Plain-English reference
Medical Billing Glossary
The codes, forms, modifiers and revenue cycle terms that come up most in medical billing, explained in plain language and based on CMS, X12 and payer guidance. Useful for practices in any of the 15+ specialties we serve.
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A to Z
Medical Billing Terms
Rules change. Always check the current payer policy, CMS manual or provider manual for the service you are billing.
A
- A/R (Accounts Receivable)
- Money owed to a practice for services already provided, from payers and patients. A/R is usually reported in aging buckets (0-30, 31-60, 61-90, 91-120 and 120+ days). A/R and denial management.
- A/R days
- The average number of days it takes to collect payment after a claim is created. A common formula is total A/R divided by average daily charges over a recent period. Lower is better.
- ABN (Advance Beneficiary Notice of Noncoverage)
- Form CMS-R-131, given to an Original Medicare patient before a service or item when the provider expects Medicare may deny it as not reasonable and necessary. A valid ABN lets the provider bill the patient if Medicare denies; it is reported with the GA modifier.
- ADR (Additional Documentation Request)
- A request from a Medicare contractor for medical records to support a claim. If the records are not sent by the deadline, the claim is denied.
- Allowed amount
- The maximum a payer will pay for a covered service under its fee schedule or contract, including the patient's share. The difference between the billed charge and the allowed amount is usually a contractual adjustment.
- Appeal
- A formal request asking a payer to review a denied or underpaid claim. Medicare has five levels of appeal; commercial and Medicaid plans set their own steps and deadlines.
- Assignment
- When a provider accepts assignment, it agrees to take the Medicare-approved amount as full payment and collects only the deductible and coinsurance from the patient.
B
- Bundling
- Paying several related services as one, so a component service is not paid separately. National Correct Coding Initiative (NCCI) edits enforce many bundling rules.
C
- CAQH ProView
- An online database where providers store credentialing data (licenses, education, malpractice coverage) once and share it with participating health plans. Profiles must be re-attested regularly. Credentialing services.
- CARC (Claim Adjustment Reason Code)
- A standard code on a remittance that explains why a claim or line was paid differently from what was billed, for example CO-50 (not medically necessary) or CO-197 (authorization absent). Maintained by X12.
- Charge capture
- The process of recording every billable service, procedure and supply so it reaches the claim. Missed charges are lost revenue. Charge entry services.
- Clean claim
- A claim with no errors or missing information, so the payer can process it without asking for anything more.
- Clean claim rate
- The share of claims accepted on first submission without rejections or edits. It is a key measure of front-end and coding quality.
- Clearinghouse
- A company that checks claims for format errors, converts them to the X12 837 standard and routes them to payers. It also returns rejection reports, ERAs and claim status. Claim submission.
- CMS-1500
- The standard paper claim form for professional services billed by physicians, therapists, suppliers and other non-institutional providers. Its electronic equivalent is the 837P.
- Coinsurance
- The percentage of the allowed amount the patient pays after the deductible. For most Medicare Part B services this is 20%.
- Contractual adjustment
- The amount a provider writes off because its payer contract or fee schedule allows less than the billed charge. It is not billed to the patient.
- Coordination of benefits (COB)
- Rules that decide which plan pays first when a patient has more than one coverage, such as an employer plan and Medicare. Billing the wrong payer first is a common denial (CO-22).
- Copay
- A fixed amount the patient pays for a service, such as an office visit, as set by their plan.
- CPT (Current Procedural Terminology)
- Five-character codes, maintained by the American Medical Association, that describe medical, surgical and diagnostic services. CPT is also Level I of HCPCS. Medical coding.
- Credentialing
- Verifying a provider's qualifications (license, education, board certification, malpractice history) so a health plan will add them to its network. It is usually followed by payer enrollment and contracting. Credentialing services.
- Crossover claim
- A claim that Medicare automatically forwards to a secondary payer, such as Medicaid or a Medigap plan, after Medicare processes it.
D
- Deductible
- The amount a patient must pay for covered services each benefit period before the plan starts paying.
- Denial
- A processed claim that the payer refuses to pay, in whole or in part, with a CARC explaining why. Denials must be corrected, appealed or written off. Compare rejection. Denial management.
- Denial rate
- The share of submitted claims (or claim dollars) denied by payers in a period. Tracking it by CARC and payer shows where to fix the process.
E
- E/M (Evaluation and Management)
- CPT codes 99202-99499 for visits and consultations. Office visit levels are chosen by medical decision making or total time on the date of the encounter.
- EDI (Electronic Data Interchange)
- Exchanging billing transactions electronically in HIPAA-standard X12 formats, such as 837 claims, 835 remittances, 270/271 eligibility and 276/277 claim status.
- EFT (Electronic Funds Transfer)
- Direct deposit of claim payments into the provider's bank account. It is paired with the ERA so each deposit can be matched to claims.
- Eligibility verification
- Checking a patient's active coverage, plan type, benefits, deductible and copay before the visit, usually with a 270/271 transaction or payer portal. Patient intake and eligibility. Eligibility verification services.
- EOB (Explanation of Benefits)
- A statement from a health plan explaining what was billed, allowed, paid and owed by the patient. Patients receive EOBs; providers usually receive an ERA or paper remittance.
- ERA / 835
- The Electronic Remittance Advice, sent in the X12 835 format. It shows what a payer paid, adjusted or denied on each claim line, with CARC and RARC codes, and is used for payment posting. Payment posting.
F
- Fee schedule
- A list of the amounts a payer allows for each code. Medicare publishes its fee schedules (such as the Physician Fee Schedule); commercial plans set rates by contract.
- First-pass resolution rate
- The share of claims paid on the first submission, with no rework, appeal or resubmission.
G
- Good Faith Estimate
- Under the No Surprises Act, an estimate of expected charges that providers must give uninsured or self-pay patients who schedule a service or ask for one.
H
- HCPCS
- The Healthcare Common Procedure Coding System. Level I is CPT; Level II codes (for example E0601 or J-codes for drugs) cover supplies, equipment, drugs and services not in CPT.
- HIPAA
- The Health Insurance Portability and Accountability Act. It sets privacy and security rules for protected health information and the standard electronic transactions used in billing. Our security and compliance.
I
- ICD-10-CM
- The diagnosis code set used on US claims to explain why a service was needed. Codes must be coded to the highest specificity the record supports.
- ICD-10-PCS
- The procedure code set used for hospital inpatient services on institutional claims. Outpatient and professional services use CPT and HCPCS instead.
- Incident-to billing
- A Medicare rule that lets services by auxiliary staff, such as nurse practitioners or physician assistants, be billed under a supervising physician's NPI when strict supervision and plan-of-care conditions are met.
M
- MAC (Medicare Administrative Contractor)
- A private contractor that processes Medicare fee-for-service claims for a region. A/B MACs handle Part A and Part B claims; four DME MACs handle DMEPOS claims.
- MBI (Medicare Beneficiary Identifier)
- The 11-character Medicare number on the patient's Medicare card, used on every Medicare claim.
- Medical necessity
- The standard that a service is reasonable and needed to diagnose or treat the patient's condition. Payers define it in coverage policies, and the record must support it.
- Medicare Advantage (Part C)
- Private health plans approved by Medicare that replace Original Medicare for enrolled patients. They set their own networks, prior authorization rules and claim addresses.
- Modifier
- A two-character code added to a CPT or HCPCS code to give more detail, such as the side of the body, a distinct service or a reduced service, without changing the code's meaning.
- Modifier 25
- A significant, separately identifiable E/M service by the same provider on the same day as a procedure or other service. The note must support a visit beyond the usual pre- and post-procedure work. Pain clinics run into this when a visit and an injection happen on the same day. See pain management billing.
- Modifier 26 and TC
- 26 bills the professional component (interpretation) of a service; TC bills the technical component (equipment and staff). Without either, the global service is billed. Common on imaging, echocardiograms and stress tests. See radiology billing and cardiology billing.
- Modifier 50
- A bilateral procedure performed on both sides of the body at the same session. Bilateral knee injections and carpal tunnel releases are common examples. See orthopedic billing.
- Modifier 59
- A distinct procedural service: a different session, site, organ system, incision or injury, used to bypass an NCCI edit when the services are truly separate. Use a more specific X modifier when one applies.
- Modifiers XE, XS, XP, XU
- More specific versions of modifier 59, introduced by CMS: XE separate encounter, XS separate structure or organ, XP separate practitioner, XU unusual non-overlapping service.
- MUE (Medically Unlikely Edit)
- The maximum units of a code that a provider would normally report for one patient on one date of service. Units above the MUE are denied.
N
- NCCI (National Correct Coding Initiative)
- CMS edits that stop incorrect code pairs (procedure-to-procedure edits) and excessive units (MUEs) on Medicare and Medicaid claims.
- Net collection rate
- Payments collected divided by the amount that could be collected (charges minus contractual adjustments) over a period. It shows how much collectible revenue is actually received.
- NPI (National Provider Identifier)
- A unique 10-digit identifier for health care providers. Type 1 NPIs are for individuals; Type 2 NPIs are for organizations such as group practices.
O
- Out-of-network
- A provider who has no contract with the patient's plan. Payment and patient costs differ, and the No Surprises Act limits balance billing in some situations.
P
- Patient responsibility
- The part of a claim the patient owes, such as deductible, copay and coinsurance, shown with group code PR on the remittance. Patient collections.
- Payment posting
- Recording payments, adjustments and denials from ERAs and EOBs against each claim line, so balances and follow-up work are accurate. Payment posting.
- PECOS
- The Medicare Provider Enrollment, Chain and Ownership System, used to enroll and update Medicare providers. Ordering and referring providers must be enrolled for certain claims to pay.
- Place of service (POS) code
- A two-digit code on professional claims that shows where the service happened, such as 11 (office), 02 or 10 (telehealth), 12 (home) or 22 (outpatient hospital). It can change the payment. Urgent care centers usually bill with POS 20. See urgent care billing.
- Prior authorization
- Approval from a payer before a service, drug or item is provided. Without it, the claim is usually denied (CO-197), even if the service was medically necessary. Prior authorization services.
R
- RARC (Remittance Advice Remark Code)
- A code that adds detail to a CARC on a remittance, such as which document or field was missing. RARCs are maintained by CMS.
- Referral
- An order from a primary care provider sending a patient to a specialist. Many HMO plans require a referral on file before they pay the specialist.
- Rejection
- A claim returned by the clearinghouse or payer before processing because of a format or data error. It was never adjudicated, so it is corrected and resubmitted, not appealed.
- Revenue code
- A four-digit code on the UB-04 that shows the department or type of service, such as room and board, pharmacy or emergency room.
- Revenue cycle management (RCM)
- The full process of getting paid for patient care, from scheduling and eligibility through coding, claims, payment posting, denials and patient collections.
S
- Secondary claim
- A claim sent to the patient's second coverage after the primary payer pays, usually with the primary payer's remittance attached.
- Superbill
- A form or charge sheet listing the services, codes and diagnoses for a visit, used to create the claim.
T
- Taxonomy code
- A code that identifies a provider's type and specialty. Many payers, including several Medicaid programs, require it on claims.
- Telehealth
- Services delivered by audio-video or, in some cases, audio-only technology. Payers set rules on eligible codes, POS codes and modifiers such as 95 or 93.
- Timely filing
- The deadline to submit a claim after the date of service. Medicare allows 12 months; Medicaid programs and commercial contracts set their own, often shorter, limits.
U
- UB-04 (CMS-1450)
- The standard claim form for institutional providers, such as hospitals, skilled nursing facilities, home health agencies and hospices. Its electronic equivalent is the 837I.
- Unbundling
- Billing the parts of a bundled service separately to increase payment. It breaks NCCI rules and can lead to denials, recoupments and audits.
- Underpayment
- A payment lower than the contracted or fee-schedule amount. Finding underpayments means comparing each ERA line with the expected allowed amount. Underpayment case study.
- Upcoding
- Billing a higher-level code than the documentation supports. It is a compliance risk and a frequent audit target.
W
- Write-off
- Removing a balance from A/R that will not be collected, such as a contractual adjustment, small balance or a denial that cannot be appealed.
X
- X12 837
- The HIPAA-standard electronic claim. 837P is for professional claims (CMS-1500), 837I for institutional (UB-04) and 837D for dental.
Specialty terms
DME and Supplies Terms
Extra terms for practices and suppliers that bill durable medical equipment, CPAP, oxygen and other DMEPOS items.
D
- Capped rental
- A Medicare payment category for items such as CPAP devices, hospital beds and many wheelchairs. Medicare pays a monthly rental for up to 13 months of continuous use, after which ownership transfers to the patient. Billed with RR plus KH, KI or KJ. Rental billing case study.
- CMN and DIF
- Certificates of Medical Necessity and DME Information Forms. CMS eliminated both for claims with dates of service on or after January 1, 2023; the medical record now carries that support.
- Compliance (CPAP adherence)
- For Medicare to keep covering a PAP device after the first three months, the patient must use it at least 4 hours per night on 70% of nights in a consecutive 30-day period during the first three months, and the treating practitioner must re-evaluate the patient between day 31 and day 91. CPAP billing services.
- DME (Durable Medical Equipment)
- Equipment that can withstand repeated use, serves a medical purpose, is generally not useful to someone who is not sick or injured, is appropriate for use in the home, and is expected to last at least three years. DME billing services.
- DME MAC and DMEPOS
- DMEPOS means Durable Medical Equipment, Prosthetics, Orthotics and Supplies. These items are billed to one of four regional DME MACs (Jurisdictions A, B, C and D), chosen by the patient's permanent address.
- KH, KI and KJ modifiers
- Capped rental months: KH for the first month, KI for months two and three, KJ for months four through thirteen.
- KX modifier
- Shows that the coverage requirements in the applicable medical policy have been met and documentation is on file. Adding it without that documentation is a common audit finding.
- LCD and NCD
- A Local Coverage Determination is a MAC coverage policy (for example L33718 for PAP devices); a National Coverage Determination is a CMS decision that applies nationwide. Each LCD has a Policy Article with coding rules.
- NU, UE and RR modifiers
- NU is a new purchase, UE a used purchase and RR a rental. The modifier must match how the item was provided.
- POD (Proof of Delivery)
- Documentation that the patient received the item, such as a signed delivery slip or carrier tracking. Suppliers must keep POD for seven years. Delivery-to-billing case study.
- Refill requirements
- For supplies sent on an ongoing basis, the supplier must contact the patient no sooner than 30 days before the expected end of the current supply and deliver no sooner than 10 days before it runs out.
- RUL (Reasonable Useful Lifetime)
- How long equipment is expected to last for Medicare purposes, generally at least five years. Replacement before then is usually covered only for loss, theft or irreparable damage.
- Same or similar
- A denial when Medicare records show the patient already has the same or a similar item within its useful lifetime. Suppliers can check this through MAC portals before delivery. Same-or-similar case study.
- SWO (Standard Written Order)
- The order Medicare requires for all DMEPOS claims, with the patient's name or MBI, order date, item description, quantity, practitioner's name or NPI and signature. It must be on file before the claim is submitted.
- WOPD (Written Order Prior to Delivery)
- A completed SWO the supplier must receive before delivering items on CMS's Required Face-to-Face Encounter and WOPD List, such as power mobility devices. Power mobility billing.
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