Common Medical Billing Terms You Should Know

Know Have you ever looked at a medical bill and felt confused by all the strange terms? Medical billing can seem like it has its own language, full of codes and phrases that don't make much sense at first. It's a way for doctors, hospitals, and insurance companies to talk about the care you get and how they pay for it.

ByadminonSeptember 19, 2023

This blog is here to help you understand some common medical billing terms. We’ll explain them in simple words, so you know what’s happening with your healthcare providers and how it’s paid for.

medical bills

Medical Billing Terms and Descriptions for Billers and Coders

Now, let’s dive into some medical billing terms that billers and coders use every day. These terms help them keep track of the care you get and make sure everything is paid for correctly.

Accounts Receivable (AR)

Accounts Receivable (AR) is the money that doctors or hospitals are waiting to get from insurance companies or patients for the medical care they give. It’s like when you lend a friend some of your toys, and you’re waiting for them to give them back. For healthcare providers, AR means keeping track of who needs to pay and making sure the money comes in.

  • Account Number

Account number is like a special code that keeps track of your medical bills and payments. It’s unique to you so the hospital or clinic knows exactly who you are.

  • Advance Beneficiary Notice of Noncoverage (ABN)

ABN is a form that doctors give you if they think Medicare might not pay for your medical care. It tells you that you might have to pay for the treatment yourself.

  • Aging Bucket or AR Aging

This shows how long the money has been owed to the healthcare provider or hospital. It helps them see which bills are new and which ones have been waiting for a long time.

  • Allowed Amount

Allowed amount is the most money that your insurance company will pay for a certain medical service. If it costs more, you might have to pay the difference.

  • Applied to Deductible (ATD)

ADT means some of the money you’ve paid for medical care goes toward your deductible. That’s the amount you need to pay before your insurance starts to cover the costs.

  • Assignment of Benefits (AOB) 

AOB is when you agree to let your insurance company pay the doctor or hospital directly. You’re saying, “Please pay them for me with my insurance benefits.”

  • Authorization

Authorization is like asking for permission. Before you get certain medical treatments, your health insurance needs to say it’s okay. This is because they want to make sure the treatment is really needed and that they cover it.

  • Authorization Number

Authorization is a special number you get when your health insurance says yes to your treatment. It’s like a ticket that shows your treatment has the green light. You need to keep this number because it’s proof you got permission.

  • Balance Billing

Imagine your doctor charging more than your health insurance agrees to pay. Balance billing is when the doctor asks you to pay the difference. It’s like when you get a toy, but the money from your parents isn’t enough, so you need to use your own savings.

  • Benefits Period

This is a set time when your health insurance says they will help pay for your medical needs. Think of it like a school year, but instead of learning, it’s the time you’re covered for doctor visits and treatments.

  • Birthday Rule

When your mom and dad both have health insurance, the birthday rule helps figure out which one will be used first for you. It goes to the parent whose birthday comes first in the calendar year, not who is older. It’s like if your mom’s birthday is in February and your dad’s is in May, your mom’s insurance is used first.

  • Bundling (or code bundling)

Sometimes, doctors do a lot of things to help you feel better during one visit. Bundling is when these are put together under one code or bill. It’s like getting a meal deal instead of ordering food separately.

  • Capitation

This is a way doctors get paid. Instead of paying for each visit or treatment, the health insurance gives them a set amount of money for each patient they have, no matter how many times you visit. 

  • Charge Entry

This is when your healthcare provider puts all the details about your visit or treatment into their computer to figure out how much to charge. It’s like when you check out at the store and they scan all your items to see how much you owe.

  • Claim Adjustment Group Codes

These codes are used to explain why your bill was changed. If your health insurance doesn’t pay for something or pays less, these codes tell why. It’s like getting a report card that shows why you got the grades you did.

  • Claim Adjustment Reason Codes (CARCs)

These are special codes that give more details about why your health insurance might not pay the full amount for your doctor’s visit or treatment. It’s like when your teacher writes comments on your test about what you missed.

  • Claim Scrubbing

This is like checking your homework before turning it in. Doctors’ offices use special computer programs to look over their bills and make sure there are no mistakes before they send them to health insurance.

  • Clearinghouse

Clearinghouse is like a messenger that takes your doctor’s bill and sends it to your health insurance. They make sure everything looks right so the insurance company can pay the bill.

  • CMS-1500 02/12 Form

CMS-1500 02/12 form is a special form your doctor fills out to tell your health insurance about your visit. It’s like a quiz your doctor takes about you, so the insurance knows how to help pay for your care. They use it for every patient to keep things organized.

  •  Co-insurance

This is when you and your health insurance split the cost of your care, like sharing a pizza. If your co-insurance is 20%, you pay 1 part, and your insurance pays 4 parts of the bill. It helps cover the cost, but it doesn’t pay for everything.

  • Co-Pay

A co-pay is a set amount of money you pay when you visit the doctor, like buying a ticket to see a movie. It’s the same amount each time, whether you see the doctor for a small cold or a big flu.

  • Co-payment (Co-pay)

Just like a co-pay, this is the money you pay upfront when you get medical care. It is your part of the deal to get checked by the doctor or get medicine. It’s a fixed amount, so you always know how much it will be.

  • COBRA Insurance

If you lose your job or can’t work, COBRA lets you keep your health insurance for a while, but you have to pay for it yourself. It’s like holding onto your school bus pass so you can still ride the bus, even if you move to a different school.

  • Coordination of Benefits

This is when you have more than one health insurance policy, and they work together to decide who pays what. It’s like when your mom and dad both help to buy you a big gift, and they figure out who pays for each part.

  • Credentialing

Before doctors can take certain insurances, they have to be checked out. This process makes sure they’re qualified to take care of you. It’s like when a teacher has to get a special certificate to show they can teach.

  • Current Procedural Terminology (CPT) Code

Every time you get medical care, it gets a special code, like a secret language that doctors and insurance companies use to talk about your treatment. This code tells your insurance exactly what the doctor did to help you.

  • Date of Service (DOS)

This is the exact day you went to the doctor or got treatment. It’s important because your insurance needs to know when things happen to help pay for your care. It’s like marking your calendar for a special event.

  • Date Sheet

In medical billing, a “date sheet” might not be a common term. But if we think of it simply, it could refer to a schedule or calendar that tracks appointments or when certain services are given. It’s like having a planner or diary where you write down all your important dates so you don’t forget.

  • Deductible

Deductible is the amount of money you need to pay for your doctor visits or treatments before your health insurance starts to help. Think of it like a piggy bank; once it’s full (you’ve paid enough), your insurance steps in to help with the bills.

  • Denied Claim

Sometimes, when you send a bill to your insurance, they might say no and not pay for it. This is called a denied claim. It’s like when you ask for a cookie before dinner and your parents say it’s not time yet.

  • Diagnosis Code (ICD-10)

The Diagnosis Code (ICD-10) is a special code that tells your insurance exactly what was wrong when you visited the doctor. Each sickness has its own code, like a secret language that doctors and insurance companies use to understand each other.

  • DRG (Diagnosis-Related Group)

DRG is a way to group illnesses and the treatments you get in the hospital that are kind of the same. It helps your insurance decide how much to pay the hospital. It is like sorting fruits into baskets so they’re easier to understand and pay for.

  • EDI Enrollment

This is when your healthcare provider signs up to send and receive information quickly over computers to and from your health insurance. It’s like signing up for email instead of sending letters by mail. It makes sharing information faster and easier.

  • Effective Date

This is the day your health insurance starts working. Before this date, the insurance won’t cover your visits to the doctor. It’s like waiting for the day you can start using a new toy or game.

  • Electronic Claim 837P (Professional) Transaction

This is a fancy way of saying your doctor sends your bill over the internet to your insurance. It’s for when you see a doctor outside the hospital. It’s quicker and less messy than sending paper.

  • Electronic Data Interchange (EDI)

EDI is how your doctor’s computer talks to your insurance company’s computer. They share information back and forth, like friends trading stickers. It helps everything go smoothly and quickly.

  • Electronic Funds Transfer (EFT)

Electronic Funds Transfer (EFT) is when money moves from one place to another electronically, like when your insurance pays your doctor directly into their bank account. It’s like sending a gift card online instead of giving cash.

  • Electronic Remittance Advice (ERA)

After your insurance company decides how much to pay for your doctor visit, they send an electronic note explaining their decision. It’s like getting a detailed receipt that shows what was paid and what wasn’t.

  • Eligibility and verification

Before you go to the doctor, it’s important to make sure your health insurance will cover your visit. This is checking if you’re eligible. It’s like making sure you have a ticket before you go to a movie.

  • Encounter

Every time you visit the doctor or get treated, it’s called an encounter. It’s like each visit is a meeting or a date on your calendar, marking the day you saw the doctor for help.

  • Evaluation and Management (E/M) Codes

These are special codes your doctor uses to say how they checked you and what they did to figure out how to help you. It’s like writing down the steps of solving a math problem so everyone knows how you got the answer.

  • Explanation of Benefits (EOB)

After your insurance helps pay for your doctor’s visit, they send you a note explaining what they paid for and what you might owe. It’s like getting a report that shows how much of your homework was right.

  • Fee Schedule 

This is a list showing how much things cost at your healthcare provider, like a menu with prices at a restaurant. It helps everyone know how much they have to pay for different kinds of care.

  • Global Period

The global period is a special time after some treatments or surgeries when your doctor checks on you but doesn’t charge extra. It’s like when you buy a toy and it comes with a warranty for repairs, but you don’t have to pay more during that time.

  • Guarantor

A guarantor is the person who promises to pay the bill for your healthcare. If you’re a kid, it’s usually a parent or guardian. It’s like when someone signs you up for a club and agrees to pay the fees.

  • Healthcare Common Procedure Coding System (HCPCS) Codes 

These codes are used to describe the medical care you get, including things like doctor visits, tests, and equipment. It’s like a library system, but for medical services, so insurance knows what you got.


HIPAA is a rule that keeps your health information safe and private. It means only you, your doctor, and anyone you say it’s okay to know about your health. It’s like having a secret diary that no one else can read without your permission.

HMO (Health Maintenance Organization)

This is a type of health insurance that wants you to use certain doctors and hospitals that agree to work with them. It’s like being on a team and going to the team’s doctor because they know what’s best for the team’s players.

ICD-10 Codes

ICD-10 codes are special codes that doctors use to tell your health insurance exactly what was wrong with you. It’s like each sickness or injury has its own secret code, and the doctor uses this code to make sure your insurance understands what happened. Check the ICD-10 codes for Hyperlipidemia, for example.

  • In-Network

When a doctor or hospital works with your health insurance, they’re called “in-network.” It means they have a deal to give you care at a lower cost. It’s like being part of a club where you get special prices because you’re a member.

  • Local Coverage Determination (LCD)

LCD is a rule made by insurance companies in your area about what medical care they will pay for. It’s like your local library deciding which books they’ll have available for you to borrow.

  • Medically Necessary

If something is medically necessary, it means you really need this care to stay or get healthy. It’s not just because you want it; it’s because it’s important for your health. It’s like needing to eat vegetables, not just candy, to keep your body strong.

  • Medicare Administrative Contractor (MAC)

These are the companies that handle Medicare claims in different parts of the country. They’re like the referees who make sure the rules are followed when Medicare pays for your healthcare.

  • Medicare Advantage Plans

Medicare Advantage Plans are special health plans from private companies that are part of Medicare. They give you Medicare benefits, and sometimes extra, like a VIP ticket that gets you more than just the basic stuff.

  • Medicare Beneficiary Identifier (MBI)

MBI is a unique number just for you if you have Medicare. It’s used instead of your Social Security number to keep your information safe. Think of it as your secret agent number that helps protect you.

  • Modifier

In medical billing, a modifier is added to a code to give your insurance more details about your care. It’s like adding a hashtag to a social media post to give more information or context.

  • National Correct Coding Initiative (NCCI) Edits

These are rules that make sure your healthcare provider doesn’t bill for things that shouldn’t be billed together. It helps prevent mistakes or extra charges. It’s like making sure you don’t get charged twice for the same movie ticket.

  • National Coverage Determination (NCD)

NCD is a decision by Medicare on whether and how it will pay for certain medical services all across the country. It’s like a big rule book that says what is covered, no matter where you live.

  • National Provider Identifier (NPI)

NPI is a special number that every doctor, hospital, or healthcare place gets. It’s like a unique ID or badge number that helps keep track of who gives you care, so there’s no mix-up.

  • Out-of-Network

If a doctor or hospital doesn’t have a deal with your health insurance, they’re called “out-of-network.” Going here might cost more money because they’re not part of the club your insurance has deals with.

  • Out-of-Pocket Maximum

This is the most money you have to pay for your medical care in a year. After you reach this limit, your insurance pays for everything else. It’s like having a cap or limit on how much you spend on games or toys in a year.

  • Place of Service (POS)

POS tells where you got your healthcare, like from a healthcare provider, hospital, or at home. It’s used on forms to let your insurance know where you were treated.

  • PPO (Preferred Provider Organization)

PPO is a type of health insurance that lets you see lots of different doctors. You get a better deal if you see doctors in their network, but you can see others too. It’s like having a pass that gets you discounts at many stores, not just one.

  • Pre-Certification Number

Before you get some kind of medical care, your insurance wants to check and say it’s okay. The pre-certification number is like getting a special pass or ticket that says you’re approved for treatment.

  • Pre-existing Condition

This is a sickness or health problem you had before you got your insurance. Some insurance companies used to not cover care for these, but now they usually do. It’s like having a scratch on your bike before you buy a helmet.

  • Preauthorization

Preauthorization is like asking permission from your insurance before you get certain medical treatments. It’s making sure they agree to help pay for it before you start. It’s like asking your parents if you can download a new game before you actually do it.

  • Primary Insurance

If you have more than one health insurance policy, the primary one is the first to pay for your care. It’s like when you have a favorite toy you play with first before the others.

  • Prior Authorization Number

This is a special number you get after your insurance says yes to paying for a treatment you need. It’s proof that they’ve given the green light or approval for your care.

  • Prior Authorization/Precertification

This is when your doctor needs to get an “okay” from your insurance before you can have certain treatments or tests. It’s like getting permission from your parents before going on a school trip. They check to make sure it’s needed and that they will pay for it.

  • Provider Enrollment 

Provider enrollment is when doctors or healthcare providers sign up to be part of an insurance network. It’s like joining a club so they can offer care to people who have that insurance and get paid by them.

  • RBRVS (Resource-Based Relative Value Scale)

RBRVS is a system that decides how much money doctors should get for the services they provide. It’s based on how hard the work is, where they do it, and the costs involved. Think of it like getting points for different chores, with harder chores getting more points.

  • Rejected Claim

Sometimes, when a bill is sent to insurance, they don’t accept it because of errors or missing information. It’s like when you forget to put your name on your homework and your teacher gives it back to you to fix.

  • Remittance Advice Remark Codes (RARCs)

These codes are messages from your insurance that explain more about your bill, like why they paid a certain amount or didn’t pay. It’s like comments on your report card explaining your grades.

  • Retinal Health Screening/Imaging Consent Form

Before a doctor can check the health of your eyes using special machines, you (or your parents) need to sign a form saying it’s okay. It’s like getting a permission slip signed for a class field trip.

  • Revenue Cycle Management (RCM)

Revenue Cycle Management (RCM) is how healthcare places keep track of the money from when you get care until they get paid. It includes everything from checking your insurance to sending bills. It’s like tracking your progress in a video game from start to finish.

  • Secondary Insurance

If you have two health insurance plans, the second one helps pay for things the first one didn’t cover. It’s like having a backup plan or an extra layer of help for paying medical bills.

  • Subscriber

A subscriber is the person who has the health insurance plan, usually through work or by buying it themselves. It’s like being the main player in a game, and your family members are the teammates covered by your plan.

  • Superbill

After your doctor’s visit, you might get a detailed bill that shows everything from the visit, like the services you got and how much they cost. It’s like getting an itemized receipt when you buy a lot of things at the store, showing everything you bought.

  • Supplemental Insurance

Supplemental insurance is extra insurance that you can have along with your main health insurance. It helps pay for things your main insurance might not cover, like some medicines or treatments. It is a bonus level in a game that gives you extra help when you need it.

  • Tax Identification Number (TIN)

TIN is a special number the government uses to keep track of businesses and people for taxes. Doctors, hospitals, and insurance companies all have one. It’s like a unique ID or tag that helps the government know who to talk to about taxes.

  • Telehealth

Telehealth lets you talk to a doctor using the internet instead of going to see them in person. You can use a computer or phone to ask questions and get advice. It’s like video calling a friend, but instead, you’re getting help from a doctor.

  • Telemedicine

Similar to telehealth, telemedicine is when you get medical care through a video call or online. It’s used for check-ups, advice, and sometimes even getting a prescription. It’s like having a doctor’s visit without having to leave your house.

  • Term Date

This is the day when your health insurance or the service you’re getting ends. It’s like the last day of school before summer break starts; after this day, the coverage or service stops.

  • Third-Party Administrator (TPA)

TPA is a company that handles the details of insurance plans for other companies. They deal with claims, paperwork, and sometimes customer service. It’s like having an assistant manage all the details of a big project.

  • Third-Party Payer 

This is usually an insurance company that pays medical bills for you. You or your employer pay them, and then they pay the doctors or hospitals when you get care. It’s like having a middleman who takes care of paying for your medical needs.

  • Type of Service (TOS)

TOS describes what kind of medical care you got, like a visit to the doctor, a surgery, or a lab test. It helps insurance companies understand how to pay for your care. It’s like categorizing your shopping list into food, clothes, and toys.

  • UB-04

UB-04 is a special form hospitals use to tell insurance companies about your stay and treatments. It’s filled with codes and information that help get the hospital paid. It’s like a detailed report of everything that happened during your stay.

  • UB-92

The UB-92 was an older version of the UB-04 form used by hospitals to bill insurance companies. It’s not used much anymore, but it worked the same way, helping hospitals explain what care they gave you and how much it should cost.

  • Unbundling

Unbundling is when doctors or hospitals list each part of your care separately to get more money from insurance. It’s like breaking a set of toys into pieces and selling each one at a higher total price than the set’s price.

  • Usual, Customary, and Reasonable (UCR) Charges

These are the amounts that health insurance decides are fair to pay for medical services in your area. It’s like looking at what most people pay for a video game and using that price as a guide.

  • Write-Off or Adjustment Amount

Sometimes, doctors or hospitals agree not to charge you for part of your bill. This is called a write-off. It’s like when you get a discount and pay less than the original price.

  • Yearly Deductible

This is a fixed amount of money you need to pay each year for your health care before your insurance starts to help. It’s like a bucket you need to fill with your own money, and once it’s full, insurance takes over.

  • Yearly Out-of-Pocket Maximum

Yearly Out-of-Pocket Maximum is the most money you will have to spend in a year for your medical care. After you reach this limit, your insurance pays 100% of your covered costs. It’s like a cap or limit on how much you spend on games or toys in a year.

The Bottom Line

The medical billing terms can make a big difference in how you see your healthcare and its costs. Now that we’ve explored these terms together, you’re better equipped to understand your medical bills and what your insurance helps cover. It’s like learning a new language that helps you navigate the healthcare industry more easily.

CloudRCM stands out as a top choice for handling these services. Discover and connect with our services today to make managing healthcare billing simpler for you.

Frequently Asked Questions (FAQs)

  • What is billing terminology?

Billing terminology refers to the specific words and phrases used in medical billing. It’s like a special language that doctors, hospitals, and insurance companies use to describe and manage payments for healthcare services.

  • What are the two most common types of medical billing?

The two most common types of medical billing are professional billing and institutional billing. Professional billing is for services provided by doctors and healthcare professionals, while institutional billing covers services from hospitals and other healthcare facilities.

  • What is a medical billing code?

A medical billing code is a short set of letters and numbers that describes a medical service or diagnosis. It’s used to tell insurance companies what kind of care you received, so they know how to pay for it.

  • What is DOS in medical billing?

DOS in medical billing stands for Date of Service. It’s the day when you receive medical treatment or services. This date is important because it helps keep track of when you get care.

  • What is the full form of SOS in medical terms?

The full form of SOS in medical terms is “Si Opus Sit,” which is Latin for “if necessary” or “as needed.” It’s often used in prescriptions to indicate how often a medication should be taken.

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