- Medical claims are documents that your practice must submit to payers for reimbursement.
- Medical claims comprise charges and codes that standardize your services for faster payer approval and reimbursement.
- Creating medical claims involves registering patients, verifying their benefits, coding and charging for your services, and scrubbing your claims.
- This article is for medical practitioners looking to master the medical claims process.
Most medical practitioners know far too well that the time between patient encounters and payment can be lengthy. This gap isn't always the patient's fault; insurers are often responsible for this delay. That's because payers must verify whether your services fall under their coverage. Medical claims streamline this process.
What are medical claims?
An industry standard for collections, a claim is a key medical billing document that a medical practice like yours submits to a health insurance company – also known as a payer. Medical claims comprise codes, primarily Current Procedural Terminology (CPT) codes, that describe the medical services you provided the patient. These services include procedures, exams, diagnoses, prescriptions and medical supplies, transportation, and devices.
How do medical claims work?
After a patient encounter, your practice must convert the services you provided into CPT codes. These codes standardize the commonly administered services listed above. Without them, medical claims would often comprise lengthy practitioner descriptions of administered services that would introduce inconsistencies. Instead, with CPT codes, payers immediately know which services you provided and can determine whether the patient is covered.
Medical claims should also include your practice's charges for each coded service. CPT codes have no impact on what you can and can't charge for your services – that decision is entirely yours to make. The ultimate question becomes whether the patient's benefits will result in the payer entirely reimbursing you or deferring some – or all – of the payment to the patient.
FYI: Although CPT codes standardize services, they have no impact on what you can charge for them.
What happens after you create claims?
Once you create claims, it's best to run them through claim scrubbers to detect errors. Without this error detection, you could submit improper claims that result in payer rejections that require a resubmission. Resending a claim creates more work for your administrative staff and delays your reimbursements, thus hindering your revenue and cash flow.
Most claim scrubbers are automatic tools that third-party medical billing services provide (we'll discuss these in more depth later), such as the one noted in our review of DrChrono. They're often part of clearinghouses – where claims go for finalization between when you submit them and payers receive the bill. Technically, you can have your admin handle claim scrubbing, but the complexity of CPT codes makes automation more reliable.
Do medical claims differ for value-based practices?
If you provide value-based care, you may have additional concerns surrounding medical claims. This payment model deviates from the standard fee-for-service model in that it prioritizes the quality of patient encounters over their quantity. The length of time patients stay at inpatient facilities, including 30-day admissions, can affect your reimbursements. Longer stays and more frequent admissions may indicate lower-quality care and could affect what payers cover.
What is included in a medical claim file?
A medical claim file comprises a claim header and a claim detail. Together, these sections describe the patient's medical background and how you treated the patient. We'll break down each section below.
The header of your claim is your overview. This includes the reason for the patient's visit and their primary diagnosis. For medical claims purposes, the patient's primary diagnosis is the condition that requires the most attention and services.
The claim header includes the following information:
- Basic patient information: Medical claims should include the patient's full legal name, date of birth, address and gender.
- Your National Provider Identifier (NPI): Think of your NPI as your practice's Social Security number and your medical claims as your tax returns. You can't get your refund without your SSN, and you can't get reimbursements without your NPI.
- All CPT codes pertaining to primary services provided: Do your best to include the correct codes, but remember that your claim scrubber will catch most errors.
- The payer's name: This way, you don't submit medical claims to the wrong insurer, which would delay proper reimbursement.
- Your charges: If you don't include your charges, payers only know which services you provided, not how much you're owed for them.
- Inpatient procedure details: This detail is the only optional inclusion in a medical claim. You'll only need to include this part in your header if you performed inpatient procedures during your encounter.
The detail section of your claim pertains to secondary diagnoses. These diagnoses arise as you treat the primary diagnosis, but require less attention and fewer services. You'll describe a secondary diagnosis using five items that are also included in the claim header: date of service, CPTs, Diagnosis Related Groups (DRGs), your NPI and your charges.
The claim detail should also include National Drug Codes (NDCs), which are unique to this section. As the name suggests, they indicate any medications or other drugs you prescribed during the encounter.
How to create a medical claim
The claims process is lengthy – it starts before you even see patients – but it's far from impossible. Just follow these steps to navigate it.
1. Register patients before their appointments.
Before all appointments, you should have patients provide their insurance information and basic personal details. Medical practice management software can streamline this task and allow patients to submit their information before they even arrive at your practice.
2. Conduct a verification of benefits (VOB).
With your patient's insurance information now handy, you should verify whether their plan covers your services. To do so, log in to the insurer's provider portal and conduct all necessary checks. Alternatively, call the provider; the agent you speak with can determine whether the payer will cover your services or if the patient will have out-of-pocket expenses.
VOBs are also necessary for calculating patient copays. These copays can help maintain your cash flow as you await full payer reimbursement. You can also use VOBs to check whether your patient must pre-authorize your services with their insurer before visiting you. This arrangement is common with health maintenance organization (HMO) plans, which typically require that patients obtain insurer approval before seeing specialists.
3. After patient visits, code your services.
Following patient encounters, give your front-office staff or third-party medical biller access to your patient charts. These charts can be used to fill your medical claims with the appropriate CPT codes. Depending on the services you provide, you may also need to include DRG codes and NDCs. Other codes you may need to include are International Classification of Diseases, 10th Revision (ICD-10) and Healthcare Common Procedure Coding System (HCPCS) codes.
4. Add your charges.
Whether it's an administrative assistant or third-party medical biller who's converting your services to codes, they should provide a charge for each code. As mentioned earlier, these charges can be whatever you please as long as they fall within industry standards. For example, just because a competitor practice charges $10 for CPT code 95004 (allergy testing) doesn't mean you can't charge $5 or even $15.
5. Scrub your claims.
After adding all your codes and charges, run your claim through a scrubber. This way, you catch as many errors as possible. Claim scrubbing often goes hand in hand with clearinghouse review, through which your claims will be adjusted to reflect the payer's desired format. However, if you're submitting claims to Medicare or Medicaid, you'll often skip the clearinghouse and go straight to the payer.
6. Await the payer's decision.
Through a process commonly known as adjudication, the payer determines whether to accept, reject or deny your claim. If your claim is accepted, then the adjudication process also involves determining the amount of your reimbursement. Note that reimbursement isn't always 100% – the payer may only pay part of what's owed and defer the remainder to the patient.
In some cases, the claims are rejected or denied. Rejections, though frustrating, are often relatively easy to solve – just resubmit your claim with all errors fixed. Payment may eventually follow.
Denials are tougher to address. They may reflect a lack of patient pre-authorization that can't be retroactively fixed, or they may indicate insufficient patient coverage. In either case, the patient can file an appeal with their insurer. The appeals process can be lengthy, and your payment will be delayed – if approved at all – until the process ends.
7. Bill your patient for the remaining amount.
If your payer won't cover all your services, you should bill the patient for the remainder. Ideally, your patient will pay before your next visit. If not, you can attempt to collect payment at this visit. On the other hand, if pursuing payment from patients sounds exhausting or tedious, you can always turn to third-party medical billing companies.
How medical billing companies help with medical claims
Not every practice has the capacity to provide services, create claims and pursue payment from the appropriate parties. Such practices often benefit tremendously from outsourcing these tasks to medical billing companies, which specialize in these services. Visit our medical billing best picks page to learn how these companies work, how they could benefit you and which vendor might best suit your practice.