This confusion of institutional and professional claims is more common than you think in medical billing. Although both types of claims are for reimbursement, they pertain to completely different situations, providers, and types of bills.
This is crucial for any practice seeking to enhance its claim acceptance rate, ensure HIPAA compliance, or minimize billing errors. Let’s break it down into some straightforward and helpful concepts you can start using immediately.
What’s the Difference Between Professional and Institutional Claims in healthcare?
Professional Claim:
Professional claims are the claims submitted by solo healthcare providers (physicians, therapists, etc.) for care they have rendered to patients, generally in outpatient clinics. Professional claims are typically for professional services such as office visits, consultations, diagnostic tests, and treatments provided by these solo practitioners.
Institutional Claim:
Institutional claims refer to the bills submitted by nursing homes, clinics, and hospitals for services provided to their patients. Institutional claims encompass numerous types of services, more than typically submitted by individual healthcare providers.
The essential distinction is between who provides the service and where it is provided. Though both represent insurance requests to payers, the submission process, forms utilized, and data required differ within each.
👉 Here’s a side-by-side comparison:
| Feature | Professional Claims | Institutional Claims |
| Billing Form | CMS-1500 (837P – electronic) | UB-04 (837I – electronic) |
| Provider Type | Physicians, NPs, PAs, mental health therapists | Hospitals, SNFs, inpatient rehab, and hospice |
| Coding Systems | CPT/HCPCS, ICD-10-CM | Revenue Codes, ICD-10-CM, ICD-10-PCS, DRGs |
| Common Settings | Private practices, outpatient clinics, and telehealth | Inpatient, ER, ambulatory surgery centers |
| Reimbursement Structure | Fee-for-service (FFS), based on procedures | Often includes bundled payments or per diem rates |
➤ Key Insight: Professional claims are tied to individual clinician services, while institutional claims encompass broader facility-based charges and resource utilization.
Understanding Professional Claims
Professional claim forms are utilized in billing for services delivered by physicians and non-physician practitioners, which are typically rendered within an outpatient facility. These include face-to-face clinical contact and diagnostic and treatment services of professional and licensed practitioners.
➤ Key Characteristics:
- Billed using CMS-1500 (837P format): This is “the standard claim form used by individual practitioners (i.e., independent or solo practitioners) for billing outpatient services”, and its electronic version is the 837P transaction.
- Includes the rendering provider’s NPI (National Provider Identifier): Individual claims should have the individual provider’s NPI, as this is how claims are tracked and paid.
- Requires Place of Service (POS) codes: POS Place of Service codes identify the actual site where the care was provided, e.g., office, clinic, telehealth visit, or hospital outpatient department, and are a payment requirement.
- Employs CPT and HCPCS procedure codes as well as ICD-10 diagnosis codes: The CPT codes represent what was done, i.e., x-ray or physical exam; the ICD-10 codes represent why it was done, or the diagnosis.
- Modifiers are often included (e.g., 25, 59, 95): These 2-digit modifiers are even further defined, for instance, to indicate that two different procedures were done on the same date of service or that the procedure was provided via telehealth.
- Reimbursement is based on a fee-for-service model: Each procedure or service that is billed is reimbursed according to the payer’s physician fee schedule, often on a per-service-unit basis.
Example of Professional Claim
A physician bills for:
- A Level 4 established patient visit (CPT 99214)
- An EKG (CPT 93000)
- Labs sent to an external lab (CPT 36415, modifier 90)
Understanding Institutional Claims
Institutional claims are filed by facilities that provide services requiring the use of hospital resources, such as nursing staff, inpatient beds, operating rooms, and medical equipment.
➤ Key Characteristics:
- Filed using UB-04 (837I format): The paper version is used by hospitals and health care facilities to bill for room, nursing, diagnostic, and surgical services; the electronic version is the 837I.
- Uses revenue codes instead of CPT codes for many line items. Revenue codes specify the type of department or service provided, such as emergency department, radiology, or therapy.
- Includes ICD-10-CM and ICD-10-PCS codes: ICD-10-CM diagnosis codes indicate the patient’s diagnoses, and PCS codes denote the procedures that were performed during the inpatient stay.
- Grouped into Diagnosis-Related Groups (DRGs): the system by which Medicare and some commercial payers reimburse hospitals in a population, or a case-rate system for inpatient hospital claims.
- References the attending provider’s NPI instead of the rendering provider: The claim must indicate the NPI of the provider who was primarily responsible for the patient’s care while at the facility, but that does not have to be the same person completing each task.
- Payment may be made on a per diem, per discharge, or bundled basis. In contrast to fee-for-service claims, flat rates are typically assigned to complete episodes of care based on diagnosis and treatment setting.
Example of Institutional Claims
A hospital bills for:
- A 3-day inpatient stay for pneumonia
- Nursing services, meals, IV therapy
- Radiology and respiratory therapy
How Misunderstanding the Two Can Affect Your Revenue Cycle Management?
Claim denials resulting from using the incorrect type of claim are among the top causes of revenue loss and prolonged reimbursement cycles. The MGMA indicates that it costs $25 on average to redo a denial, and as much as 65% of denials are never redone.
Common consequences of misfiled claims include:
- Rejection due to incorrect form: Submitting a claim on the incorrect form, such as submitting a CMS-1500 claim form instead of a UB-04, will generally result in rejection by the payer and must be resubmitted, which can delay payment.
- Duplicate claim denials can also impact your revenue and necessitate additional administrative tasks. If a service is accidentally submitted on both a professional and institutional claim, the payor will consider this a duplicate filing and deny both claims.
- Delays in patient reimbursement: Patients become frustrated and satisfaction decreases when misfiled claims delay payments to providers, as well as refunds to patients or coordination with secondary insurance.
- Compliance issues and audit risks: Frequent filing of incorrect claims could alert insurance payers or governmental programs to the provider, possibly resulting in audits, fines, or sanctions under HIPAA or payer compliance programs.
💡 Tip: If you’re billing for a provider’s time and expertise, use the CMS-1500 form. If you’re billing for the use of a facility or its services, use UB-04.
Real-World Scenarios and How to Handle Them
Let’s walk through some examples that commonly confuse billers:
Scenario 1: A hospital-employed physician performs surgery.
In this instance, the hospital would submit an institutional claim in a UB-04 form for the use of the facility and surgical suite, while the surgeon would submit a professional claim on a CMS-1500 form for his time and skill.
- Billing Path: Two claims are needed:
- UB-04 from the hospital for the facility and surgical suite.
- Surgeon’s CMS-1500 for the procedure performed.
Scenario 2: A behavioral health provider treats a patient via telehealth.
This is billed as a telehealth visit per payer, in accordance with HIPAA telehealth specifications, using the CMS-1500 form with modifier 95 and POS 10 (patient is at home), which indicates a virtual care visit.
- Billing Path: CMS-1500 claim with modifier 95 and POS 10 or 02 (depending on the patient’s location)
Scenario 3: A patient receives outpatient physical therapy at a hospital.
The facility utilizes Revenue Code 0421 on the UB-04 claim form to indicate physical therapy services and includes applicable CPT codes for services rendered.
- Billing Path: UB-04 form with Revenue Code 0421 for therapy, and CPT codes for specific services
Key Differences Between Professional and Institutional Claims
| Criteria | Professional (CMS-1500) | Institutional (UB-04) |
| Claim Ownership | Individual provider | Facility or institution |
| Modifiers Used | CPT Modifiers (e.g., 25, 59, 95)/td> | Occasionally, condition codes, not CPT mods |
| Common Payers | Medicare Part B, Commercial PPOs | Medicare Part A, Medicaid, Commercial HMOs |
| HIPAA Transaction Type | ANSI 837P | ANSI 837I |
Best Practices to Avoid Billing Errors
Train Your Team
Ensure that billers and the front desk are aware of when to use the CMS-1500 versus the UB-04. Provides ongoing training to prevent costly mistakes and keep your personnel up-to-date on forms and regulations for each payer.
Map Services to Billing Type
Assign Services to Billing Type: Consider the services that your practice provides and which claim form they correspond with. This prevents things like outpatient imaging from being billed on a UB-04 when it should be billed on a CMS-1500.
Use Automation Tools
Utilize claim scrubbers and EHRs that automatically display the appropriate form based on the data entered during the encounter. These systems can identify mismatches, missing codes, or erroneous form use ahead of claim submission, thereby significantly reducing rework.
Know Your Payers
Some payers, such as Medicaid or TRICAR, are different, and it is essential to know how to bill them. Avoiding needless denials for claims filed with more than one type of service setting can be achieved by checking each payer’s billing manual.
Track Denials by Claim Type
This can help determine if the problem is due to misuse or a lack of documentation. Examining trends in denials will enable your team to refine workflows, utilize retainer staff more effectively, or update EHR templates to facilitate cleaner first-pass claims.
Final Thoughts
Moving into 2025, payers have more intelligence, systems are better integrated, and compliance has never been more crucial. Submitting accurate claims is not only a good business practice, but it is also critical to your bottom line. With a clear understanding of the distinctions between and regulations governing professional versus institutional claims, providers can avoid many unnecessary denials, reduce A/R days, and bill accurately to stay within both payers’ regulations and Federal guidelines. Such clarity aids in being audit-ready and enhances the cleanliness of the revenue cycle. So what’s the bottom line? One is a provider bill, and the other is a facility bill. If you understand when to use each, you’re halfway to cleaner, faster, more profitable billing.
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