One billing expert who analyzed one thousand claims found that over thirty percent of claims had problems due to missing or incorrect entity codes—an issue that was costing the practice a few thousand dollars a month.
For a lot of healthcare providers, let’s face it, medical billing is a frustrating and complex puzzle. After submitting claims, it is annoying to see the claims were paid, but the reasoning is quite vague and obscure. If this has happened to you, it is likely you have received a rejection notice with the reasons, “entity is not found or does not exist” or “invalid entity ID”. These problems are by far the most common and the easiest to fix, but are prevalent in the billing world.
The codes serve to do a lot more than just protect from administrative risk; they protect the bottom line of the practice. This guide will explain what they are, why the codes seem to cause so many claims to stop, and teach you why you should know how to use them so you can get paid in a timely manner.
Understanding the “Who” in Your Claims: What Are Entity Codes?
Essentially, an entity code is a unique designation used to identify the parties involved in a single transaction for a medical claim. It tells the insurance payer, “This is the doctor that performs the service,” “This is the site of service,” or “This is the insured patient.
In medical billing, an “entity” refers to every person or organization involved in the transaction. These are:
- Healthcare providers (doctors, nurse practitioners, therapists)
- Facilities (hospitals, clinics, urgent care centers)
- Patients and insurance subscribers
- Insurance payers themselves
- Third-party billing companies
Without the appropriate entity codes, a claim is like an incomplete manuscript. The payer doesn’t know the who, what, where, and for whom, and therefore cannot properly adjudicate and pay the claim.
Key Identifiers Tied to Entity Codes
Entity codes work hand-in-hand with specific identification numbers. The most critical ones you’ll encounter are:
- National Provider Identifier (NPI): A unique 10-digit number for healthcare providers, mandatory for all standard transactions.
- Tax Identification Number (TIN/EIN): Used to identify the billing practice or organization for tax purposes.
- Member/Subscriber ID: The patient’s unique identifier assigned by their insurance plan.
Decoding the List: Common Entity Codes and Their Roles
To use entity codes correctly, you need to know which code corresponds to which role on the claim form. These codes are standardized, especially within the ANSI 837 electronic claim format.
Here is a quick-reference table for some of the most frequently used entity codes:
| Entity Code | Who It Identifies | Common Purpose & Notes |
| 85 | Billing Provider | The person or organization (like a clinic) to be paid. |
| 82 | Rendering Provider | The healthcare professional who actually performed the service. |
| DN | Referring Provider | The provider who referred the patient for this service. |
| IL | Subscriber | The person who holds the insurance policy. |
| QC | Patient | The individual who received care (if different from the subscriber). |
| 77 | Service Location | The facility where the service was rendered. |
Why Getting It Wrong Hurts: The Real Cost of Entity Code Errors
The sine qua non of entity code mistakes is more often than not, claim rejection or denial. This is not just a minor procrastination; it is a straight shot to your revenue cycle management. Denied claims often require investigation, correction, and resubmission of claims, which may add more than 30 to 60 days to your timeline of payments.
From my experience working with different practices, I can feel the frustration in the billing office. The system often appears to be built with the goal of rejection, which can stem from a root issue that may be hidden in plain sight and deceptively simple.
Top Reasons for Entity Code Rejections
Based on analysis of thousands of claims, here are the most common triggers for entity code rejections:
- NPI Mismatch or Misuse: This is the #1 culprit. It happens when the NPI on the claim doesn’t match what the payer has on file. Common scenarios include using a group NPI when an individual NPI is required, or billing under a supervising doctor’s NPI for a mid-level provider’s service without the proper modifiers or setup.
- Outdated or Inaccurate Patient Information: A patient’s member ID, last name, or date of birth on the claim doesn’t match the insurer’s records. This often happens after life events like marriage or when a patient brings an old insurance card.
- Missing or Incorrect Taxonomy Code: Many payers require a precise taxonomy code—a specialty classification—that must align perfectly with the provider’s enrolled information. Being one digit off can cause a rejection.
- Credentialing and Enrollment Gaps: A provider may be fully credentialed, but if they are not actively “loaded” in a specific payer’s claims processing system, every claim will be rejected as an “entity not found”.
- Referring Provider Omissions: For services that require a referral, failing to include the referring provider’s NPI and correct entity code (DN) will stop a claim in its tracks.
A Proactive Playbook: How to Prevent Entity Code Errors
The good news is that entity code errors are highly preventable. Moving from a reactive “fix-it” approach to a proactive “prevent-it” system is the key to a healthier revenue cycle. Here are actionable steps you can implement:
- Verify Eligibility Every Single Time: This is your first and most effective line of defense. A robust eligibility verification process before the patient’s visit catches wrong IDs, terminated coverage, and plan changes instantly.
- Audit and Update Provider Profiles Monthly: Don’t let provider information go stale. Schedule a monthly check to verify that all NPIs, taxonomy codes, practice locations, and enrolled payers in your system are 100% accurate and up-to-date.
- Invest in a Quality Claim Scrubber: A good claim scrubbing tool acts as a spell-checker for your claims. It flags missing NPIs, mismatched provider-patient data, and invalid codes before submission, preventing up to 80% of common errors.
- Train Your Entire Front-End Team: Billing errors often start at the front desk. Ensure your intake staff understands the critical importance of collecting accurate insurance information, spelling names correctly, and checking IDs at every visit.
- Bridge the Credentialing-Billing Gap: Establish a clear protocol so that your billing team is immediately notified whenever a provider joins, leaves, changes specialties, or updates their NPI. This synchronization is vital.
What to Do When You Get an Entity Code Rejection
When a rejection arrives, don’t panic. Follow this systematic approach:
- Examine the message from the payers carefully. Words and phrases like “rendering provider” or “subscriber” will indicate what section (Loop) of the COB (claims) the problem is in.
- Assess the side that is in question (NPI, TIN, name, DOB, member ID) from your documents, and if necessary, from the primary source (provider credentialing file, patient’s insurance card).
- When the provider is ascertained to be correct, ensure they are fully enrolled and accredited with that specific payer for the date of service.
- Correct the details in your practice management system and ensure the claim is submitted again for processing. Also document the error as well as the solution for the sake of referential integrity.
When to Call in the Experts: How A2Z Billings Can Help
Even with optimal internal systems in place, practices can consider outsourcing the medical billing function because staff members still need to concentrate on patient care, and the complexity of medical billing can be extremely burdensome. This is how and why you should consider working with an outsourced O2Z Billings for all the medical billing and coding.
Competitively, A2Z Billings is a medical billing and revenue cycle management service provider with extensive experience built through numerous years in the industry. They become part of your team and work on the details with precision and compliance to let you focus on the patients, and for the entity code challenges, they work on providing the following:
- Expert Credentialing & Enrollment: They ensure your providers are not only credentialed but also correctly loaded into payer systems, eliminating a major source of “entity not found” rejections.
- Advanced Claim Scrubber Technology: Their systems utilize sophisticated claim scrubbing tools that automatically catch and flag entity code inconsistencies before claims are submitted.
- Proactive Denial Management: Their team doesn’t just resubmit claims; they analyze denial trends—including recurring entity code issues—to identify and fix the root cause in your process.
- Specialty-Specific Expertise: Whether you’re in cardiology, mental health, pediatrics, or physical therapy, their certified coders and billers understand the unique entity code and billing nuances of your field.
As one client testimonial for A2Z Billings noted, the relief of having experts handle these complexities allows providers to reclaim time and mental energy, leading to both better patient care and a more stable practice revenue.
Final Thoughts: Mastering the Fundamentals for Financial Health
For a medical practice to run smoothly, understanding, and applying entity codes must be done correctly. When it comes to medical billing, knowing a fundamental piece of the medical billing puzzle leads to fewer denials, n faster payment, and reduces the overall frustration one may experience on a daily basis.
Through the use of strong upfront processes, entity codes can be used to pay and reduce denials due to the accurate and timely payment for the services provided.
Are entity code rejections slowing your cash flow? Reach out to A2Z Billings for a free billing audit and tell us your biggest billing challenge to uncover the revenue leaks in your billing process.
FAQs
- What is an entity code in simple terms?
An entity code is a short identifier that tells the insurance payer who is who on a medical claim. It labels each party – the billing doctor, the performing provider, the patient, etc., ensuring the claim tells the complete story. These codes are paired with specific IDs, most importantly the provider’s NPI number.
- Why are entity codes so important for my practice?
Using the wrong entity code is a top reason for immediate claim denials, which delays your payments and hurts cash flow. Correct codes correlate with clean claims that get processed, which is crucial for the revenue cycle management to flow smoothly. They eliminate back and forth, which is a source of administrative burden for your team.
- What is the most common error when dealing with entity codes?
The most common and often most frustrating error is an NPI mismatch. This is when the provider’s NPI number on the claim isn’t what the insurance payer has on file. This often happens when using a group NPI instead of an individual one, or if a provider isn’t fully enrolled with that specific payer. It simply leads to an entity not found.
- What does it mean when I get a rejection for “Rendering Provider”?
It indicates that the claim does not contain or contains inaccurate details for the rendering healthcare professional (Entity Code 82). Please ensure the individual NPI and taxonomy code for that provider are correct. Always verify this with the payer’s provider enrollment records.
- What’s the difference between entity codes and procedure or modifier codes?
Simply put, entity codes specify “who “ (the people and organizations involved), whereas procedure codes (CPT/HCPCS) specify “what “ was done. Then modifiers add additional information on “how” or “why” a service was rendered. For a claim to be accepted, all three components must be correct and complement each other.