Search for the types of medical billing and you will usually find the same three labels: closed, open and isolated. You will also find articles that use "billing methods" to mean something else entirely, such as fee-for-service or value-based payment. Both questions come up when a practice is choosing software or setting up its billing, so this guide answers both.
It is written for practice owners, office managers and billing staff, including practices that treat both insurance and personal injury patients. It explains what each of the three labels means, which one describes most practices today, how billing systems differ from payment models, and where lien-based billing fits.
What are the three main types of medical billing systems?
The three types usually named are closed, open and isolated billing systems. The labels describe how far patient and billing information can travel: within one practice (closed), across providers (open), or only with the patient (isolated).
These are informal terms used in billing training and industry writing, not categories defined by a regulator, and different writers use them a little differently. They map most closely to three kinds of health record that federal sources do define: the electronic medical record (EMR), the electronic health record (EHR) and the personal health record (PHR).
| Type | Closest record type | Who holds the information | How far it travels |
|---|---|---|---|
| Closed | EMR | One practice | Stays inside that practice |
| Open | EHR | Several providers and organizations | Shared with other providers involved in the patient's care, and accessible to the patient |
| Isolated | PHR | The patient | Wherever the patient chooses to take it |
What is a closed billing system?
A closed billing system keeps clinical and billing information inside one practice. The practice charts, codes and bills from its own records, and the data does not easily move to other providers.
This matches how the Office of the National Coordinator for Health IT (ONC) has described an EMR: a digital version of the paper chart in one clinician's office, with information that generally does not travel easily outside that practice. The benefit is control. The practice decides who sees what. The drawback is that when another provider treats the same patient, records have to be requested and sent separately.
What is an open billing system?
An open billing system shares information across the providers who treat the same patient. Records and related data can move between practices, hospitals, labs and other organizations involved in care.
ONC has described the EHR this way: a record built to reach beyond the organization that first collected the information, so it can be shared with other providers and accessed by the patient. Sharing reduces repeated paperwork and missing history. It also means more people and systems touch the data, so access controls and HIPAA (Health Insurance Portability and Accountability Act) safeguards matter more.
What is an isolated billing system?
An isolated system puts the patient in charge of the record. The patient keeps their own health information and decides who sees it.
This is the personal health record model. MedlinePlus, from the National Library of Medicine, describes a personal health record as something the patient keeps for themselves, separate from the records held by doctors' offices and hospitals, and suggests it can include medicines, allergies, test results and past surgeries. In practice, an isolated record is rarely how a medical office actually bills. Claims still come from the provider's own system.
Which type do most practices use today?
Most practices bill from an EMR or practice management system they control, which looks like the closed model, while also exchanging data with payers and other providers electronically. In real life the lines blur.
Under HIPAA, health plans and covered providers use adopted electronic standards for transactions such as eligibility checks, claims, claim status and payment and remittance advice. So even a practice whose clinical records stay in-house sends standardized data out to payers every day. When you compare systems, it is more useful to ask practical questions than to pick a label:
- Who controls access to the chart and the bill?
- How are records shared with other providers or with an attorney, and is each release logged?
- How are claims, eligibility checks and payments handled electronically?
- Is the system cloud-based or installed on your own servers? Our guide to cloud-based and on-premise billing software covers that choice.
