Medical billing glossary

60 terms you'll see on medical bills, explanations of benefits, and insurance notices, explained in plain words.

A

Allowed amount: The most your health plan will pay for a covered service. It's often lower than the provider's full price, and your share is figured from it.
Amounts generally billed (AGB): A limit for nonprofit hospitals based on what insured patients usually pay. If you qualify for financial assistance, the hospital can't charge you more than this for emergency or medically necessary care.
Ancillary services: Care that supports your main treatment, like anesthesia, lab tests, imaging, and pathology. At an in-network facility, these providers can't ask you to give up your surprise billing protections.

B

Balance billing: When a provider bills you for the difference between its full charge and your plan's allowed amount. In-network providers generally can't do this for covered services.
Bundling: Grouping related services under 1 billing code or 1 payment. A service that's part of a bigger one usually shouldn't show up again as its own charge.

C

Chargemaster: A hospital's master list of full prices for every item and service it bills. These prices come before any discounts, so what you pay is often less.
Charity care: Free or discounted hospital care for people who qualify, often based on income. Nonprofit hospitals must have a written policy that explains who qualifies and how to apply.
Claim adjustment reason code (CARC): A standard code that explains why your health plan paid a claim line differently than the provider billed it, such as an amount applied to your deductible or a denial.
Claim denial: When your health plan refuses to pay for all or part of a service. Your plan must tell you why in writing, and you have the right to appeal.
Coinsurance: Your share of the cost of a covered service, shown as a percentage, like 20%. You usually start paying it after you meet your deductible.
Contractual adjustment: The amount a provider writes off because of its contract with your health plan. It's the gap between the full charge and the allowed amount, and it isn't part of what you owe.
Coordination of benefits: The rules that decide which health plan pays first when you're covered by 2 or more plans. The plan that pays second may cover some of what's left.
Copay (copayment): A fixed dollar amount you pay for a covered service, like $30 for a doctor visit. The amount can differ for visits, drugs, lab tests, and specialists.
Cost sharing: The part of the cost of covered care you pay yourself, like your deductible, copays, and coinsurance. It usually doesn't include your monthly premium.
CPT code: A 5-digit code that tells your health plan which medical service or procedure you got. The American Medical Association maintains the codes and updates them every year.

D

Debt collector: A person or company that regularly collects debts owed to someone else, like a collection agency. Federal law limits what debt collectors can say and do.
Debt validation notice: A written notice a debt collector must send in its first contact or within 5 days. It shows who's collecting, who you owe, how much, and how to dispute the debt.
Deductible: The amount you pay for covered care before your health plan starts to pay its share. It usually resets once a year.
Diagnosis code (ICD-10): A code that tells your health plan why you got care, such as a symptom, injury, or illness. Providers in the U.S. use the ICD-10-CM code set.
Diagnosis-related group (DRG): A category for a hospital inpatient stay, based mainly on your diagnoses and procedures. Medicare uses it to pay hospitals a set amount for each stay.

E

Emergency medical condition: An illness, injury, or symptom so serious that a reasonable person would seek care right away to avoid severe harm. It's judged by your symptoms, not your final diagnosis.
Evaluation and management (E/M) level: The billing code for a visit with a doctor or other clinician, like an office visit. Its level reflects how complex the visit was or how much time it took.
Explanation of benefits (EOB): A summary from your health plan of the charges for care you got, what your plan paid, and what you may owe. It isn't a bill.
External review: A review of your health plan's denial by an independent reviewer who doesn't work for your plan. Your plan must accept the reviewer's decision.

F

Facility fee: A charge from a hospital or other facility for the use of its space, staff, and equipment. It's billed separately from the doctor's own fee.
Financial assistance policy (FAP): A nonprofit hospital's written rules for free or discounted care. It explains who qualifies, how to apply, and how the hospital figures what you're charged.
Flexible spending account (FSA): An account through your employer that lets you pay many medical costs with money that isn't taxed. You usually need to use it by the end of the plan year.
Fully insured plan: A job-based health plan your employer buys from an insurer. The insurer pays the claims, and state insurance laws generally apply to the plan.

G

Good faith estimate: A written estimate of expected charges that a provider must give you if you're uninsured or not using insurance. You get it when you schedule care at least 3 business days ahead, or when you ask.
Grandfathered plan: A health plan that was in place on or before March 23, 2010, and has kept its old status. It may not include some Affordable Care Act protections, like free preventive care.

H

HCPCS code: A code from the Healthcare Common Procedure Coding System. Bills and claims use these codes to name services, supplies, drugs, and equipment.
Health savings account (HSA): A savings account for people with a qualifying high deductible health plan. You put in money before taxes and use it for qualified medical costs. Money you don't spend stays yours.
Hospital price transparency: A federal rule that requires hospitals to post their standard charges online, including cash prices and the rates they've negotiated with each insurer.

I

In-network: Describes a provider or facility that has a contract with your health plan. In-network care usually costs you less, and the provider can't bill you above your share for covered services.
Insurance claim: A request for payment sent to your health plan after you get care. Your provider usually sends it, but you may need to file it yourself in some cases.
Internal appeal: Asking your health plan to take a second look at its decision to deny or not fully pay for care. You usually have 180 days from the denial notice to file.
Itemized bill: A bill that lists each charge from your care on its own line, with the date, a description, a billing code, and a price. You can ask the provider's billing office for one.

M

Medically necessary: Care or supplies needed to diagnose or treat an illness, injury, condition, disease, or its symptoms, and that meet accepted standards of medicine. Plans usually pay only for care they find medically necessary.
Medicare Summary Notice (MSN): A notice people with Original Medicare get every 6 months if they had care. It lists what providers billed, what Medicare paid, and what you may owe. It isn't a bill.
Modifier: A 2-character code added to a procedure code to give more detail about the service, like special circumstances. A modifier can change whether and how much your plan pays.

N

No Surprises Act: A federal law, in effect since January 1, 2022, that protects you from many surprise out-of-network bills. It covers most emergency care, air ambulance rides, and some care at in-network facilities.

O

Observation status: When a hospital treats you as an outpatient while your doctor decides whether to admit you. You can be under observation even if you stay overnight, and it can change what you pay.
Out-of-network: Describes a provider or facility that doesn't have a contract with your health plan. Out-of-network care usually costs you more, and the provider may bill you above your plan's allowed amount.
Out-of-pocket maximum: The most you pay in a plan year for covered, in-network care. After you reach it, your plan pays 100% of covered costs for the rest of the year.

P

Patient responsibility: The part of a claim your insurer says you owe, such as your deductible, copay, or coinsurance. Your explanation of benefits may call it "what you owe."
Place of service: A 2-digit code on a provider's claim that shows where you got care, such as a doctor's office, a hospital outpatient department, or an emergency room.
Premium: The amount you pay for health insurance, usually every month, whether or not you get care. It's separate from your deductible, copays, and coinsurance.
Preventive care: Routine care like screenings, checkups, and shots that aims to prevent illness or find it early. Most plans cover many preventive services in-network at no cost to you.
Prior authorization: Approval from your health plan before you get certain care, drugs, or equipment. If it's required and missing, your plan may deny the claim.
Prompt-pay discount: A lower price some providers offer if you pay your bill quickly, such as before you leave or within 30 days. Offers vary, and you often have to ask.

R

Remark code (RARC): A code on a claim decision that adds detail about why a claim was paid, reduced, or denied. Remark codes work alongside claim adjustment reason codes.
Revenue code: A 4-digit code on each line of a hospital or facility bill that sorts the charge by type, such as a room charge or an ancillary service like a test or drug.

S

Self-funded plan: A job-based health plan where the employer pays claims with its own money, often with an insurer handling the paperwork. State insurance laws generally don't apply to it.
Self-pay: Paying for care yourself instead of through insurance, either because you don't have insurance or you choose not to use it. Self-pay patients can get a good faith estimate.
Special enrollment period: A time outside open enrollment when you can sign up for or change health coverage after a life event, like losing coverage, moving, marrying, or having a baby.
Statute of limitations (debt): The time limit, set by state law, for suing you to collect a debt. After it passes, a debt collector can't sue or threaten to sue, but the debt usually still exists.
Summary of Benefits and Coverage (SBC): A short, standard summary of a health plan's costs and coverage. Every plan uses the same format, so you can compare plans side by side.

T

Timely filing limit: The deadline for a provider to send a claim to your health plan. For Original Medicare, it's 12 months after the date of service. Other plans set their own limits.

U

Unbundling: Billing separate codes for parts of a service that should be billed under 1 combined code. It can raise the total, so it's a coding question worth asking about.
Upcoding: When a service is billed with a code for a more complex or costly service than the records support. It's often a coding error and worth asking about if a charge looks high.