© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 1 McGraw-Hill Insert Cover Here The Hospital Billing Environment PART ONE Chapter 2 The Hospital Billing Process

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 2 McGraw-Hill LEARNING OUTCOMES After completing this chapter, you will be able to define the key terms and: 1.Describe the main steps in the hospital billing process. 2.List the items that are entered into the patient accounting system to establish the patient’s account during preregistration or registration. 3.Compare and contrast routine charges and ancillary charges. 4.Discuss the content and purpose of the charge description master. 5.Identify the main causes of billing errors. 6.Identify the advantages and disadvantages of using information technology in the hospital billing process.

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 3 McGraw-Hill KEY TERMS accounts receivable (AR) adjustments admission aging ancillary charges appeal attending physician charge description master (CDM) charge explode charge slip compliance discharge DNFB (discharged/not final bill) list electronic health record (EHR) system encounter form explanation of benefits (EOB) guarantor inpatient-only procedures medical necessity precertification professional services Quality Improvement Organization (QIO) referring physician remittance advice (RA) routine charges uncollectible account utilization review (UR)

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 4 McGraw-Hill THE BILLING PROCESS Business goal is to collect accounts receivable (AR) as quickly as possible based on the following landmarks:  Admission  Treatment  Discharge

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 5 McGraw-Hill BUSINESS OFFICE DUTIES Admissions (also called registration or access) Insurance verification Health information management (HIM) Information systems (IS) Patient accounting (claim preparation and submission, posting payments, billing) Collections

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 6 McGraw-Hill BILLING PROCESS STEPS Step 1: Preregister or Register Patients  Scheduling o Physician requests services o Services scheduled o Referring physician, patient, department, attending physician notified  Establish Patient Account which contains: o Personal data o Basic billing data o Medical information o Account number o Medical record number

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 7 McGraw-Hill Step 2: Establish Financial Responsibility  Patient Payment Policy Explained o Remind patients of their obligation to their health plan (e.g., copayments, coinsurance, deductibles) o Inform patients of estimated amount they will owe o Explain to patients without insurance that they are responsible for complete payment o Prepare patients scheduled for outpatient procedures to pay expected amount at time of service o Tell inpatients they will be billed after discharge and after insurance payments are received o Explain financial counseling is available o Review acceptable forms of payment (e.g., cash, check, credit card)

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 8 McGraw-Hill Step 2: Establish Financial Responsibility (cont.)  Insurance Verification and Precertification o Verification: insurance coverage verified; first payer determined if more than one health plan o Precertification: payer authorizes payment or recommends another course of action; Medicare often requires preadmission and preprocedure review o Medical Necessity: treatment/procedure must meet generally accepted standards of medical practice to be considered medically necessary  Inpatient-Only Procedures o Certain procedures designated “inpatient-only” by Medicare; if performed as outpatient, the entire claim will be denied

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 9 McGraw-Hill Step 3: Check Patients In  Check In o Complete demographic and medical information verified; outstanding issues resolved; copayments and deductibles collected, as appropriate  Patient Consent o Consent in writing for planned procedures must be obtained o HIPAA Privacy Disclosure signed to consent to disclosure of information regarding the patient’s stay o Hospital’s Notice of Privacy Practices given to patient o Any other legal forms or waivers necessary are signed at this time

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 10 McGraw-Hill Step 4: Check Patients Out  Inpatients o Physician provides discharge order/plan o Discharge planning recommendations prepared o Time and date of discharge noted in system to determine length of stay  Outpatients o Post-discharge care instructions provided if needed o Time and date of services received noted in system for billing

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 11 McGraw-Hill Step 5: Review Coding Compliance  Coding Compliance o Medical record reviewed by health information management (HIM) department to determine diagnosis and procedure codes that are compliant with official guidelines o Patient account specialists and HIM personnel ensure documentation in medical record supports coding  Patients’ Records: Working with the HIM Department o Medical record standards set by the Joint Commission o Medicare and hospital by-laws influence standards o Each record has a unique number o HIM Department responsible for three tasks: medical transcription, medical records, medical coding

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 12 McGraw-Hill Step 6: Check Billing Compliance  Billing Compliance o Applying knowledge of various payer guidelines to determine what can be billed  Charge Collection Gathering all charges from all departments that provided services…either from automated system or manually o Routine Charges: inpatient room and board charges and outpatient visits (total of costs of all supplies customarily used to provide the service) o Ancillary Charges: additional charges such as medications, anesthesia, radiology services, etc.

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 13 McGraw-Hill Step 6: Check Billing Compliance (cont.)  Charge Slips o Each department has its own charge slip (also called encounter forms or charge tickets) listing the major services provided o Ordering physician or technician checks off the general heading of the service provided o When posted, patient accounting system “explodes” the charge and bills all the components of the major service o Hold Period: charges typically must be reported in one to five days after discharge for inpatients; seven to ten days after outpatient services

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 14 McGraw-Hill Step 6: Check Billing Compliance (cont.)  Charge Description Master (CDM) o Computerized list of charge codes for all services and items that a hospital can bill to a patient, payer, or other provider o Includes description of service or item, price, and other data required for creating an insurance claim o Maintaining the Charge Description Master: accuracy of codes in CDM is vitally important for accurate claims; CDM should be updated/maintained on an ongoing basis

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 15 McGraw-Hill Step 7: Prepare and Transmit Claims Patient account specialists are typically responsible for preparing accurate, timely insurance claims and patient bills.  Timely Claims o Each payer has a timeline for the submission of claims o Many facilities use “scrubber” software to test claims before sending them o Most hospital claims sent electronically  Billing Errors o Possible results: 1) claims are not paid or only partially paid; 2) investigations by government regulators who suspect fraud

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 16 McGraw-Hill Step 7: Prepare and Transmit Claims (cont.) o Common billing errors: services and/or supplies not documented in patient’s medical record double billing medically unnecessary services services included in other charges inaccurate or incorrect provider information

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 17 McGraw-Hill Step 8: Monitor Payer Adjudication Payers put claims through a series of steps to judge whether they should be paid; this process is called adjudication.  Claims Follow-up o Patient account specialists contact insurance companies when claims have not been paid  Payment Processing o Payments received are posted to the appropriate patient account o If a claim is denied or not paid in full, an appeal can be submitted o If a claim is rejected, it can be corrected and resubmitted

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 18 McGraw-Hill Step 9: Generate Patient Statements After receiving all insurance payments, patients with balances due are periodically sent statements Step 10: Follow up on Patient Payments and Handle Collections Patient account specialists analyze patient accounts regularly and begin collection procedures for overdue bills.  Writing Off Uncollectible Accounts o If no payment is received after the collection process and the cost of continuing is higher than the amount owed, the account is considered uncollectible or a bad debt and written off

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 19 McGraw-Hill THE HOSPITAL BILLING PROCESS AND INFORMATION TECHNOLOGY The next major step in health care information technology is the implementation of electronic health record (EHR) systems to replace paper files and interface with accounting systems. Some advantages: Immediate access to health information Computerized management of physician orders Clinical decision support Electronic communication Error reduction Some disadvantages: o Cost o Learning curve for staff o Confidentiality and security concerns

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 20 McGraw-Hill CHAPTER REVIEW  The business goal of the billing process. [To collect the facility’s accounts receivable as quickly as possible]  Collecting and entering the basic demographic and insurance information required to establish a patient account in advance. [Preregistration]  When is the patient normally informed of his or her financial responsibility? [registration or preregistration]  What does Medicare hire QIOs to do? [assess medical necessity]

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 21 McGraw-Hill CHAPTER REVIEW (cont.)  Patients’ protected health information (PHI) can be used and disclosed without authorization for what purposes? [treatment, payment, health care operations]  Categorize the following charges as either routine or ancillary: room charges, pharmacy, laboratory, oxygen, gloves. [Routine: room charges, oxygen, gloves] [Ancillary: pharmacy, laboratory]  The central file in the facility’s patient accounting system that maintains details of each charge is the: [charge description master (CDM)]

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 22 McGraw-Hill CHAPTER REVIEW (cont.)  Billing errors lead to unpaid or partially paid claims, and? [investigations that suspect fraud]  If a claim is rejected, what recourse does the facility have? [correct and resubmit it]  If a claim is denied or partially paid, what recourse does the facility have? [submit an appeal]  What is the next logical step when all collection attempts have been exhausted? [account is written off as uncollectible]

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 23 McGraw-Hill TERMINOLOGY QUIZ  Type of transaction entered to write off or change an entered transaction. [adjustment]  Physician responsible for patient care while in the hospital. [attending physician]  Another name for an inpatient or outpatient charge slip. [encounter form]  Document that accompanies payment from an insurance company. [remittance advice (RA)]  Accounts receivable (AR) report that classifies charges according to the number of days since the charge was incurred. [aging report]

© 2009 The McGraw-Hill Companies, Inc. All rights reserved. 24 McGraw-Hill TERMINOLOGY QUIZ (cont.)  Based on the invasive nature of the procedures, Medicare classifies certain procedures as: [inpatient-only procedures]  Actions that satisfy official requirements are in: [compliance]  Next major step in health care information technology. [electronic health record (EHR) systems]