How to File Medical Claims

What are medical claims?

Medical claims are invoices that a medical services provider submits to insurers so they’ll be reimbursed for their patients’ services and procedures. Items on the invoice could include the following patient information: 

• Visit summary
• Diagnosis
• Treatment
• Prescriptions
• Any medical devices or supplies used to treat them
• Follow-up treatments (such as therapy)
• Medical transportation
• Special assistance 

A medical claim will also include relevant medical codes assigned to various diagnoses, procedures and services; the names and details of the attending physician or healthcare practitioner (such as a therapist or social worker); and the total charge for that visit. 

And if an insurance company or clearinghouse declines your claims, the medical service provider will need to gather more information and begin an appeals process, potentially revising a claim with supporting evidence or rewriting the claim. 

What information does a medical claim file contain?

Each medical claim has two parts: the claim header and claim details.

• Claim header: A claim header summarizes the claim. It includes protected health information like date of birth, gender and ZIP code. Additional details include the primary diagnosis code, the diagnosis-related group (DRG), inpatient procedures (if any), the name of the patient’s insurance provider, the National Provider Identifier (NPI) for the doctor and healthcare facility, and the total charge for the visit.
• Claim details: Claim details comprise the bill’s body. These details include the procedure code and corresponding diagnosis code, date of visit, and National Drug Code (NDC), if applicable. This section also contains the doctor’s NPI number and the total charge for the medical services provided.

How does the medical claims payment process work?

The medical claims billing and payment process follows these steps: 

1. Providers submit an invoice. A medical provider, such as a physician, submits an invoice to their billing department. In the billing department, the invoices are appended with the appropriate ICD-10 diagnosis and CPT treatment codes (and code modifiers, if necessary). 
2. A superbill is created. A billing specialist documents summaries of a patient’s visit with applicable diagnosis and treatment codes on a superbill – a detailed invoice outlining the services the patient received. Some physicians will check or circle the diagnosis and treatment codes directly on the superbill. 
3. The invoice is checked for errors. Medical billing specialists typically use medical billing software to check the superbill and insurance information for flaws like code mistakes or formatting errors. 
4. An electronic claim is created. Billing personnel generate an electronic claim and submit it to a third-party medical claims clearinghouse or directly to an insurance provider.
5. Denials are investigated. If there are problems with the bill, the medical billing specialist follows up to find out what went wrong. If they find an obvious error, they may correct the bill and resubmit it. If a claim is denied, billing personnel may need to submit an appeal with supporting evidence to the payer.
6. The payer sends remittance. The payer sends remittance to the medical provider; a remittance advice statement from the insurer usually accompanies the remittance and serves as a receipt. In cases of patient responsibility, such as copays and coinsurance, the supplier will send the patient a statement.
7. Unpaid claims are investigated. Unpaid delinquent accounts are turned over to a collections agency, or other debt collection measures may begin. 

What is a medical claims clearinghouse?

A medical claims clearinghouse is a third-party intermediary between a doctor’s billing department and the insurance company. After the medical billing department submits a claim, the medical clearinghouse uses special software to scrub, standardize, and screen the claim before sending it on to the payer.

A medical claims clearinghouse will check a submitted claim for medical coding errors, formatting, HIPAA standards, and more. It may correct the claim, ask the medical services provider for more information, or send the claim back for further revisions.

What are the medical claim forms used?

While filing medical claims, you’ll encounter the following forms. 

• CMS-1500, UB-04 and CMS 1450: The CMS-1500 and UB-04 are forms used to process medical claims. CMS-1500 forms are used for non-institutional healthcare facilities (such as private practices). The UB-04 or CMS-1450 forms are variations of the CMS-1500. They’re used by institutional healthcare facilities, such as hospitals.
• 835 and 837: Form 837 or EDI (the claim’s electronic record) is the medical claim prepared for reimbursement. The 835 is the receipt, where the insurer paraphrases the claim and either accepts or denies it. It may take weeks, if not months, until the billing department finds the reimbursement in their bank accounts.
• EOB, EFT and ERA: Once insurers process your medical claims, you’ll receive one or more of the following.
  • Explanation of Benefits (EOB) is the document that tells you the medical claim was processed. Details include which healthcare provider processed it, what it was for, whether it was approved and for how much. 
  • Electronic funds transfer (EFT) is where the insurer wires the remittance directly to the provider’s bank account.
  • Electronic remittance advice (ERA) is the electronic version of the EOB. If the claim was approved, an ERA often accompanies the EFT.

What could go wrong with a medical claim?

Most bills are accepted the first time they’re submitted, according to Becker’s Hospital CFO Report. A 5% denial rate is the average for medical practices. 

Increase your chances of acceptance with these four best practices:

1. Check patient details. Is the patient’s name, address and policy number correct? Most claims are rejected because the patient’s identifiers are incomplete or misspelled.
2. Use quality EHR software. Use quality EHR software to check and process medical claims. Humans tend to make errors, but software is more accurate. Use medical records management software to generate custom forms and check those forms for coding or other errors before submitting them to the insurer.
3. Train staff. Coding updates and HIPAA regulations change frequently. Keep your staff trained and updated on coding and billing updates, among other changes.
4. Stay abreast of trends. Regularly follow medical journal reports on why denials occur.

Why are claims rejected? 

Even if medical claims go through multiple checks for formatting, coding or other errors, the payer may still reject the claim or ask for adjustments. 

Payers typically reject claims for one of three reasons.

1. Administrative errors: The claim has incomplete information, a data mismatch or typos.
2. Coding errors: Incorrect diagnoses or treatment codes are found. 
3. Documentation errors: There could be a missing provider signature, a missing or incorrect date, illegible documentation, or illegible provider signatures without signature logs.

If a patient uses an out-of-network provider, fails to obtain preauthorization, or if their coverage has expired, the payer can reject the claim. The insurer may also deem the medical service unnecessary or judge that the patient should have received less expensive treatment. 

Some medical claims errors, usually administrative, are found during the clearing house check. Others, especially documentation errors, are detected in the last stage when inspected by the insurer. 

Reason codes and insurance adjustments

If an insurer sends an adjusted reimbursement that’s different from the amount billed, it will contain specific codes: 

• Claim Adjustment Reason Codes (CARC) explain why a claim was paid differently than billed.
• Remittance Advice Remark Codes (RARC) provide an additional explanation for the adjustments described by the CARC.

How do you appeal a denied claim?

Each insurance company has its own appeals process. Some ask that the provider complete and sign a form. Others may accept a letter of appeal with supporting evidence and provide instructions. Some providers may direct you to their online appeal process, where you’ll likely upload additional information. 

Medicare and government payers typically direct you to standard appeal forms, such as the CMS-20027 redetermination request form.

Successful claims adjudication involves five steps:

1. Confirm that the claim contains no duplicate charges.
2. Ensure the claim contains all relevant details with no typographical errors, illegible content or inaccurate data.
3. Check for correct Inspect codes with no contradictions or inconsistencies.
4. Confirm that the doctor and clinic location are in the insurer’s network. Verify that the patient is a member with an active insurance plan.
5. Inspect whether the billed items are medically necessary, in line with industry best practices, and safe for the patient. Ensure that insurance benefits cover the services the patient received.

Successful claims processing 

According to Thorsten Wirkes, former vice president of insurance operations at Oscar Health, claims processing success is more than just processing claims from point A to point B. 

“[It’s about] accuracy (did we pay the right price for the right services?), timeliness (did we process claims quickly?), and cost efficiency (did we process claims automatically?),” Wirkes said. “If any of these goals aren’t met, it can cause headaches for all parties.”