What inpatient billing is
Inpatient billing means claiming for services to a private patient admitted to hospital. If they are insured, two parties pay you: Medicare and their health fund.
Medicare pays 75 percent of the MBS schedule fee for any service to an admitted patient. The health fund pays at least the other 25 percent. So for an insured patient you are paid at least the full schedule fee.
Most funds pay more if you take part in their gap cover scheme. You then choose one of three positions for each claim:
| Billing position | What you charge | Who pays | Patient pays |
|---|---|---|---|
| No-gap | The fund’s gap scheme rate | Medicare 75 percent of MBS, fund the rest up to its scheme rate | Nothing |
| Known-gap | Above the fund’s scheme rate, up to its known-gap cap | As for no-gap | A capped gap, invoiced separately |
| Out of scheme | Any fee you set | Medicare 75 percent of MBS, fund 25 percent of MBS | Everything above the MBS fee |
Most physicians bill inpatient consultations no-gap. They are often unplanned, so getting informed financial consent (IFC) for an out-of-pocket fee before you see the patient is difficult. A no-gap claim also needs nothing from the patient, but you need to tell them verbally, or give them written advice, that you will be making a claim on their behalf against their insurance and that there is no out-of-pocket fee. That makes it the fastest, most reliable claim to get paid.
An illustrative example
The same $130 subsequent consultation, billed two ways
- Medicare, 75 percent of the $90 MBS fee
- Health fund
- Patient
Billed outside the scheme, the fund pays only $22.50. The patient owes $40, which you invoice and collect. Check current fees on MBS Online and each fund’s schedule.
These claims are lodged electronically through ECLIPSE, the Services Australia channel that sends one in-hospital claim to Medicare and the health fund together. Both then pay into your nominated bank account. Any out-of-pocket amount is invoiced to the patient separately, outside ECLIPSE.
Related guide: How private inpatient billing works
Getting set up
Allow six to eight weeks before your first private list or ward round. Most steps are free, but several depend on each other and some are slow to come back.
- Specialist registration with AHPRA. Medicare pays consultant physician items only once your specialist registration is recorded. Check it has reached Services Australia before you start.
- A Medicare provider number for every hospital. Each provider number belongs to one location. Apply for one per private hospital through HPOS, which needs a PRODA account first. A claim under the wrong location’s number is rejected.
- Bank details against each provider number. Nominate in HPOS the account Medicare pays into. Health funds use the bank details registered with them, so keep both the same.
- Hospital credentialing. Each hospital approves your scope of practice and admitting or consulting rights. Expect to supply your CV, registration, indemnity certificate and referees.
- Medical indemnity insurance. Cover that includes private practice, not only public hospital work.
- Health fund gap cover registration. Each large fund runs its own scheme, and AHSA runs Access Gap Cover for many smaller funds. Some funds need a signed agreement or a form. Others apply their rates whenever your charge is at or below them. Register before you bill, or the fund pays only 25 percent of MBS on your no-gap claims.
- A way to lodge through ECLIPSE. Your own ECLIPSE-capable billing software, a practice management system with in-hospital claiming, or a billing service that lodges under your provider numbers. The rest of this guide helps you choose.
- A fee policy. Decide in advance whether you bill no-gap, known-gap or out of scheme, with which funds, and what you do for uninsured, DVA and compensable patients. Write it down so claims stay consistent, whoever lodges them.
- IFC and assignment of benefit. IFC applies to any out-of-pocket fee. The assignment of Medicare benefit rules changed on 1 July 2026. Check that your claiming process records the patient’s authority as the new rules require.
- An ABN and an accountant. Income, fees and fund payments all need to reconcile at tax time. Medical services are GST-free, but billing service fees are usually quoted plus GST.
How it works day to day
Every inpatient consultation goes through the same steps: collect the patient’s details, check them with Medicare and the health fund, lodge the claim, fix any rejections, then track and reconcile the payment. Income can be lost at any of these points, so how well they are done decides how much of what you bill is paid.
The items you will use most
Consultant physician attendances are claimed with these items:
| Item | Used for | Requirements and limits |
|---|---|---|
| 110 | Initial attendance in a course of treatment | Valid referral; once per course |
| 116 | Subsequent attendance in the same course | Record the time of each attendance if more than one in a day |
| 119 | Minor subsequent attendance | For brief attendances |
| 132 | Initial assessment of a patient with at least two morbidities, producing a treatment and management plan of significant complexity | At least 45 minutes; valid referral; once in 12 months by the same physician |
| 133 | Review of a 132 treatment and management plan | At least 20 minutes; twice in 12 months; a 132 by the same physician in the preceding 12 months |
Items 132 and 133 can be claimed for admitted patients, including in inpatient rehabilitation. Both attract Medicare compliance attention, so record the plan, the morbidities and the time spent.
A course of treatment usually starts with a new referral. A new course can also begin after a set period without an attendance. Whether a 110 applies depends on time, reason and referral, not on a readmission alone, so check how the MBS defines each item. Other consultant physician, case conference and prolonged attendance items exist, but some descriptors exclude admitted patients.
Referrals
You need a valid referral before the first attendance. A GP referral lasts 12 months unless it says otherwise. A specialist referral lasts three months, or for the whole admission if the patient is still an inpatient. The admitting specialist usually requests hospital consultations, so record who referred and when.
Billing details for each consult
Each claim needs the patient’s identity, Medicare and fund details, the date of service, the item, the referrer and the hospital. The hospital sticker covers most of the patient’s details. If you see someone twice in one day, record the time of each attendance, or the second is rejected as a duplicate.
What happens to the claim
Every field must match the details the patient has registered with Medicare and their health fund. Any mismatch is rejected automatically, and nothing is paid until the claim is corrected and lodged again.
- ConsultDetails collected
- Details checkedWith Medicare and fund
- LodgeOne ECLIPSE claim
- Medicare assesses75 percent of MBS
- Fund assessesPays its share
- Payment trackedInto your account
- ReconciledMatched to each claim
Rejected at step 4 or 5Cause found, claim corrected, lodged again from step 3. Nothing is paid until it clears.
- Check eligibility. Before lodging, an online check confirms the patient’s fund membership and cover. It catches lapsed policies, waiting periods and excluded services.
- Lodge through ECLIPSE. One in-hospital claim goes to Medicare and the fund together.
- Medicare assesses its 75 percent and passes the claim to the fund.
- The fund assesses its share against your gap scheme registration.
- Payment. Medicare and the fund each pay into your account, often in one deposit covering many patients. A well-run claim is paid within days. A poorly run one takes weeks, if it is paid at all.
- Reconcile. Match every deposit to the claims it pays, and every claim to a deposit. Anything unmatched is late or lost. Identify the claim, ask the health fund or Medicare why, and lodge it again.
Rejections. Common causes are wrong fund or membership details, an expired or missing referral, items that cannot be claimed together, the wrong provider number for the hospital, and dates outside the admission. Medicare allows one year from the date of service to claim. Health funds generally honour claims passed through Medicare, but differ in how far back they will pay.
Who pays, by patient type
Most inpatient work is privately insured patients claimed through ECLIPSE. The rest is handled differently and takes most of the manual effort.
| Patient | Who pays | How it is claimed | What to watch |
|---|---|---|---|
| Privately insured | Medicare and health fund | ECLIPSE in-hospital claim | Gap scheme registration, fund details, waiting periods and exclusions |
| DVA (Gold card, or White card for an accepted condition) | Department of Veterans’ Affairs | ECLIPSE | DVA pays its own fee schedule in full; you cannot charge the patient a gap |
| Uninsured private (self-funded) | Medicare 75 percent, patient the rest | Medicare benefit through ECLIPSE or patient claim, balance invoiced | IFC and collecting the patient’s share |
| Compensable (TAC, WorkCover and state equivalents) | The insurer or scheme | Invoice to the insurer with a claim number | Approval first, the scheme’s own fee schedule, slower payment |
| Overseas visitor or student | The patient’s overseas cover, or the patient | Invoice to the insurer or the patient | No Medicare benefit; insurers pay on different bases |
| Private patient in a public hospital | Medicare and fund, often through the hospital | Usually managed by the hospital’s private practice arrangement | Your agreement says who bills and what is deducted |
A claim that ends in an invoice rather than an ECLIPSE payment takes longer: the invoice is prepared, sent, followed up and matched to the payment. Billing services usually charge more for manual invoicing, so your expected patient mix affects which pricing suits you.
What billing costs
The full cost of any billing arrangement is the fee, plus your or your staff’s time, plus the value of claims paid late or not at all. The fee is the easiest of the three to see, and the one most often compared.
Your options and how they are priced
| Arrangement | How you pay | Watch for |
|---|---|---|
| Do it yourself with ECLIPSE software | A software subscription, plus your own time | Hours on data entry, rejections and reconciliation, usually after clinical work |
| Rooms staff or a family member | Wages or a share of their time, plus software | Knowledge of inpatient rules, cover for leave, whether anyone checks the results |
| Hospital or clinical group billing | A percentage deducted before you are paid | Rates can be high for what is mostly data entry; read what the fee covers |
| Billing service, percentage of collections | Commonly 2 to 5 percent of what is paid | Charged on billed or collected? On patient payments too? |
| Billing service with a minimum per claim | The percentage or a fixed minimum, whichever is higher | Minimums make small claims such as item 119 expensive |
| Billing service, flat fee per claim | A fixed amount per claim, including some offshore teams at around $5 | Charged on rejected and unpaid claims? Where is patient data held? |
| Extras on any service | Setup fees, rejection fees (some charge up to $25 each), monthly minimums, exit fees | Lock-in contracts and corrections handed back to you |
A worked example
The figures below assume an average claim of $170, three minutes of data entry each, a 20-minute correction for 10 percent of claims, and weekly reconciliation. Replace them with your own.
| Early career | Established | |
|---|---|---|
| Inpatient claims per year | 500 | 2,000 |
| Billed per year | $85,000 | $340,000 |
| Service fee at 3 percent | $2,550 | $10,200 |
| Service fee at 5 percent | $4,250 | $17,000 |
| Value of each 1 percent of claims never paid | $850 | $3,400 |
| Do-it-yourself time per year | About 70 hours | About 220 hours |
| Software, assuming $100 a month | $1,200 | $1,200 |
At a 4 percent fee, a service buys back your time at roughly $30 an hour early in your career and $55 an hour once established. That is close to what an administrator costs. On fee alone, a service rarely beats a competent person in-house.
Claim losses can outweigh fee differences. The unpaid rate is the share of claims that fail and are never paid. At 2 percent, an established practice loses $6,800 a year, the same as the difference between a 3 and a 5 percent fee. So a dearer service with fewer failed claims can end up costing less.
Late payment is a cost too. Typically, 3 to 5 percent of what you bill in a year may go uncollected. That matters most in your first year, when cash flow is tightest.
Common pitfalls
Most lost income comes from a handful of predictable failures. None shows up unless someone counts claims at every stage.
- Claims never lodged. Stickers lost in a pocket, a list left in the car, a batch never entered. An unlodged claim never appears on a report of unpaid accounts, so nobody chases it.
- Batching. Saving claims for a weekly session invites errors. Details go stale, entry is rushed, and accuracy falls as the pile grows. A whole batch can also be overlooked or lost.
- Transcription errors. A mistyped Medicare or fund number, the wrong date or provider location, a misspelt long name. Each causes a rejection, and someone has to find and fix the error.
- Referral problems. An expired or missing referral, or a 110 claimed while the patient is still in a course of treatment.
- Rejections left unresolved. Some need knowledge of Medicare and fund rules to fix. If nobody has the time or expertise, they become bad debt.
- Weak reconciliation. Medicare and funds pay in batches. Unless each deposit is matched to its claims, short and missing payments go unnoticed.
- Missed time limits. A claim found after Medicare’s one-year limit, or past the fund’s own limit, may not be payable at all.
- Responsibility. Claims under your provider number stay your legal responsibility, whoever lodges them. Medicare directs compliance reviews and debt recovery at the provider.
Percentage fees also leave you and the service with different stakes. A failed claim costs you its full value, but the service loses only its fee on it. A difficult rejection is worth far more to you to recover than to them.
Whether to pay for a billing service
A billing service is worth paying for when it gets more of your claims paid, sooner, than you would, by more than its fee. Not every service is fast or efficient. Where it isn’t, doing it yourself or using your own staff can be the better choice.
When it probably doesn’t make sense
- Your group already bills for you. Many hospital private practice arrangements, and some clinical groups, include billing in the agreement. You may have no choice, and paying twice is money wasted. Their admin fee is often more than a billing-only service charges. Check whether you need the other services it covers, or whether that part can be split out.
- Your inpatient volume is low and straightforward. A handful of no-gap consultations a week, at one hospital, with mostly insured patients, is manageable with good ECLIPSE software, provided you lodge promptly and reconcile every deposit.
- You already have an experienced in-house biller with spare capacity. Someone who knows Medicare and fund rules, has good ECLIPSE software and is measured on claims paid can match many services.
- Your inpatient work is a small part of a rooms-based practice whose practice management system already lodges in-hospital claims well, and someone reconciles them.
- You’re happy to do the admin, and you do it promptly. Claims held over for a weekend session are the ones that go missing.
When it probably does make sense
- Your volume is growing, or you consult across several hospitals with different provider numbers.
- Your workload is unpredictable, with on-call and after-hours consults, so claims pile up between sessions.
- You have no staff, or your staff are skilled at rooms billing but not at inpatient claiming.
- You see DVA, compensable or uninsured patients who need invoicing and follow-up.
- You don’t know your current unpaid rate, or you suspect claims are going missing.
- Your time is worth more elsewhere, clinically or personally, than the hourly rate the fee implies.
Self-billing works well when each claim is lodged within a day or two, every deposit is reconciled, and there’s a running list of claims not yet paid.
How to tell whether a service is good value
Compare what each service gets paid and how much work it leaves with you. A good service answers each question below with a figure or a plain yes or no.
Questions to ask
| Question | Why it matters |
|---|---|
| What share of lodged claims end up paid, and how is that measured? | Lodged and paid are different numbers; the gap between them is lost income |
| What is the median time from consult to payment? | Slow payment ties up cash, most of all in your first year |
| How are consults captured, and how do you know none are missed? | A claim that was never lodged never appears on an unpaid report |
| Who does the data entry? | If it’s you or your staff, that time is part of the cost |
| Who fixes rejections, and what does that cost? | Rejections handed back, or charged per item, add to the fee |
| Is the fee charged on amounts billed or collected? | A fee on billed amounts is charged on claims that are never paid |
| Is there a minimum fee per claim? | Minimums raise the effective rate on small items such as 119 |
| Are there setup fees, monthly minimums, exit fees or a fixed term? | These change the full cost and how hard it is to leave |
| How can I see a claim’s status? | Without that, you can’t measure the paid rate yourself |
| How are deposits reconciled and reported? | Your accountant needs each payment matched to a patient and claim |
| Where is patient data held, and who can access it? | Privacy obligations stay with you. Weigh this if a service works from overseas |
| Do you handle gap scheme registration? | An unregistered fund pays only 25 percent of MBS |
| How do you handle DVA, compensable and patient invoicing? | This work takes longer and is often priced differently |
Red flags
- No figure for claims paid, or a figure for claims lodged presented as if it were claims paid.
- Rejections returned to you to fix, or charged per rejection regardless of cause.
- A fee charged on the amount billed rather than the amount collected.
- No way to see a claim’s status without phoning or emailing.
- A long fixed term or an exit fee.
Measure before you compare
Start with your own baseline. For one to three months, count three numbers: consults performed, claims lodged and claims paid in full. The gap between the first and last is what your current arrangement costs on top of its fee.
Then cost each option the same way: annual fee, plus your or your staff’s hours, plus the expected value of claims paid late or not at all. The lowest total is the best value for your practice.
Quick-start checklist
This guide is general information current at October 2026, not legal, financial or tax advice. MBS items, fees, referral rules and fund arrangements change; check MBS Online, Services Australia and each health fund before relying on them. It is published by FreshClaim, an inpatient billing service.