Life Cycle of a Claim

Life Cycle of a Medical Bill and How it Affects You

Where does a medical bill start, and where does it travel before it ends up in your mailbox?

It’s your first visit to a new doctor. You fill out paperwork, present your insurance card, and are ushered back to see the doctor.

Most patients trust and assume their information is accurately captured and they will be billed correctly. The reality is far more complicated with a process that’s susceptible to errors. Both unintentional and intentional

Here’s the actual life cycle of a medical bill from start to finish, and where you can expect billing overcharges and errors to crop up.

Step 1: Input into System

First, your personal information, such as name, date of birth, and insurance information is entered into your doctor’s billing system by the front desk staff.

Where errors can happen: Ideally, the front desk staff will get info off your insurance card and enter it accurately in their EHR (electronic health record) system. But with part human touch, and part technical touch involved, there’s plenty of room for mistakes. A keystroke slip or software glitch could mean your name is spelled wrong, date of birth is entered incorrectly, or insurance information left off. Wrong information could result in a denial of insurance claims down the line.

Step 2: To the Billing Department

After seeing the doctor, your diagnosis and treatments are assigned a code. If it’s a large practice, they typically have a separate billing department or use a third party billing service in a different location. The billing service submits these diagnosis and procedure codes to the Electronic Health Record (EHR) system.

Where it can go wrong:

  • Unscrupulous billing departments or doctors could choose more lucrative codes to bill. After all, it’s pretty easy to (wrongfully) code a cold as pneumonia. This is called upcoding, and it’s illegal.
  • Doctors and other providers are often far removed from their own billing departments or services, meaning communication is virtually nonexistent.

Step 3: En Route to the Insurance Carrier

From the EHR, the claim goes to a clearinghouse that disseminates all information to different insurance carriers. Once at the respective insurance carriers, the submitted bill goes to the carrier claims department.

Where it can go wrong:

  • Sometimes claims departments are outsourced overseas. Overseas and often underpaid insurance claims departments are far removed from the process and the policy holders they serve.
  • Under-trained insurance processors make mistakes, such as crossing spreadsheets or software cells. Why not fix the problem? From their own mouths, supervisors regretfully admit it’s cheaper to pay the fines for errors than pay claims correctly.

Step 4: Processing & Paying of Claims

Next, the insurance carrier processes and pays claims according to plan benefits… or denies them. AARP reports that 200 million claims are denied each year.

Where it can go wrong:

  • Insurance may deny a claim due to having inaccurate or incomplete patient information.
  • The carrier may deny a claim due to a problem with the doctor’s choice of diagnosis or procedure code.
  • Whether due to lack of training or a blame game, insurance carriers’ claims departments simply process received claims mechanically. Often, if they come across an obvious error, rather than taking a closer analysis, they shift blame to the medical office for the error and flatly deny it. It takes a disgruntled patient calling the carrier and combing through the claim to motivate the claims department to question something that doesn’t look right and get it processed correctly.

Step 5: Patient is Billed

After insurance has processed the claim, the patient may be billed if they have not met their deductible, owe coinsurance, have chosen an out-of-network provider, or the claim was denied.

Where it can go wrong:

  • Some providers illegally practice balance billing. This happens when a doctor tries to bill a patient above the negotiated in-network rate. For example, if the provider’s charge is $100 and the allowed amount is $70, the provider may bill you for the remaining $30.
  • A patient was never made aware an out-of-network provider was practicing within an in-network facility, resulting in being billed a much higher out-of-network rate, after services are rendered. (It happens.)

If you suspect any charges on a medical bill that you’ve received to be inaccurate or much higher than you were expecting, you should immediately call your provider to question the charge. 

It can be easy to miss buried or unsuspecting errors on your medical bills. HealthLock can help with a free audit of your medical claims and transactions here. You’ll receive Verified and Alert flags on all claims letting you know which ones are good to pay, or which ones likely need further investigation.

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