Professional Claims vs Institutional Claims

Many clinics and billing teams experience frequent claim denials and delays. In 2025, the average initial claim denial rate is between 11 and 12%, up from around 10.2% a few years ago. This surge is largely due to tougher payer criteria and more automation in claims review. For healthcare providers and billers, employing the improper claim type or form can result in extensive rework, lost income, and wasted staff time.

Denials are expensive. Providers can spend anywhere from $25 to $181 to rectify and resubmit a refused claim, with hospitals often charging more. Initial denials for private payer claims average around 15% nationwide, while Medicare takes 8-10% and Medicaid covers 12-17%. These numbers highlight the importance of distinguishing between professional and institutional claims appropriately.

This blog will describe each claim type, its merits and cons, and provide a clear path ahead. You will learn how to reduce denials, process payments more quickly, and improve billing accuracy. Use this as your expert guidance to streamline your billing procedure.

Understanding Professional Claims vs Institutional Claims

This section discusses how each claim type works, who uses them, and why selecting the incorrect type results in costly rework and delayed reimbursement.

What Are Professional Claims?

Professional claims are used to bill for individual medical services, such as office visits, consultations, or treatments provided by physicians, nurse practitioners, or other licensed professionals.

CMS-1500 (also known as HCFA-1500).

Medicare covers mostly Part B treatments.

Common contexts include private practices, outpatient clinics, and hospital-based providers that bill separately for their professional services.

Typical examples:

An orthopedic surgeon bills for surgery fees (excluding facility charges).

A family physician pays for a normal checkup.

What Are Institutional Claims?

Healthcare facilities use institutional claims to bill for the services and resources they provide on campus.

The form used is UB-04 (also known as CMS-1450).

Medicare covers mostly Part A services.

Common venues include hospitals, skilled nursing facilities, inpatient rehabilitation institutes, and some outpatient departments.

Typical examples:

A hospital bill for inpatient room and board.

A radiology department bills for imaging services provided by the facility.

Key Differences Between Institutional and Professional Claims

Institutional claims (UB-04) bill facility-based services with revenue codes, whereas professional claims (CMS-1500) bill provider services using CPT/HCPCS codes.

Aspect	Professional Claims	Institutional Claims
Billing Form	CMS-1500	UB-04
Billed By	Individual healthcare providers	Hospitals, clinics, and facilities
Payer Type	Medicare Part B / Commercial plans	Medicare Part A / Commercial facility plans
Codes Used	CPT, HCPCS, ICD-10-CM	CPT, HCPCS, ICD-10-CM, ICD-10-PCS, Revenue codes
Services Covered	Office visits, procedures, outpatient	Inpatient care, surgeries, and diagnostics

Why the Difference Matters in Claims Processing

Understanding the difference between professional and institutional claims is crucial for avoiding denials, making timely payments, and maintaining compliance.

Impact on Reimbursement

The claim type impacts how reimbursement is calculated and processed.

Professional claims are reimbursed based on fee schedules, such as the Medicare Physician Fee Schedule.

Institutional claims use payment systems such as DRGs (Diagnosis-Related Groups) for inpatient stays and APCs (Ambulatory Payment Classifications) for outpatient services.

Submitting the wrong claim type can trigger:

Payment delays are due to reprocessing procedures.

Underpayment occurs when services are not recognized under the billed claim type.

Audit risk due to repeated submission errors.

Impact on Coding and Documentation

The coding criteria differ for professional and institutional claims.

Professional claims employ CPT and HCPCS Level II codes to describe the provider’s services.

Institutional claims explain facility charges using ICD-10-CM diagnosis codes, ICD-10-PCS procedure codes (for inpatients), and revenue codes.

Common Errors and How to Avoid Them in Professional Claims vs Institutional Claims

Errors in claim submission can result in income loss, delays, and compliance issues. Understanding typical errors and how to avoid them is critical for accurate billing.

Frequent Mistakes

The most common concerns are:

Incorrect form submission: Use a CMS-1500 form for facility-based services or a UB-04 form for physician services.

Code mismatches occur when CPT codes are used for institution claims instead of suitable revenue codes.

Incomplete documentation includes missing signatures, service dates, or other supporting documents.

Incorrect payer rules application: Failure to alter claim type depending on Medicare, Medicaid, or private payer criteria.

Duplicate submissions: Sending claims without resolving the original denial reason.

Best Practices

To reduce errors:

Use the appropriate form: CMS-1500 for professional claims, and UB-04 for institutional claims.

Match codes with claim types: Pair CPT/HCPCS codes for professional services with revenue codes for institutional billing.

Verification of documentation: Ensure that all clinical and administrative details are complete.

Follow the payer-specific guidelines: Before delivery, review each insurer’s claims guide.

Track and analyze denials: Identify recurring error patterns and address the root causes.

Conclusion

Determining the appropriate claim type is crucial for accuracy, compliance, and pay efficiency. Professional claims and institutional claims have different coding rules, forms, and payer criteria. Submitting the wrong type causes delays, underpayments, and additional administrative effort. Consistent adherence to payer requirements, correct coding, and complete documentation all contribute to preventing denials. By implementing these techniques, healthcare providers may protect revenue while maintaining operational efficiency.