Physicians interact with billing every day, but many do not see what happens once a claim leaves the EHR. The distinction between professional claims and institutional claims determines how services are billed, how revenue is calculated, and which payer rules apply.
Without understanding these differences, practices risk denials, inaccurate reimbursement, and compliance issues.
Let’s take a deeper look into the two claim formats in practical, operational terms so physicians and practice leaders can recognize what gets billed, why it’s billed, and how the claim type influences payment.
Table of contents
- What Professional Claims and Institutional Claims Actually Represent
- How Professional Claims Work
- How Institutional Claims Work (UB-04 / CMS-1450 / 837I)
- Key Differences Physicians Need to Understand
- How Reimbursement Flows Differ Between Claim Types
- Common Scenarios Where Claim Type Changes the Outcome
- How Coding Differs Between Professional and Institutional Claims
- Documentation Requirements for Each Claim Type
- Mistakes Physicians Commonly Make When Distinguishing Claim Types
What Professional Claims and Institutional Claims Actually Represent
Professional and institutional claims are two formats used to describe who performed the service and where the service occurred.
They don’t just differ in form, they differ in billing rules, payment logic, documentation needs, and how payers adjudicate each claim.
Understanding claim type ensures the right combination of physician services, facility services, and payer requirements are captured correctly.
How Professional Claims Work
Professional claims are used to bill physician services and other individual healthcare professionals.
These claims capture the professional work done by the clinician, not the facility’s overhead or resources.
Key Characteristics of Professional Claims
- Billed on CMS-1500 or 837P electronic format
- Uses CPT, HCPCS, and ICD-10-CM codes
- Includes modifiers to indicate complexity, laterality, or procedural relationships
- Reimburses based on the Medicare Physician Fee Schedule (MPFS)
- Requires the provider’s individual NPI
Professional claims follow a valuation system where each CPT code has RVUs assigned: work RVU, practice expense RVU, and malpractice RVU. Payers use these RVUs to calculate reimbursement.
Who Submits Professional Claims?
- Physicians
- Advanced practice providers (NPs, PAs)
- Behavioral health professionals
- Ambulance providers
- Labs (when billing professional interpretation)
Professional claims reflect the provider’s work, not the resources of the facility.
How Institutional Claims Work (UB-04 / CMS-1450 / 837I)
Institutional claims are used by hospitals, outpatient facilities, ASCs, SNFs, rehab centers, and other organizations that provide facility-based care. These claims capture overhead, equipment, supplies, nursing, room charges, and institutional-level services.
Key Characteristics of Institutional Claims
- Billed on UB-04 or 837I
- Uses revenue codes, HCPCS, condition codes, and ICD-10-PCS for inpatient procedures
- Paid under facility-specific payment systems such as:
- APCs (outpatient hospital)
- DRGs (inpatient hospital)
- ASC payment systems
- Requires the facility’s billing NPI
Institutional claims reflect everything surrounding the patient encounter, beds, equipment, nursing time, pharmacy, imaging, and supplies.
Who Submits Institutional Claims?
- Hospitals
- Outpatient hospital departments
- Surgery centers
- Skilled nursing facilities
- Rehab hospitals
- Home health agencies
These claims represent the facility’s services, not the provider’s individual work.
Key Differences Physicians Need to Understand
Professional and institutional claims differ not only in form but in how payers interpret and reimburse them. Below is a beginner-friendly comparison:
| Category | Professional Claim (CMS-1500) | Institutional Claim (UB-04) |
| Who bills? | Physician or clinician | Facility or hospital |
| Focus | Provider’s work (CPT) | Facility resources (rev codes, APCs, DRGs) |
| Codes used | CPT, HCPCS, ICD-10-CM | Revenue codes, HCPCS, ICD-10-CM, ICD-10-PCS |
| NPI used | Individual NPI | Facility NPI |
| Payment method | RVU-based fee schedule | APC/DRG-based payments |
| Modifiers | Required frequently | Used selectively |
| Examples | Office visit, interpretation | OR time, imaging equipment, bed charges |
This distinction is essential because payer rules, documentation, and reimbursement differ completely depending on the claim type.
How Reimbursement Flows Differ Between Claim Types
Reimbursement works differently for professional and institutional claims because payers use separate payment systems for provider work and facility resources. Understanding these differences helps physicians anticipate how services are paid, why the same encounter generates two payments, and how documentation influences each revenue stream.
Professional Claims (Physician Payment Flow)
- Reimbursed per CPT code
- Based on MPFS or contracted fee schedule
- Payment is tied to provider documentation
- Modifiers affect payment significantly
Institutional Claims (Facility Payment Flow)
- Reimbursed under APCs, DRGs, or ASC methodology
- Global payments may cover multiple services
- Facility documentation must support medical necessity
- Device costs, room charges, and supplies are included in the reimbursement structure
These two claims can describe the same patient encounter but generate completely different revenue streams.
Common Scenarios Where Claim Type Changes the Outcome
The claim type used can completely change how a service is billed and reimbursed. Different settings, provider roles, and billing rules determine whether a professional claim, an institutional claim, or both must be submitted.
- Hospital-Based Physician – A physician employed by a hospital bills a professional claim. The hospital separately bills the institutional claim for facility services.
- Outpatient Surgery Center – The surgeon submits a professional claim for the procedure. The ASC submits an institutional claim for the operating room, supplies, and nursing.
- Emergency Department – The emergency physician bills a professional claim, while the hospital bills facility ED charges separately.
- Split/Shared Services – In 2024–2025 rules, split/shared impact how E/M is attributed, and the claim type determines whether the service qualifies as provider-level vs facility-level.
How Coding Differs Between Professional and Institutional Claims
Professional Claims
- CPT describes the service performed
- HCPCS describes supplies or drugs
- ICD-10-CM defines medical necessity
- Modifiers refine details
- Time, complexity, and documentation influence payment
Institutional Claims
- Revenue codes identify the department providing service
- APCs/DRGs determine payment grouping
- ICD-10-PCS used for inpatient procedures
- Charges reflect facility resource consumption
Coding teams must coordinate to ensure professional and institutional coding align, especially during audits
Documentation Requirements for Each Claim Type
Professional Claims Require:
- Detailed procedure notes
- Clear diagnosis linking to medical necessity
- Time-based documentation (when applicable)
- Specific provider signatures
- Support for modifier use
Institutional Claims Require:
- Facility documentation supporting resource use
- Start/stop times for procedures and anesthesia
- Supply and device logs
- Nursing and ancillary notes
- Condition codes and occurrence codes when needed
Both claim types depend heavily on accurate and consistent documentation, but in different ways.
Mistakes Physicians Commonly Make When Distinguishing Claim Types
- Assuming one claim type covers both physician and facility services
- Using CPT assumptions for services billed under DRGs or APCs
- Forgetting that modifiers affect professional claims more than institutional claims
- Underestimating the impact of facility documentation on inpatient DRG payment
- Not aligning diagnosis selection between professional and institutional coding teams
Avoiding these mistakes prevents denials and protects reimbursement.
Professional and institutional claims are two parts of the same revenue cycle ecosystem. Understanding the differences helps physicians anticipate how services are billed, how payers adjudicate claims, and how documentation influences payment. With the right knowledge, practices can reduce denials, strengthen compliance, and improve overall reimbursement accuracy.
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FAQs
Yes. If coding teams assign conflicting diagnoses or service dates, payers may flag the claims for review.
Yes. For example, a surgeon bills CPT codes while the facility bills a DRG or APC for the surgical encounter.
Revenue codes tell the payer which department provided the service and how the facility resources were used.
The claim requires the facility NPI, but rendering provider NPIs may appear as secondary identifiers.
Institutional claims can take longer due to DRG/APC validation and facility-level medical necessity reviews.
Yes. Professional audits focus on CPT accuracy and documentation, while institutional audits focus on DRG assignment, medical necessity, and resource use.
