Learning professional vs facility billing is essential for medical providers, billing teams, and healthcare administrators who want accurate reimbursements and fewer denials. These two claim types represent distinct billing responsibilities within the healthcare system and are handled by separate workflows, forms, and departments. In fact, claim type errors are among the most common causes of delayed or denied payments, often due to incorrect classification or submission method.
In this blog, we break down facility claim vs professional claim, how institutional and professional claims are processed, and why understanding this distinction plays a direct role in cleaner claims and faster reimbursement.
What is a Facility Claim/Institutional Claim?
Facility claims, also referred to as institutional claims or hospital claims, represent the cost of delivering care within a healthcare facility rather than the professional services performed by individual providers. These claims follow separate billing rules and reimbursement structures, making correct classification essential for accurate payment and reduced claim denials, a process typically managed by medical billing services.
Aspect |
Facility / Institutional / Hospital Claim |
| Who submits it | Hospitals, ambulatory surgery centers, skilled nursing facilities, rehabilitation centers |
| What it covers | Room and board, nursing services, medical equipment, medications given during care, use of treatment areas |
| Claim form used | UB-04 (CMS-1450) |
| Billing focus | Facility overhead and resources used to deliver patient care |
| How it differs | Does not include physician or provider professional fees |
What is a Professional Claim/Physician Claim?
A professional claim is used to bill for the medical services personally performed by a provider, rather than the cost of using a healthcare facility. These claims reflect the provider’s skill, time, and clinical decision-making involved in diagnosing and treating a patient.
Professional claims are submitted separately from facility or institutional claims and follow their own coding, documentation, and reimbursement guidelines. Accurate submission of professional claims is essential to ensure proper payment, compliance with payer rules, and clear separation between provider services and facility-related costs.
Aspect |
Professional Claim |
| Who submits it | Physicians, surgeons, non-physician practitioners, and provider groups |
| What it covers | Evaluation and management services, consultations, procedures, and provider time |
| Claim form used | CMS-1500 |
| Billing focus | Clinical expertise and professional work performed by the provider |
| Coding used | CPT and HCPCS codes with applicable diagnosis codes |
| How it differs | Does not include facility overhead or institutional service charges |
Table of Difference Between Institutional and Professional Claims
Not all medical claims work the same way. A hospital’s charges and a doctor’s services are handled separately, and knowing the difference can save a lot of headaches when it comes to billing and getting paid. Our professional vs facility billing table below makes it easy to see how institutional and professional claims differ.
Aspect |
Institutional (Facility) Claim |
Professional Claim |
| Claim purpose | Bills for facility-related services and operational costs | Bills for medical services personally provided by a clinician |
| Who submits the claim | Hospitals, ambulatory surgery centers, skilled nursing and rehab facilities | Physicians, surgeons, and non-physician providers |
| Claim form used | UB-04 (CMS-1450) | CMS-1500 |
| Services billed | Room and board, nursing care, equipment, medications, facility use | Evaluation and management, procedures, consultations |
| Billing focus | Facility infrastructure and resources | Provider skill, time, and clinical expertise |
| Coding system | Revenue codes with ICD-10 diagnosis codes | CPT/HCPCS with ICD-10 diagnosis codes |
| Reimbursement basis | Based on facility fee schedules and institutional payment systems | Based on physician fee schedules |
| Submitted by department | Facility billing or hospital billing department | Professional billing or provider billing department |
What to Keep in Mind While Tackling Professional and Institutional Claims?
While both of these claim types are different, it is essential to keep a few key points in mind when working with them.
1. Know That Both Claims Follow Different Rules
Professional and institutional claims may relate to the same patient visit, but they are governed by different billing guidelines. Using the wrong claim type, form, or coding structure can quickly result in denials or payment delays.
2. Keep Provider and Facility Charges Clearly Separated
Professional claims should include only the services personally performed by the provider, while institutional claims should reflect facility-related costs. Blending these charges can cause compliance issues and reimbursement problems.
3. Ensure Documentation Matches the Claim Type
Each claim must be supported by documentation that aligns with what is being billed. Incomplete or mismatched records are a common reason claims are questioned or rejected by payers.
4. Follow Payer-Specific Billing Requirements
Different payers may apply unique rules for professional and institutional claims, including coverage policies, timelines, and coding expectations. Staying aligned with these requirements helps avoid unnecessary rework.
5. Maintain Coordination Between Billing Teams
When professional and facility billing are handled separately, clear communication between teams helps ensure claims are submitted accurately and processed smoothly.
Take a moment to learn “Why Medical Billing Credentialing Can Make or Break Your Practice’s Revenue.”
Why is Learning the difference between institutional and professional claims Important?
There are clear differences between professional and institutional claims, and learning them is important. Here’s why:
1. Prevents Claim Denials and Payment Delays
One of the most common billing issues comes from submitting the wrong claim type. Understanding whether a service should be billed as a facility or professional claim helps reduce denials, rejections, and unnecessary resubmissions.
2. Ensures Accurate Reimbursement
Facility and professional claims are reimbursed differently. When services are billed correctly under the right claim type, providers and facilities are more likely to receive the correct payment without underbilling or overbilling.
3. Supports Billing Compliance
Each claim type follows its own billing rules, coding requirements, and payer guidelines. Knowing the difference helps maintain compliance and reduces the risk of audits, penalties, or payer disputes.
4. Improves Coordination Between Billing Teams
Professional and institutional billing are often handled by separate teams. A clear understanding of each claim type improves communication, reduces confusion, and creates smoother billing workflows.
5. Builds Stronger Revenue Cycle Management
When claims are classified and submitted correctly from the start, the overall billing process becomes more efficient. This leads to faster payments, fewer errors, and better financial stability for healthcare organizations.
Challenges When Handling Professional Billing vs Hospital Billing
Professional and hospital billing follow different rules and workflows, and even small mistakes can cause delays or denials. Knowing the common challenges helps billing teams handle claims more efficiently.
1. Misclassification of Services
One of the most frequent real-world problems is accidentally billing a service as a professional claim when it should be a hospital claim, or vice versa. This can lead to denials, delayed payments, or even audits.
2. Incomplete or Conflicting Documentation
Both claim types rely on accurate documentation, but the details needed often differ. Missing notes, incomplete charts, or conflicting information between provider and facility records can cause claim rejections.
3. Lack of Communication Between Teams
Professional and hospital billing are often managed by separate departments. Without proper coordination, claims may be submitted with mismatched patient information, overlapping charges, or duplicate services.
4. Complex Payer Rules
Insurance plans handle professional and hospital claims differently. Keeping up with payer-specific rules, coverage limits, and required modifiers is an ongoing challenge for billing staff.
5. Coding Errors
Even minor mistakes in CPT, HCPCS, or revenue codes can trigger denials. Coding errors are especially common when a visit involves both provider services and facility resources.
6. Timing and Claim Submission Issues
Professional and hospital claims may be submitted on different schedules. Delays in submission, or submitting one claim before the other is properly documented, can result in slow or partial payments.
7. Managing Appeals and Denials
When a claim is denied, the process to correct it differs between professional and hospital claims. Understanding the nuances and handling appeals correctly is critical to recovering revenue.
Curious about claim deadlines? Check out our “Understanding Medical Billing Time Limits: A Complete State-by-State Guide”
How Professional Claims Are Processed
Professional claims are how providers bill for the care they give. Following the right process ensures claims are accurate and payments come through without delays.
Step 1: Capture Services During Patient Visit
The provider documents the services rendered, including the diagnosis, procedures, and any other treatments provided during the encounter.
Step 2: Verify Patient and Insurance Information
Before billing, the billing team confirms that the patient’s insurance coverage is active and that demographic details are accurate.
Step 3: Code the Services
Billing staff assign the appropriate CPT or HCPCS codes for procedures and ICD-10 codes for diagnoses based on the provider’s documentation.
Step 4: Prepare the CMS-1500 Claim Form
The professional claim is entered into the billing system and formatted on the CMS-1500 claim form, ensuring all required fields, including provider details and modifiers, are correct.
Step 5: Submit the Claim to the Payer
The claim is transmitted electronically (or occasionally by paper) to the insurance payer for review.
Step 6: Payer Adjudication
The insurance payer reviews the claim, checks for coverage, coding accuracy, and eligibility, and processes payment.
Step 7: Post-Payment Review and Reconciliation
Payments are posted, and any discrepancies or denials are reviewed. If necessary, corrections are made and resubmitted.
Find out how Liberty Liens supports high-performance medical practices by reading “Liberty Liens: Your Complete Revenue Cycle Partner for High-Performance Medical Practices”
How Hospital (Facility) Claims Are Processed
Hospital or facility claims are submitted by healthcare facilities to bill for services, resources, and overhead used during patient care. Unlike professional claims, these focus on the facility’s costs rather than the provider’s services.
Step 1: Capture Facility Services
The hospital documents all facility-related services during the patient’s stay, including room and board, nursing care, medications, procedures, and use of equipment.
Step 2: Verify Patient and Insurance Details
The billing team ensures the patient’s insurance coverage is active and all demographic information is correct.
Step 3: Assign Revenue and ICD-10 Codes
Revenue codes are used to describe the type of facility services provided, along with ICD-10 codes for the patient’s diagnoses.
Step 4: Prepare the UB-04 Claim Form
The claim is entered into the hospital’s billing system and submitted on the UB-04 (CMS-1450) claim form, including all relevant charges, dates, and department details.
Step 5: Submit the Claim to the Payer
The claim is transmitted electronically or by paper to the insurance payer for review.
Step 6: Payer Adjudication
The payer reviews the claim, checking for coverage, coding compliance, and eligibility before issuing payment.
Step 7: Post-Payment Review and Reconciliation
Payments are posted, and any discrepancies or denials are addressed by the billing team to ensure the hospital receives full reimbursement.
How Liberty Liens Make Professional and Facility Billing Easier for Providers
Billing for healthcare services is complicated, especially when a single patient visit involves both provider services and facility charges. Liberty Liens help take that burden off your team.
For professional claims, we make sure every service your providers perform is properly documented, coded with the correct CPT/HCPCS and ICD-10 codes, and submitted accurately on the CMS-1500 form. This means fewer denials, faster payments, and less time spent chasing claims.
For facility or institutional claims, we handle the details hospitals and clinics need, including room charges, nursing care, medications, procedures, and equipment usage. We assign the right revenue codes, prepare the UB-04 forms, and submit claims efficiently so the facility gets reimbursed correctly.
By managing both types of claims together, our HIPAA-compliant medical billing company reduces errors, avoid mismatches between professional and facility charges, and keep the claims process running smoothly. The result: your staff can focus on patient care while we make sure the billing side works seamlessly.
Conclusion:
Professional and facility (institutional) claims serve different purposes in the billing process, but both are essential for proper reimbursement. Professional claims reflect the services provided by physicians and clinicians, while facility claims cover the hospital or clinic’s resources and overhead. Understanding these differences helps prevent errors, streamline workflows, and ensure timely payments. When both types of claims are managed accurately, healthcare teams can focus on patient care, confident that the billing process is handled efficiently and correctly.
