Billing Glossary

We understand that some of the terminology on billing statements may be unfamiliar, so we’ve provided a list of commonly used terms and definitions.


Ambulatory care – Refers to outpatient services; ambulatory surgery refers to outpatient surgery or same-day surgery.

Applied to deductible – Portion of the bill your insurance company requires you to pay to the hospital.

Billed charges – The total charges that the hospital sends to the insurance company or patient before any negotiated contracts or discounts have been applied.

Birthday Rule – Used to determine coordination of primary or secondary benefits for children when both parents insure them. The rule indicates that the plan of the parent whose birth date (month and day) falls earlier in the calendar year is the primary plan for dependent children. If the parents have the same birth date, the health plan that has been in effect longest will be the primary insurance.

For situations in which the parents are separated or divorced and both parents have coverage for the child, the benefits are determined in the following order:

1.    The insurance plan of the parent with legal custody of the child.
2.    The plan of the spouse of the parent with legal custody of the child.
3.    The plan of the parent who doesn’t have legal custody of the child.

Please note, the benefit determination of divorced or separated parents can vary depending on the court decree. 

Coordination of benefits (COB) – The combination of benefits payable under more than one health insurance policy, such as Medicare (primary insurance) and supplemental insurance (secondary insurance). 

Contractual adjustment – The difference between the insurance contracted payment amount and the amount of the charge.

Copayment or co-insurance – A set fee that you must pay for healthcare services, determined by your insurance company

CPT codes – Used to describe services provided by healthcare providers.

Deductible – A set amount that you must pay for your healthcare services before your insurance company will make a payment. The amount is predetermined by your insurance company based on your policy, usually on a calendar-year basis.

Explanation of benefits (EOB) – An explanation of payments that your insurance provider sends to both the healthcare provider and you, the policyholder.

Guarantor – The person who’s responsible for the medical bill.

Managed care – A medical delivery system, or medical group, that manages the quality and cost of medical services.

Medi-Cal – A state and federal government-funded health insurance program that provides free or low-cost health coverage for California residents who meet eligibility requirements.

Medically necessary – Services or supplies that are required to treat a specific medical condition. Those that aren’t considered medically necessary by insurance may be denied.

Medicare – The federal health insurance program for people 65 or older, certain younger people with disabilities, and people with end-stage renal disease. Medicare is made up of four components:

  • Part A (hospital insurance) – Covers inpatient stays, care in a skilled nursing facility, hospice care and some home healthcare.
  • Part B (medical insurance) – Covers certain doctors' services, outpatient care, medical supplies and preventive services.
  • Part C (Medicare Advantage Plans) – A Medicare Advantage Plan is a type of Medicare health plan offered by a private company that contracts with Medicare to provide you with all your Part A and Part B benefits.
  • Part D (prescription coverage) – Adds prescription drug coverage to some Medicare plans. These plans are offered by insurance companies and other private companies approved by Medicare.

Non-covered services (non-covered charges) – Services that aren’t covered by the insurance policy. The patient is responsible for paying these charges.

Nonparticipating provider (out-of-network provider) – A doctor, hospital or other healthcare entity that isn’t part of an insurance plan's network. If you receive services from a nonparticipating provider, you may be responsible for full payment or higher costs. 

Out-of-pocket expenses – Payments for medical services due from the patient, including copayments, co-insurance and deductibles.

Payment arrangements (payment plan) – A formal payment plan that’s arranged with the hospital’s financial services department. These plans are based on established policies and guidelines.

Payor (payer) – A third-party entity, either commercial or government, that processes and applies payment for your medical claim.

Prior authorization/pre-authorization/pre-certification – The process of getting a formal agreement from your insurance company that it will cover specific services before the service is performed. Your insurance company may require pre-authorization for certain tests, procedures, or services or consultations from specialists. Most insurance companies require pre-authorization for hospital services.

Self-pay – When you pay out of pocket for medical services. You may pay for services on your own if you don’t have insurance, your insurance doesn’t cover a particular service, or you decide to handle payment without submitting to your insurance company. In these instances, payment is due 30 days from when you’re discharged from the hospital.

Subscriber – The person enrolled in a healthcare plan.

Workers compensation – Insurance coverage provided by employers to cover medical care costs of employees injured on the job.