Revenue Cycle and Medical Billing Glossary

This glossary defines the terms used most often in revenue cycle management, medical billing and coding. Each entry is a short definition; follow the links to our service pages for how we work with these areas.

A/R (accounts receivable): Money owed to a provider for services already delivered, from payers and patients. A/R days and aging buckets show how quickly it is being collected.
Adjudication: The payer’s process of reviewing a claim against coverage, benefits and policy rules and deciding whether, and how much, to pay.
Appeal: A formal request asking a payer to reverse a denial or underpayment, submitted within the payer’s deadline with supporting documentation.
Authorization (prior authorization): Payer approval obtained before certain services are delivered. Services without a required authorization are a common cause of denials.
CARC (claim adjustment reason code): A standardized code on a remittance advice explaining why a claim or line was adjusted or denied. Maintained by X12.
Clean claim rate: The share of claims accepted and paid on first submission without correction. A core indicator of front-end quality.
Clearinghouse: An intermediary that checks, formats and routes electronic claims between providers and payers and returns acceptance reports.
Coordination of benefits (COB): The rules that decide which payer is primary and which is secondary when a patient has more than one health plan.
CPT code: Current Procedural Terminology: the AMA-maintained code set that describes medical, surgical and diagnostic services.
Credentialing: Verifying a provider’s qualifications, licences and history so they can be approved by, and enrolled with, payers.
Denial: A claim that a payer processed and refused to pay, in whole or in part. Different from a rejection, which never enters adjudication.
Days in A/R: An estimate of the average number of days it takes to collect payment after a service is billed.
EDI enrollment: Registering a provider with payers and clearinghouses to exchange claims, remittances and eligibility transactions electronically.
ERA / 835: The electronic remittance advice, an X12 835 transaction, that explains how a payer processed each claim and line.
Explanation of benefits (EOB): The paper or electronic statement from a payer showing what was billed, allowed, paid and owed by the patient.
HCC (hierarchical condition category): A risk-adjustment category used to estimate the expected cost of care for a patient, based on documented diagnoses.
HIPAA: The U.S. Health Insurance Portability and Accountability Act, which sets privacy and security rules for protected health information.
ICD-10-CM: The diagnosis code set used in the United States to report patient conditions on claims.
Medical necessity: The standard that a service is appropriate and needed for diagnosis or treatment, as defined by the payer’s policy.
Net collection rate: Payments collected as a percentage of the amount that was collectible after contractual adjustments.
Payer: The organisation, such as an insurer, government program or employer plan, that pays for healthcare services.
RARC (remittance advice remark code): A supplemental code on a remittance advice that adds detail to a CARC. Maintained by X12.
Rejection: A claim returned for errors before payer adjudication. It can usually be corrected and resubmitted.
Revenue cycle management (RCM): The administrative and clinical processes that capture, manage and collect patient service revenue, from registration to final payment.
Timely filing: The deadline by which a claim, corrected claim or appeal must be received by the payer, set by contract or regulation.
Underpayment: A payment that is lower than the contracted or expected allowed amount and may be disputed with the payer.

Official code lists: CARC and RARC (X12), CPT (AMA) and HIPAA (HHS).