The Key to Understanding Healthcare Bills: It’s in the Codes!

In a 2024 Healthcare Financial Experience Study, it’s clear that financial billing in healthcare is failing more than half of all US patients. Over 50% of patients struggle to understand their medical bills, including what amount they are responsible for paying and almost two-thirds of those surveyed were not aware of any financial assistance options or payment plans available if they cannot afford the bill. In addition to patients scratching their heads over unclear bills, healthcare providers are also suffering because it’s been reported that nearly half of all hospitals are operating in the red… and 40% of patients stated they will not pay a bill that they do not understand; so the current issues will continue to be exasperated.

For patients, a large amount of this confusion stems from the medical billing codes that were developed for the medical billing business to provide a standardized way to document medical procedures, diagnoses and services while streamlining communication amongst healthcare professionals, insurers and administration staff. But, in accomplishing this “streamlined” billing communication amongst medical services professionals and those involved in medical billing processes, patients have been left in the dark without an understanding of the procedure codes and why they should pay attention.

An understanding of medical billing and coding could help patients know what to expect during their healthcare visits and enable patients to identify and question facilities and insurance companies when there’s been a billing error or fraudulent charge.  It is important to know that when you go to a healthcare provider (doctor, lab facility, urgent care, hospital…), there is a regulated medical billing and coding process that is designed to make sure everything is recorded and processed amongst payers properly, follows regulatory compliance rules, enables medical data analysis for research purposes and that all parties are paid correctly.

Medical Coding:

There are tens of thousands of medical codes that can be thought about as a way for your doctor or healthcare provider to communicate the details of your visit. Each service or procedure has a specific code, kind of like a universal ID. These codes make sure everyone knows exactly what happened during your visit. It's all about accuracy and consistency in medical records and this coding helps maintain and streamline communications.

Medical Billing:

When it comes to making sure all parties get paid, there are several sets of medical billing codes that need to be noted and approved according to the medical billing compliance requirements, industry standards and Insurance policies. It's important that a well-organized statement and invoice is sent to your insurance company, detailing the services provided with the corresponding codes. This ensures that your healthcare provider gets paid for the services they provided.

Role of Insurance:

Here's where insurance takes an important role in helping you save money. Your insurance is like a superhero card for medical providers that are part of their network. Working with an in-network provider helps ensure your amount due will be pre-negotiated amount and they should help cover the medical costs. The medical billing letter that is sent to your insurance, is essentially letting them know, "Hey, we took care of this person, and here are the details with the secret codes." Your insurance steps in to make sure the right amount gets paid for the services you received.

Why It Matters:

Getting the medical billing and coding right is crucial because errors can cause financial headaches for both healthcare providers and patients. With literally thousands of codes, along with the American Medical Association retiring or changing codes every year, the potential for error or use of a code that may result in patients having to pay more than necessary is very high.  

What insurance companies cover and pay for is all tied to medical codes that healthcare providers enter, and changes based on the medical code. This means that you may have better or different coverage with another code for the same procedure.  It is also why sometimes a doctor will say a procedure was not pre-approved.  Finally, a prescription drug may not be covered for one condition but will be covered for another resulting in high co-pays or even forcing to pay for the drug out of pocket when the wrong code is used.  

Mistakes might lead to denied claims or wrong bills, causing confusion and delays in the whole payment process.  Almost three-quarters (71%) of consumers find reconciling a billing issue between their payer and provider stressful, more stressful than their separate interactions with payers (66%) and providers (67%).. Unfortunately, these mistakes are common and often are difficult for patients to properly evaluate because of a lack of visibility and understanding of medical billing codes.

Statistics on Errors:

Believe it or not, errors in medical billing are quite common. In recent reports from the Center for Medicare & Medicaid Services (CMS) incorrect coding accounted for $3.2 billion in improper payments in their 2022 report found here.  In fact, the Office of the Inspector General and the Department of Health and Human Services say that more than 1 in 4 statements sent out contain an overcharged line item.  Studies have shown that billing errors can affect a significant percentage of claims. According to the American Medical Association (AMA), billing errors contribute to a substantial portion of healthcare fraud and abuse cases. In fact, some estimates suggest that up to 80% of medical bills contain errors, ranging from minor mistakes to more significant discrepancies.  

Importance of Audits:

This is where audits come into play. Regular audits help identify and rectify errors in the billing and coding processes. By reviewing claims, codes, and payments, auditors ensure that everything aligns with the rules and regulations. Not only do audits help correct mistakes, but they also contribute to cost savings by ensuring that everyone is paying and getting paid the correct amount.

So, in a nutshell, accurate medical billing and coding are like the glue that holds the financial side of healthcare together. It ensures that everyone involved, from healthcare providers to insurance companies, is on the same page, promoting transparency and fairness in the system. And those audits? They're the detectives making sure everything adds up and stays on the up-and-up.

What Can YOU do?

Review your bills!  It is easy to just pay the bills, but here are some simple things to look at:

• Was the provider location correct? 

• Was the lab test you are billed for the test you were supposed to get?

• Were the dates of service correct?  Don’t get charged for three days when you only stayed two!

• Is the service description what you expect it to be?  Does it sound like what you had?

• Have questions?  Something seems high or not right?  Call your medical providers billing office and ask them to clarify or explain the bill to you!  

• Still have questions?  Ask the provider to do an audit of the bill.

• Still not satisfied?  Get an independent audit - Trickybills can help!