At least once a week, a professional medical biller gets a phone call from a patient. “I got a bill from my insurance company,” the patient says. This is despite the fact that the top of the paper they are holding says, “THIS IS NOT A BILL.” Patients think it is a bill because it looks like a medical bill. It says that they are responsible for a set sum of money, or, sometimes, it states that a service on their healthcare claim was not covered by their insurer.

Patients do not receive bills for medical services from their insurers. Only healthcare providers send out bills for services rendered. What the patient receives is commonly called an Explanation of Benefits (EOB). Alternative terms include Summary of Benefits, Remittance Advisory, Coverage Determination, or Beneficiary Notice. Medical billers commonly refer to these as EOBs, and they are the means by which commercial healthcare insurers and government healthcare programs notify their beneficiaries of how an individual healthcare claim was processed for payment.

What is an EOB?

An EOB does look like a bill. It contains the date of service, the code used to bill a particular service to an insurance company, the fee charged by the healthcare provider, the allowed amount under the third-party payers’s contractual fee schedule, the patient’s responsibility under the terms of their coverage, the payment made by the payer, and the contractual write-off. The final entry of each line item is usually the titled something along the lines of, “what you owe,” or, “your responsibility.” This is why some patients confuse an EOB with a medical bill.

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Like most medical billing transactions, EOBs consist of medical code, not only the Healthcare Common Procedure Coding System (HCPCS Level I and Level II) codes, but also explanation codes that have been established by the Healthcare Portability and Accountability Act of 1996 (HIPAA). These explanation codes are easily understood by professional medical billers who are schooled in the language of healthcare reimbursement, but they are a mystery to laypeople who only encounter them in EOBs. While each EOB normally includes a definition of the adjustment and adjudication codes, they are often in fine print and their definitions are not always apparent to a person unfamiliar with reading them.

Adjudication Codes

Certified medical coders are not usually familiar with the code sets that third-party payers use to communicate payment or denial information to medical billers who post payments and make financial adjustments to patient accounts. These codes fall fully within the professional domain of a medical practice’s business office rather than its compliance department. This code set is used exclusively by third-party payers, and certified medical coders do not assign these codes. They are assigned by insurance adjusters as they process healthcare claims.

CO-16 means that required information was not receive on a healthcare claim, preventing payment for an otherwise covered service. N257 means that a third-party payer does not recognize the provider of service. CO-45 means that the fee charged exceeds the contractually agreed upon fee schedule. CO-97 means that a procedure has been bundled into a previously provided and charged, related service.

Professional medical billers recognize these codes and adjust accounts accordingly. Some codes, such as N257, indicate that a patient’s healthcare claim was submitted with an inaccurate National Provider Number (NPI) to identify that a credentialed provider rendered covered services to a patient. The claim is then corrected by the biller and resubmitted. Other codes, such as CO-97 mean that a claim must be referred to a certified medical coder to determine if the documentation in the patient’s medical record supports modifying a charged code, or if an appeal of denied payment should be initiated by supplying appropriate documentation.

The Role of EOBs

Third-party payers try to keep their beneficiaries informed of what healthcare claims were submitted on their behalf by healthcare providers. They inform their patients of expected financial obligations for healthcare received, such as copays, co-insurance, and deductibles. They also inform patients that they may have received services that a payer considers medically unnecessary, experimental, or cosmetic in nature. EOBs are an important factor in identifying healthcare fraud and abuse.

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Though most patients may not be able to discern the difference between the codes 99213 and 99214, an intermediate versus an extensive office visit as defined by Common Procedural Terminology (CPT), they can tell if they received an intramuscular injection (CPT 96372). By informing patients of what was charged on their behalf, third-party payers hope to identify fraudulent charges and patterns of abuse in the billing process.

The federal Medicare program has recognized that EOBs are a powerful fraud and abuse detection tool by actively enlisting beneficiaries to report suspected fraud and abuse. Medicare beneficiaries receive quarterly Medicare Summary Notices (MSNs) that detail all healthcare claims that have been submitted on their behalf in a three-month period. Recent changes in the format of MSNs are designed to make them more easily understood by people who are not fluent in the language of medical coding or HIPAA-standard adjudication codes. New MSNs contain plain language, and the Centers for Medicare and Medicaid Services (CMS) has undertaken an extensive public information campaign directing patients to compare their MSN to services actually received by healthcare providers.

Clean Claims

Professional medical billers and certified medical coders work together to ensure that accurate claims are submitted to third-party payers that clearly describe the services contained in the patient’s medical record. This includes accurate demographic information such as a patient’s date of birth, insurance identification number, or the provider’s NPI, and it also includes the correct procedural and diagnostic codes to describe services, with appropriate modifiers if applicable.

An EOB informs a patient of what is included in their healthcare claims, and how it was processed according to the terms of their coverage. In an efficient medical practice or inpatient facility, the information has already been applied to a patient’s account before the patient calls with a query. A medical biller applies the information contained in an EOB because he or she receives it in the form of a Remittance Advice (RA) that accompanies a check or formal denial from a third-party payer. When the patient calls, a professional medical biller can refer to a patient’s account and tell the patient what their financial responsibility is, if any, or if a denied claim has been corrected and resubmitted on their behalf.

The business side of medicine is conducted on a daily basis by professionals who are trained to negotiate the intricate transactions that govern healthcare reimbursement. Every medical code is associated with a charge and an agreed-upon fee. By applying the information contained in EOBs and RAs in an effective manner, medical billers ensure that no patient is responsible for more than is legally due for services, while medical coders ensure that no patient is responsible for more than is legally due for medically necessary services that were provided. EOBs ensure compliance with applicable statutes and contractual obligations, making patients an important component in the transparency of healthcare reimbursement. Educated and trained billers and coders strive to ensure that the only advisement code they see on an RA is CO-45.