Health Information Technology and Management CHAPTER 9 Healthcare Coding and Reimbursement
Pretest (True/False) CPT-4 codes are used to bill for disease and illness. Medicare Part B provides medical insurance and helps pay for doctors services and outpatient care. When a healthcare claim is adjudicated, it means that it has been rejected and the claim is either denied or suspended. Subscriber, insured party, enrollee, member, and beneficiary are all terms that refer to the primary person who is named on a health insurance card.
Insurance Billing Terms Patient account Hospitals create a new account for each episode of care. Medical practices create a new account on the first visit and use the same account for the life of the patient (except for family accounts). Guarantor The person, often the patient, responsible for paying amounts not covered by insurance. May also be a parent, guardian, or spouse. Health plan / Payers May be a for-profit or not-for-profit insurance company, employer selfinsurance fund, or government program such as Medicare. Although not technically health plans, government programs are set up in the registration computer system the same way.
Insurance Billing Terms Subscriber (insured party, enrollee, member, or beneficiary) The primary person who is named on the health insurance card. That person s insurance ID is used to determine eligibility and during claims processing to determine which dependents and services are covered. The beneficiary is the person who is entitled to receive benefits from the plan, and may also include spouses and children (dependents). Member number, policy number, or insurance ID A unique ID assigned by a health plan to each policy or by a government program to each participant. Some plans assign a unique member number to each dependent as well.
Insurance Billing Terms Group number A number used to further identify the policy and the benefits to which a patient is entitled. Generally used in cases where insurance is obtained through an employer who has negotiated special rates and coverage. Claims Bills submitted to insurance plans for healthcare services or supplies. Assignment of benefits A document signed by the patient during registration that authorizes the plan to pay a doctor directly.
Insurance Billing Terms Adjudication The processing of a claim by a health plan in which coded information in the claim is compared to a set of coding rules, or claim edits, and a list of covered benefits. Claims that do not meet the computer criteria are denied or suspended. Explanation of benefits (EOB) / Remittance advice An explanation of the items and the amounts being paid that are communicated to the provider. An EOB is also sent to the patient. Allowed amount An established amount that providers will receive from all parties for each service.
Insurance Billing Terms Remittance / Reimbursement The amount the provider receives from the insurance plan. Adjustments (contractual adjustment or write-down adjustment) An entry made in the patient accounting system to reduce the original charge to the allowed amount based on the provider s contractual agreement with the health plan.
Insurance Billing Terms Coordination of benefits (crossover or piggyback claims) The process by which two or more health plans determine which plan pays first and how much the other plans pay. The primary plan will adjudicate the claim first and determine the allowed amount for the services billed. The secondary claim will include information about what the primary plan allowed, paid, and denied. Claims that are transferred electronically from the primary to the secondary plan are called crossover or piggyback claims.
Insurance Billing Terms Copay / Coinsurance amount The portion of the charges, usually a fixed amount per visit, that a patient is required to pay. Coinsurance is a percentage of the allowed amount determined after the health plan has adjudicated a claim. Deductible A fixed minimum that the patient must pay, usually within a calendar year, before the plan begins paying. Some plans have several deductibles, for example, one amount for doctor visits and another deductible for hospital stays.
Insurance Billing Terms Patient billing Amounts that are determined to be the responsibility of the patient are sent on a bill. Different than a statement, which is a list of charges, payments, and adjustments posted to the account during the period covered by the statement.
Codes For Billing Standardized codes required for healthcare transactions, such as insurance claims and remittance advice HCPCS/CPT-4 codes Procedure codes assigned for services rendered and supplies used. ICD-9-CM codes (and ICD-10) Diagnosis codes assigned to represent disease or medical condition treated.
Overview of Codes CPT-4 (Current Procedural Terminology, 4 th edition) Numeric standardized codes for reporting medical services, procedures, and treatments performed by medical staff Five digits long and numeric
Figure 9-3 Small sample of CPT-4 codes.
Overview of Codes HCPCS (Healthcare Common Procedure Coding System) Coding system used for billing for procedures, services, and supplies Includes CPT-4 codes
Figure 9-4 Small sample of HCPCS supply codes and administration codes.
Overview of Codes Procedure modifier codes Two-digit codes used in conjunction with HCPCS/CPT-4 codes for billing purposes ABC codes (Alternative Medicine Billing) Used to bill for alternative medicine (e.g. acupuncturists, message therapists, etc.) Not part of the CPT or HCPCS code sets Only accepted by some payers
Figure 9-5 Small sample of procedure modifier codes.
Overview of Codes ICD-9-CM (Intl Classification of Diseases - 9 th version - Clinical Modification) System of standardized codes developed collaboratively by WHO (World Health Organization) and 10 international centers The modifier CM provides way to code patient clinical information; makes codes useful for indexing medical records, medical case reviews, and communicating a patient s condition precisely
Figure 9-6 Small sample of ICD-9-CM codes.
Overview of Codes DRG (Diagnosis-Related Group) Used to classify ICD-9-CM codes into 25 major diagnostic categories (MDCs) Old DRG system had 538 codes Newer MS-DRG system has 745 codes (MS-DRG: Medicare Severity--Diagnosis-Related Group)
ICD-9 and ICD-10 Comparison ICD-9: lacks specificity in info conveyed in codes ICD-10: characters in code identify right versus left, initial encounter versus subsequent, and other clinical info ICD-9: some chapters are full, impeding the ability to add new codes ICD-10: increased character length ICD-9: does not address new medical knowledge ICD-10: uses full code titles and reflects advances in medical knowledge and technology
ICD-9 and ICD-10 Comparison (cont.) ICD-9 ICD-10 Length 3-5 characters 3-7 characters Number of Codes Digits Approximately 13,000 Approximately 68,000 Digit 1 is alpha or numeric; digits 2-5 are numeric Example 780.01 S52.521A Digit 1 is alpha; digits 2 and 3 are numeric; digits 4-7 are alpha or numeric
Reimbursement Methods Fee for service Control what provider can charge Allowed amount Discounted fees agreed to by provider for services Listed on EOB
Reimbursement Methods Managed care Control patients utilization of services (i.e. HMO -- Health Maintenance Organization) Developed to help control costs of use of healthcare services Designed to make PCP (primary care physician) into gatekeepers who control access to additional services HMOs act as both insurer and provider HMO patients must use HMO for all services, except emergencies
Reimbursement Methods Capitation Flat rate paid to provider by HMO based on per member per month (i.e. head count) Receive a flat rate per member per month from the HMO regardless if the provider sees the patient PPO (Preferred Provider Organization) Allows patients to use both PPO and non-ppo providers, but pay more when going out of network
Reimbursement Methods Government-funded health plans Largest payers in U.S. Include: CHAMPVA (Civilian Health and Medical Program of Veterans Affairs) VA (Veterans Administration) TRICARE (active duty military, retirees, and dependents) IHS (Indian Health Services) FECA (Federal Employee Compensation Act) WC (Workers Compensation) Medicaid, Medicare
Reimbursement Methods Medicare -- Largest and most significant govt program! Part A (hospital insurance) Covers inpatient hospital stays and skilled nursing facilities Most beneficiaries do not pay premiums (previously collected as Medicare taxes) Reimburses hospitals per discharge based on a prospective payment system (PPS)
Reimbursement Methods Part B (medical insurance) Covers professional services Beneficiaries pay premium Uses fee-for-service model based on resource-based relative value scale (RBRVS) Relative value * dollar amount conversion factor = amount allowed for each procedure RBRVS varies the relative value based on wage and geography
Reimbursement Methods Part C (Medicare Advantage Plans) HMO/PPO plans authorized by Medicare Patient pays HMO a premium, which supplies all of patient s Part A, Part B, Medigap, and sometimes Part D coverage Part D (prescription drug coverage) Helps patients purchase prescription drugs at lower cost Patients pay premium to private insurance plans for this coverage
Reimbursement Methods Medigap (Medicare supplemental insurance) Supplemental private insurance Pays portion of Medicare claims and deductibles for which patient is responsible
Reimbursement Methods Prospective Payment System (PPS) Hospitals do not bill insurance plans in same way as physicians, nor are reimbursements calculated the same way Hospitals use UB-04 claim form instead of CMS-1500 form Hospital claim coders must identify principal diagnosis and associate revenue codes with procedures Not used for children s hospitals, cancer hospitals, or critical access hospitals
Reimbursement Methods Other Medicare PPS Inpatient psychiatric hospital prospective payment system Long-term care hospital prospective payment system Skilled nursing facility prospective payment system Home health prospective payment system
Reimbursement Methods Outpatient PPS Reimburses hospital outpatient services Does not use DRGs or apply to doctor s offices Determines payment based on procedures that are assigned to an APC (Ambulatory Payment Classification) Relative weights represent resource requirements of service Calculates reimbursement from RW of APC times national conversion factor; adjusts for wage and geographic differences Allows outpatient claim to have multiple APCs
Reimbursement Methods Medicare Part A and MS-DRGs PPS uses DRGs to determine reimbursement for inpatient stays PPS determines DRG from principal diagnosis Assigns a higher DRG if relevant diagnoses of comorbidities or complications exist MS-DRGs better account for medical severity of health-related situations
Reimbursement Methods Medicare Part A and MS-DRGs DRG code assigned RW Reflects average relative costliness of group s cases compared with costliness for average Medicare case PPS adjusts RW of DRG for geographic and wage differences Hospital reimbursement calculated by multiplying hospital s PPS rate (operating and capital base rate) times RW of DRG code
Fraud and Abuse Examples Medically unnecessary services performed to increase reimbursement Upcoding, or deliberately incorrectly coding hospital claim to trick Grouper software into assigning higher DRG Unbundling, or coding components of a comprehensive service as several HCPCS codes instead using comprehensive code Billing for services not provided Billing for levels of service not supported by documentation in patient s health record