Billing

Billing is the process of submitting a request for payment for services rendered or goods provided to a client. In the health care system, this may take several forms. A bill may be submitted directly to the patient or to a third party (such as an insurance company, an intermediary as in Medicare, or an administrative agent for a self-insured employer) who is responsible for paying for the services. If the bill is submitted to the patient, the patient may in turn submit it to a third party for reimbursement. Or bills may be submitted to both the third party and to the patient, with the patient responsible for paying the difference between the charge and the amount paid by the third party, a process known as balance billing. The health care provider may, however, agree to accept the amount paid by the third party as payment in full; in this case, the provider is said to accept assignment.

Bills may be generated based on charges for different units of service. A charge may be generated for each individual service that is performed, or may be bundled to include charges for all services provided during an episode of illness (for example, surgeon's fees that include preoperative and postoperative care as well as the operation itself, or all hospital costs incurred during a hospitalization) or for all services delivered on a particular day (per diem billing). Bills for individual services may be based on usual and customary charges in the community (such as for conventional fee-for-service systems), a fee schedule based on bids or negotiation as in managed care models, or on a legislated or administratively determined fee schedule as in Medicare and many Medicaid plans. Administratively set schedules may, in turn, be based on actuarial studies, estimated resource use (as in the resource-based relative value scale), or other determinations.

Bills may be subject to various forms of deductions before payment is made. These include deductibles and copayments that the patient must pay and discounts negotiated between the payer and provider. In addition, bills may not be paid if the claim is denied because, for example, the service is not covered by the payer or because the patient cannot or does not pay. Bills that are expected not to be paid represent charity care, and those that are expected to be paid but are not paid represent bad debt. The sum of bad debt and charity care represents uncompensated care.

Bills may be submitted for payment in two basic forms: manual or electronic. Manual billing involves the completion of paper forms that are sent from the provider or patient to the payer. Electronic bills are generated from data input to a computer at the site of care and transmitted electronically to the payer; automated systems then determine the patient's eligibility and payment rates, and generate an electronic payment back to the provider.

The Health Insurance Portability and Accountability Act (HIPAA) of 1996 has mandated electronic billing using standard formats for most billing transactions. This law requires the health care industry to develop and implement data and transaction standards, including the use of a single electronic format, for providers to use to bill for their services. Health plans must be able to accept transactions in this format, and providers may either directly bill in electronic form or submit manual bills to a clearinghouse that will convert these bills into the standard electronic form.

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