September 24, 2024

When it comes to the healthcare industry, many different terms and phrases can be confusing for those outside of the field. One common dilemma is understanding the difference between professional billing and institutional billing. While both types of billing are essential for ensuring proper payment in the healthcare system, they have distinct differences. In this blog, we will discuss professional billing vs institutional billing and provide a clear understanding of each.

If you want to work with a medical billing service, understanding the distinctions between institutional and professional billing is important. Without this understanding, you risk claim denials and potential revenue loss.

Understanding Professional Billing

Professional billing is also known as physician or provider billing. It refers to the process of submitting claims for services provided by individual healthcare professionals such as doctors, nurses, therapists, etc. These services can include consultations, procedures, and any other medical services provided to patients. Professional billing is usually done by a third-party medical billing company or the in-house billing department of the healthcare provider.

Key Features of Professional Billing

• Claims are submitted for individual services provided by healthcare professionals.
• Healthcare providers collect payments directly from insurance companies or patients.
• Reimbursement rates are determined by contracted fee schedules or negotiated rates between the provider and payer.
• Rules and regulations regarding professional billing are set by government agencies such as CMS (Centers for Medicare & Medicaid Services).

Understanding Institutional Billing

Institutional billing is also known as facility or hospital billing. It involves submitting claims for services rendered in a healthcare facility, such as hospitals, nursing facilities, and outpatient clinics. These services can include inpatient and outpatient procedures, tests, medications, and other medical services provided to patients. Institutional billing is usually handled by the healthcare facility’s finance department or a third-party billing company.

Key Features of Institutional Billing

• Claims are submitted for all services provided by a healthcare facility.
• Healthcare facilities receive payments directly from insurance companies or patients.
• Reimbursement rates are determined based on predetermined rates set by government agencies such as CMS (Centers for Medicare & Medicaid Services).
• Rules and regulations regarding institutional billing are more complex as compared to professional billing due to the involvement of various departments within a healthcare facility. 

Differences between Professional Billing vs Institutional Billing

1. Definitions and Scope

Professional Billing

Professional billing is concerned with the claims process for individual healthcare providers. This includes services rendered by doctors, surgeons, anesthetists, and other healthcare professionals who provide direct patient care. These services are typically billed using the CMS-1500 form.

Institutional billing

Institutional billing covers the claims process for services provided by healthcare institutions. This includes hospitals, skilled nursing facilities, and other healthcare organizations. Institutional billing includes a wider range of services, such as inpatient care, outpatient services, diagnostic tests, and facility fees. The UB-04 (also known as CMS-1450) form is used for institutional billing.

2. Billing Codes

Professional Billing

• CPT Codes (Current Procedural Terminology): These codes describe the medical, surgical, and diagnostic services provided by healthcare professionals.
• HCPCS Codes (Healthcare Common Procedure Coding System): These codes are used for products, supplies, and services not included in the CPT codes, such as ambulance services and durable medical equipment.

Institutional Billing

• Revenue Codes: These codes identify the specific department within a hospital where services are provided. They help to categorize services into different revenue-producing centers.
• ICD Codes (International Classification of Diseases): These codes are used to describe diagnoses and procedures. ICD-10-CM codes are used for diagnosis coding, while ICD-10-PCS codes are used for inpatient procedure coding.
• DRG Codes (Diagnosis-Related Groups): These codes are used for inpatient hospital stays and categorize patients with similar clinical characteristics and treatment costs.

3. Claims Forms

Professional Billing

• CMS-1500 Form: This standard claim form is used by individual healthcare providers to bill for their services. It is typically submitted to insurance carriers for reimbursement of outpatient and professional services.

Institutional Billing

• UB-04 (CMS-1450) Form: This form is used by hospitals and other institutional providers to bill for services. It is submitted to insurance companies for both inpatient and outpatient services provided by the institution.

4. Billing Process

Professional Billing Process

1. Patient Registration: Collecting patient demographics and insurance information.
2. Insurance Verification: Verifying the patient’s insurance coverage.
3. Coding: Assigning appropriate CPT and HCPCS codes to the services provided.
4. Charge Entry: Entering charges based on the provided services.
5. Claim Submission: Submitting the CMS-1500 form to the insurance company.
6. Payment Posting: Recording payments received from insurance companies and patients.
7. Denial Management: Addressing and resubmitting denied claims.

Institutional Billing Process

1. Patient Registration: Gathering patient demographics and insurance details.
2. Insurance Verification: Ensuring the patient’s insurance coverage is valid.
3. Coding: Using ICD, revenue, and DRG codes to describe services provided.
4. Charge Capture: Recording all charges related to the patient’s care.
5. Claim Submission: Submitting the UB-04 form to the insurance company.
6. Payment Posting: Logging payments from insurers and patients.
7. Denial Management: Managing and resolving denied or rejected claims.

5. Revenue Cycle Management

Professional Billing

Revenue cycle management (RCM) in professional billing involves an improved process to ensure that healthcare providers are reimbursed for the services offered. The focus is on efficient handling of outpatient services, timely submission of claims, and effective follow-up on denied or underpaid claims. The use of accurate CPT and HCPCS codes plays a critical role in reducing errors and ensuring quick reimbursement.

Institutional Billing

In institutional billing, RCM has a broader and more complex array of services. It includes managing inpatient and outpatient services, facility fees, and ancillary services. The emphasis is on capturing all charges accurately, ensuring compliance with coding standards, and managing high-volume claims. Effective RCM in institutional billing helps healthcare facilities maintain financial stability and support comprehensive patient care.

6. Regulatory Compliance

Professional Billing

Compliance in professional billing involves adhering to regulations set by entities like the Centers for Medicare & Medicaid Services (CMS) and private insurers. It includes accurate coding, maintaining patient confidentiality, and following proper claim submission protocols. Regular audits and training can help ensure compliance and reduce the risk of fraud and abuse.

Institutional Billing

Institutional billing compliance is more complex due to the extensive range of services billed. Institutions must adhere to federal, state, and payer-specific regulations. This includes compliance with HIPAA, the False Claims Act, and other regulatory requirements. Ensuring compliance in institutional billing helps avoid legal issues and ensures the proper handling of patient data and billing information.

7. Reimbursement Rates

Professional billing

Reimbursement rates are based on contracted fee schedules or negotiated rates between the provider and payer. Institutional billing: Reimbursement rates are predetermined by government agencies such as CMS, which can be subject to change.

Institutional billing

Reimbursement rates are predetermined by government agencies such as CMS, which can be subject to change.

Conclusion

Next time you encounter the terms Professional Billing vs Institutional Billing, remember their key features, differences, and importance in the healthcare industry.  Professional and institutional billing are both important for the financial stability of healthcare providers. Understanding the two concepts can help you maximize your reimbursements and ensure efficient billing processes. 

As the healthcare industry continues to evolve, it is essential to stay updated on any changes in regulations and guidelines for both types of billing. So, it is important to choose a reliable medical billing company to handle billing processes efficiently. By doing so, healthcare providers can focus on providing quality care to their patients without worrying about complex billing processes.

About the Author: Aima Aizaz

Aima is a skilled content writer specializing in the fields of tech and emerging technologies. She is passionate about staying up-to-date with the latest trends and creates engaging and informative content that simplifies complex concepts. Combining a strong technical background with excellent writing skills, she delivers articles, blog posts, and guides that captivate readers and provide valuable insights into the world of technology.