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

A man at a desk is confused and frustrated by his medical bills.
Understanding medical bills can be confusing and frustrating for many patients.

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. Fees might seem illogical when you ask for cost estimates from your medical provider or insurance company, or when you receive a bill after your appointment. However, there are many things that factor into calculating the cost of healthcare services.

Medical billing and coding 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.

Understanding Medical Bill Terminology

A couple looks over their medical bills.
Medical bills include a lot of terminology that often leads to confusion when reading.

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: This is 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: Your bill includes a column listing the dates you received each medical service.
  • Description: This is a short phrase that explains the service or supplies you received.
  • Charges: This is the full price of the services or supplies you received before insurance has been factored in.
  • Billed Charges: This is the total amount charged directly to either you or your insurance provider.
  • Adjustment: This is 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 the healthcare provider.
  • Payable to: This is the organization you should address check payments to.
  • Service code / Current Procedural Terminology (CPT): Healthcare providers use a standardized code to identify the exact services and supplies you received during your appointment.

Now that the terminology has been defined, let’s take a look at steps 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. That’s 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 and other personal information on the bill are correct and verify your health insurance information. 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 numerical systems, called Current Procedural Terminology (CPT) determine how much your provider will be paid. There are thousands of billing codes, and they’re very complicated. 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 is. Utilize free online tools to get an estimate of typical charges in your area for specific codes.

Step Four: Compare with your EOB

Every medical procedure or visit will show up on an explanation of benefits (EOB) from your insurance company. These 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 costing you money. 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 looking at 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 but it was canceled, it could still end up on your bill because no one removed it from your chart. 
  • Incorrect patient information: Small 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 may 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.

Did you find this post helpful? Be sure to read our other guides on how to understand your Explanation of Benefits (EOB) statement and how to appeal a claim.

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