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

Professional and institutional billing are important medical billing and coding entities under federal and state regulations. While both entities have a common goal of getting reimbursement for patient services, both have different billing protocols. When you compare their surface level description, you might initially find little or no significant difference between institutional and professional billing. But, when you delve into the depth and look at their purposes, the methods used to bill and code them, and their complications, you will find the crucial differences without which claim acceptance requirements are never met.
Whether you are a medical practitioner or a person who wants to apply to a medical billing company, understanding institutional billing vs. professional billing is imperative because without understanding this difference, your claims will get denied, and revenue loss will occur. This post will cover the significant differences between hospital and physician billing to ease the task and provide a deep understanding. If you are still in the dilemma of claim denials, MedsIT Nexus comprehensively combines professional and institutional billing services, prioritized payer relationships, optimized front-end processes, and advanced technology to optimize your administrative process.

Difference between Institutional Billing and Professional Billing

While some billing steps are the same, some important aspects that differentiate both types of billing are given below.

Description

Institutional billing, also called hospital billing, is mainly performed for healthcare facilities, hospitals, and clinics. It includes hospital services from the patient's admission to treatment and covers the expenses of supplies, medicines, and room fees. The major types of services included are inpatient, emergency, hospital-based outpatient, and other facility services, while the specialized procedures are endoscopies, cardiac catheterizations, complex imaging, therapy services, and surgeries. Moreover, the pillar duties of institutional billers & coders are medical billing, charging, and payment collection.
On the other hand, professional billing encompasses the services performed by healthcare practitioners, physicians, and other entities; hence, it is also called physician billing. Healthcare providers, nurses, practitioners, therapists, physicians, chiropractors, and other medical staff use professional billing to get paid for their rendered services. The types of services included for professional billing are ambulatory and outpatient services, while the specialized procedures are routine outpatient consults, exams, and minor procedures. The primary duties of a professional biller encompass appointment scheduling, greeting patients at the front desk, registration & verification, and payment processing.

Differing claims - Institutional vs. professional claim

An institutional claim is used to submit a bill to an insurer for a patient who receives medical services from an institute (e.g., a hospital). Hence, it is linked to hospital billing and centers on billing procedures. On the other hand, professional claims are used to bill a patient who receives medical services from an individual practitioner or physician.
Paper Claim form: The UB-04 form captures and shows the patient received institutional services such as admission to a room, use of hospital equipment, etc., so the Administrative Simplification Compliance Act (ASCA) mandated its usage for hospital or institutional billing. On the other hand, the CMS-1500 claim form indicates physician services (non-institutional services). Hence, it is linked to physician billing and centers on medical coding.
Electronic claim form (EDI 837-I vs. 837-P): Payers, particularly Medicare and Medicaid, often require digital claim submission. Therefore, EDI 837, a standard HIPAA electronic claim form, is used to submit claims electronically. There are three types of EDI-837, two of which (837-I and 837-P) are used for medical billing. These are electronic versions of paper claim forms.

In institutional billing and claim formation, the electronic/digital version of the UB-04 form is 837-I, while I depict institutional configuration. Meanwhile, in professional billing and claims, the electronic/digital counterpart of CMS-1500 is 837-P, while P shows the professional configuration.
Note: As a medical practitioner, you must avoid mixing EDI-37 with EDI-20 and EDI-35 because this confusion will lead to errors. EDI-20, also called Payment Order/Remittance Advice, assists in electronically transferring funds between payers and medical practitioners, making institutes handle their monetary aspects such as payment reconciliation and tracking. Meanwhile, EDI-35, also called Healthcare Claim Advice/payment, is an electronic document comprising the information on the amount, claim denials, reasons, and adjustments, helping institutes lead the billing process smoothly.
Key aspects: The critical elements of an institutional claim are multiple services (medical procedures, surgeries, room charges, medical equipment, inpatient care), complex coding (due to diverse procedures, complex codes must be inserted), thorough documentation (diverse services are proved by comprehensive documentation), and submission of the claim by facility (institutions such as hospitals will be responsible for direct submission of the claim).
The critical aspects of professional claims include physician-centricity (the claim encompasses the services given by an individual provider), service variety (the claim consists of multiple services like medical consultations and procedures), clinical setting (the services mentioned to form a claim must be rendered in a clinical setting), and direct claim submission (the independent provider is responsible for directly submitting the claim to the respective payer).

Coding system

Cost

Facility charges or institutional fees have increased up to four times at 531% compared to professional fees (132%); hence, the average cost is still rising. This high price is because facility billing is more complicated, remains open 24/7, entails room fees and equipment charges, utilizes high technology, and adheres to strict adherence to state and federal laws about PHI privacy and its exchange, incurring more costs. As elaborated by the Colorado Hospital Association, institutional or facility encompasses the cost of service, fee for front-desk staff, nurses & assistants assisting patients, fee for staff managing clinical data (PHI), environmental services staff doing cleaning, managed services staff, technical services staff, and many more. Here, we have mentioned the terms technical services and managed services, making facility charges higher than professional fees. Let's have a bird's eye view for a better understanding.
As discussed earlier, professional services are the treatment and care given by an independent provider (outside an institute). Conversely, technical services are non-professional services (such as IT systems, EHR, AI, and pharmaceutical production in pharmacy), and technical charges do not include physician's professional charges. Similarly, managed services are the typical and familiar image of technical (IT) services, such as healthcare integration, digital workspaces, staff augmentation, data analytics, and cost.

Reimbursement models

As the healthcare world has shifted towards quality, the importance of value-based payment models cannot be denied.

Let MedsIT Nexus handle your professional and institutional billing with expertise!

It might seem easy to handle hospital and physician billing effectively and simultaneously provide quality care to patients. But, most providers compromise on one of these while performing both. Getting the help of 3rd party billers and coders is a wise decision toward the revenue. MedsIT Nexus is a proven and renowned medical billing company that allows you to outsource your administrative tasks to gain applaudable results. Our claim submission process implements electronic data interchange (EDI) to stay on time, efficiently, and accurately track the record of each claim. Considering the HIPAA guidelines, we take every step to protect PHI, such as clearing houses, cloud-based software, EHR, EMR, etc. Technology boosts accuracy and effectiveness, and the different types of auditing that we perform are beneficial. Moreover, our certified and experienced team is well-versed in better patient and client support and maintains transparency to enhance trust. We believe in quality over quantity; therefore, partnering with us is advantageous.