Claim submission and payment collection for services provided to patients fall under medical billing. Simply speaking, the healthcare provider submits a service claim, and the insurance payer reimburses it. This entire transaction is known as medical billing.
However, medical billing primarily has two types: hospital billing and professional billing. Both are clearly distinct from one another.
In this comprehensive guide, we will cover everything about hospital billing vs. professional billing, including their key differences, challenges, and claim types. So, let’s discuss.
What is Professional Billing?
Professional billing, also known as physician billing, is when a physician, medical specialist (e.g., orthopedist or gynecologist), nurse, or other healthcare professional provides services to the patient and directly charges the insurance payer for those services.
The goal of professional or physician billing is to seek fair compensation for the practitioner’s expertise, time, and the specific procedures performed.
Workflow for Professional Billing
The workflow for professional billing may vary slightly depending on the codes used for every medical service. However, the process is generally similar. It involves submission of CMS-1500 claims for services like office visits, diagnostic tests, procedures, or surgeries.
The physician or specialist has the liberty to choose the appropriate treatment option based on this diagnosis. Once the medically necessary services or procedures are performed, a claim is generated and submitted to the patient’s insurance payer for reimbursement.
What is Hospital Billing?
When discussing hospital billing, also known as institutional billing, we must understand the primary difference, i.e., the scale of services provided.
In professional billing, there is only one professional rendering services. However, that is not the case in hospital billing. Most reputable hospitals or facilities have several teams, dedicated speciality departments, and the potential to cater to hundreds of patients simultaneously.
Hospital billing also involves dedicated billing departments that handle medical billing for covered patients. The purpose is to collect reimbursement for the use of facility rooms, equipment, and supplies.
Workflow for Hospital Billing
Hospital billing is larger in scope and volume compared to physician billing. Unlike professional billing, where the service provider generally handles a few claims daily, hospital billing involves claims processing and document management for every inpatient stay and outpatient encounter.
Hospital billing also involves submitting facility charges (via the UB-04/CMS-1450 form) to the insurance payer for in-house radiology procedures and surgeries, which adds more to the billing process.
Key Differences Between Professional Billing & Hospital Billing
The best way to better understand institutional billing vs. physician billing is to draw clear differences between the two billing types.
1. Place of Service
Institutional billing usually occurs for services provided in medical facilities. This can include hospitals, emergency departments, ambulatory surgery centers, skilled nursing facilities, home health agencies, and other institutional providers like radiology labs.
On the other hand, professional billing can be for any medical setting, including a physician’s office, a specialty clinic, a group practice, telehealth, or an operating room.
2. Bill Sender
Another distinction between hospital billing and professional billing is that in institutional billing, the hospital systems or healthcare facilities are the ones that send the bills to the relevant payers.
However, in professional billing, individual physicians, medical staff (assistants and nurses), or their billers send the claims for provided services to the payers.
3. Billed Services
When it comes to institutional billing vs. physician billing, what a patient gets billed for may also vary. Generally, in hospital billing, facility costs, like the room rent, staff time, medical supplies, equipment, laboratory usage, etc., are included.
However, professional billing typically includes charging for physician consultations and their surgical skills. Payers may also be billed for examination time and medical decision-making. Similarly, other elements, such as the procedure interpretation, exercise performance, and surgical assistance, may also be billed.
4. Forms Used
Hospital billing and professional billing also have their dedicated claim forms. Form UB-04, also known as CMS-1450, is used for institutional billing. Whereas, individuals use the CMS-1500 claim forms for professional billing.
The itemized services or products (drugs, equipment, and supplies) billed in these forms will vary from case to case. Nonetheless, both these forms are suited for their respective settings where services are provided.
5. Payment Models & Speed
When it comes to payment, the first major distinction between physician billing and institutional billing is the speed at which these two entities are reimbursed. Physicians submitting claims through professional billing are generally reimbursed much faster, often within days. However, hospitals submitting claims via institutional billing are reimbursed after weeks due to added scrutiny during claim processing.
Also, physicians are paid based on a fee-for-service model, but medical facilities often receive bundled payments, prospective payments, or per-diem rates.
6. Complexity
Institutional billing is usually far more complex than professional billing. The main reason is larger teams, high patient volume, multiple departments, and a spectrum of billable services. Conversely, professional billing involves single practitioners filing 5-10 claims per day for similar kinds of services, making the billing process easier.
7. Medical Insurance
Institutional billing usually involves charging for Medicare Part A benefits. This is because Medicare Part A generally covers inpatient stays or outpatient services rendered by institutional providers, such as skilled nursing facilities.
In contrast, during professional billing, physicians charge for services covered under Medicare Part B, like office visits and procedures.
Challenges: Professional vs. Hospital Billing
When it comes to hospital billing vs. professional billing, both options have their own challenges. Therefore, here’s a comprehensive table explaining these challenges for each billing type.
| Category | Hospital Billing | Professional Billing |
|---|---|---|
| Technology Requirements | Expensive software systems and advanced technology. | May require billing software or outsourcing for accuracy and compliance. |
| Staffing Needs | Requires a large billing team. | Often handled by small teams or an individual. |
| Scope | Covers many services like ER, inpatient, tests, supplies, etc. | Usually, for similar and limited services, e.g., orthopedic surgeries. |
| Risk Level | Errors lead to claim denials or reimbursement delays, halting the institute’s revenue. | In case of denials, a medical professional loses an income opportunity. |
| Insurance Handling | Must handle different insurance requirements and multiple payment models. | Requires knowledge of speciality-specific billing codes and insurance rules. |
| Impact of Errors | Can result in significant denials, long payment delays, and reputational damage. | Payment delays, denials, or potential legal issues. |
| Cost | High operational cost. | Lower cost compared to hospital billing. |
| Compliance Requirements | High compliance standards and strict data privacy regulations. | Compliance is a must to retain board licenses. |
| Complexity | Very complex with many codes and rules. | Simpler than hospital billing. |
Claims Types for Hospital vs. Professional Billing
Institutional billing vs. physician billing both have their claim types, depending on what the billing team opts for. Here is an overview of their claim types.
Types of Hospital Claims
1. Inpatient Claims
Inpatient claims are for patients who stay in the medical facility for treatment. This may include claims for surgery room charges, intensive care units (ICUs), etc.
2. Outpatient Claims
These claims are for outpatient services and a few hours of stay at the hospital. For example, the facility may submit outpatient claims for emergency departments, radiology labs, or outpatient surgeries.
3. Skilled Nursing Facility Claims
These claims are for long-term care patients. For example, a patient in a rehabilitation program after a major hip replacement surgery requires medical attention and intervention for long periods.
Types of Professional Claims
1. Physician Claims
These are claims that specialists like cardiologists or general practitioners/ surgeons use to bill for services the patient received in healthcare clinics.
2. Consultations and Specialist Visit Claims
Like treatment, consultation sessions, and specific visits also fall under professional claims. Similarly, consultations with specialists are also covered by professional claims. For instance, dermatologists or other specialists can bill for services using these claims.
3. Emergency Department Claims
Physicians, nurses, and similar emergency service staff also use professional claims to bill for their services.
Understanding Hospital vs. Professional Billing Claim Differences
Here are the main differences when submitting claims for hospital billing vs. physician billing:
| Category | Institutional Claims | Professional Claims |
|---|---|---|
| Who Submits the Claim | Hospitals, skilled nursing facilities, or institutional providers. | Physicians and specialists, or other individual practitioners. |
| Claim Form Used | UB-04/CMS-1450 | CMS-1500 |
| Services Covered | Outpatient facility services, Inpatient admissions, and skilled nursing care. | Physician services, specialty consultations, and emergency department services. |
| Coding Systems Applied | HCPCS and Diagnosis-Related Groups for service reporting. | Current Procedural Terminology and ICD-10. |
| Payment Model | Reimbursed through per-day rates, bundled payments, or DRG-based payments. | A fee-for-service model based on CPT codes. |
| Revenue Impact | Generally, a higher reimbursement for comprehensive facility-based services. | Typically, a lower reimbursement for individual provider services. |
In a Nutshell
Understanding institutional billing vs. physician billing can seem challenging at first, especially if an in-house billing department is involved in both. However, we have clearly discussed how these two types of billing are distinct. While hospital billing is on behalf of a medical facility and primarily for ancillary services, professional billing is on behalf of physicians and other healthcare practitioners to claim reimbursement for their expertise and care services.
However, those who still require assistance with hospital billing or professional billing can choose our medical billing and coding services to ease their troubles.
