A medical claim is a standardized document that a healthcare provider sends to an insurance company requesting payment for services delivered to a patient. Every time you visit a doctor, get lab work, or spend time in a hospital, the provider’s office translates that encounter into codes and data fields, packages them into a claim, and submits it to your insurer for reimbursement. It’s the mechanism that makes the entire insurance billing system work.
What Information Goes Into a Claim
A medical claim is essentially a detailed invoice, but it follows a rigid format with dozens of required fields. At minimum, it includes your name, date of birth, sex, and insurance ID number. It also identifies the provider who treated you using a National Provider Identifier (NPI), a unique 10-digit number assigned to every healthcare provider in the U.S.
The clinical heart of a claim lives in two types of codes. Diagnosis codes, called ICD-10 codes, describe what’s wrong with you. A single claim can list up to 12 diagnosis codes. Procedure codes describe what the provider actually did. For most office visits, tests, and surgeries, those are CPT codes. A second tier of codes, called HCPCS Level II, covers items that CPT doesn’t, like durable medical equipment (wheelchairs, CPAP machines), prosthetics, certain drugs, and ambulance services.
Beyond codes and patient info, the claim includes dates of service, the location where care was provided, the charges for each service, and information about any referring or ordering provider. If even one of these fields is wrong or missing, the claim can bounce back before the insurer ever looks at it.
Professional Claims vs. Institutional Claims
There are two main categories of medical claims, and they use different forms. Professional claims cover services from individual practitioners: your primary care doctor, a surgeon, a physical therapist, a radiologist. These use the CMS-1500 form (or its electronic equivalent, the 837P file).
Institutional claims cover facility-based services: hospitals, skilled nursing facilities, hospice programs, dialysis centers, and birthing centers. These use the UB-04 form, or electronically, the 837I file. A separate form, the ADA-2012 (837D electronically), handles dental claims. The distinction matters because the data fields differ. A hospital stay generates a very different set of billing details than a 15-minute office visit.
How Claims Are Submitted
Most claims today are filed electronically. An 837 file is the standard electronic format, mandated under HIPAA, that replaces the old process of printing and mailing paper forms. Providers rarely send claims directly to insurers, though. Instead, they route them through a clearinghouse, a third-party service that acts as a secure intermediary.
The clearinghouse performs what’s called “claim scrubbing,” a layered validation process that catches problems before the insurer ever sees the claim. This includes checking that the electronic file structure meets HIPAA formatting standards, verifying that patient demographics and provider identifiers are consistent, reviewing diagnosis and procedure code pairings for logical accuracy, applying payer-specific rules (like whether a prior authorization was required), and flagging potential duplicate submissions. Claims that pass all these checks move forward to the insurer. Claims with errors get sent back to the provider’s billing team with specific error codes and instructions for fixing them.
What Happens After the Insurer Receives a Claim
Once a claim reaches the insurance company, it goes through a process called adjudication, which is just the insurer’s formal review and payment decision. This typically unfolds in stages.
First, the insurer does a quick initial review, checking for basic errors or missing information. Claims that pass move into automated review, where the insurer’s computer system checks whether the service is covered under your plan, whether the treatment matches the diagnosis, and whether the claim was submitted within the required filing deadline. If anything raises a flag during the automated stage, a trained reviewer examines the claim manually.
After review, the insurer reaches one of three outcomes. The claim is paid in full, paid at a reduced amount (meaning the insurer covers part but not all of the billed charges), or denied outright. The insurer then sends an Electronic Remittance Advice back to the provider, which is essentially an explanation of what was paid, what wasn’t, and why. If you’ve ever received an Explanation of Benefits in the mail, that’s the patient-facing version of the same information.
Rejected Claims vs. Denied Claims
These two terms sound interchangeable, but they mean very different things. A rejected claim never made it into the insurer’s system at all. It was kicked back, usually by the clearinghouse or during the insurer’s initial review, because of a data error: a wrong insurance ID, a missing NPI, a formatting problem. Rejections aren’t formal decisions. You can’t appeal them. The provider simply corrects the error and resubmits.
A denied claim, on the other hand, was accepted into the system, reviewed, and the insurer made a deliberate decision not to pay. Denials happen for clinical or contractual reasons: the insurer determined the treatment wasn’t medically necessary, the provider was out of network, the wrong procedure or diagnosis codes were used, or the service required prior authorization that wasn’t obtained. Unlike rejections, denials can be formally appealed.
Common Reasons Claims Get Denied
Several patterns account for most claim denials. The most frequent is a determination that the treatment wasn’t “medically necessary,” meaning it didn’t meet the insurer’s internal clinical policies for the given diagnosis. Out-of-network provider issues are another common trigger, particularly when patients receive care from a specialist or facility that isn’t part of their plan’s network.
Disputes over the appropriate care setting also lead to denials. An insurer might deny a hospital stay if it determines the same care could have been delivered in an outpatient or home setting at lower cost. Mental health and substance abuse claims, despite legal requirements for equal coverage, still face denial patterns. Gender-affirming care can also be denied, though many states restrict insurers from denying medically necessary gender-affirming treatment.
On the administrative side, simple coding errors, missing information, and missed filing deadlines account for a significant share of denials. Submitting error-free claims on the first attempt is one of the most effective ways to avoid delays and lost revenue, which is why provider offices invest heavily in billing staff and clearinghouse services.
Why This Matters to You as a Patient
You’ll never fill out a medical claim yourself (unless you’re submitting an out-of-network reimbursement request), but understanding the process helps you make sense of your medical bills. When you get an Explanation of Benefits showing that a service was denied or only partially covered, it traces back to something that happened during claim adjudication. Knowing the difference between a coding error and a medical necessity denial tells you whether the issue is likely to be resolved with a simple resubmission or whether you need to file a formal appeal with your insurer.
If a claim is denied, you have the right to appeal. The denial notice from your insurer will include the specific reason and instructions for how to challenge it. For medical necessity denials, appeals often require a letter from your provider explaining why the treatment was appropriate for your condition. For network-related denials, you may be able to argue that no adequate in-network provider was available within a reasonable distance or timeframe.