Medical Necessity
BillingRequirement that services must be reasonable and necessary for diagnosis or treatment of illness or injury. Payers will not cover services deemed not medically necessary. Determined by diagnosis codes, clinical guidelines, coverage policies. Provider documentation must support medical necessity.
More Billing Terms
Ambulatory Payment Classification
Payment system for Medicare outpatient services including hospital clinics, emergency departments, same-day surgeries. Groups services with similar clinical characteristics and costs. Updated quarterly. Used instead of DRGs for outpatient settings. Determines Medicare reimbursement.
Bundling
Payment methodology where multiple related services are paid under single comprehensive code rather than separately. National Correct Coding Initiative (NCCI) defines bundling rules. Prevents fragmentation of services. Common in surgical procedures where anesthesia, supplies bundled with primary procedure.
Chargemaster
Comprehensive list of hospital's prices for all services, procedures, supplies. Used to generate patient bills. Charges typically higher than actual payment from insurance. Negotiated rates lower than chargemaster. Uninsured patients may be charged full chargemaster rates. Must be publicly available.
Claim Rejection
When claim not accepted for processing due to errors—wrong patient ID, incomplete information, formatting issues. Must be corrected and resubmitted. Different from denial.
CMS-1500 Form
Standard paper claim form for billing professional services from physicians, suppliers, other non-institutional providers. Used for Medicare, Medicaid, private insurance. Also called HCFA-1500. Contains patient demographics, diagnosis codes, procedure codes, charges. Most claims now submitted electronically.
Conversion Factor
Dollar amount multiplied by total RVUs to calculate Medicare payment. Single conversion factor for most physician services. Adjusted annually by Congress or formula. 2023 factor is about $33. Geographic practice cost indices adjust for local costs. Final payment = RVU × CF × GPCI.
Understanding Your Benefits Made Easy
Use our tools to navigate Minnesota PFML and health insurance