When a patient visits a doctor's office or a hospital, a detailed record is kept of any tests, procedures, or examinations that are performed in the treatment of your condition. This medical record provides information necessary to the billing process. After you provide your insurance information to the doctor's office or hospital, the medical billing cycle begins.

Before a bill is submitted to an insurance company for payment, it is coded. During coding, each service or procedure must be given an alphanumeric code based on a standardized system. In the U.S., procedures are given a code based on the Current Procedural Terminology (CPT) manual, and diagnoses are coded using the International Classification of Diseases (ICD-9) manual.

After the coding process is finalized, the bill is transmitted to the insurance company. This is normally done electronically, but in some cases a bill may be sent via fax or standard mail. When the insurance company receives the claim from the doctor, the information is reviewed to determine whether the patient was covered at the time of service, and whether the treatment is appropriate for the diagnosis submitted. If the procedure or treatment falls within standard and customary treatment for that condition, it is considered medically necessary and the bill is approved for payment.