Institutional vs. Professional Billing: What’s the Difference?

For a clean claim submission, the billing staff should understand which billing type they are handling: institutional vs. professional billing. Hospitals charge payers for the facility used during treatment, and physicians file claims for services such as examinations, treatments, surgeries, etc. Any billing or coding discrepancy results in claim rejections and revenue gaps. Managing hospital and physician billing can be overwhelming for the organization. To resolve the issue, RCM vendors offer services to retain the financial health of the healthcare organizations. Furthermore, a provider and a hospital can outsource medical billing services to streamline revenue cycle management (RCM).

Understanding Institutional Billing vs. Professional Billing

Institutional Billing

Institutional billing, also called hospital billing, occurs when a hospital receives reimbursements from the payer. It is more facility-focused. This includes payments for medical equipment, laboratory tests, medication, transportation, rooms, imaging, etc. The payment is made for every facility used by the patient. The claim form for institutional billing is CMS-1450 (UB-04).

Professional Billing

Professional billing, also called physician billing, occurs when a provider receives reimbursements from the payer for the services rendered. It is more provider-focused. This includes inpatient and outpatient services, varying from consultation to surgery or post-surgical care. The claim form for physician billing is CMS-1500.

Which Billing Type Applies to Your Healthcare Practice?

It is essential to navigate which billing type (institutional vs. professional billing) is suitable to file a claim and receive reimbursements for the services rendered. Hospital billing is more complex due to the number of facilities involved in a single treatment. Conversely, physicians receive payments for diagnosis, treatment, examination, surgeries, etc. The institutional billing applies to your medical practice if the technical components are involved in the procedure. On the other hand, professional billing applies to billing the payer for evaluations, office visits, or any other patient encounter with the provider.

Reimbursement Models

The reimbursement models differ in institutional and professional billing. Healthcare organizations receive bundled payments according to the CMS payment criteria. Payers pay hospitals and healthcare centers based on treatment episodes and technical components used. On the contrary, professional billing payments are made based on the prospective payment system. The physician receives reimbursements according to the contractual agreement with the payer.

Coding System for Institutional vs. Professional Billing

HCPCS is used for hospital billing, which includes medical equipment, medications, medical transport, rooms, medical devices, etc. On the other hand, physician billing uses CPT and ICD coding systems to file claims and receive accurate payments. It is necessary to navigate institutional vs. professional billing coding systems to avoid billing and coding errors.

Overlapping of Institutional and Professional Billing

Suppose a patient receives treatment for the gallbladder removal. This surgical treatment requires hospital facilities and a surgeon. Post-surgical care is further necessary to observe the recovery period. So, the hospital bills the payer for the operating and recovery room, medical equipment, supplies, imaging, and lab tests. Conversely, the physician receives payment for the examination, treatment, surgery, and post-surgical care.

Conclusion

Both parties receive timely and accurate reimbursement by consulting institutional vs. professional billing services. The RCM experts enable providers and hospitals to enhance cash flow and reduce claim denials via clean claim submission. Professional billers use CMS form 1500, and hospital billers use CMS form 1450. In addition, they manage denied claims and rigorously follow up with the payer to speed up the AR recovery process.