Domain 10.3Administrative Assisting

Insurance Billing Referrals

Last updated June 16, 2026

Overview

This guide covers the revenue cycle and care coordination. As a Medical Assistant, you link clinical care to financial reimbursement. You must understand insurance terminology, coding, the referral process (including authorization), and claim submission.

1. Insurance Fundamentals

Term	Definition	Exam Tip
Subscriber (Policyholder)	The individual who owns the insurance policy.	Think of a magazine subscription; the subscriber is the one paying.
Premium	Recurring fee to keep the policy active.	Like a streaming subscription fee.
Deductible	Amount patient pays out-of-pocket before insurance starts paying.	Must be deducted from patient's pocket first.
Co-payment	Fixed fee paid at the time of service (e.g., $25).	Co-pay = Pay at time of service.
Coinsurance	Percentage split (e.g., 80/20) after deductible is met.
Assignment of Benefits	Patient authorizes insurance to pay the provider directly.
Accepting Assignment	Provider agrees to accept the approved amount as full payment. The difference between the billed amount and approved amount is a Disallowed Charge (write-off).	Disallowed charges cannot be billed to the patient.
Coordination of Benefits (COB)	Process determining primary vs. secondary payer when a patient has multiple plans to avoid overpayment.
Exclusions	Specific conditions or services explicitly not covered by the policy.	The policy "excludes" these items.
Group Policy	Insurance provided to a group (like employees) under a single Master Contract.	Individuals receive a certificate of coverage.
Birthday Rule	For children with two insurance plans: The primary plan belongs to the parent whose birthday comes first in the calendar year (Month/Day).

The Payer Landscape

Medicare Part B: Covers outpatient/doctor visits and Durable Medical Equipment (DME). (Think B for Bills and Borrowing equipment).
- Payment Split: Medicare pays 80% of the approved amount; the patient is responsible for 20%.
- Non-Participating Providers: If a provider does not accept assignment, the patient may be responsible for a higher portion of the cost (up to a limiting charge).
Medicare Part D: Covers Drugs.
Workers' Compensation: ALWAYS primary for work-related injuries.
- Reporting: The provider must submit the First Report of Injury/Illness immediately after the initial visit.

2. Medical Coding Essentials

Medical Necessity is the principle that services must be justified by the diagnosis. You prove this by Code Linkage.

Patient Status (New vs. Established)

New Patient: An individual who has not received professional services from a provider of the same specialty in the same practice within the past 3 years.
Established Patient: Has been seen within the past 3 years.

Key Terminology

Abstracting: The process of reviewing the patient's medical record to identify the relevant diagnoses and procedures for billing purposes.

Coding Systems

ICD-10-CM (Diagnoses): Describes the "Why" (condition/symptom). Codes are 3-7 characters.
- Primary Diagnosis: The main reason for the patient encounter. It is always listed first on the claim form.
- Coding Process (Golden Rule): Always start with the Alphabetic Index to locate the term, then verify the code in the Tabular List. Never code directly from the index.
- Rule: Code to the highest specificity. Never code "rule out" or "possible"—code the symptoms instead.
CPT (Procedures): Describes the "What" (service/surgery).
- Structure: The CPT manual is organized by Body System (anatomy). For example, a procedure on the pituitary gland is found in the Nervous System section because of its anatomical location.
HCPCS Level II: Codes for supplies, injectables, and DME (e.g., wheelchairs).
- Structure: Alphanumeric codes consisting of one letter followed by four numbers (e.g., J0540).

3. The Referral Process & Authorization

A referral directs a patient to a specialist. The most critical administrative step is Insurance Authorization.

A. Authorization / Precertification

Definition: Getting approval from the insurer before a service is performed (e.g., surgery, specialist visit).
Why? To prove Medical Necessity.
Process: The MA submits clinical info (ICD-10 codes, history) to the insurer. If approved, an authorization number is issued.
Expiration: Authorizations act like coupons; they have an expiration date. Services performed after this date will be denied.
Denied? If denied, the provider may need a "peer-to-peer" review.

B. Types of Referrals

Regular: 3-10 business days (e.g., chronic stable eczema).
Urgent: 24-48 hours (e.g., new cardiac symptoms).
STAT: Immediate (e.g., suspected DVT/blood clot).

C. Transmitting the Referral (Faxing Rules)

Electronic: Preferred method.
Fax: High-Yield Topic. You must always use a cover sheet containing a HIPAA confidentiality statement. This is the first step for privacy.

D. Closing the Loop

**Ensure the specialist sends a consultation report back to the PCP. The referral is not complete until this report is received.

4. The Revenue Cycle

Step 1: Claim Submission

Documentation Rule: "If it wasn't documented, it wasn't done." Reimbursement requires that the code submitted is supported by the medical record.
CMS-1500: The universal paper claim form. The electronic version is the 837P.
Medicare Exception: While electronic submission is the standard, Medicare allows providers with fewer than 10 full-time employees or those who submit fewer than 10 claims per month to use paper claims.
Superbill: The source document containing the codes needed to fill out the claim.

Step 2: Adjudication (Outcomes)

Rejected: Contains clerical errors (typos). Correct and resubmit. (Think Rejected = Re-do).
Denied: Processed but not paid due to policy issues (e.g., not medically necessary, no authorization). Requires an appeal.

Step 3: Payment & Statements

Remittance Advice (RA): Sent to the Provider (details payment).
Explanation of Benefits (EOB): Sent to the Patient (explains what was covered).

Billing Compliance: Fraud vs. Abuse

Fraud: Intentional deception for gain (e.g., billing for services not rendered, upcoding).
Abuse: Practices that are inconsistent with sound fiscal or medical practices (e.g., billing for services that are not medically necessary, excessive charges). Abuse is often due to negligence rather than intent.

Financial Management & Collections

Accounts Receivable (A/R): Money owed to the practice by patients and insurers. When a payment is received, the A/R balance is lowered.
Accounts Payable (A/P): Money the practice owes to others (rent, supplies).
Bank Reconciliation: The monthly process of comparing the practice's financial records (cash book) with the bank statement to ensure they match.
Cycle Billing: A strategy where the patient database is divided (e.g., alphabetically), and invoices are sent to different groups at different times of the month to spread out the workload.
Professional Courtesy: A reduction or waiver of fees for other medical professionals or staff.
Credit Adjustments: When posting a payment, a credit adjustment (the difference between the charged amount and allowed amount) is often recorded at the same time to ensure the patient's balance is instantly accurate.
Aging Report: Tracks how long invoices have been unpaid (30, 60, 90 days). Used for collections.
Collection Agencies: Once a patient's account has been transferred to a collection agency, the office must stop all billing activity. If the patient contacts the office to make a payment or negotiate, you must refer them to the collection agency.
ABN (Advance Beneficiary Notice): Form given to Medicare patients before a service that might not be covered, notifying them they may have to pay.

5. Final Key Takeaways

Linkage: Diagnosis (ICD-10) must justify Procedure (CPT).
New vs. Established: The cutoff is 3 years.
Lookup Order: Alphabetic Index → Tabular List.
Preauth: Get authorization before specialized procedures to ensure payment and check expiration dates.
Collections: Once sent to collections, refer the patient to the agency.
Documents: RA goes to the doctor; EOB goes to the patient.
Safety: Workers' Comp is primary for on-the-job injuries; First Report is due after initial visit.
Reconciliation: Monthly check ensuring practice records match the bank statement.