Medical Billing Glossary: 45+ Terms in Plain English

The maximum a payer will recognize for a service under its fee schedule or contract. Everything is calculated from this number, not from the billed charge — the gap between them becomes the contractual write-off.

A formal request asking a payer to reverse a denial or payment decision, backed by records and policy citations. Deadlines are strict — commonly 90 to 180 days. Our appeal letter generator drafts one in a minute.

The patient authorization that lets the payer send payment directly to the provider instead of to the patient.

Accounts receivable — billed money not yet collected — and the average number of days it takes to collect it. Healthy practices generally run under 35-40 days; measure yours with the AR days calculator.

Billing the patient for the difference between the billed charge and the allowed amount. Prohibited for in-network care and, since the No Surprises Act, for most emergency and in-network-facility situations.

Payer edits that fold one service into another so only one payment is made. Shows up on remits as codes like CO-97; unbundling legitimately distinct services is what modifier 59 exists for.

Claim Adjustment Reason Code — the standardized codes (CO-45, PR-1, OA-23...) payers use on remittances to explain payments and denials. Our denial code library decodes the ones that matter.

A payment model where the provider receives a fixed per-member-per-month amount regardless of visit volume, instead of fee-for-service payment per encounter.

A hospital or practice master price list of every billable service. Chargemaster prices are the "sticker prices" — almost nobody actually pays them.

A claim that passes all edits and processes for payment on first submission with no rejections or requests for information. Clean claim rates above 95% are the standard worth chasing.

The intermediary that receives claims from practices, scrubs them for format errors, and routes them electronically to each payer. Its acceptance reports are your proof of timely filing.

The Centers for Medicare & Medicaid Services — the federal agency that runs Medicare and Medicaid and effectively sets the coding and payment standards most private payers follow.

The percentage of the allowed amount the patient owes after meeting the deductible — commonly 20%. Math check: coinsurance calculator.

The rules deciding which insurance pays first when a patient has more than one plan. Unresolved COB is a major source of pended and denied claims (CO-22).

The fixed dollar amount a patient pays for a visit type — $30 primary care, $60 specialist. Unlike coinsurance it does not depend on the service price.

The five-character AMA code identifying what service was performed. Every claim line has one; see our CPT code guides.

The process of getting a provider approved and enrolled with a payer so their claims can be paid in network. Typically takes 60-120 days; see our credentialing service.

The amount a patient pays out of pocket each plan year before the insurance starts sharing costs. Until it is met, the patient owes the full allowed amount (not the sticker price).

A processed claim the payer refuses to pay, with the reason expressed as a CARC code. Distinct from a rejection, which bounces before processing. Benchmark yours with the denial rate calculator.

Electronic Data Interchange — the standardized electronic formats (837 claims, 835 remittances, 270/271 eligibility) that move billing data between providers, clearinghouses, and payers.

Explanation of Benefits — the statement a payer sends the patient showing what was billed, allowed, paid, and owed. Not a bill. Full walkthrough: how to read your EOB.

Electronic Remittance Advice (the 835) — the machine-readable version of the payment explanation that posts into your practice management system.

The payer's price list — the allowed amount for every code. Your contract typically pegs rates to a percentage of the Medicare fee schedule.

A plan's list of covered drugs, organized in cost tiers. Off-formulary prescriptions need exceptions or the patient pays cash price.

The person financially responsible for the bill — the patient, or for minors and dependents, the responsible adult on the account.

The written cost estimate uninsured and self-pay patients must receive before scheduled care under the No Surprises Act. Bills running $400+ over it are disputable — details in our No Surprises Act guide.

The code set covering supplies, drugs, equipment, and services outside CPT — J-codes for injectables, E-codes for equipment, G-codes for Medicare services.

The federal law governing health information privacy and the standard electronic transactions all covered entities must use.

The diagnosis code explaining WHY a service happened. Payers judge medical necessity by whether the ICD-10 justifies the CPT — mismatches drive denials like CO-50.

Whether a provider holds a contract with the patient's plan. In-network care caps what the patient owes at contracted cost sharing; out-of-network care costs more and, outside No Surprises Act protections, can be balance-billed.

The payer's standard that a service must be reasonable and required for diagnosis or treatment. The diagnosis-procedure pairing on the claim is how necessity is judged automatically.

A two-character addition to a CPT code that changes how the payer should read it — distinct service, bilateral, repeat, and so on. Full library: CPT modifiers.

Medically Unlikely Edit — the maximum units of a code Medicare expects for one patient in one day. Claims above it stop for review or denial.

National Provider Identifier — the 10-digit number identifying every provider and organization on claims. Wrong or mismatched NPIs are a classic rejection cause.

The annual cap on what a patient pays in deductible, copays, and coinsurance combined. After the cap, covered in-network care is 100% plan-paid. Estimate scenarios with the patient responsibility calculator.

Place of Service — the two-digit claim code for where care happened (office 11, telehealth 02/10, hospice 34...). It changes payment rates; see the POS library.

Payer approval required BEFORE certain services will be covered. Missing auths are among the most expensive denials because many payers refuse retroactive approval.

The monthly price of holding the insurance plan itself — paid whether or not care is used, and separate from deductibles, copays, and coinsurance.

Remittance Advice Remark Code — the supplemental codes that add detail to CARC denial codes on a remit.

Revenue Cycle Management — the entire money side of healthcare from eligibility through final payment. Overview: what is RCM.

A claim bounced before processing for format or data errors. Fix and resubmit — but the timely filing clock keeps running the whole time.

Relative Value Unit — the work/expense/malpractice weighting behind Medicare payment for every code. Convert RVUs to dollars with the RVU calculator.

Automated pre-submission checking of claims for errors — modifier conflicts, mismatched codes, missing data — so problems are fixed before the payer ever sees them.

The encounter summary listing the visit's diagnoses and services, used to build the claim — or given to patients to self-file with out-of-network plans.

The code identifying a provider's specialty classification on claims and credentialing records. Mismatches between taxonomy and services billed cause avoidable denials.

The deadline for submitting a claim after the date of service — 90 days to a year depending on payer and contract. Miss it and the claim denies (CO-29) with no patient billing allowed. Check deadlines with the timely filing calculator.

Usual, Customary and Reasonable — the benchmark some plans use to price out-of-network services, typically derived from area charge data.

Billed amounts removed from AR — contractual write-offs (the mandatory gap between charges and allowed amounts) and avoidable write-offs (denials nobody worked). The second kind is where practices quietly lose real money.