institutional billing and professional billing

Difference Between Institutional Billing and Professional Billing

The world of healthcare billing and coding can be a labyrinthine maze for those not intimately familiar with its intricacies. Among the many complexities within this field, one of the most crucial distinctions to grasp is the difference between Institutional Billing and Professional Billing. In this comprehensive guide, we will break down these two billing methodologies, highlighting their unique features, key differences, and the impact they have on the healthcare ecosystem.

Institutional Billing Explained

Institutional billing refers to the billing processes employed by healthcare institutions such as hospitals, nursing homes, and rehabilitation centers. These facilities handle a broad spectrum of services, including inpatient care, outpatient care, and various diagnostic and treatment procedures. Here’s a closer look at the components of institutional billing:

Patient Admissions

Institutional billing often starts with patient admissions. When a patient is admitted to a healthcare institution, a comprehensive record is created, encompassing medical history, insurance details, and the reason for admission. This information is the foundation of the billing process.

UB-04 Claim Form

One of the hallmarks of institutional billing is the use of the UB-04 claim form, also known as the CMS-1450 form. This standardized form is used to bill for services provided in institutional settings. It includes information on patient demographics, medical procedures, and diagnosis codes.

DRG Coding

Institutional billing relies heavily on Diagnosis-Related Group (DRG) coding. DRGs categorize patients based on their diagnoses and are used to determine the reimbursement amount for inpatient services. Accurate DRG coding is essential for proper reimbursement.

Professional Billing Demystified

Professional billing, on the other hand, pertains to billing for services provided by individual healthcare professionals or groups, such as physicians, surgeons, and allied health practitioners. Let’s delve into the specifics of professional billing:

CPT Coding

The cornerstone of professional billing is the Current Procedural Terminology (CPT) code system. Healthcare professionals use CPT codes to describe and bill for specific medical procedures and services. Each code corresponds to a unique medical service or treatment.

HCPCS Level II Codes

In addition to CPT codes, professional billing may involve Healthcare Common Procedure Coding System (HCPCS) Level II codes. These codes are used for supplies, equipment, and services not covered by CPT codes, such as ambulance services and durable medical equipment.


Professionals generate superbills, which are essentially itemized invoices listing the services rendered during a patient’s visit. Superbills include CPT and HCPCS codes, along with corresponding charges.

Key Differences Between Institutional and Professional Billing

Now that we have a clear understanding of institutional and professional billing, let’s explore the critical distinctions between these two billing methodologies:


The most apparent difference lies in the setting of service provision. Institutional billing is associated with healthcare facilities, while professional billing is linked to individual healthcare providers and group practices.

Billing Forms

Institutional billing predominantly uses the UB-04 claim form, whereas professional billing relies on superbills and electronic health records (EHRs) for documentation.

Coding Systems

Institutional billing leans heavily on DRG coding, while professional billing relies on CPT and HCPCS Level II codes to describe services accurately.

Reimbursement Models

Reimbursement in institutional billing is often based on prospective payment systems (PPS) or per-diem rates, while professional billing involves fee-for-service or, increasingly, value-based reimbursement models.

Administrative Complexity

Institutional billing tends to be more administratively complex due to the comprehensive nature of services provided by healthcare facilities. Professional billing, while still intricate, is often more straightforward in comparison.

Credentialing and Licensing

Healthcare facilities engaged in Institutional Billing are responsible for credentialing and licensing their staff, ensuring that healthcare professionals meet the required qualifications and regulations. In Professional Billing, individual practitioners and group practices are responsible for their own credentialing and licensing.

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The Impact on Healthcare

Understanding the difference between institutional and professional billing is not just a matter of billing semantics. It has far-reaching implications for the healthcare industry as a whole:

Cost Management

The choice of billing methodology can significantly impact the cost management strategies of healthcare organizations. Institutional billing may necessitate extensive administrative support, which can be costlier than professional billing systems.

Quality of Care

Billing methodologies can influence the quality of care. Professional billing often aligns with value-based care models, encouraging healthcare professionals to focus on patient outcomes rather than the quantity of services provided.

Healthcare Economics

The choice of billing method can shape healthcare economics. Institutional billing, with its DRG system, has prompted discussions on overutilization and the need for healthcare cost containment.


In conclusion, the difference between institutional billing and professional billing is more than a mere technicality in the healthcare billing and coding landscape. It impacts the way healthcare services are delivered, documented, and reimbursed, ultimately influencing the quality and cost-effectiveness of care. Healthcare organizations, professionals, and policymakers must understand these distinctions to navigate the complex terrain of healthcare billing effectively. By doing so, they can work towards a healthcare system that prioritizes both patient well-being and financial sustainability.

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