An entity code in medical billing helps identify the type of entity billing for treatment services. The entity codes ensure that the correct entity gets the bill of services and that neither Medicare nor Medicaid receives bills for the same services. The healthcare professional, billing partners/offices, or insurance payers can assign an entity code in medical billing. Moreover, a wrong entity code can result in billing the wrong entity – leading to problems with both Medicare and Medicaid.

Before tapping into the specifics of medical coding and billing errors, let’s explore the following:

Entities in Medical Billing

To understand an entity code for medical billing, let’s start by clarifying what we mean by an “entity.” An entity is an individual or something that exists independently, like a person, a business, or a local company. When you outsource your medical billing to a trusted service provider, you gain access to accurate entity codes for efficient medical billing services.

When referring to a billing entity, we discuss any distinct entity involved in the medical billing process. This could be a relationship, a limited liability company, or any clearly defined entity involved in the medical billing process explicitly or otherwise. It encompasses information from:

  • Healthcare facilities,
  • Patients
  • Doctors
  • Insurance firms, and more.

All this information is vital in ensuring that medical billing is effectively managed and patient payments are received timely.

Before going into the medical billing process, healthcare centers prioritize collecting and verifying the information of each entity involved. This step is necessary for the smooth flow of the billing process. This includes details from health facilities, patients, doctors, and insurance companies. The healthcare center can simplify the billing process and facilitate timely patient payments by ensuring accurate entity information.

Understanding the concept of an entity code in medical billing involves recognizing the various entities, individuals, or organizations that play a role in the billing process. By focusing on accurate entity information, healthcare providers can enhance the efficiency of their medical billing services.

Why is entering the correct codes in medical billing important?

Accurate coding is essential for processing claims and billing amounts efficiently. Delays can lead to an inefficient and slow healthcare system. If the code entered is incorrect, the insurance provider may reject the claim, adding to the financial burden on the patient. It’s, therefore, essential to ensure accuracy in medical coding to avoid such complications.

Regardless of the complexity of each medical procedure, any information shared can trigger the generation of paperwork and data that a medical billing company must handle skillfully. Medical billing and coding staff address and rectify any discrepancies that may arise during this process.

Entity Code in Claim Rejection

In insurance billing and claim rejection, the entity code in medical billing serves as a system insurance companies use to pinpoint the reason for rejecting a claim. This aspect is an essential component of the claims processing procedure, aiding insurers in swiftly identifying and resolving issues leading to the rejection.

The system of entity code in medical billing establishes a standardized method for insurers to categorize and track their rejections. This systematic approach allows insurers to quickly recognize trends and patterns in denials, enhancing their processes and reducing the likelihood of future rejections. This emphasizes the importance of incorporating accurate entity codes in the medical billing process for smoother and more effective claims processing.

Entity Code Error Leads to Medical Claim Denial

Identifying and correcting an error in an entity code in medical billing stands out as one of the most demanding tasks for billers. This process requires considerable time as billers carefully work to pinpoint the actual issues within the claims. Unfortunately, due to this uncertainty, there’s a common occurrence where billers miss the deadlines to submit and appeal claims to payers. This delay results in a notable decrease in revenue for healthcare professionals and affects their overall financial performance.

In essence, the impact of an error regarding entity code on claim goes beyond just a denial; it directly influences the financial health of healthcare providers. Billers need to simplify their processes, ensuring accurate use of entity code in medical billing to avoid revenue decline and maintain a positive bottom line.

Entity-Related Errors in Coding and Claims

When a claim faces rejections or denials, the supporting explanation should provide insight into which entity is causing the issue. It may specify that it is the patient/client or indicate the relevant box on the form. If it remains unclear, contacting the payer for clarification is necessary.

Various software may phrase explanations differently, but the challenges are universal. Here are some common errors of entity code in medical billing that you might encounter.


This error surfaces when a claim is corrected and resubmitted. Here, the entity is the payer, hence billers must ensure that the claim number assigned to the original claim by the payer is accurately used.

Patient’s Member ID

Inconsistencies with this information often lead to missing data, and the patient is responsible. If the information is appropriately managed for claims, a potential issue could be a change in the patient’s insurance, leaving them uncovered as of the service date. Mismatched IDs with their insurance system can also trigger this error.

Missing Entity Code in Medical Billing

If the explanation indicates the need for an entity code, you overlooked identifying one entity on the bill. To resolve the error, identify and correct the misidentified or forgotten entity.

Problem with Billing NPI (National Provider Identifier)

The NPI is a unique number for healthcare providers in the United States. Submitting a claim with an incorrect NPI (or Tax ID) can lead to entity code rejection. Your information must constantly match.

Service Location – Entity’s Postal/Zip Code

This relates to the provider. Ensure inclusion of the final four digits of the nine-digit zip code (not just 0000) to avoid errors in this category.

Unidentified ID

Proper use of an entity code in medical billing is essential here. The medical provider can review each section in the claims to identify the entity causing the issue.

You can deduce the specified entity by the required information or form location in most instances. If unclear, a call to the payer is likely necessary to determine the specific information they need.

Solutions to Coding and Claims Errors

In the earlier sections, we explored what an entity code in medical billing is and what are some common mistakes inside it. Now, let’s discuss some recommendations to prevent errors in claim and entity codes.

• Matching NPI and Tax IDs

Ensure that insurance companies use the same NPI and Tax IDs in the records of both medical practitioners and payers.

• Pre-submission Checks

Medical billing firms should thoroughly review claims before submission to catch any errors in the entity code.

• Direct Communication with Payer

For additional information, it’s beneficial to contact the payer directly for clarification.

• Emphasize Electronic Claim Submission

Inform payers that medical claims are submitted electronically for faster processing.

• Patient Profile Verification

Medical professionals should verify patient eligibility, especially if there are discrepancies in the patient’s information.

Imagine professionals discovering a claim denial due to a recent patient plan enrollment. In such a case, quickly contacting the insurance company ensures the patient is recognized as an active member with valid insurance coverage.

After resolving any issues and settling all medical claims, insurance companies should carefully review the medical expert’s report. Subsequently, they can rebill the service to ensure all affected claims are submitted.

Managing denied claims that return to healthcare professionals from payers can be a complex task. However, following these suggested steps can make the process more efficient and reduce errors.

Entity Code List

An entity code in medical billing identifies various participants, including healthcare providers, facilities, payers, and other stakeholders. The specific codes can differ based on the coding system or standards of a particular country or region. Let’s explore some common types of entity codes in healthcare:

National Provider Identifier (NPI)

This is a distinctive 10-digit identification number exclusively assigned to healthcare providers within the United States.

HCPCS Level II Codes

These codes identify diverse healthcare services, supplies, and equipment, specifically for billing.

ICD Codes

These codes categorize and document diseases, conditions, and other health-related issues. Globally, ICD-10 is widely adopted for this purpose.

CPT Codes

Maintained by the AMA, these codes are established for reporting medical procedures and services.

UDI (Unique Device Identifier)

This code identifies and tracks medical devices throughout their distribution and usage.

Insurance Provider Codes

Specific codes are designated as an entity code for insurance billing providers, serving billing and administrative functions.

FIN (Facility Identification Number)

Healthcare facilities, including hospitals and clinics, are distinguished by a unique identifier known as the Facility Identification Number.

Pharmacy National Provider Identifier

Pharmacies are assigned a specific NPI for billing and administrative processes.

EIN (Employer Identification Number)

The unique identifier is assigned to employers, encompassing healthcare organizations, for tax-related purposes.

It’s important to acknowledge that these codes can vary between countries, and diverse coding systems may be in practice. Moreover, changes and updates to coding systems may transpire over time. Therefore, staying informed about the most recent coding standards and guidelines in the specific healthcare context is essential.


When properly using an entity code in medical billing, it’s essential to be cautious about common errors. Third-party billing firms employ a professional approach to help you avoid typical entity coding and billing mistakes. Should any errors arise, they are promptly and efficiently fixed.

If you find yourself facing an error specific to an entity code, enlisting a reputable company like MedICD is advisable. Our experts possess a keen understanding of ensuring accurate claims by employing flawless entity coding, thereby preventing discrepancies.

In choosing us as your billing company, you gain the reassurance of a well-equipped team to handle and rectify any entity code or Condition Code errors in medical billing, ensuring a smooth and error-free medical billing process.

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