Healthcare finance terminology.

ABN (Advance Beneficiary Notice)

A written notice a provider gives a Medicare patient before delivering a service that Medicare may not cover. By signing the ABN, the patient acknowledges they may be responsible for the cost if Medicare denies the claim.

Accountable Care Organization (ACO)

A group of healthcare providers who coordinate care for a defined patient population and share in savings achieved when total cost of care falls below a benchmark. ACOs operate under value-based payment contracts with Medicare or commercial payors.

Accounts Receivable (AR)

Money owed to a healthcare provider by payors or patients for services already rendered. In insurance billing, accounts receivable represents the outstanding balance of submitted claims not yet paid by the payor.

Accounts Receivable Finance

A financing structure in which a provider sells insurance receivables to a third party in exchange for immediate cash. Unlike a loan, accounts receivable finance does not add debt to the balance sheet. Copay offers this on a non-recourse, service-line basis.

Adjudication

The process by which an insurance payor evaluates a submitted claim, determines coverage, calculates the allowed amount, and issues a payment decision. Timelines typically range from 30 to over 90 days depending on the payor and claim complexity.

Advance Rate

The percentage of a claim's Expected Net Reimbursement provided to the provider as an upfront payment at the time of purchase. Copay calculates purchase amounts individually per claim based on actual reimbursement performance data.

Allowed Amount

The maximum amount an insurance payor will pay for a covered service, as determined by the provider's contract with the payor. The allowed amount is typically less than the billed charge and forms the basis for calculating patient cost-sharing.

Assignment of Benefits

An authorization that allows an insurance company to pay healthcare providers directly for services rendered, rather than sending payment to the patient. Most providers require patients to sign an assignment of benefits before providing care.

Authorization

Approval from an insurance payor obtained before providing certain services. Also called prior authorization or pre-authorization. Claims submitted without required authorization are typically denied. See also: Prior Authorization.

Balance Billing

Billing a patient for the difference between a provider's billed charge and the amount paid by insurance. Many states have enacted balance billing protections prohibiting in-network providers from balance billing patients beyond their standard cost-sharing amounts.

Billed Charges

The full amount a provider bills for a service before any contractual adjustments or insurance payments. Also referred to as gross charges. Billed charges are almost always higher than the allowed amount under payor contracts.

Bundled Payment

A single payment for the combined cost of services provided during a defined episode of care, such as a surgical procedure and its post-operative care. Payors use bundling rules to prevent separate billing for services included in a global payment.

Business Associate Agreement (BAA)

A HIPAA-required contract between a covered entity (such as a healthcare provider) and a business associate that handles protected health information (PHI). Copay executes a BAA with every practice before the integration goes live.

Capitation

A payment model in which a provider receives a fixed monthly payment per enrolled patient, regardless of the number or type of services provided. Capitation transfers utilization risk from the payor to the provider.

CARC (Claim Adjustment Reason Code)

A standardized code used by payors on remittance advice to explain why a claim was adjusted, reduced, or denied. Common CARCs include code 97 (contractual adjustment) and code 50 (not covered by plan).

Carve-Out

A health plan design in which a specific benefit — such as behavioral health, pharmacy, or dental — is managed separately from the main health insurance policy, often by a specialized third party.

Claim

A formal request submitted by a healthcare provider to an insurance payor for reimbursement of services rendered. Professional claims are submitted on the CMS-1500 form (837P electronically). Facility claims use the UB-04 form (837I electronically).

Clean Claim

A claim that complies with all standard coding guidelines, contains no missing or invalid information, and requires no additional information from the provider for processing. Clean claims are processed and paid faster than claims with deficiencies.

Clearinghouse

A third-party company that acts as intermediary between providers and payors, translating and transmitting claims data in standardized EDI formats. Copay integrates with major clearinghouses without disrupting existing submission workflows.

Clinical Validation Denial

A denial issued when a payor's clinical reviewers determine that the diagnosis codes on a claim are not supported by the clinical documentation in the medical record.

CMS-1500

The standard paper claim form used by professional (non-facility) healthcare providers to bill Medicare and most commercial payors. Electronically, the CMS-1500 is submitted as an 837P transaction.

Coordination of Benefits (COB)

The process used to determine which insurance plan pays first (primary) and which pays second (secondary) when a patient has more than one health insurance policy. COB rules prevent duplicate payment for the same service.

Copayment

A fixed dollar amount a patient pays for a covered service at the time of the visit, separate from their deductible or coinsurance. Copayments are set by the patient's insurance plan.

CPT Code (Current Procedural Terminology)

A standardized set of medical codes maintained by the American Medical Association used to describe medical, surgical, and diagnostic procedures for billing purposes. CPT codes are five-digit numeric codes used on all professional claims.

Credentialing

The process by which a payor verifies a provider's qualifications, licensure, education, training, and competence before allowing the provider to participate in the payor's network. Credentialing must be completed before claims can be submitted.

Days in AR

A metric measuring the average number of days it takes a practice to collect payment after providing a service. Calculated by dividing total AR by average daily charges. Higher days in AR typically indicate collection delays or billing inefficiencies.

Deductible

The amount a patient pays out of pocket for covered services before their insurance plan begins paying. Deductibles reset annually and vary by plan. High-deductible health plans shift more initial cost to the patient.

Denial

A payor's refusal to pay a submitted claim, in full or in part. Common denial reasons include lack of medical necessity, missing authorization, timely filing violations, and eligibility issues. Copay absorbs denial risk on eligible purchased claims.

Denial Rate

The percentage of submitted claims denied by payors. A high denial rate indicates billing or coding issues, credentialing gaps, or systemic payor problems. Industry average denial rates range from 5% to 15%.

Discount Fee

The fee charged by Copay for purchasing insurance receivables. Deducted from the purchase amount before deposit, it reflects the time value of money and the risk assumed on each purchased claim.

DRG (Diagnosis Related Group)

A classification system used by Medicare and some commercial payors to set fixed payment rates for inpatient hospital services based on diagnosis, procedures performed, and patient characteristics.

EDI (Electronic Data Interchange)

The electronic exchange of standardized healthcare data between providers, clearinghouses, and payors. The 837P transaction is used to submit professional claims. The 835 transaction carries electronic remittance advice. Copay integrates at the EDI layer.

Eligibility Verification

The process of confirming a patient's insurance coverage, plan details, and benefit information before providing services. Eligibility verification helps prevent claim denials due to inactive coverage or benefit limitations.

ENR (Expected Net Reimbursement)

Copay's proprietary metric for estimating the actual net payment a specific claim will receive from a specific payor. ENR is calculated using actual historical reimbursement performance data for the payor, procedure, and specialty combination and forms the basis of Copay's purchase pricing.

EOB (Explanation of Benefits)

A document sent by an insurance payor to a patient explaining how a claim was processed, what was covered, what was denied, and what the patient owes. Not a bill. Providers receive a corresponding Remittance Advice.

ERA (Electronic Remittance Advice)

The electronic version of a paper Explanation of Benefits sent from a payor to a provider. The 835 EDI transaction carries ERA data and includes claim payment details, adjustment codes, and denial reasons.

Fee Schedule

A complete listing of fees a payor uses to reimburse providers for covered services. Providers contracted with a payor agree to accept the fee schedule amounts as payment in full.

Fee-for-Service

A payment model in which providers are paid separately for each service rendered. The dominant reimbursement model in the United States, fee-for-service creates incentives for volume and is gradually being supplemented by value-based payment models.

Global Period

A defined period following a surgical procedure during which the surgeon's fee includes all routine post-operative care. Major surgeries have a 90-day global period. Minor procedures have a 10-day global period. Separately billing for services within the global period results in claim denials.

Group NPI

A National Provider Identifier assigned to a healthcare organization or group practice. Claims may be submitted under either the rendering provider's individual NPI or the group NPI, depending on the payor's billing requirements.

HCPCS Code (Healthcare Common Procedure Coding System)

A standardized set of codes used to describe products, supplies, and services not covered by CPT codes. Level I HCPCS codes are CPT codes. Level II HCPCS codes (letter-prefixed) cover Medicare and Medicaid services, durable medical equipment, and non-physician services.

HIPAA (Health Insurance Portability and Accountability Act)

Federal legislation that establishes national standards for protecting patient health information (PHI), standardizing electronic healthcare transactions, and ensuring the portability of health insurance. All healthcare providers, payors, and their business associates must comply with HIPAA.

HMO (Health Maintenance Organization)

A type of health insurance plan that requires members to receive care within a defined network and typically requires a primary care physician referral to see a specialist. HMOs generally have lower premiums but less flexibility than PPO plans.

ICD-10 Code

The International Classification of Diseases, 10th Revision — the standardized diagnostic coding system required on all U.S. healthcare claims. ICD-10-CM codes describe diagnoses. ICD-10-PCS codes describe inpatient procedures. Correct ICD-10 coding is required for claim adjudication.

In-Network

A provider who has contracted with a health insurance plan to provide services at negotiated rates. Patients generally pay less for in-network services than for out-of-network services.

In-Network Contract Rate

The negotiated reimbursement rate agreed upon between a provider and a payor. Providers accept the contract rate as payment in full for covered services and cannot bill patients for the difference between billed charges and the contract rate.

LCD (Local Coverage Determination)

A Medicare Administrative Contractor's decision about whether a particular service is covered under Medicare in a specific geographic area. LCDs specify the diagnoses and clinical conditions that support medical necessity for covered services.

Managed Care

A healthcare delivery and financing system designed to manage cost, utilization, and quality through networks of contracted providers, prior authorization requirements, and utilization management programs. HMOs and PPOs are common managed care structures.

Medical Necessity

The standard used by payors to determine whether a service is appropriate and required for the diagnosis or treatment of a patient's condition. Claims denied for lack of medical necessity require clinical documentation demonstrating the appropriateness of the service.

Modifier

A two-digit code appended to a CPT or HCPCS code that provides additional information about the service performed without changing the base code's definition. Common modifiers include 25 (significant, separately identifiable E&M), 59 (distinct procedural service), and 50 (bilateral procedure).

Non-Recourse

A financing structure in which the purchaser of a receivable absorbs the loss if the receivable is not collected. Copay's purchase structure is non-recourse on eligible claims — if a purchased claim is denied, the provider keeps the purchase amount.

NPI (National Provider Identifier)

A unique 10-digit identification number required by HIPAA for all healthcare providers who transmit health information electronically. Individual providers have their own NPI. Group practices receive a separate group NPI.

Out-of-Network

A provider who has not contracted with a patient's health insurance plan. Payors typically reimburse out-of-network services at a lower rate or not at all, and patients face higher cost-sharing for out-of-network care.

Out-of-Pocket Maximum

The most a patient will pay for covered services in a plan year. Once a patient reaches their out-of-pocket maximum, the insurance plan pays 100% of covered services for the remainder of the year.

Payor (Payer)

Any organization that pays for healthcare services on behalf of a patient. Payors include commercial health insurance companies, Medicare, Medicaid, and self-insured employer health plans.

Place of Service (POS)

A two-digit code on professional claims that identifies the location where a service was rendered. Common codes include POS 11 (office), POS 21 (inpatient hospital), POS 10 (telehealth in patient's home), and POS 02 (telehealth other than patient's home).

PPO (Preferred Provider Organization)

A type of health insurance plan that allows members to see any provider but offers lower cost-sharing for in-network providers. PPOs do not require primary care physician referrals for specialist visits.

Premium

The monthly amount paid by an individual or employer to maintain health insurance coverage. Premiums are paid regardless of whether services are used and are separate from deductibles, copayments, and coinsurance.

Prior Authorization

Approval required from an insurance payor before a provider performs certain services or prescribes certain medications. Claims for services requiring prior authorization that was not obtained are typically denied. Also called pre-authorization or precertification.

Provider Enrollment

The process of registering with a payor to become a participating network provider. Providers must complete enrollment before submitting claims to that payor. Enrollment requirements vary by payor and may include credentialing, contract negotiation, and EFT setup.

Purchase Agreement

The legal agreement between Copay and a healthcare provider governing the purchase of insurance receivables. The purchase agreement defines eligible claims, purchase pricing, the non-recourse terms, and the rights and obligations of each party.

Reconciliation

The process of matching payor remittances against purchased or billed claims to verify payment accuracy and identify underpayments, denials, or adjustments. Copay performs automated reconciliation on all purchased claims as remittances are released.

Remittance Advice (RA)

A document sent by a payor to a provider explaining how claims were processed and paid. Remittance advice includes payment amounts, contractual adjustments, denial codes, and patient responsibility amounts. Electronic remittance advice (ERA) is delivered as an 835 EDI transaction.

Revenue Cycle Management (RCM)

The financial process healthcare organizations use to track patient care from registration and appointment scheduling through the final payment of a balance. RCM encompasses eligibility verification, charge capture, coding, claim submission, payment posting, denial management, and collections.

Secondary Insurance

A health insurance plan that pays after the primary insurance plan has processed a claim. Secondary insurance may cover some or all of the remaining patient balance after primary insurance payment. Coordination of benefits rules determine which plan pays first.

Self-Pay

A patient who does not have health insurance or who is being billed for services not covered by insurance. Self-pay claims are not purchased by Copay as they are not insurance receivables.

Timely Filing

The deadline by which a claim must be submitted to a payor after the date of service. Most commercial payors require claims within 90 to 180 days of service. Medicare requires claims within one year. Claims submitted after the timely filing deadline are denied and cannot be appealed on clinical grounds.

UB-04

The standard claim form used by hospitals and facility providers to bill for inpatient and outpatient services. Electronically, the UB-04 is submitted as an 837I transaction. Professional (non-facility) providers use the CMS-1500 instead.

Unbundling

Billing separately for services that should be billed together under a single comprehensive code. Unbundling is a common billing compliance issue that can trigger payor audits and Medicare fraud and abuse investigations.

Underpayment

When a payor reimburses less than the contracted rate for a covered service. Identifying underpayments requires comparing actual payments to contract terms. Systematic underpayment recovery is a core function of revenue cycle management.

Upcoding

Billing a higher-level procedure code than the service actually performed in order to receive a higher reimbursement. Upcoding is a form of healthcare fraud subject to False Claims Act liability.

Utilization Management

A set of techniques used by payors to manage the cost and appropriateness of healthcare services. Includes prior authorization, concurrent review, and retrospective review. Intended to ensure services are medically necessary and delivered in the appropriate setting.

Value-Based Care

A healthcare payment model in which providers are compensated based on patient health outcomes rather than volume of services. Value-based contracts may include quality bonuses, shared savings arrangements, or downside risk for providers who exceed cost benchmarks.

Write-Off

The amount a provider agrees not to collect, typically representing the difference between the billed charge and the allowed amount under a payor contract. Contractual write-offs are standard in medical billing. Bad debt write-offs occur when a balance is deemed uncollectible.