Glossary of billing terms

Short definitions in the sense MedFlow uses them. Payer contracts can be narrower.

Accounts receivable (A/R): Money that has been billed and not yet collected or written off. Days in A/R is the open balance divided by average daily charges.
Adjudication: The payer’s decision on a claim: paid, paid in part, or denied. A rejection that never reached the payer is not an adjudication.
Allowed amount: The fee the contract says the payer will consider. The difference between your charge and the allowed amount is a contractual adjustment, not a denial.
Appeal: A formal ask for the payer to reconsider a denial, usually with the medical record. It is not the same as correcting and resubmitting a claim.
Business associate agreement (BAA): The HIPAA contract between a practice and a vendor that handles patient information. MedFlow signs one before we see any patient data.
CARC: Claim adjustment reason code. The number on a remittance that says why a line was paid at zero or reduced. MedFlow routes denials by this code.
Clean claim: A claim the payer accepts and processes on the first submission, with no clearinghouse rejection and no resubmission. MedFlow’s target is 95% or higher.
Clearinghouse: The network that checks a claim file and forwards it to the payer. A clearinghouse rejection means the file never got that far.
Contractual adjustment: Charge minus allowed amount. You agreed to it in the contract. It is not money you failed to collect.
Copay: A fixed amount the patient pays for a covered visit, set by the plan. Eligibility responses often return it before the visit.
CPT: Current Procedural Terminology. The codes for what was done, such as an office visit or a psychotherapy session. Published by the AMA. Payers require them on professional claims.
Credentialing: The process of enrolling a provider with a payer so claims under that provider will be considered. Billing cannot collect from a plan that has not enrolled the clinician.
Date of service: The day the care was provided. Filing limits and eligibility are both counted from this date, not from the day the claim was typed.
Deductible: The amount the patient pays each year before the plan pays. A high deductible is why a “paid” claim can still leave a patient balance.
Denial: The payer adjudicated the claim and refused some or all of the payment. It comes with a reason code. Compare with a rejection.
EOB: Explanation of benefits. The statement a payer sends the patient describing what was paid and what the patient may owe. The practice’s matching file is the remittance.
ERA / 835: The electronic remittance advice. It is how payments and denials arrive so they can be posted to the right claim instead of typed from a paper EOB.
Fee schedule: The practice’s charge for each CPT code, and sometimes the allowed amount by payer. Claims should not go out with a zero fee.
HCPCS: Codes for supplies, drugs and some services that CPT does not cover, including many vaccines and Medicare wellness visits.
ICD-10-CM: The diagnosis code set used on professional claims in the United States. MedFlow loads the CMS code list for the current fiscal year.
Medical necessity: The payer’s test for whether the service was justified by the diagnosis and the record. A denial for necessity is an appeal problem when the note supports the service.
Modifier: Two characters added to a CPT code to explain a special circumstance, such as a significant, separate service on the same day. Missing modifiers are a common denial.
NCCI: Medicare’s National Correct Coding Initiative. Pairs of procedure codes that should not be billed together, and limits on how many units of a code are plausible in a day.
Net collection rate: Payments divided by allowed amounts (charges minus contractual adjustments) on adjudicated claims. MedFlow’s target is 95% or higher. It is not payments divided by charges.
Place of service: The two-digit code for where the care happened: office, urgent care, telehealth, and so on. The wrong place of service is a rejection or a denial, depending on the payer.
Prior authorization: Approval the plan requires before it will pay for a service. The approval number has to be on the claim. It is not the same as eligibility.
RARC: Remittance advice remark code. Extra detail that sometimes rides along with a CARC to explain a denial.
Rejection: The claim was stopped before adjudication, usually by the clearinghouse, because data was missing or invalid. Fix the file and send it again. It is not a denial.
Timely filing: The deadline, in the contract, for the payer to receive the claim. Miss it and the balance is usually a write-off, not an appeal.
Write-off: Balance the practice gives up. Filing-limit denials and amounts too small to pursue are write-offs. A contractual adjustment is not a write-off.