Of Service (DOS) - The date(s) medical services were provided to the patient.

Deductible - An agreed amount that a patient must pay before the insurance company will pay anything toward medical charges. Usually the amount must be met and paid by the patient each year.

Denial - A decision by insurance company not to pay for part or all of a medical bill based on a lack of medical necessity or pre-admission approval/certification, terminated coverage, or other reasons. Denied amounts may be charged to the patient. See also appeal.

Diagnosis Code - A code used for billing that describes the patient's illness.

Diagnosis-Related Groups (DRGs) - A payment system of classifying patients on the basis of diagnosis. The DRG system categorizes payments into groups based on the principal diagnosis, type of surgical procedure, complications, and other criteria.

Doctor Participation - A way in which a doctor agrees to accept an insurance company's payment level as payment in full. The bill is sent directly to the insurance company with payment made directly to the doctor. This does not include patient's co-insurance, deductibles, and non-covered services.

Duplicate Coverage Inquiry (DCI) - A request from one insurance company to another to find out whether patient has other coverage (see Coordinated Coverage).

Durable Medical Equipment (DME) - Medical equipment that can be used multiple times and is ordered by a doctor for use at home. Examples include hospital beds, wheelchairs and oxygen equipment.

EEG - Equipment or medical procedure that measures electricity in the brain.

EKG/ECG - Equipment or medical procedure that measures how the heart works.

Eligibility Verification - A way hospitals determine whether the patient has insurance coverage for the services they will provide.

Employee Retirement Income Security Act of 1974 (ERISA) - This law regulates self-insured plans and makes them exempt from many state regulations that regulate other insurance plans. ERISA mandates financial standards and other requirements for group insurance plans.

Enrollee - Person who is covered by health insurance.

Explanation of Benefits (EOB/EOMB) - The statement sent by the insurance company to the patient with a list of services provided, amount billed, and any insurance payments. This statement normally includes any payment due from the patient, such as co-insurance, deductibles, and co-payments.

Fiscal Intermediary (FI) - A private company that has a contractual relationship with Medicare to process Medicare claims.

Group Name - name of the group (usually an employer) or insurance plan that insures the patient.

Group Number - A number the insurance company uses to identify the group under which the patient is insured.

Guarantor - Someone who accepts or is legally responsible to pay for a patient's hospital bill. The guarantor may or may not be the patient. HCFA/CMS 1500 - A billing form used by doctors to file insurance claims for medical services.

HCPCS codes - (HCFA Common Procedural Coding System) - A coding system used to describe outpatient services provided to the patient.

Health Care Provider - A person or entity that provides medical services (e.g. a doctor, hospital or laboratory).

Health Insurance - coverage that provides for the payment of medical services as a result of sickness or injury. It includes insurance for losses from accident, medical expense, disability, or accidental death and dismemberment.

Health Insurance Portability and Accountability Act (HIPAA) - A federal law that governs standards for the security and privacy of patients' health information.

Health Maintenance Organization (HMO) - A type of insurance plan that provides coverage of designated health services for a fixed, prepaid premium. Home Health Agency - An agency that offers medical care to patients in their homes. Hospice - A group that provides inpatient, outpatient, and home health care for terminally ill patients.

Hospital Inpatient Prospective Payment System (IPPS) - Medicare's way of paying acute care hospitals for inpatient care. Payment rates are set at a level that covers operating costs for treating a typical inpatient in a given Diagnosis-Related Group (DRG).

Inpatient (IP) - Patients who stay overnight in the hospital.

International Classification of Diseases, 9th Edition (Clinical Modification) (ICD-9-CM) - A coding system used to describe the patient's diagnosis and the procedures performed to treat them.

Lifetime Reserve Days - Under Medicare rules, once a patient has received more than 90 days of inpatient services within a benefit period, they have a lifetime reserve of 60 days for inpatient services that they can still receive. The patient must pay a daily co-insurance for each lifetime reserve day used. Additionally, lifetime reserve days can only be used once during a patient's life.

Long Term Care - Medical care received in a nursing home.

MCARE Non-Covered drug - See self-administered drug.

Medicaid - A state insurance plan, funded by federal and state agencies, for low-income people who have limited or no insurance.

Medically Necessary - Refers to services or supplies that are required to properly treat a specific medical condition. Services or supplies that are not considered medically necessary by insurance may be denied. 

Medicare - A federal health insurance program established for people age 65 and older. Additionally, Medicare covers some people under age 65 who have disabilities or end-stage renal disease (ESRD).

Medicare + Choice - Gives Medicare patients the option of enrolling in a variety of private plans including health maintenance organizations (HMOs), preferred provider organizations (PPOs), provider-sponsored organizations (PSOs), private fee-for-service (PFFS) plans, and medical savings accounts (MSAs) with high deductible insurance plans. Under M+C plans, patients receive medical services without additional out-of-pocket costs.

Medicare Number - A number given to every Medicare patient for tracking and billing purposes. This number can be found on the Medicare card.

Medicare Part A - Medicare coverage that helps pay for inpatient hospital, home health, hospice, and skilled nursing facility services.

Medicare Part B -Medicare coverage helps pay for doctor services, medical supplies, and other outpatient services not paid for by Medicare Part A.

Medicare Part D - Medicare coverage that helps pay for the costs of prescription drugs.

Medicare Summary Notice (MSN) - Also called an Explanation of Medicare Benefits (EOMB). See explanation of benefits.

Medicare Supplement Policy (Medsupp) - The insurer will pay a policyholder's Medicare coinsurance, deductible and co-payments for Medicare Part A and B and may provide additional supplement benefits according to the supplement policy selected. Also called Medigap or Medicare wrap.

Medigap - Additional insurance purchased by Medicare beneficiaries to cover co-payments, coinsurance, deductibles, and services not paid for by Medicare Part A or B. Also known as Medicare supplement insurance.

Network - A group of doctors, hospitals, and other health care providers that have a contract with an insurance plan to provide services to its patients. Non-Covered Charges - Charges for medical services denied or excluded by insurance. The patient may be billed for these charges. Also called "non covered amount."

Non-Participating Provider (non-par) - A doctor, hospital, or other health care entity that is not part of an insurance plan's network. For medical services rendered by non-participating provider, the patient may be responsible for payment in full or higher costs. Also known as out-of-network provider.

Observation - Type of medical service used by doctors and hospitals to determine whether the patient needs inpatient care, outpatient care or can recover at home. Observation is usually charged by the hour and may include an overnight hospital stay.

Out-of-Network (OON) Services - Medical services received from a non-participating provider. Coverage generally requires payment of a higher deductible, co-payment, and/or coinsurance than for medical services from a participating provider.

Out-of-Pocket (OOP) - Payment for medical services due from the patient, including copayments, co-insurance, and deductible.

Outpatient (OP) - A patient who does not need to stay overnight in a hospital. Outpatient services include lab tests, X-rays, and some surgeries.

Over-the-Counter (OTC) Drug - Drugs that may be purchased at a pharmacy or drug store without prescription.

Participating Provider - A doctor, hospital, or other health care entity that is part of an insurance plan's network. They agree to accept insurance payment for covered medical services as payment in full, less any patient liability.

Patient Type - A way to classify patients based on the type of services they receive from the hospital, such as outpatient, inpatient, Emergency, etc.

Per Diem - Per day. Typically refers to charge or payment methods based on a set rate per day of medical care.

Point-of-Service Plan (POS) - A health insurance plan that allows the patient to choose to receive a medical service from a participating or non-participating provider, with different benefit levels with the use of participating providers.

Policy Number - A number that the insurance company assigns the patient to identify the contract for coverage.

Pre-Admission Approval/Certification (PAC) - An agreement by insurance company to pay for medical services. Doctors and hospitals ask the insurance company for this approval before providing medical services. Failure to get the approval often results in a penalty to the patient since the services may not be covered by insurance.

Pre-Existing Condition (PEC) - Any health condition that has been diagnosed or treated within a certain time period immediately before the patient's effective date of coverage. Pre-existing conditions may not be covered for a specified time period as noted in the insurance company's certificate of coverage (usually 6 to 12 months).

Pre-Existing Condition Exclusion - A practice of some health insurance companies to deny coverage to patients for a certain time period for medical conditions that already exist when coverage began.

Preferred Provider Organization (PPO) - An insurance plan that has contracts with healthcare providers for discounted charges. Typically, the plan offers significantly better benefits and lower costs to the patients for services received from preferred providers.

Premium - The amount paid, often in monthly payments, for an insurance policy.

Prepayment - Money paid before receiving medical services.

Prevailing Charge - A billing charge that is frequently made by doctors in a specific region or community.

Primary Care Network (PCN) - A group of primary care doctors who have agreed to share the risk of providing medical care to their patients who are covered by a given health plan.

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