Medical Billing Glossary

How to use this guide

Medical billing terminology is dense with acronyms, and the same idea often has two names. This glossary defines 88 terms that practice owners, office managers and billers meet on claims, remittances, payer contracts and AR reports, sorted A to Z with a short table for each letter.

Definitions are general. Payers and contracts can define a term more narrowly, so when a dispute turns on a definition, check the payer's provider manual or your contract. For how these terms fit into the claim cycle, see the medical billing process guide.

Terms A to C: AR, claims and coding

A

Term	Meaning
Accept assignment	A provider's agreement to accept the Medicare-approved amount as payment in full. The patient still owes any deductible and coinsurance.
Accounts receivable (AR)	Money owed to the practice for services already provided, from payers and patients. AR is usually reported in aging buckets such as 0–30, 31–60 and 61–90 days.
Adjudication	The payer's process of reviewing a claim against eligibility, benefits, coding edits and contract terms, and deciding to pay, reduce or deny it.
Adjustment	An amount added to or subtracted from a patient account that is not a payment, such as a contractual write-off or a correction.
Advance Beneficiary Notice of Noncoverage (ABN)	A written notice (form CMS-R-131) given to an Original Medicare patient before a service Medicare may not cover. A properly signed ABN allows the provider to bill the patient if Medicare denies.
Allowed amount	The maximum a payer recognizes for a covered service under its fee schedule or contract. The payer's payment plus the patient's cost sharing equals the allowed amount.
Appeal	A formal request asking a payer to reconsider a denied or underpaid claim, usually with supporting records and a written argument.

B

Term	Meaning
Balance billing	Billing a patient for the difference between the provider's charge and the allowed amount. Network contracts, Medicare rules and surprise billing laws limit when it is permitted.
Batch	A group of claims sent together to a clearinghouse or payer in one electronic file.
Beneficiary	A person who has coverage under a health plan, most often used for Medicare and Medicaid enrollees.
Billing provider	The provider or organization that submits the claim and receives payment, identified by its NPI and tax ID. It may differ from the rendering provider.
Bundling	Combining related services into one payment because one is considered part of another, as defined by coding rules such as NCCI edits.

C

Term	Meaning
Capitation	A payment model in which a plan pays a set amount per member per month regardless of how many services the member uses.
CARC (claim adjustment reason code)	A standard code on a remittance that explains why a claim or line was paid differently from what was billed, for example CARC 16 for missing information or CARC 97 for a bundled service.
Charge entry	Recording the codes, units, fees and provider details for each service so a claim can be created.
Claim	A request for payment sent to a payer that lists the patient, provider, services, diagnoses and charges.
Claim adjustment group code	A two-letter code paired with a CARC that assigns financial responsibility: CO (contractual obligation), PR (patient responsibility), OA (other adjustment) or PI (payer-initiated reduction).
Clean claim	A claim with every required element complete and correct, so the payer can process it without asking for more information. Many state prompt pay laws define the exact elements.
Clearinghouse	A company that checks claims for format errors, converts them to the payer's required electronic format and routes them, returning reports and remittances.
CMS-1500	The standard paper claim form for professional services. Its electronic equivalent is the 837P transaction.
Coinsurance	The patient's share of the allowed amount stated as a percentage, such as 20 percent, usually after the deductible is met.
Coordination of benefits (COB)	Rules that decide which plan pays first when a patient has more than one plan, so total payments do not exceed the allowed amount.
Copayment	A fixed dollar amount the patient pays for a service, such as an office visit, set by the plan.
CPT (Current Procedural Terminology)	The code set maintained by the American Medical Association for reporting medical, surgical and diagnostic services. Category I codes are five digits.
Credentialing	Verifying a provider's education, licensure and history so a payer can approve the provider to join its network.
Credit balance	A patient account with a negative balance because payments exceeded charges, which usually requires a refund to the payer or patient.
Crossover claim	A claim that Medicare automatically forwards to a secondary payer, such as Medicaid or a supplemental plan, after Medicare processes it.

Glossary entries D to H: denials to HMOs

D

Term	Meaning
Date of service (DOS)	The date a service was provided. Timely filing limits and coverage rules are measured from it.
Days in AR	The average number of days it takes to collect payment, calculated as total AR divided by average daily charges.
Deductible	The amount a patient must pay each plan year for covered services before the plan begins paying.
Denial	A payer's decision not to pay a claim or a line, explained by CARC and RARC codes on the remittance.
Downcoding	Reporting, or a payer reducing, a service to a lower-level code than the one billed, which lowers payment.

E

Term	Meaning
Electronic data interchange (EDI)	The exchange of standard electronic transactions, such as claims and remittances, between providers, clearinghouses and payers.
Electronic funds transfer (EFT)	Payment deposited directly into the practice's bank account, matched to the ERA by a trace number.
Eligibility verification	Confirming a patient's active coverage, benefits, cost sharing and authorization rules before the visit, often through the 270/271 transaction.
Evaluation and management (E/M)	CPT codes for visits in which a provider evaluates and manages a patient's health, such as office visit codes 99202–99215.
Explanation of benefits (EOB)	A statement from the payer showing how a claim was processed: billed amount, allowed amount, payment, adjustments and patient responsibility.
Electronic remittance advice (ERA)	The electronic version of a remittance, sent as the X12 835 transaction, which lets payments be posted automatically.

F

Term	Meaning
Fee schedule	A list of the amounts a payer allows for each code, or the practice's own list of charges.
Fee-for-service	A payment model in which each service is billed and paid separately.
First-pass resolution rate	The share of claims paid on first submission without rework, a common measure of claim quality.

G

Term	Meaning
Good faith estimate (GFE)	An estimate of expected charges that the No Surprises Act requires providers to give uninsured and self-pay patients for scheduled services.
Group number	The number identifying the employer or group plan under which a patient is covered, shown on the ID card.
Guarantor	The person financially responsible for the patient's bill, such as a parent of a minor.

H

Term	Meaning
HCPCS Level II	Alphanumeric codes maintained by CMS, a letter followed by four digits, used for supplies, drugs, equipment, ambulance services and services not in CPT.
HIPAA	The Health Insurance Portability and Accountability Act, which sets privacy and security rules for health information and the standard electronic transactions used in billing.
HMO (health maintenance organization)	A plan that generally covers only in-network care, except emergencies, and often requires referrals from a primary care provider.

Glossary entries I to O: ICD-10-CM to overpayments

I

Term	Meaning
ICD-10-CM	The diagnosis code set used in the United States to report why a service was provided. Every claim line links to at least one diagnosis code.
In-network	A provider that has a contract with the patient's plan and accepts its allowed amounts.
Incident-to	A Medicare billing rule that lets certain services by staff under a physician's direct supervision be billed under the physician, when all conditions are met.

L

Term	Meaning
Limiting charge	The most a Medicare non-participating provider who does not accept assignment can charge, set at 115 percent of the non-participating fee schedule amount.
Local coverage determination (LCD)	A Medicare Administrative Contractor's policy on when a service is reasonable and necessary in its region.

M

Term	Meaning
Medicare Administrative Contractor (MAC)	A private company that processes Medicare Part A and Part B claims for a region.
Medical necessity	The standard that a service is reasonable and needed to diagnose or treat a condition under accepted practice and the payer's policy.
Modifier	A two-character code added to a CPT or HCPCS code to show that a service was altered, such as modifier 25 for a separately identifiable E/M service.

N

Term	Meaning
National Correct Coding Initiative (NCCI)	CMS edits that identify code pairs that should not be billed together and the maximum units reported for a service.
National Provider Identifier (NPI)	A unique 10-digit number for providers: Type 1 for individuals and Type 2 for organizations.
No Surprises Act	A federal law, effective January 1, 2022, that limits surprise bills for emergency care, certain out-of-network care at in-network facilities and air ambulance services.
Non-participating provider	A provider that has not signed a participation agreement with a payer, such as Medicare, and may be paid differently.

O

Term	Meaning
Out-of-network	A provider without a contract with the patient's plan. The patient often pays more, and some plans pay nothing outside emergencies.
Out-of-pocket maximum	The most a patient pays for covered services in a plan year, after which the plan pays in full for covered in-network care.
Overpayment	A payment higher than what is owed, which must be refunded. Medicare requires overpayments to be reported and returned within 60 days of identification.

Glossary entries P to X: payers to X12

P

Term	Meaning
Patient responsibility	The portion of a bill the patient owes: deductible, copayment, coinsurance and non-covered amounts the patient agreed to pay.
Payer	The organization that pays the claim, such as a commercial insurer, Medicare, Medicaid or a workers' compensation carrier.
Payment posting	Recording payments, adjustments and denials from remittances to patient accounts.
Place of service (POS) code	A two-digit code that shows where a service was provided, such as 11 for an office or 10 for telehealth in the patient's home.
PPO (preferred provider organization)	A plan that pays more for in-network care but also covers out-of-network care at a lower level, usually without referrals.
Prior authorization	Approval a payer requires before certain services, drugs or equipment are provided, also called preauthorization or precertification.
Primary insurance	The plan that pays first under coordination of benefits rules.

R

Term	Meaning
RARC (remittance advice remark code)	A code that adds detail to a CARC, such as which information is missing. It appears on the ERA and EOB.
Referral	An order from a primary care provider sending a patient to a specialist, required by some plans before the specialist is paid.
Rendering provider	The clinician who actually performed the service, reported on the claim with an individual NPI.
Resubmission (corrected claim)	A replacement or corrected claim sent to fix an error on a claim already processed, using the frequency code the payer requires.
Revenue cycle management (RCM)	The full set of steps from scheduling and eligibility to coding, claims, payment posting, denials and patient collections.

S

Term	Meaning
Secondary insurance	The plan that pays after the primary plan, often covering some or all of the remaining patient cost sharing.
Self-pay	A patient who pays without insurance, or a balance billed directly to the patient.
Subscriber	The person who holds the insurance policy, such as the employee in an employer plan. Dependents are covered under the subscriber.
Superbill	An itemized form listing the codes, fees and provider details for a visit, often given to patients who file their own out-of-network claims.

T

Term	Meaning
Taxonomy code	A 10-character code describing a provider's type and specialty, reported with the NPI.
Timely filing limit	The deadline for submitting a claim after the date of service. Medicare allows 12 months; commercial limits vary by contract.
Tax identification number (TIN)	The federal tax number, an EIN or SSN, under which the billing provider is paid.

U

Term	Meaning
UB-04	The paper claim form for institutional services, also called the CMS-1450. Its electronic equivalent is the 837I.
Unbundling	Billing separately for services that should be reported with one code, which payers deny and which can raise compliance concerns.
Underpayment	A payment below the contracted or allowed amount owed for a service.
Usual, customary and reasonable (UCR)	A payer's measure of the typical charge for a service in a geographic area, often used for out-of-network payment.

W

Term	Meaning
Workers' compensation	Insurance that pays for treatment of work-related injuries, with its own fee schedules, forms and authorization rules.
Write-off	An amount removed from a balance that will not be collected, such as a contractual adjustment or approved bad debt.

X

Term	Meaning
X12	The standards organization whose electronic formats, such as the 837 claim, 835 remittance and 270/271 eligibility transactions, are adopted under HIPAA.

No common billing terms are listed under J, K, Q, V, Y or Z.

Remittance terms in practice: what is an EOB and what is an ERA

Three terms cause most of the confusion when a payment arrives: the allowed amount, the EOB and the ERA. Here is how they connect on a single claim.

Say a practice bills $200 for a visit. The payer's contract sets the allowed amount at $120, so $80 is written off as a contractual adjustment with group code CO and CARC 45. The patient has a $20 copay, shown with group code PR, and the payer pays $100. The $100 payment and the $20 copay add up to the $120 allowed amount.

EOB versus ERA

The EOB is the human-readable statement of that result, sent to the patient and, in a provider version, to the practice. The ERA is the same information in the X12 835 format, which billing software reads to post payments and adjustments line by line. Our article on EOB vs ERA covers the differences in detail, and the CARC and RARC denial code guide explains the codes that appear on both.

Practices that post ERAs carefully catch underpayments and denials sooner, because each adjustment code tells the team whether to bill the patient, appeal or write off the balance. That work is the core of payment posting and reconciliation.

Put the terms to work

If remittance codes, AR reports or payer contracts are hard to interpret in your practice, Fastora's certified billing and coding professionals can review them with you in a free medical billing audit.

New readers should also work through the common medical billing mistakes that create denials, and the FAQ page for short answers to pricing, credentialing and switching questions.

Checklist

Print checklist

• Know where the allowed amount appears on each payer's EOB and ERA.
• Map CARC group codes CO, PR, OA and PI to the correct posting action.
• Confirm clean claim elements match each payer's requirements before submission.
• Track timely filing limits by payer and contract.
• Review coordination of benefits order for patients with more than one plan.

Frequently asked questions