An entity code is used in medical billing to identify the type of entity billing for the services. Entity codes are crucial for ensuring that every party on the claim is correctly identified and that the right entity is billed for the services. These codes can be assigned by the provider, billing office, payer, or other healthcare professionals involved in the revenue cycle.
Entity codes help to ensure accurate billing and reduce the risk of claim denials. If the wrong entity code is used, it may result in billing errors, leading to payment delays and avoidable rework.
Each entity is assigned a unique identifier, often referred to as an Entity ID Number, such as an NPI (National Provider Identifier) or TIN (Tax Identification Number), which is reported alongside the entity code identifying that party’s role on the claim. It’s essential for healthcare professionals and billing teams to use the correct code to prevent costly mistakes. If you’re unsure which code to use, always consult the provider, billing office, or payer for clarification.
Medical billing includes a lot of terminology, but with the right fundamentals of a medical billing guide, even complex topics like entity code errors can be better understood. However, entity code errors on claim denials are among the more challenging issues to troubleshoot.
Understanding Entity Codes:
Entity codes are standardized role codes used in medical billing to distinguish between the different entities involved in healthcare services. These codes ensure the correct party is being billed, thereby reducing claim rejections. In medical billing, entities can include patients, providers, healthcare professionals, medical billing companies, and insurance carriers.
By accurately using entity codes, healthcare professionals and medical billing solutions can streamline the billing process and minimize delays in reimbursement.
Entities in Medical Billing
In medical billing, an entity refers to any individual or organization that plays a role in the healthcare revenue cycle such as a patient, healthcare provider, hospital, or an outsourced medical billing service acting as a third-party biller. Each entity is identified by a unique identifier, commonly an NPI (National Provider Identifier) for providers or a TIN (Tax Identification Number) for businesses. These Entity ID numbers are essential for ensuring accurate claims submission, eligibility verification, and Medicare/Medicaid compliance.
Understanding entity-related errors can be challenging for billing professionals because the claim form may reference multiple entities in different sections. A mismatch or omission in any entity’s information such as a missing ID, incorrect provider number, or outdated billing credentials, can lead to claim denials or rejections, disrupting the revenue cycle management (RCM) process.
Types of Entity Codes:
Entity codes are not clinical codes. CPT and HCPCS tell what, ICD-10 tells why, and entity codes tell who. Each is in a different set of codes, and each is validated independently, so even if a claim passes all the clinical edits, it could fail because of an entity error.
The codes can be classified in three groups. Provider entities include all those that provided, ordered or billed for the service. Patient and subscriber entities separate the policyholder from the person actually treated. Transaction entities define the individual or entities moving the claim, the submitter, the receiver, and the payer. Additional codes are included for institutional claims on the 837I or UB-04, such as 71 for the attending provider.
Most rejections of professional claims are due to these codes:
| Code | Entity | 837P loop | CMS-1500 box |
| 85 | Billing provider | 2010AA | 33 |
| IL | Insured / subscriber | 2010BA | 1a, 4, 11 |
| PR | Payer | 2010BB | 1 |
| QC | Patient (when not the subscriber) | 2010CA | 2, 5 |
| DN | Referring provider | 2310A | 17, 17b |
| 82 | Rendering provider | 2310B / 2420A | 24J, 31 |
| 77 | Service facility location | 2310C | 32 |
Entity Code Requirements:
Entity codes are key to accurate billing and to avoid errors in the billing process. Medical billing services use these codes to know what entity is billing for services. When using an entity code, you must submit accurate and complete information including the entity’s name, address and ID #. If you don’t submit the correct entity code, you will get claim denials and delayed payments, which can impact your revenue cycle. So medical billing services must ensure all entity info is correct and up to date to make the claims process smooth.
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Entity Related Errors in Coding and Claims
Most entity problems surface as front-end rejections rather than denials. The claim never entered adjudication, so there is nothing to appeal and the timely-filing clock keeps running while it sits. The explanation should give you an indication of which entity is the problem by stating that it is the patient/client, or by what box it is in on the form. If it isn’t clear, you will need to contact the payer for clarification.
Different software may word explanations slightly differently, but the issues that arise are common to all of them. The following are a few of the entity code errors you may encounter.
- Entity’s Medicare Beneficiary Identifier (MBI): MBIs replaced HICNs on all Medicare claims as of January 1, 2020, and a claim carrying a legacy HICN will be rejected. It also shows up on corrected claims resubmitted without the payer’s original claim number.
- Entity’s contract/member number: Errors with this reference usually point out missing information, and the entity is the patient. If the information was filled out in the claim, the problem could be that the patient’s coverage has changed, they were not covered on the date the service was delivered, or a newborn patient has not been added to the policy yet.
- This code requires the use of an entity code: In this case, the biller must attempt to determine which entity was not clearly identified by checking each box of the claim. In addition to the patient and the provider, be sure to check for correct identifying medical billing services and any referring physician, if applicable.
- Service Location: Entity’s Postal/Zip Code: This refers to the service facility, which is not always the same as the billing provider’s address. Make sure to include the final four digits of the nine-digit zip code (not just 0000) if this shows up as an error.
Common Scenarios for Entity Code Usage
Most entity codes are automatically populated by practice management software. Issues are seen in edge cases where the billing structure, bill location, or coverage structure is not the simple default.
Entity Related Errors in Coding and Claims
Each group’s Type 2 (organizational) NPI would be listed under the billing provider (85), and the clinician’s Type 1 (individual) NPI would be listed under the rendering provider (82). The most common entity error in group settings is reversing the two, or assuming it is covered by the group NPI.
Services Delivered Away From the Billing Address
If the care is provided at another address (other than the one on box 33), a hospital outpatient department, a nursing facility, or a satellite office, then code 77 should be used and include the name and address of the service facility as well as the NPI. Leaving it blank while reporting a facility place-of-service code creates a contradiction the payer’s edits will catch.
A Dependent Treated Under Another Person’s Policy
The policyholder is the subscriber and is covered by IL. The patient (the dependent for whom care was provided) is the person who has QC. If both are the same person, no patient loop is performed. The most frequent rejection in pediatrics is member number mismatch, which occurs when the dependent is entered as the subscriber.
Entity Codes and HIPAA Compliance
While most people associate HIPAA with privacy and security, entity codes exist because of it as well. HIPAA’s Administrative Simplification provisions directed HHS to adopt uniform national standards for electronic healthcare transactions, the same part of the law that produced the Privacy and Security Rules.
The Transactions and Code Sets Rule adopted the ASC X12N 837, currently version 5010, as the required format for electronic claims, and the entity identifier code set forms part of that standard. This is why 85 means billing provider at every payer, and why entity code usage is a compliance requirement rather than a payer preference.
Bottom Line
In most cases, you will be able to determine which entity is indicated by the information being required, or the location on the form. In cases where this is not clear, a call to the payer is probably going to be required to find out exactly what information they need.
Medical billing is becoming more complex all the time. If you are still doing medical billing in-house, give us a call at 800-640-6409 or request a free demo. Our client case studies illustrate the benefits of having MedCare MSO handle billing and healthcare revenue cycle management (RCM), and we are happy to answer any questions you have.
