What is Medical Billing and Coding?

Medical billing and coding are two distinct functions within any financially stable healthcare practice. Medical coding involves translating the clinician’s documentation into standardized alphanumeric codes. 

The documentation may include:

• Diagnoses
• Procedures
• Services 
• Supplies 
• Setting

The intricate process of medical billing uses these codes, along with patient, provider, and insurance information, to create, submit, and follow up on claims for payment. 

You should understand it like this: coding provides the standardized clinical information that billing uses, along with other claim data, to prepare and submit the claim. This includes:

1. ICD- 10-CM (International Classification of Diseases, 10th Revision, Clinical Modification) for diagnoses.
2. CPT (Current Procedural Terminology) for procedures and services.
3. HCPCS (Healthcare Common Procedure Coding System) Level II for supplies, durable medical equipment, ambulance services, drugs, and other services not represented by CPT codes.

Once the codes are finalized from the visit-related documentation, a biller handles the remaining process. They attach charges, verify payer requirements, and submit a clean claim. 

Together, medical billing and coding create a continuous revenue cycle. Thus, they are not separate departments working in isolation.

Examples of Medical Billing and Coding

Did you know that according to Experian, in 2025, 10% or more of claims were denied for a growing number of providers? A key reason for these denials was a misunderstanding of billing and coding requirements. 

Billing teams can learn about medical billing and coding only via real encounters. These encounters cover documentation and its conversion into revenue. It may also highlight how minor differences in detail impact a practice’s reimbursement at the end.

1. An Office Visit (Low-Complexity)

Consider the case of the patient who arrives at a general clinic with a sore throat and mild fever. The physician:

• Performs a focused history and exam
• Diagnoses acute pharyngitis
• Recommends rest and proper hydration before sending the patient home

Following the service, the biller reports the relevant ICD-10-CM code J02.9 (acute pharyngitis, unspecified) and an appropriate office/outpatient evaluation and management (E/M) code based on the documented medical decision-making or qualifying total time.

However, the exact codes used may vary according to the documented complexity. The claim is submitted with the provider’s charge based on the applicable contract or fee schedule.

The claim is submitted electronically to the payer for adjudication, after which the patient’s responsibility is determined. 

2. An Office Visit (Moderate-Complexity)

Consider another patient with the same sore throat. However, the physician:

• Documents a rapid strep test
• Notes the patient has poorly controlled type 2 diabetes (which complicates the visit)
• The encounter supports a higher level of medical decision-making based on the documented problems addressed, data reviewed or analyzed, and risk of patient management. 

Therefore, this encounter is not as simple as the previous one. It supports:

• Higher-level E/M code (99214)
• Dedicated CPT code for the strep test (87880)
• Secondary ICD-10-CM code for diabetes (E11.65 for hyperglycemia). 

Due to the additional work by the physician, the final reimbursement will be much higher than in the first case. 

Moreover, this scenario reflects a change in the medical billing and coding process. In this case, higher clinical complexity was documented, which is the core reason for increased reimbursement. 

Remember, the documentation detail drives reimbursement.

3. A Denied Claim and Its Correction

For our last example, imagine that a healthcare practice submits CPT 20610 with a non-specific diagnosis that does not adequately support the medical necessity requirements. The payer denies the claim due to a lack of medical necessity. 

This denial occurred because the procedure was not supported by clinical documentation. The physician reimbursement claim for the service is flagged as denied by the biller and is routed back to the coder.

During the review, the billing team verifies physician-documented osteoarthritis and the correct diagnosis code. The claim is then resubmitted after corrections and is paid. 

Such an error can be a common denial pattern, where a code pairing didn’t cover details for the encounter in the first submission.

Medical Billing and Coding Process

Medical billing and coding are part of a connected workflow, not isolated tasks. Therefore, the billing and coding process is multi-step and typically includes these stages:

1. Registration and Insurance Eligibility Verification: Confirming active coverage, benefits, network status, and applicable patient cost-sharing before the visit.
2. Clinical Documentation: The provider documents the patient encounter and relevant clinical information in the medical record.
3. Medical Coding: The coder translates the provider’s documentation into ICD-10-CM, CPT, and HCPCS codes. This is the key step that connects clinical documentation to claim creation. The accuracy of everything that follows depends on getting the coding right.
4. Charge Capture: Capturing all billable services and linking the documented procedures, supplies, and other charges to the appropriate codes and charge amounts.
5. Claim Scrubbing: Software and billing staff review the claim for missing information, coding conflicts, modifier issues, and payer-specific billing requirements before submission.
6. Claim Submission: Sending the completed claim electronically to the insurance payer.
7. Payer Adjudication: The payer processes the claim, applies its coverage and pricing rules, and determines the allowed amount, payment, contractual adjustments, patient responsibility, or denial.
8. Payment Posting: Recording payer payments, contractual adjustments, denials, and patient responsibility on the account.
9. Denial Management: Reviewing denied or underpaid claims, correcting any issues, and filing appeals when appropriate.
10. Patient Billing and Collections: Billing the patient for any balance and following up on outstanding amounts.
11. Reporting and Analysis: Reviewing performance and identifying opportunities to improve each step of the revenue cycle.

So, the medical billing and coding process involves multiple steps, and each step builds on the next step. An error in one step could collapse the entire billing and coding process. 

Typically, breakdowns occur at handoff points in different forms. For instance:

• Late claim submission leading to delays
• Claim submissions without querying an ambiguous code choice, increasing denial risk
• Missed eligibility check at registration surfacing as a rejected claim weeks later

Many billing problems can originate from miscommunication, incomplete information, or delays at these transition points. 

Thus, billing and coding must be treated as a single workflow by the practice, and not as isolated departments, to reduce denials.

How to Improve Medical Billing Process

According to Counter Force Health, less than 1% of denied claims are ever appealed. This means practices may leave significant amounts of potential reimbursement uncollected.

Therefore, medical billing and coding should prioritize preventing avoidable denials and delays while maintaining a structured process for recovering denied or underpaid claims. Practices must know how to improve the medical billing process, which they can ensure by:

Front-End Fixes 

The medical billing and coding process begins at the front desk, when staff collects patient and insurance information. The front-desk workflow is designed to prevent problems before services are rendered or claims are created.

The front-end fixes typically include:

• Real-time insurance eligibility verification
• Accurate capture of patient registration data
• Verifying whether prior authorization is required and tracking authorization status and expiration dates

Mid-Cycle Fixes 

Just because the front-end staff performs their duties properly does not mean errors will not occur mid-cycle. Therefore, practices must detect errors before submission, which can be done through:

• Automated claim scrubbing
• Standardized clinical documentation templates 
• Ongoing coder and biller training on annual coding and payer rule changes 

This is particularly important because the 2026 CPT code set includes 288 new Category I and III codes, along with 84 deletions and 46 revisions, effective January 1, 2026.

Back-End Fixes

Back-end fixes should focus on existing revenue recovery. Practices should employ a dedicated denial management workflow and not an ad hoc task assigned when time allows. Similarly, practices should ensure the system has:

• Structured collections strategy
• Regular internal claim and chart audits
• Timely claim follow-up and patient balance collection

Additionally, the need for automation and billing software often goes overlooked. Depending on the platform, billing software can support all three stages by:

• Supporting real-time eligibility verification
• Detecting scrubbing errors before submission
• Flagging potential duplicate charges or claims before submission

Moreover, the software helps track key metrics, such as:

• Denial rate
• Net collection rate
• Clean claim rate
• A/R aging

These metrics help practices identify denial patterns, A/R bottlenecks, and revenue leakage, allowing them to make data-driven improvements rather than relying on guesswork. 

However, practices that fail to employ medical billing and coding fixes may consider outsourced medical billing services as a practical option.

Differences Between Medical Billing and Coding

Even though medical billing and coding are connected, they are separate parts of the revenue cycle. Fundamentally, coding documents the care encounter and translates diagnoses and procedures into standardized codes. 

Conversely, billing creates, submits, and collects claims based on those codes. The following are some additional differences between the two:

Category	Medical Coding	Medical Billing
Primary Responsibility	Assign ICD-10-CM, CPT, and HCPCS codes.	Submit, track, and follow up on claims.
Core Knowledge	Anatomy, clinical terminology, coding guidelines.	Payer policies, claims processing, denials, collections.
Primary Output	Accurate, compliant codes.	Submitted claims, posted payments, resolved denials.

Medical Billing and Coding for Small vs. Large Practices

Practices vary based on patient volume and scale of operations, which impacts their needs. Many small practices employ one person, who handles both billing and coding. This person is typically called a “biller-coder.” 

Conversely, larger organizations separate medical billing and coding into distinct teams. Sometimes, this may include certified coders reporting to billing and collections staff. 

However, the same source documentation is used to derive information, regardless of the practice size. 

Note that a coding error isn’t limited to the coding step. Instead, it produces a:

• Billing denial
• Rejection
• Underpayment 

The difference between medical billing and coding matters even for practices that outsource it entirely. The reason? This understanding impacts:

• Accountability for denials 
• Training of the staff
• Evaluation of the billing partner’s scope of work

Common Medical Billing and Coding Errors

Medical billing and coding errors may vary for each encounter or service rendered. However, some common errors may occur during billing and coding. 

Billing Errors 

Billing errors typically include:

• Missed timely filing deadlines (filing claims after the submission deadline ends).
• Inaccurate or incomplete patient information (patient age, address, medical history, etc.).
• Missing prior authorization (providing specialized services without pre-authorization).
• Lapsed or missing insurance verification (rendering services while the patient doesn’t have valid insurance).
• Duplicate billing (billing the same item or service multiple times for the same patient).

Practices should remember that any of these billing errors can change a clean claim into a denial or a delay.

Coding Errors 

Coding errors typically include:

• Upcoding (billing for a higher level of service than documented).
• Undercoding (under-reporting service complexity, which quietly costs practices revenue).
• Unbundling (billing separately for services that should be billed as one bundled code).
• Incorrect or missing modifiers.
• Mismatched diagnosis-to-procedure codes (the pairing issue illustrated in the knee injection denial example above).

However, practices should learn that not all errors are the same. If a practice overlooks honest documentation gaps or appends outdated codes, the billers may correct the claim later. 

Upcoding, on the other hand, may lead to serious compliance and fraud exposure. Therefore, it must be addressed through internal policy, not a training refresher. 

According to the American Association of Professional Coders (AAPC), practices commonly face challenges due to the complexity of coding guidelines.

Other factors may also contribute to the complication, including:

• Gaps in clinical documentation 
• Continued use of outdated codes 
• Overlooking annual updates
• Poor coordination between clinical staff, coders, and billers

Given how quickly medical billing and coding updates are implemented, following current guidelines is no longer optional. It is necessary for practices trying to avoid preventable denials.

How Does Outsourcing Medical Billing Help Healthcare Practices?

Practices must prioritize coding accuracy, payer expertise, and revenue cycle efficiency throughout the billing process. 

The right billing partner can uncover:

• Missed charges
• Underpayments
• Recurring denial patterns 

MediBillMD’s medical billing services streamline medical billing and coding, helping providers improve reimbursement collection and reduce administrative burden. 

Lastly, practices considering outsourcing should choose a partner based on their billing management expertise.