A health care claim is a formal request for payment that a medical provider submits to a patient’s insurance company, or payer, after services have been rendered. This request details the procedures performed, the diagnosis, and the associated costs. Given the billions of transactions processed annually, a standardized format ensures efficiency and accuracy across the healthcare system. Without a uniform structure, providers would have to adapt their billing to thousands of different payer requirements, leading to administrative delays and errors. Standardization allows for the rapid, automated processing of these documents, enabling different computer systems to communicate effectively.
The Standardized Electronic Format
The dominant format for sending health care claims today is an electronic data file mandated by HIPAA regulations. This highly structured data transaction is known as the 837 Health Care Claim transaction set. The 837 file uses Electronic Data Interchange (EDI) standards, which structure data into specific segments and elements that computers can read and process automatically.
This electronic format transmits all the necessary information, including patient demographics, provider credentials, procedure codes (CPT/HCPCS), and diagnosis codes (ICD-10). Standardization ensures the information is consistent, complete, and machine-readable, reducing manual errors and subsequent claim rejections. The 837 standard is subdivided into three specific types to accommodate different billing scenarios across the industry.
The three main versions of the 837 transaction set specify the type of provider or service being billed. The 837P (Professional) is used by physicians, therapists, and other non-institutional providers for professional services. The 837I (Institutional) is used by facilities like hospitals and skilled nursing facilities to bill for facility charges. The 837D (Dental) is tailored specifically for dental claims.
The 837 standard is a complex file structure that ensures all parties—providers, clearinghouses, and payers—are speaking the same technical language. Adhering to this standard streamlines the reimbursement cycle, ensuring quicker payments and lower administrative costs compared to processing paper documents.
The Role of Paper Claim Forms
Despite the widespread shift to electronic submission, two standardized paper claim forms are used when electronic billing is not feasible or permitted. These forms are primarily used by very small practices, when a payer cannot accept electronic submissions, or when specific state programs require them. They act as a fallback option, though they are less common than their electronic counterparts.
The CMS-1500 form is used to bill for professional services, serving as the paper equivalent of the 837P electronic claim. Individual practitioners, such as doctors and physical therapists, utilize this form to submit claims for outpatient services. It includes fields for the patient’s information, provider details, and the specific codes describing the procedures and diagnosis.
The second primary paper format is the UB-04 form, also known as the CMS-1450. Institutional providers, including hospitals and nursing facilities, use this form to bill for facility charges. Unlike the CMS-1500, the UB-04 is designed to consolidate all charges related to a patient’s stay or an entire episode of care, such as room and facility fees.
Paper claims must be printed using special red “drop out” ink and must be typed, never handwritten, to ensure they can be accurately scanned and processed by payers. The process of mailing and manually handling these forms makes them slower and more prone to errors than electronic submission, which is why they are reserved for exceptional circumstances.
Navigating the Claims Submission Process
Once a healthcare provider generates a claim, the file must be securely transmitted to the insurance payer. While some large health systems submit files directly, the majority of claims are routed through an intermediary service known as a clearinghouse. A clearinghouse acts as a central hub, simplifying communication between thousands of providers and hundreds of different payers.
The clearinghouse performs a function called “claim scrubbing.” This involves validating the 837 file to ensure it is HIPAA-compliant and checking for common errors, such as missing patient information, invalid diagnosis codes, or incorrect payer IDs. If the clearinghouse detects errors, the claim is flagged and returned to the provider for correction before it ever reaches the insurance company. This significantly reduces rejections and speeds up the payment timeline.
After the claim passes scrubbing, the clearinghouse translates the standardized 837 file into the specific format required by the individual payer’s system. It then batches and securely transmits the claims to the appropriate insurance companies. This streamlined process allows a provider to send all claims to a single entity, which handles the distribution and format conversion.