1. CHAPTER © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 17 Insurance and Billing Volunteers aren't paid, not because they are worthless, but because they are priceless. Sherry Anderson

2. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Learning Outcomes After completing Chapter 17, you will be able to: 17.1Define the key insurance terminology 17.2 Explain the differences among fee-for-service plans, HMOs, and PPOs. 17.3 Outline the key requirements for coverage by the Medicare and Medicaid programs. 17.4 Explain the formula for RBRVS and define allowed charge, contracted fee, and capitation. 17.5 List the components of the claims process. 17.6 Produce a clean CMS-1500 health insurance claim form. 17.7Define accounts receivable and accounts payable and give the common payment methods accepted in medical practices today. 17.8List the different types of documents used as statements to bill patients. 17.9Outline the differences among open-book, written-contract and single-entry accounts, and explain the purpose of creating an accounts receivable aging. 17.10Explain the purposes of the following credit and collections acts: ECOA, FCRA, and FDCPA. 17.11List the required components of a Truth in Lending Statement. 17.12Define the two common types of problem collection accounts in the medical office. 17-2

3. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Introduction Patient Financial Accounts –Insurance Billing Terminology –Insurance Billing Procedures 17-3

4. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Basic Insurance Terminology Premium Benefits –Lifetime Maximum Benefit Deductible Coinsurance Copayment Exclusions Formulary Elective Procedure Preauthorization / Precertification 17-4

5. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Checkpoint LO 17.1 Why is a thorough knowledge of insurance terminology necessary for an administrative medical assistant? 17-5

6. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Private Health Plans Fee-for-Service and Managed Care Plans 17-6

7. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Checkpoint LO 17.2 Why do you believe that managed care programs are so much more popular today than the more traditional fee-for-service plan? 17-7

8. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Government Plans Medicare –Part A –Part B –Medicare Part C and Part D –Medicare Plan Options Fee-for-Service: The Original Medicare Plan Medicare Advantage Plans –Recovery Audit Contractor (RAC) Program 17-8

9. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Government Plans (continued) Medicaid –Accepting Assignment –Medi/Medi –State Guidelines TRICARE and CHAMPVA –TRICARE –CHAMPVA TRICARE and CHAMPVA Eligibility State Children’s Health Plan Workers’ Compensation 17-9

10. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Checkpoint LO 17.3 What is the difference between Medicare and Medicaid? 17-10

11. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Fee Schedules and Charges Medicare Payment System: RBRVS Payment Methods –Allowed Charges –Contracted Fee Schedule –Capitation Calculating Patient Charges Communications with Patients about Charges 17-11

12. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Checkpoint LO 17.4 Explain why it is good for the practice to have the patient sign an assignment of benefits form. 17-12

13. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. The Claims Process: An Overview Obtaining Patient Information –Basic Facts –Eligibility for Services –Obtaining Prior Authorization –Coordination of Benefits Delivering Services to the Patient –Physician’s Services –Medical Coding –Referrals and Authorizations for Other Services 17-13

14. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. The Claims Process: An Overview Preparing the Health-Care Claim –Filing the Insurance Claim –Time Limits Insurer’s Processing and Payment –Review for Medical Necessity –Review for Allowable Benefits –Payment and Remittance Advice Reviewing the Insurer’s RA and Payment 17-14

15. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Checkpoint LO 17.5 Explain how to decide coverage priority for dependent children of divorced parents who both have insurance coverage. 17-15

16. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Preparing and Transmitting Health-Care Claims Electronic Claims and Paper Claims –Preparing Electronic Claims –Preparing Paper Claims –Completing the CMS-1500 Form Transmission of Electronic Claims –Transmitting Claims Directly –Using a Clearinghouse –Using Direct Data Entry Generating Clean Claims Claims Security 17-16

17. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Checkpoint LO 17.6 Why is it important that insurance claims, paper and electronic, be submitted correctly on the first submission? 17-17

18. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Patient Payments in the Office Accepting Patient Payment –Cash –Check –Debit Card –Credit Card 17-18

19. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Patient Payments in the Office (continued) Using the Pegboard System for Posting Payments –Responsibility for Minors –Responsibility for Elderly Patients and Patients with Disabilities –Refunding and Overpayment –Professional Courtesy 17-19

20. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Checkpoint LO 17.7 What payment methods are commonly accepted in medical offices? 17-20

21. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Standard Billing Procedures Preparing Statements –Using Codes on the Statement –Using the Patient’s Ledger Card as a Statement –Computer Generated Statements –Using an Independent Billing Service Using the Superbill Managing Billing Cycles 17-21

22. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Checkpoint LO 17.8 What two types of codes are commonly found on the patient superbill (encounter form)? 17-22

23. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Standard Collection Procedures State Statute of Limitations –Open-Book Account –Written-Contract Account –Single-Entry Account Using Collection Techniques –Initial Telephone Calls or Letters –Follow-Up Statement and Collection Letters Preparing an Age Analysis 17-23

24. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Checkpoint LO 17.9 Define statute of limitations as relating to collecting a debt. 17-24

25. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Laws That Govern Credit and Collections Fair Debt Collection Practices Act of 1977 Telephone Consumer Protection Act (TCPA) of 1991 Observing Professional Guidelines for Finance Charges and Late Charges Using Outside Collection Agencies Insuring Accounts Receivable 17-25

26. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Checkpoint LO 17.10 Why must medical practices be particularly careful when choosing a collection agency? 17-26

27. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Credit Arrangements Following Laws Governing Extension of Credit –Equal Credit Opportunity Act –Performing a Credit Check –Employment Verification –Credit Bureau Report –Extending Credit Unilateral Agreement Mutual Agreement Truth in Lending Act 17-27

28. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Checkpoint LO 17.11 Under ECOA, for what reasons may credit not be denied? 17-28

29. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Common Collection Problems Hardship Cases Patient Relocation and Address Change 17-29

30. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 17-30 Checkpoint LO 17.12 When would a patient be described as a skip?

31. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 17-31 Summary LO 17.1 The following are key terms used by insurance companies, knowledgeable administrative medical assistants, medical billers, and coders: premium, benefit, lifetime maximum, deductible, coinsurance, copayment, exclusions, formulary, elective procedure, precertification, preauthorization, liability insurance, and disability insurance. LO 17.2 Fee-for-service plans are traditional plans in which, after a yearly deductible is met, the insurance plan pays for a percentage of the charges and the patient is responsible for the other percentage (often 80% insurance plan and 20% patient). HMOs are prepaid plans that pay the providers either by capitation or by contracted fee-for-service with patients choosing a PCP, seeing preferred providers, and paying a fixed per-visit copay. A PPO is a managed care plan that establishes a network of providers to perform services for plan members. Members may seek care out-of-network, but their costs will be higher.

32. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 17-32 Summary (continued) LO 17.3 Medicare provides health insurance for citizens aged 65 and older as well as for certain disabled workers, disabled widows of workers, and patients with long-term disability related to chronic kidney disease requiring dialysis or end-stage renal disease requiring transplant. Medicaid is a health benefit plan for low- income, blind, or disabled patients; needy families; foster children; and children born with birth defects. LO 17.4 RBRVS stands for “resource-based relative value scale.” Its formula is RVU x GAF x CF. An allowed charge is the maximum dollar amount an insurance carrier will base its reimbursement on—it is also the maximum amount a participating provider is allowed to collect. A contracted fee is a negotiated fee between the MCO and the provider.

33. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 17-33 Summary (continued) LO 17.5 The claims process includes obtaining patient information; delivering services to the patient and determining the diagnosis and fee; recording charges and codes, documenting payment from the patient, and preparing the health-care claims; and reviewing the insurer’s processing of the claim, remittance advice, and payment. LO 17.6 Using the step-by-step instructions within the chapter and Procedure 17-4, and given a completed encounter form with all necessary information, the student should produce a legible, clean, and acceptable CMS- 1500 claim form.

34. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 17-34 Summary (continued) LO 17.7 Accounts receivable refers to the money that is owed to the practice (able to be received). Accounts payable refers to the money that the practice owes other vendors (able to be paid). Common payment methods accepted by medical practices include cash, check, and debit and credit cards. LO 17.8 Common statement documents include superbills, typed or computer-produced itemized statements, and copies of ledger cards.

35. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 17-35 Summary (continued) LO 17.9 An open-book account is the account type most commonly found in a medical practice, consisting of periodic charges and payments added on an as-needed basis as patients are seen in the practice. A written-contract account is used when the physician and patient sign a contract for a specific service or procedure. A single- entry account is used for patients when it is expected they will be seen only once, such as for a relative visiting the area on vacation. An age analysis is the process of classifying and reviewing past-due accounts by age from the first date of billing. It helps you keep on top of past-due accounts and determine which ones need follow-up. LO 17.10 ECOA is the Equal Credit Opportunity Act. It prohibits discrimination based on sex, marital status, race, national origin, religion, or age. Applicants also cannot be discriminated against for receiving public assistance income or exercising their rights under the Consumer Credit Protection Act. The Fair Credit Reporting Act (FCRA) requires that credit bureaus supply correct and complete information to businesses to use in evaluating a person’s application for credit, insurance, or a job. The Fair Debt Collections Practices Act, or FDCPA, requires debt collectors to treat debtors fairly and prohibits certain collection tactics, including harassment, false statements, threats, and unfair practices.

36. © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 17-36 Summary (continued) LO 17.11 The Truth in Lending Statement must include the following elements: the amount of total debt, the amount of the down payment, the amount of each payment and the date due, the due date for the final payment, the interest rate (if any) expressed as an annual percentage rate, and the total finance charges (if any). LO 17.12 The two most common types of collection problems in the medical office are hardship cases, who simply cannot afford to pay their debt, and accounts known as skips, in which the debtor moved and left no valid forwarding information, so it is not possible to bill the patient.