Medical Claims 101: What You Need to Know

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Medical claims are one of the most valuable sources of data for healthcare organizations. All-payer claims contain detailed diagnosis and procedure information for any billable patient visit. Healthcare organizations can use this claims information to:

It can be difficult to do all this without fully understanding medical claims data. In this blog, we will help you learn the basics about medical claims: what they are, where they come from, and what they mean.

What is a medical claim?

A medical claim is a bill that healthcare providers submit to a patient’s insurance provider. This bill contains unique medical codes detailing the care administered during a patient visit. The medical codes describe any service that a provider used to render care, including:

  • A diagnosis
  • A procedure
  • Medical supplies
  • Medical devices
  • Pharmaceuticals, and
  • Medical transportation

When a provider submits a claim, they include all relevant medical codes and the charges for that visit. Insurance providers, or payers, assess the medical codes to determine how they will reimburse a provider for their services. In a value-based care model, length of stay and 30-day readmissions impact provider reimbursements.

What information does a medical claims file contain?

Every medical claims file contains details specific to each patient and patient encounter. In a medical claims file, this information is in two parts: the claim header and the claim detail.

Claim header

The claim header summarizes the most essential information in the claim. This includes confidential patient information like date of birth, gender, and zip code. The claim header also contains details like:

Claim detail

The claim detail includes information about secondary diagnoses or procedures administered during an inpatient hospital stay. Each new claim detail, or service record, contains the following information:

  • Date of service
  • Procedure code
  • Corresponding diagnosis code
  • National Drug Code (NDC), if applicable
  • Attending physician’s NPI number, and
  • Charge for the service

What is a medical claims clearinghouse?

A medical claims clearinghouse is an electronic intermediary between healthcare providers and payers. Healthcare providers transmit their medical claims to a clearinghouse. Clearinghouses then scrub, standardize, and screen medical claims before sending them to the payer.

This process helps mitigate errors in medical coding and reduce the time to receive provider reimbursement. If a claim contains medical coding errors or fails to meet formatting requirements, the payer could reject it. This means that the claim would be resubmitted, delaying provider reimbursement.

The service that clearinghouses provide is also beneficial for payers. Clearinghouses format medical claims data according to the unique requirements of each payer. Standardizing the data in this way helps payers streamline their medical billing process.

What does the medical billing process look like?

The medical billing process contains seven essential steps. These steps trace the entire claims journey from the moment a patient checks in at a healthcare facility, to the moment they receive a bill from their insurance provider.

a circle diagram depicting the medical billing process
Fig. 1 Illustration of the medical billing process. Circle diagram displays the seven-step process that a medical claim must pass through. Illustration from The Definitive Approach to Healthcare Sales – 101: Codifying the Patient Journey.

Patient registration

Patient registration is the very first step in the medical billing process. Registration occurs when a patient gives their provider personal details and insurance information.

Insurance eligibility verification

After a patient has registered, the care provider must verify the patient’s insurance. This helps to confirm that the patient has adequate coverage for the care that they will receive. Verification helps care providers determine coverage and eligibility, and assess the following:

  • What the patient’s policy benefits are
  • Whether the patient has accumulated co-pay, deductible, or out-of-pocket expenses
  • Whether the patient’s insurance provider requires pre-authorization

Medical coding

Medical coding is a critical step that occurs after care has been administered. Care providers transcribe their notes and other clinical documentation into standardized medical codes. Some of the most common medical coding systems include:

Care providers use these codes to describe which medical diagnoses, procedures, prescriptions, and supplies they administered and why. The specificity of medical codes also helps providers describe the patient’s condition.

Charge entry

Charge entry is the last step before care providers submit their claim for payment. Providers or medical billing specialists list the charges that they expect to receive.

Claims transmission

Claims transmission is when claims are transferred from the care provider to the payer. In most cases, claims are first transmitted to a clearinghouse. The clearinghouse reviews and reformats medical claims before sending them to the payer.

In some cases, healthcare providers send medical claims directly to a payer. High-volume payers like Medicare or Medicaid may receive bills directly from providers. This helps to reduce the time that it may take to receive reimbursement from high-volume payers.


Adjudication occurs once the payer has received a medical claim. The payer evaluates the claim and decides two important things:

  1. Whether the medical claim is valid, and
  2. How much of the claim they will reimburse

If the claim is accepted, the payer will issue provider reimbursement and charge the patient for any remaining amount. The payer may deny the claim if the patient has insufficient coverage or did not get pre-authorization for a service. If a payer denies a medical claim, the patient may have to submit an appeal to gain coverage for the care costs.

The payer may also reject a claim. This happens when the claim does not meet formatting requirements or contains an error in medical coding. Rejected medical claims can be resubmitted for payment once the errors have been corrected.

Patient statement

Patient statement is the final step in the medical billing process. Once the payer has reviewed a medical claim and agreed to pay a certain amount, the payer bills the patient for any remaining costs.

Learn more

Are you interested in learning more about medical claims data and how to use it? Catch an on-demand replay of our webinar: The Definitive Approach to Healthcare Sales – 101: Codifying the Patient Journey. The presenters provide a comprehensive overview of medical claims data, including details about:

  • Types of U.S. insurance programs
  • Types of clinical codes
  • How to find the right codes for your use-case
  • Custom reporting capabilities, and
  • Definitive Healthcare’s medical claims database
  • Blog
  • Medical Claims 101: What You Need to Know
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