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Health Information Technology and Management
Richard Gartee
CHAPTER
Health Information
Technology and Management
Healthcare Coding
and
Reimbursement
9
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Health Information Technology and Management
Richard Gartee
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.
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Richard Gartee
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 self-
insurance 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.
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Richard Gartee
Insurance Billing Terms
(continued) • 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.
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Richard Gartee
Insurance Billing Terms
(continued) • 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.
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Insurance Billing Terms
(continued) • 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.
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Health Information Technology and Management
Richard Gartee
Insurance Billing Terms
(continued)
• 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.
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Richard Gartee
Insurance Billing Terms
(continued)
• 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.
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Richard Gartee
Insurance Billing Terms
(continued) • 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.
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Insurance Billing Terms
(continued)
• 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.
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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.
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Overview of Codes
• CPT-4 (Current Procedural Terminology,
4th edition)
– Numeric standardized codes for reporting
medical services, procedures, and treatments
performed by medical staff
– Five digits long and numeric
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Richard Gartee
Figure 9-3 Small sample of CPT-4 codes.
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Richard Gartee
Overview of Codes (continued)
• HCPCS (Healthcare Common Procedure
Coding System)
– Coding system used for billing for procedures,
services, and supplies
– Includes CPT-4 codes
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Richard Gartee
Figure 9-4 Small sample of HCPCS supply codes and administration codes.
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Richard Gartee
Overview of Codes (continued)
• 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
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Richard Gartee
Figure 9-5 Small sample of procedure modifier codes.
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Overview of Codes (continued)
• ICD-9-CM (Intl Classification of Diseases -
9th 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
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Richard Gartee
Figure 9-6 Small sample of ICD-9-CM codes.
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Overview of Codes (continued)
• 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)
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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
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ICD-9 and ICD-10 Comparison
(cont.) ICD-9 ICD-10
Length 3-5 characters 3-7 characters
Number of
Codes
Approximately 13,000 Approximately 68,000
Digits Digit 1 is alpha or numeric;
digits 2-5 are numeric
Digit 1 is alpha; digits 2 and 3 are
numeric; digits 4-7 are alpha or
numeric
Example 780.01 S52.521A
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Reimbursement Methods
• Fee for service
– Control what provider can charge
• Allowed amount
– Discounted fees agreed to by provider for
services
– Listed on EOB
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Reimbursement Methods
(continued)
• 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
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Reimbursement Methods
(continued)
• 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
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Reimbursement Methods
(continued)
• 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
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Reimbursement Methods
(continued)
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)
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Reimbursement Methods
(continued) • 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
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Reimbursement Methods
(continued)
• 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
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Richard Gartee
Reimbursement Methods
(continued)
• Medigap (Medicare supplemental insurance)
– Supplemental private insurance
– Pays portion of Medicare claims and deductibles for
which patient is responsible
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Reimbursement Methods
(continued) • 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
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Reimbursement Methods
(continued)
• 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
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Reimbursement Methods
(continued)
• 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
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Richard Gartee
Reimbursement Methods
(continued)
• 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
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Richard Gartee
Reimbursement Methods
(continued)
• Medicare Part A and MS-DRGs (continued)
– 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
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Richard Gartee
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