Component 1: Introduction to Health Care and Public Health in the U.S. 1.5: Unit 5: Financing Health Care (Part 2) 1.5a: Private Health Care Plans and Medical Billing and Coding 1Component 1 / Unit 5A Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

Unit 5: Objectives Describe healthcare financing in the US and the history and role of the health insurance industry Understand the payment process in healthcare and concepts of reimbursement, billing and coding of claims using appropriate code sets during the billing process Review factors responsible for escalating healthcare expenditures in the US Describe methods of cost containment 2Component 1 / Unit 5A Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

Section 5A Goals Examine total healthcare expenditures in the United States Review the growth and development of the health insurance industry in the US Describe the revenue cycle and the billing process including charge capture and coding in the cycle that ensures appropriate reimbursement Review the use code sets and electronic data interchange transactions used in the claims process 3Component 1 / Unit 5A Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

National Health Expenditures 2008 Total Healthcare Expenditures (billions)2339 Private1232 Public 1107 Federal 817 State and Local 290 U.S. Population in Millions 305 GDP in Billions National Health Exp. Share of GDP (%) Adapted from: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at (Historical) Component 1 / Unit 5A Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

U.S. Healthcare Expenditures (2008) Average $7668 per person 16.2% GDP 2008/19% GDP by % paid out of pocket 64% paid by private health insurance Private health insurance developed during last 80 years 5 Adapted from: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at (Historical) Component 1 / Unit 5A Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

History of Healthcare Financing Late 19 th and early 20 th century –Care provided at patient’s or doctor’s home –Self-pay/charity payment for services –Increasing advancement of medicine as a science especially in surgery and infectious disease –AMA standardizes medical education and quality of care improves –Medical care for illness moves out of the home to doctor’s office, surgical care at hospitals –Commercial health insurance not available due to unpredictability of health and “moral hazard” 6 Adopted from: Thomasson, M, Health Insurance in the United States, available at Component 1 / Unit 5A Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

Early Hospital & Physician Health Plans In 1929, 1300 Dallas school teachers contract with Baylor Hospital for 21 days hospitalization for 50¢/month each –Hospital service plans - steady stream of income –Exempt from most state insurance regulations –Later becomes Blue Cross Physicians fearing loss of control form own associations –In 1939, California physicians form pre-paid healthcare services plan –Blue Shield Association 7 Adapted from: History of Blue Cross and Blue Shield available at Component 1 / Unit 5A Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

Employer Pre-paid Plans Ross-Loos Medical Group provided pre-paid care to Los Angeles County employees –Believed to be first HMO in US –Focus on quality of care including preventive care Surgeon Dr. Sidney Garfield starts pre-paid medical practice –1930s – Organizes employer pre-paid plan for construction workers on the Los Angeles Aqueduct and Grand Coulee Dam and Kaiser Shipyards during WWII –Fixed payment per employee per month –Subsequently, formed Permanente Health Plan Open to the public Union support boosts growth 8Component 1 / Unit 5A Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

Commercial Health Insurance Commercial insurance carriers offer group health insurance –Compete against the Blues –Employer (group) enrollment spreads risk and addresses “moral hazard” –Experience rating vs. community rating – lower rates for young healthy individuals 9Component 1 / Unit 5A Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

Factors Influencing Development of Commercial Health Insurance WWII wage controls –Employers offer health insurance as a benefit to attract skilled employees IRS favorable tax treatment –Employer – free of payroll tax –Employee -- no income tax Employer sponsored health contracts non- cancellable 1949 – Unions may negotiate health insurance benefits as part of wages 10 Adopted from: Thomasson, M, Health Insurance in the United States, available at Component 1 / Unit 5A Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

HMO Plans Health Maintenance Organization Act of 1973 –Federal grants and loans to encourage HMOs Required employers offering traditional health plans to offer HMO option –HMO offers comprehensive, prepaid health coverage for hospital and physician services through specific health care providers –Gave pre-paid health plans access to the employer based insurance market 11Component 1 / Unit 5A Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

Healthcare Plans Today 85% of the population have health care insurance Future challenges increasing demand and driving costs include –Aging of the population –Chronic disease –Increased government spending 12Component 1 / Unit 5A Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

Billing and Coding - Definitions Medical billing: process of submitting claims to insurance companies in order to receive payment for services rendered by a healthcare provider Coding: process of translating the written diagnosis and procedures relating to a patient encounter into a numeric classification or code Code set: any set of codes used to encode data elements, such as tables of terms, medical concepts, medical diagnostic codes, or medical procedure codes. A code set includes the codes and the descriptors of the codes. 13Component 1 / Unit 5A Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006, Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

Billing and Coding Definitions Charge capture: process of collecting all services, procedures, and supplies provided during an encounter or patient care Charge description master: the database of prices for services provided used by HCOs during the billing process (price list) Electronic data interchange (EDI): the structured transmission of data between organizations by electronic means using standard transaction sets A transaction set: an electronic model of a paper transaction or form Component 1 / Unit 5A14 Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006, Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

Revenue Cycle Overview Appointment scheduled Registration: Demographic and insurance info Services provided Charge capture Coding Claim submission: paper or electronic Reimbursement received Final settlement with patient 15Component 1 / Unit 5A Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006, Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

Registration Practice management software or hospital management software Demographic information –Accurate patient and responsible party information Insurance information –Confirm terms of coverage –Determine deductibles, copayments, and coinsurance –Accurate claim identification by 3rdPP 16Component 1 / Unit 5A Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006, Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

Charge Capture Charge capture: the process of collecting a list of all services, procedures, and supplies provided during an encounter or in the course of care –Paper based forms Superbill, encounter form, or charge ticket –Electronic capture Charge description master: database used by healthcare facilities – the price list Automatic and accurate Component 1 / Unit 5A17 Adapted from: Castro, AC and Layman, E,. Principles of Healthcare Reimbursement. Chicago, IL: American Health Information Management Association; 2006, Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

Coding Clinical terminology - diagnosis and services converted to a standard code, for example –Diagnosis Upper respiratory infection = (ICD-9-CM) –Service, procedure or test New patient, office visit, level II = (CPT) Biopsy of skin, subcutaneous tissue and/or mucous membrane(including simple closure), unless otherwise listed; single lesion = (CPT) Immune globulin 10 mg = J1564 (HCPCS Level II) Component 1 / Unit 5A18 Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

HIPAA Code Sets Health Care Common Procedure Coding System (HCPCS) and Current Procedure Terminology (CPT) codes - AMA ICD-9-CM Volumes 1 & 2 (diagnosis codes) and ICD-9-CM Volume 3 (procedures) – National Center for Health Statistics, CDC National Drug Codes (NDC) – DHHS and drug manufacturers Code on Dental Procedures and Nomenclature (CDT) - ADA 19Component 1 / Unit 5A Available at: : lasthttp:// accessed July 27, 2010 Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

ICD-10-CM & ICD-10-PCS Replaces ICD-9-CM Volume 1 & 2 and ICD-9-CM Volume 3 Compliance set for October 1, Component 1 / Unit 5A Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

ICD-9-CM Diseases of the circulatory system( ) Ischemic heart disease ( ) (410) Acute myocardial infarction (410.0) MI, acute, anterolateral (410.1) MRI, acute, interior, NOS Component 1 / Unit 5A21 Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

Claim Code Sets Physician - Inpatient and outpatient –Diagnosis – ICD-9-CM –Procedure – CPT Hospital Facility – inpatient –Diagnosis – ICD-9-CM –Procedure – ICD-9-CM volume 3 Hospital Facility – outpatient –Diagnosis – ICD-9-CM –Procedure – HCPCS (CPT Level I and HCPCS Level II) Component 1 / Unit 5A22 Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

Claim Submission Claim elements –Demographic and insurance identification information –Encounter elements Dates Diagnosis Procedure Identifiers Paper claim or electronic transaction –Paper: physicians – CMS Form 1500 or facility – CMS Form 1450 –EDI: 837 Transaction Component 1 / Unit 5A23 Heathcare IT Workforce Curriculum Version 1.0/Fall 2010

Electronic claims-transactions Electronic data interchange (EDI) –HIPAA privacy rules/Transactions Rule 837 Healthcare claims or equivalent encounter information 835 Healthcare payment and remittance advice 270/271 Eligibility for a health plan 276/277 Health claims status 278 Referral certification and authorization Component 1 / Unit 5A24 Available at: last accessed July 27, 2010 Heathcare IT Workforce Curriculum Version 1.0/Fall 2010