Understanding the Healthcare Claim Life Cycle: From Patient Registration to Payment

September 12, 2023

The claim life cycle as it travels through the world of healthcare administration is an intricate and complex journey. Within this process lies the essential task of medical billing, a behind-the-scenes operation that quietly ensures healthcare facilities are properly reimbursed for their services. Simultaneously, this process reassures patients of financial support from their insurance providers. It’s a subtle yet crucial interplay that forms the healthcare system’s backbone, ensuring that providers and patients can confidently navigate their paths with confidence.

This process involves several steps that trace the entire healthcare claims life cycle from when a patient checks in at a facility to when they receive a bill from their insurance provider. In this blog, we will explore each step in detail, shedding light on the intricacies of medical billing and its crucial role in the healthcare industry.

What is a Healthcare Claim?

A healthcare claim refers to a formal request submitted by a healthcare provider, such as a hospital or a doctor’s office, to an insurance company or a third-party payer seeking reimbursement for medical services rendered to a patient. This claim typically includes detailed information about the benefits, associated costs, and relevant patient information. There are industry mandated forms and formats for the claims data. A healthcare claim aims to facilitate the financial transaction between the provider and the payer, ensuring that the provider receives appropriate compensation for the medical services delivered. In contrast, the patient’s financial responsibility is determined according to their insurance coverage.

Step 1: Patient Check-In and Registration

Medical billing can begin even before a patient arrives at a healthcare facility. For example, a prior authorization or eligibility check for an upcoming procedure can take place before their appointment. During check-in at a healthcare facility, the patient provides essential personal and insurance information, which includes their name, address, contact details, date of birth, and insurance policy details. Accurate and up-to-date information is critical at this stage, as any discrepancies might lead to claim denials or delays in payment later in the process.

Step 2: Eligibility Verification

Once the patient’s information is registered, the healthcare provider verifies eligibility. This step involves verifying the patient’s insurance coverage, copayment responsibilities, deductibles, and other limitations or exclusions. It ensures that the patient’s insurance plan is active and covers the specific services they are seeking.

Step 3: Medical Coding

Medical coding is critical in translating the services provided during the patient encounter into universally recognized alphanumeric codes. Healthcare providers typically use Current Procedural Terminology (CPT) codes to describe medical procedures and services and International Classification of Diseases (ICD) codes to represent diagnoses. Other codes include the Diagnosis-related group (DRG), the Healthcare Common Procedure Coding System (HCPCS), and the National Drug Code (NDC). Proper coding is crucial, as it determines the accuracy of the claim and impacts the reimbursement received. For more information about these codes, click HERE.

Step 4: Patient Encounter and Service Documentation

Healthcare professionals document all relevant medical services during the patient encounter, including examinations, tests, procedures, and other interventions. Accurate and comprehensive documentation is essential to support the medical necessity of the services billed, ensuring compliance with coding and billing guidelines. The charges for medical and other patient-facing services are then submitted to the appropriate payers for payment, called “charge entry.” It involves a detailed accounting for services rendered and an initial intake of important information.

Step 5: Claim Creation and Submission

Using the coded information, the healthcare facility creates a healthcare claim that includes details such as the patient’s information, the services provided, associated codes, and the total cost of the treatment. In most cases, claims are first transmitted to a clearinghouse for review and reformatting before sending them to the payer. The claim is then electronically submitted to the patient’s insurance provider for processing. Timely submission is crucial, as delays can lead to payment issues and hinder the overall revenue cycle.

Step 6: Healthcare Claim Adjudication 

Upon receiving the claim, the insurance provider initiates the claim adjudication process. This involves thoroughly reviewing the claim to assess its accuracy and compliance with the insurance policy’s terms and conditions. The insurer checks for missing or incorrect information, verifies coverage, and determines the appropriate reimbursement based on the policy’s benefits.

Step 7: Claim Approval or Denial 

After adjudication, the insurance provider can approve or deny the claim, they can fall into other categories including “pending,” or they can be held for additional documentation. If approved, the insurer will calculate the payment amount, considering factors such as deductibles, copayments, and coverage limits. In case of denial, the healthcare facility may need to appeal the decision, correct errors, and resubmit the claim.

Step 8: Payment and Patient Responsibility 

Once the claim is approved, the insurance provider pays the covered services to the healthcare facility. The patient may receive an Explanation of Benefits (EOB) detailing the payment breakdown. Copayments are normally collected upfront at the time of service. If the patient has any other financial responsibilities, such as deductibles, the healthcare facility will bill the patient accordingly. This bill includes details about the services provided, the insurance payment received, and the patient’s portion of the cost. Patients are then responsible for making timely payments to the healthcare facility.

Step 9: Accounts Receivable Management 

Accounts receivable management involves tracking and managing both incoming and outstanding payments from insurance providers and patients. It includes following up on unpaid or partially paid claims, resolving payment discrepancies, and addressing billing inquiries from patients or insurance companies.

By understanding the essential steps of the medical billing process, healthcare facilities can optimize their revenue cycle, enhance patient satisfaction, and maintain the financial health of their organization.

About The SSI Group, LLC (SSI)

Through continuous innovation, SSI provides industry-leading revenue cycle and analytics solutions for healthcare providers, and a payer solution that offers personalized standardization and support.

Learn more about SSI’s RCM solutions or request a demo by clicking HERE.