How to Read a Medical Bill: Understanding the Cost of Healthcare

Understanding your medical bill is no simple matter. Most are filled with specialized terminology, confusing acronyms, and numerical codes. When you decide to take steps to control your health costs knowing how to read your medical bills will come in handy. Knowing t the factors behind your medical bill will inform your healthcare spending by bringing clarity to the previously opaque process.

Administrative professionals are working behind the scenes from the moment you schedule an appointment up until you receive a bill. Most patients aren’t familiar with the negotiations that occur between insurance companies and healthcare providers. Understanding the back and forth can take some of the mystery out of the insurance and billing processes.

Once you receive a medical bill from your healthcare provider, you will notice that it consists of multiple components that might not be clear to you. For most patients, the codes, descriptions, and prices listed in their bills can seem confusing.

{{toc}}

Understanding Medical Bill Terminology

The following list explains each element of your medical bill with an in-depth description. Just to be clear, this is different from an Explanation of Benefits (EOB). An EOB is a statement from your insurance company about what will or will not be covered. We’ll talk more about that in part two of our series.

• Statement Date: The date your healthcare provider printed the bill.
• Account Number: Your own unique account number. It’s typically needed when paying a bill online and when discussing medical bills with your healthcare provider’s billing office.
• Service Date: The dates you received each medical service.
• Description: A short phrase that explains the services or supplies you received.
• Charges: The full price of the services or supplies you received before insurance has been factored in.

• Billed Charges: The total amount charged directly to either you or your insurance provider.
• Adjustment: The amount the healthcare provider has agreed not to charge.
• Insurance Payments: The amount your health insurance provider has already paid.
• Patient Payments: The amount you are responsible to pay.
• Balance / Amount Due: The amount currently owed to the healthcare provider.

• Payable to: The organization you should address check payments to.
• Service code / Current Procedural Terminology (CPT): A standardized code used by healthcare providers to identify the exact services and supplies you received during your appointment.

Now that the terminology has been defined, let’s look at steps that every patient can take to better understand if their healthcare bill is correct.

Step One: Get an Itemized Statement

If your bill does not include a detailed list of charges, call the billing office and ask for an itemized invoice. Requesting an invoice is the only way to make sure you’re being charged just for the services you received. You may receive additional statements from physicians, surgeons or specialists such as anesthesiologists, radiologists and pathologists who are not employees of the hospital or facility where you were treated. Request itemized bills from those providers as well.

Step Two: Check Basic Information

Make sure your name, address, other personal details, and health insurance information on the bill are correct. If this information is wrong it can lead to a claim denial.

If your bill includes an “adjustment” or a “plan discount,” that’s the difference between the full fee a doctor or facility charges for a service and the rate negotiated by your insurance company.

The “insurance payment” or “plan payment” shows what portion of the charges your insurance company has paid. If no payments appear here, your plan may not yet have paid what it owes — check with your insurer before paying the amount listed as due.

Step Three: Understand the Codes

Every medical procedure has a corresponding five-digit code. These codes, called Current Procedural Terminology (CPT) codes, determine how much your provider will be paid. There are thousands of codes, which add substantial complexity to healthcare billing. Mistakes range from simple typos to billing offices misreading or misinterpreting doctors’ notes or hospital discharge summaries. If the description of something is unclear or a charge seems excessive, you can type the code into Google to get a good idea of what it entails. Free online tools can offer an estimate of typical charges in your area for specific codes.

Step Four: Compare with your EOB

Every medical procedure or visit will be included on an explanation of benefits (EOB) from your insurance company. EOBs list the services performed, what the doctor or hospital charged, what your insurance company or Medicare paid, and what you owe. Make sure the dates and codes on that statement match the bills you receive from medical providers.

Step Five: Check for Common Errors

Medical billing errors are probably more common than you think, and they could be hurting your wallet. In fact, millions of Americans could be overpaying on their medical bills because of common errors. Whether it’s duplicate charges, incorrect information like a wrong insurance ID number, or an inflated quantity of services provided–errors happen, and they can be costly. Here are some of the most frequent billing mistakes to watch out for when reviewing your medical bill:

• Duplicate charges. Make sure a service or procedure isn’t listed more times than it was performed. Duplicate charges are surprisingly common. Also be sure to keep an eye out for simple typos. If an extra 0 was added, you could wind up being charged for 100 pills instead of 10.
• A treatment, medication, or procedure you didn’t receive. If you were scheduled for a test or procedure that was canceled, the procedure could still end up on your bill because no one removed it from your chart. 
• Incorrect patient information: Minor errors such as incorrect name spellings or policy number misprints are common on medical bills. If your insurance ID number is wrong, it can lead to a claim denial, or a full amount sent out by your health plan
• Operating room and anesthesia time: If you underwent surgery, check your medical records to see how long you were in the operating room or under anesthesia. Because patients are usually billed in 15-minute increments in these instances, mistakes here can add up quickly.
• Room fees. If the bill includes a hospital stay, check that you were charged for the right kind of room (shared or private) and the right number of days. If you were formally admitted after midnight, make sure your charges start on that day. Also, most insurance companies don’t allow hospitals to charge room fees for the day you’re discharged. 

You may find that you received all the services and that the bill is correct, but the charges themselves still seem excessive. Hospitals and doctors can charge whatever they want for your care, unless you are a Medicare or Medicaid beneficiary, but all medical bills are negotiable. If you think the cost of your care is too much, consider using a cost lookup tool to find out what a reasonable price might be for some of the services you received. FAIR Health is a great one, and it’s available for free. You should be able to look up some of the charges by code or service to verify your charges are similar.

‍