Billing Glossary

Plain-English definitions for medical, hospital, and dental billing

Billing runs on jargon. This glossary translates the codes, acronyms, and payer language we work with every day into plain English – for practice managers, hospital revenue cycle teams, dental offices, and anyone trying to read a remittance advice without a decoder ring. Terms are grouped so you can jump to what you need.

Denial & adjustment codes · A/R & performance terms · Payer & claims jargon · Coding concepts · Hospital & facility billing · Dental billing terms

Denial & adjustment codes

CARC (Claim Adjustment Reason Code) – The standardized code a payer puts on a remittance to explain why a claim or line was paid differently than billed. The first two letters tell you who the payer thinks is responsible: CO (contractual obligation – the provider writes it off), PR (patient responsibility), OA (other adjustment), PI (payer initiated), GA (expected patient liability, usually with an advance notice on file).

RARC (Remittance Advice Remark Code) – A supplemental code that adds detail to a CARC – the “because” after the “what.” For example, a CARC might say a service isn’t covered, and the RARC explains which policy drove that decision.

Denial – A claim the payer processed and refused to pay, in whole or in part. Denials can usually be corrected and appealed – which is why a disciplined denial work queue matters more than the denial itself.

Rejection – A claim that never made it into the payer’s processing system, usually for a formatting or data error (bad subscriber ID, missing field). Rejections are fixed and resubmitted; they are not technically denials and never got a formal decision.

Common CARCs worth knowing:

• CO-16 – Claim lacks information needed for processing. Usually fixable: find what is missing, supply it, resubmit or appeal.
• CO-45 – Charge exceeds the contracted fee schedule. The difference between your billed charge and the allowed amount; normally a contractual write-off, not a denial to fight.
• CO-50 – Non-covered service, not a medical necessity per the payer. The classic medical-necessity denial; appeals need documentation.
• CO-97 – Payment already included in another service (bundled). Common with NCCI edits and global periods.
• CO-109 – Service not covered by this payer – often a wrong-payer problem. Bill the correct insurer.
• CO-197 – Prior authorization or precertification absent. Preventable on the front end; painful on the back end.
• PR-1 / PR-2 / PR-3 – Deductible, coinsurance, and copay amounts. These shift the balance to the patient; they are why accurate eligibility checks matter before the visit.
• OA-23 – Adjustment because a prior payer’s payment or decision affects this one – usually a coordination-of-benefits situation.

Timely filing – The contractual deadline to submit a claim (and often to appeal). Miss it and the balance usually becomes a write-off regardless of merit. Every payer and plan has its own limit.

Appeal – The formal request to reconsider a denial, supported by documentation, contract language, or policy citations. Deadlines and levels vary by payer; a good appeal cites the payer’s own rules.

A/R & performance terms

A/R (accounts receivable) – Money owed to you for services already delivered – unpaid claims and patient balances. The number that tells you whether your billing operation is working.

Days in A/R – Average number of days between billing and payment. Lower is better; specialty norms vary, but creeping days in A/R is the earliest sign of billing trouble. Optimal-managed clinics run in the mid-20s.

A/R aging – Sorting receivables by how old they are (0-30, 31-60, 61-90, 91-120, 120+ days). Money past 90-120 days gets much harder to collect, which is why follow-up discipline matters.

Clean claim rate – Percentage of claims accepted and processed on first submission without edits. High clean claim rates mean faster payment and less rework.

First-pass resolution rate (FPRR) – Percentage of claims paid in full on the first pass, no touches, no appeals. The single best measure of front-end quality.

Denial rate – Percentage of claims (or dollars) denied. A rising denial rate is a process problem announcing itself; the mix of denial reasons tells you where to look.

Net collection rate – Of the money you were contractually allowed to collect, the percentage you actually collected. The truest measure of billing performance, because it ignores write-offs you never had a right to.

Contractual adjustment – The write-off between your charge and the payer’s allowed amount under contract. Expected and normal – but only when it matches the contract, which is why underpayment review exists.

Bad debt – Money owed (usually by patients) that you don’t expect to collect. Different from a contractual adjustment: bad debt was collectible and wasn’t collected.

Charge lag – Days between the date of service and the charge going out the door. Slow charge entry delays everything downstream.

Payer & claims jargon

EOB (Explanation of Benefits) – The document a payer sends explaining how a claim was processed – what was billed, allowed, paid, adjusted, and left to the patient. The patient-facing version of the remittance.

ERA / 835 – The electronic version of that remittance, posted straight into your billing system. “Posting ERAs” is how payments actually hit patient accounts.

EFT – Electronic funds transfer: the payer’s actual deposit into your bank account. EFT and ERA should reconcile; when they don’t, money is leaking.

Eligibility verification (270/271) – The electronic check confirming a patient’s coverage, plan, and cost-sharing before service. The cheapest denial prevention there is.

Prior authorization (pre-cert, pre-auth) – Payer approval obtained before certain services. Skipping it converts a payable claim into a CO-197 denial.

Claim status inquiry (276/277) – The electronic “where is my claim?” transaction – how follow-up teams work aging claims without sitting on hold.

Allowed amount – The maximum a contract or fee schedule says a service is worth. Everything else above it is adjustment; patient responsibility comes out of it.

Fee schedule – The payer’s price list, usually attached to your contract. If you haven’t looked at yours lately, your charges and your write-offs are probably both wrong.

COB (coordination of benefits) – The rules deciding which insurer pays first when a patient has more than one. Wrong COB is a top cause of denials that bounce between payers.

NPI (National Provider Identifier) – The standard 10-digit ID for providers and organizations on every claim. Wrong or missing NPI data stops payment cold.

Credentialing / enrollment – Getting a provider approved and linked with each payer so claims can be paid under that provider. Uncredentialed rendering providers are silent revenue killers.

Remittance advice – The umbrella term for the payment explanation (paper or ERA) accompanying payer payment.

Coding concepts

CPT (Current Procedural Terminology) – The AMA’s code set describing medical services and procedures on professional claims. A code identifies a service; coverage and payment are separate questions.

HCPCS Level II – Codes for supplies, drugs, DME, ambulance, and services CPT doesn’t cover (the ones starting with a letter, like J-codes for injectables).

ICD-10-CM – The diagnosis code set: the “why” behind every claim. Medical necessity lives here – the diagnosis must support the procedure.

Modifier – A two-character suffix on a CPT/HCPCS code that changes its story (separate procedure, bilateral, professional component, etc.). Right modifier: clean payment. Wrong or missing: denial.

NCCI edits – Medicare’s National Correct Coding Initiative rules about which code pairs can’t be billed together and which modifiers can override. Commercial payers largely follow them.

RVU (Relative Value Unit) – Medicare’s building blocks of physician payment: work, practice expense, and malpractice components, adjusted for geography and multiplied by a conversion factor. See our CPT reimbursement guide for the full formula.

Place of service (POS) – The two-digit code saying where care happened (office, hospital outpatient, inpatient, telehealth). POS drives which fee schedule column applies; wrong POS, wrong rate.

Medical necessity – The payer’s judgment that a service was reasonable and needed, judged from diagnosis codes and documentation. The root of the most-argued denials in the business.

Hospital & facility billing

UB-04 (CMS-1450) – The institutional claim form hospitals and facilities bill on, as opposed to the professional CMS-1500. Different form, different rules, different team.

Revenue code – The UB-04 code identifying the department or service category (emergency room, operating room, pharmacy). Claims price off revenue code and procedure code combinations.

MS-DRG – Medicare Severity Diagnosis Related Group: the case-rate bundle that pays most Medicare inpatient stays. One payment per stay, driven by diagnoses, procedures, and severity – coding accuracy is payment accuracy.

IPPS / OPPS – Medicare’s Inpatient and Outpatient Prospective Payment Systems: the fixed-price frameworks for facility payment. Outpatient services pay through APCs (Ambulatory Payment Classifications).

APC – The outpatient counterpart of the DRG: packaged payment for hospital outpatient services.

Chargemaster (CDM) – The hospital’s master price list feeding every facility claim. Stale chargemasters quietly misprice thousands of claims.

DNFB (discharged, not final billed) – Cases discharged but not yet billed, usually waiting on coding or documentation. DNFB is unbilled revenue sitting in a drawer.

Case mix index (CMI) – The average relative weight of a hospital’s DRGs – a proxy for case complexity that moves both payment and benchmarking.

Dental billing terms

CDT (Current Dental Terminology) – The ADA’s procedure code set for dental claims – the dental counterpart of CPT. Updated annually; stale code sets mean avoidable denials.

Pre-determination (pre-treatment estimate) – Asking the dental plan, before treatment, what it expects to cover. Not a guarantee of payment – but the best protection against surprises for the office and the patient.

UCR (usual, customary, and reasonable) – The plan’s idea of a fair fee in a geographic area, often used to cap out-of-network payment. Frequently opaque and worth questioning.

Downcoding – The plan paying a procedure at a less expensive code’s rate (posterior composite paid as amalgam is the classic). Sometimes contractually valid, sometimes not – the difference is money.

Bundling – The plan combining separate procedures into one payment – common with crowns and build-ups. Like downcoding: sometimes right, sometimes appealable.

Alternate benefit clause (least expensive alternative treatment) – The plan covering only the cheapest adequate treatment and leaving the patient the difference. Treatment plans and estimates should account for it.

Missing tooth clause – No coverage to replace a tooth lost before coverage began. A nasty surprise unless eligibility review catches it up front.

Frequency limitation – Plan limits like two cleanings a year or one crown per tooth per five years. Verifying before the visit turns denials into informed patient conversations.

Attachment / narrative requirements – Many dental procedures pay only with X-rays, perio charts, or a narrative attached. Send what the payer needs the first time and the claim sails.

Definitions are general explanations for education, not coding, coverage, or legal advice. Payer policies and contracts control in every case. Something you want defined next? Tell us – we update this page.