Medical billing and coding might not be the most exciting part of running a healthcare practice, but they are essential for keeping things running smoothly. Whether you’re a healthcare provider, practice owner, administrator, or decision-maker, you have likely dealt with claim denials, delayed reimbursements, or frustrating coding errors. These issues do not just affect cash flow. They impact patient care, compliance, and overall efficiency.
At its core, medical billing and coding ensure that every service provided, whether it is a routine check-up or a complex procedure, is properly documented, coded, and billed. When done correctly, claims are processed without issues. When mistakes happen, denials, compliance risks, and financial headaches follow. Nearly 20% of all medical claims are denied, and a significant portion of those denials come from coding errors. Even more concerning, up to 60% of denied claims are never resubmitted, leading to lost revenue that could have been recovered.
With insurance rules and reimbursement models constantly changing, understanding the basics of billing and coding is critical. This guide breaks it all down, covering how it works, why it matters, and the potential challenges practices may face. Whether you want to reduce denials, improve cash flow, or optimise your revenue cycle, this article will help you navigate the essentials.
Medical billing and coding are the foundation of a well-functioning healthcare practice. If you have ever dealt with claim rejections, slow reimbursements, or endless back-and-forth with insurance providers, you know how important it is to get these processes right. Billing and coding are not just about paperwork. They determine whether your practice gets paid accurately and on time, while also keeping you compliant with regulations.
At its core, medical coding is about translating a patient’s diagnosis, procedures, and treatments into universally recognised codes. These codes serve as a common language between healthcare providers, insurers, and regulatory bodies. The two most widely used coding systems are:
- ICD-10 (International Classification of Diseases, 10th Edition): Used to classify diseases, conditions, and causes of death.
- CPT (Current Procedural Terminology): Used to document medical procedures and services.
- HCPCS (Healthcare Common Procedure Coding System): Includes codes for supplies, medications, and services not covered under CPT.
Once the coding is completed, the medical billing process begins. Billers take these codes and create claims that are submitted to insurance companies. They ensure that all necessary information is included, verify patient coverage, and follow up on outstanding claims. If an insurer rejects or denies a claim, the biller investigates the issue, corrects any errors, and resubmits the claim if necessary.
Errors in billing and coding are costly. A simple mistake, such as using the wrong code or missing required documentation, can lead to claim denials, delayed payments, or even audits. But when done correctly, they ensure that healthcare services remain both high-quality and financially sustainable.
How Medical Billing and Coding Work: Step-by-Step Process
Medical billing and coding follow a structured process that ensures healthcare providers are reimbursed for the services they deliver. Each step plays a role in preventing claim rejections and keeping patient records accurate. Here is a breakdown of how the process works from the moment a patient walks into a healthcare facility to the final payment:
1. Patient Visit and Documentation
The process begins when a patient receives medical care. Whether it is a routine check-up, a diagnostic test, or a surgical procedure, the provider records details about the visit. This includes the patient’s symptoms, test results, diagnoses, and any treatments or procedures performed. Accuracy at this stage is essential, as the information documented by the provider forms the basis for coding and billing. If there are missing or unclear details, coders and billers may struggle to process the claim correctly.
2. Medical Coding
Once the provider completes the documentation, a medical coder steps in to translate the information into standardised codes. These codes classify everything from the patient’s condition to the procedures and treatments provided. The most common coding systems used are:
- ICD-10 (International Classification of Diseases, 10th Edition): Used for diagnosing conditions and diseases.
- CPT (Current Procedural Terminology): Covers medical procedures and services.
Coding must be precise. A minor mistake, such as selecting the wrong diagnosis code or mismatching a procedure with a diagnosis, can lead to a denied claim or an audit.
3. Claim Creation and Submission
After coding is complete, medical billers use the coded data to create an insurance claim. This claim includes patient details, provider information, service dates, and the appropriate codes. The biller also ensures that all necessary documentation is attached, such as referrals or prior authorisation records if required by the insurance company.
The claim is then submitted electronically through a clearinghouse or directly to the insurance payer. Electronic submissions reduce errors and speed up the processing time compared to paper claims.
4. Insurance Review and Payment Processing
Once the insurance company receives the claim, it undergoes a review to determine whether the services provided are covered under the patient’s insurance plan. The insurer checks:
- If the correct codes were used
- Whether the services were medically necessary
- If the patient’s policy covers the treatments received
If everything checks out, the insurance company processes the payment, reimbursing the provider based on the agreed contract rates. However, if errors are found, the claim may be rejected or denied, requiring additional steps to resolve the issue.
5. Follow-Up and Collections
Not all claims get approved on the first attempt. If an insurance company denies a claim due to errors or missing information, the biller must correct the issue and resubmit it. This appeals process can take time, especially if multiple corrections are needed.
If the insurance company has paid its portion but there is a remaining balance, the provider may bill the patient directly. Billers also handle payment plans and follow up on overdue accounts.
The entire process is designed to ensure that providers are paid accurately and in a timely manner. When each step is handled correctly, claim denials decrease, revenue cycles remain steady, and both healthcare providers and patients experience fewer financial headaches.
Challenges in Medical Billing and Coding and How to Overcome Them
Medical billing and coding come with several challenges, from coding errors and claim denials to evolving regulations and insurance complexities. Even small mistakes can lead to rejected claims, delayed payments, and compliance risks. Manually handling these processes or using disconnected systems increases the likelihood of errors, making revenue cycle management more difficult.
One of the most effective ways to overcome these challenges is by using a comprehensive practice management system that integrates billing and coding alongside other administrative and clinical workflows into one system. When coding, claims submission, payment tracking, and compliance checks are handled within a single platform, there is no need to transfer data between different systems. This reduces human error, eliminates duplicate entries, and ensures accurate claims submission from the start.
An integrated system also automates routine tasks, flagging potential coding issues before claims are submitted, and providing real-time reporting for better financial oversight. This translates to fewer claim denials, faster reimbursements, and reduced administrative burdens.
To find out more about one of the leading practice management systems and what it can do for your revenue cycle, read this article here.
