Research Outline

Insurance Companies - Provider Payment Process


To understand the process through which insurance companies and healthcare programs such as Medicare and Medicaid pay healthcare providers for their services by determining required information, the submission process, and payments disbursement to comprehend the pain points of the market.

Early Findings

Insurance Companies

  • Insurance companies use medical information to underwrite policies. These companies receive this information directly from health providers and other sources. Also, it's worth noting insurance companies share information with other insurers.
  • For patients that have previously applied for an insurance policy with a MIB Group, Inc. (previously known as the Medical Information Bureau) member, this information may be in the MIB database. The MIB provides medical information to the members taken from individuals' insurance applications. Member companies also need to report back to the MIB.
  • Insurance companies pay a fee both to become a MIB member and every time they consult the company's database.
  • Despite the fact that some state and federal privacy laws may require a healthcare provider to keep records private, an insurance company can demand to review all necessary records before reimbursing the providers for services rendered. In fact, information about patients who pay from their own pocket can also be obtained because most providers and hospitals are part of health care networks that require access to all records, not just their own enrollees.
  • Regarding payments, as most large companies are self-insured, meaning they use third-party administrators and pay claims as they occur. The third-party administrator is usually the same insurance company, which will be in charge of supplying a network of contracted clinicians, processing claims, and providing other infrastructure.


  • The largest payer entity in the United States is the federal government, through Medicare. The traditional fee-for-service Medicare and the Center for Medicare are used to create contracts with intermediaries that set most local policy and process claims.
  • Medicare uses prospective payment systems for most of its providers. Basically, these systems require that Medicare pre-determine a base payment rate for a given unit of service (e.g., an episode of care, a treatment, a hospital stay, a particular service). Then, depending on several variables such as the provider’s geographic location and the complexity of the patient receiving the service, payment is adjusted for each unit of service provided.
  • They receive information about billing and the patient's information is sent through claims created by medical billing specialists. When billing for traditional Medicare (Parts A and B), they follow the same protocol as for private, third-party payers, and input the required patient information, NPI numbers, procedure codes, diagnosis codes, price, and Place of Service codes.
  • The biller can use manual forms to bill Medicare. Requiring different forms for different parts of Medicare. However, for the most part, they will enter the proper information into a software program and then use that program to transfer the claim to Medicare directly.
  • The claim is then processed by a Medicare Administrative Contractor (MAC), who will evaluate and adjudicate each claim sent to Medicare. When a Part A claim is processed by Medicare, Medicare pays the provider directly for the service rendered by the provider. On the contrary, in a Part B claim, there will be an 80% - 20% breakdown, where Medicare will pay the majority of the cost of the service provided and the patient will pay the rest.
  • In most cases, providers are paid through electronic funds transfer as claims are received and adjudicated.

Summary of Findings

  • During our initial hour of research, we focused on assessing the availability of the information with a focus on insurance companies and Medicare practices. We have provided a brief overview of the Medicare claim creation and billing process. However, the Medicaid claim creation process proved to be more difficult to determine due to the fact that Medicaid regulations vary state-by-state. Further information about the Medicaid billing process can be provided with continued hours of research. However, if a regional approach is preferred (e.g California) this should be clearly stated in any response.