Introduction to the Medical Billing Process Chapter 1 © 2010 The McGraw-Hill Companies, Inc. All rights reserved.

Learning Outcomes After studying this chapter, you should be able to: 1.1 Describe the basic features of medical insurance policies. 1.2 Compare indemnity and managed care plans. 1.3 Discuss the fee-for-service and the capitation methods of payment for medical services. 1.4 Compare health maintenance organizations, point-of-service plans, and preferred provider organizations. Chapter 1

Learning Outcomes (Continued) 1.5 Describe the key features of a consumer- driven health plan. 1.6 Describe the major types of payers for medical insurance. 1.7 List the ten steps in the medical billing process. 1.8 Identify the most important skills of medical insurance specialists. 1.9 Discuss the types of health care organizations that employ medical insurance specialists. 1.10 Compare medical ethics and etiquette. Chapter 1

Key Terms Accounts receivable (A/R) Adjudication Benefits Capitation Coinsurance Compliance Consumer-driven health plan (CDHP) Copayment Covered services Deductible Diagnosis code Ethics Etiquette Excluded services Fee-for-service Health care claim Chapter 1

Key Terms (Continued) Health maintenance organization (HMO) Health plan Indemnity plan Managed care Managed care organization (MCO) Medical coder Medical insurance Medical insurance specialist Medical necessity Network Noncovered services Open-access plans Out-of-network Out-of-pocket Participation Chapter 1

Key Terms (Continued) Patient Ledger Payer Per member per month (PMPM) Point-of-service (POS) option Policyholder Practice management program (PMP) Preauthorization Preexisting condition Preferred provider organization (PPO) Premium Preventive medical services Primary care physician (PCP) Chapter 1

Key Terms (Continued) Procedure code Professionalism Provider Referral Schedule of benefits Self-funded health plan Third-party payer Chapter 1

Increasing Employment Opportunities For Medical Insurance Specialists! Medical insurance specialists are valuable because they help ensure Top-quality service, and increased revenue for health care practices and facilities Chapter 1

Rising Spending on Health Care Cost of advances in medical technology Aging population of the United States RAPIDLY GROWING OPPORTUNITIES FOR EMPLOYMENT IN THE MEDICAL ADMINISTRATIVE AREA

Medical insurance specialists display value to their employers by Verifying compliance with various medical insurance guidelines and governmental regulations Completing health care claims accurately and in a timely manner Understanding billing regulations and filing procedures Using interpersonal skills Chapter 1

A medical insurance specialist’s work contributes to Patient satisfaction Financial success of the practice Chapter 1

Insurance Basics Medical Insurance: Financial plan (the payer) that covers the cost of hospital and medical care Policyholder: Person who buys an insurance plan; the insured, subscriber, or guarantor Health Plan: Individual or group plan that provides or pays for the cost of medical care Benefits: What a health plan pays for services covered in an insurance policy; listed in the schedule of benefits. Medical Necessity: Reasonable services of provider (doctor or facility) consistent with professional medical standards. Chapter 1

Health Care Benefits Covered Services: Noncovered Services: Listed on the schedule of benefits May include primary care, emergency care, medical specialists’ services, and surgery Coverage may be mandated Noncovered Services: Most policies do not cover dental services, eye examinations or eyeglasses, employment-related injuries, cosmetic procedures, or experimental procedures - May also not cover specific items, drugs, or preexisting conditions Chapter 1

Two Types of Medical Insurance Policies Individual contract between individual and the plan known as direct pay Group contract between an employer or organization and the plan the group members are insured as “subscribers” or “enrollees” The insured (individual) is the policyholder The insured (employer or organization) is the policyholder Chapter 1

Other Insurance Types Disability Insurance: Replaces income lost because the insured cannot work Workers’ Compensation Insurance: Provides benefits for an insured injured on the job

Health Care Plans Indemnity Payment method is fee-for-service based on the contract’s schedule of benefits. Managed Care Payment method is typically based on capitation or a discounted fee-for-service. Chapter 1

Health Care Plans Indemnity The contract is between the insured and the plan. Managed Care The plan has a contract with both the policyholder and provider. Chapter 1

Health Care Plans Indemnity Patients receive care from the providers of their choice. Managed Care Patients receive care from a limited panel of providers. The contracted providers have agreed to a discounted reimbursement. Chapter 1

Indemnity Plans Key Terms: Premium: Periodic payment the patient is required to make to keep the policy in effect Deductible: Amount that the insured pays on covered services before benefits begin Coinsurance: Percentage of each claim that the insured pays; states the health plan’s percentage of the charge, followed by the insured’s percentage Chapter 1

Indemnity Plans (Continued) Example: An indemnity policy states that the deductible is the first $200 in covered annual medical fees and that the coinsurance rate is 80-20. A patient whose first medical charge of the year was $2,000 would owe $560. Chapter 1

Health Maintenance Organizations (HMOs) Combines coverage of medical costs and delivery of health care for prepaid premium. Prospective Payment: Payment paid before the patient visit; covers a specific period of time Capitation Method: Fixed prepayment to a medical provider for all necessary contracted services provided to each patient who is a plan member PMPM (per member per month): The capitated rate Chapter 1

Health Maintenance Organizations (HMOs) (Continued) Cost Containment An HMO uses the following containment methods: Restricting patients’ choice of providers Requiring preauthorization for services Controlling the use of services Controlling drug costs Cost-sharing Chapter 1

Health Maintenance Organizations (HMOs) (Continued) Health Care Quality Improvement The quality improvements made by HMOs are illustrated by these features, which most plans contain: Disease/case management Preventive care Pay-for-performance (P4P) Chapter 1

Point-of-Service Plan Also called an “open access HMO” Allows members to see providers in or out of HMO’s network Members pay more for out-of-network providers Chapter 1

Preferred Provider Organizations (PPOs) Another health care delivery system Requires payment of a premium and often of a copayment for visits PPOs control the cost of health care by: Directing patients’ choices of providers Controlling use of services Requiring preauthorization for services Requiring Cost-sharing Chapter 1

Consumer-Driven Health Plans (CDHP) Combine two elements: A health plan, usually a PPO, that has a high deductible (such as $1,000) and low premiums A special “savings account” that is used to pay medical bills before the deductible has been met Cost containment plan based on consumerism: Idea that patients who pay for health care services become more careful consumers Chapter 1

Private Payers For-Profit Aetna Cigna United Healthcare Group Health Net Humana Pacificare Health Systems Nonprofit Kaiser Permanente (the largest nonprofit HMO) Blue Cross/Blue Shield Associations (have both profit and nonprofit components) Chapter 1

Self-Funded Health Plans Health insurance provided by employers Organization assumes the risk of paying directly for medical services and sets up a fund from which it pays for claims Organization establishes the benefit levels and the plan types it will offer May set up their own provider networks or use existing networks from managed care organizations Chapter 1

Government-Sponsored Plans Medicare: Coverage for those age 65 and older, people with certain disabilities, and people with permanent kidney failure Medicaid: Coverage for low-income people who cannot afford medical care TRICARE (was CHAMPUS): Coverage for active-duty military personnel, their spouses, children, and other dependents; also retired military personnel and their dependents, as well as family members of deceased active-duty personnel CHAMPVA: Coverage for veterans with permanent service-related disabilities and their dependents Chapter 1

The Medical Billing Process Job functions of medical insurance specialists: Understand patients’ responsibilities for paying for medical services Analyze charges and insurance coverage to prepare accurate, timely claims Collect payment for medical services from health plans and from patients To complete their duties, medical insurance specialists follow a medical billing process Chapter 1

The Medical Billing Process (Continued) Step 1: Preregister Patients There are two main tasks: Schedule and update appointments Collect preregistration demographic and insurance information Both new and returning patients are asked about the medical reason for the visit Chapter 1

The Medical Billing Process (Continued) Step 2: Establish Financial Responsibility for the Visit Questions and procedures to follow: Questions about covered services, billing rules, and patient responsibility Verify patients’ eligibility and health plan coverage, determine the first payer, and meet payers’ conditions for payment Chapter 1

The Medical Billing Process (Continued) Step 3: Check In Patients Check in individuals as the practice’s patients: Collect or confirm detailed and complete demographic and medical information with the patient Copy and file insurance cards and other identification cards, such as drivers’ licenses, into the patient’s record Complete any other necessary forms Chapter 1

The Medical Billing Process (Continued) Step 4: Check Out Patients Tasks following a patient’s encounter: Assign medical codes to medical diagnoses and procedures Assign a diagnosis code to the patient’s primary illness Assign a procedure code that stands for the particular service, treatment, or test Enter transaction information in the patient ledger Chapter 1

The Medical Billing Process (Continued) Step 5: Review Coding Compliance Follow official guidelines when codes are assigned: After diagnosis and procedure codes are selected, they must be checked for errors Link the diagnosis and the medical services that are documented in the patient’s medical record, so that the payer understands the charges’ medical necessity Chapter 1

The Medical Billing Process (Continued) Step 6: Check Billing Compliance Each charge, or fee, for a visit is related to a specific procedure code Provider’s fees for services are listed on the medical practice’s fee schedule Whether a code can be billed depends on the payer’s rules; following these rules when preparing claims results in billing compliance Chapter 1

The Medical Billing Process (Continued) Step 7: Prepare and Transmit Claims The preparation of accurate, timely health care claims Communicates information about the diagnosis, procedures, and charges to a payer May be for reimbursement for services or to report an encounter to an HMO Follow the practice’s schedule Chapter 1

The Medical Billing Process (Continued) Step 8: Monitor Payer Adjudication Payers review claims by following the adjudication process Puts the claim through a series of steps designed to judge whether it should be paid or not The payer’s decision is explained on a report sent back to the provider with the payment Chapter 1

The Medical Billing Process (Continued) Step 9: Generate Patient Statements Bills mailed to patients listing the dates and services provided, any payments made by the patient and the payer, and the balances now due The amount paid by all payers (the primary insurance and any other insurance) plus the amount to be billed to the patient should equal the expected fee Chapter 1

The Medical Billing Process (Continued) Step 10: Follow Up Patient Payments and Handle Collections Analyze patient payments and follow the collections process Patient medical records and financial records are filed and retained according to the medical practice’s policy Collection process begins when patient payments are later than permitted Chapter 1

Procedures, Communication, and Information Technology Medical insurance specialists should follow the office procedures: Communicate effectively Use information technology (IT) Learn to use electronic health records (EHR) as they are introduced into the industry Chapter 1

Procedures, Communication, and Information Technology Most medical practices use information technology throughout the medical billing process to: Store patient and insurance information Schedule patient appointments Create encounter forms for patient encounters Generate and transmit health care claims Post payments to patient’s accounts Chapter 1

Procedures, Communication, and Information Technology WHAT INFORMATION TECHNOLOGY CANNOT DO: Change inaccurate data entry If the data entered are wrong, the information based on them is wrong as well. Chapter 1

Employment as a Medical Insurance Specialist The health care industry offers many career paths for well-qualified employees (with varied tasks or specialized work): Positions in physician practices, clinics, hospitals or nursing homes, and insurance companies Positions are also available in government and public health agencies Self-employment as a claims assistance professional Chapter 1

Medical Insurance Specialist Skills Knowledge of medical terminology, anatomy, physiology, and medical coding Communication skills Attention to detail Flexibility Information technology (IT) skills Honesty and integrity Ability to work as a team member Think about your skills… & the skills you need to develop to become an insurance specialist. Chapter 1

Medical Insurance Specialist Attributes Factors that mostly have to do with the quality of professionalism, which is key to getting and keeping employment, include: Appearance Attendance Initiative Courtesy Chapter 1

Medical Ethics and Etiquette Standards of behavior shared by those in the medical profession. Etiquette Describes proper protocol and behavior in a medical practice. Values Manners Chapter 1

Certification and Credentials Certified Medical Assistant Chapter 1

Certification and Credentials Registered Medical Assistant Chapter 1

Certification and Credentials Registered Health Information Technology Chapter 1

Certification and Credentials Coding Certification From AHIMA or AAPC Chapter 1