1. The Business of Medicine
Chapter 1
The Business of Medicine
Chapter 1 – The Business of Medicine 1

2. Objectives Coding as a profession Reimbursement aspects
How the coder fits in
Hospital vs. physician services
Hierarchy of providers
Reimbursement aspects
Payers
Understanding RBRVS
Medical necessity
ABN
Healthcare is a multifaceted industry which employs all types of professions and is bound by a multitude of statutes and regulations. To help you understand how a coder fits into the health care industry, we will discuss coding as a profession and how the coder fits into the physician office as well as differences of services provided by hospitals and those provided by physicians.
Although some coders will not be involved in billing, it is important to understand what some consider billing aspects in order to perform more effectively. To help, we will discuss the different types of payers for medical services, the RBRVS system for fees, medical necessity and the ABN as it relates to physician services.

3. Objectives Regulations What the AAPC will do for you HIPAA Compliance
OIG Workplan
What the AAPC will do for you
It is also important to discuss the varying regulations affecting us as coders. This includes Privacy and Security, Compliance rules and audits, and using tools such as the OIG work plan to identify possible areas of concern.
We will wrap up this chapter by talking a little about the AAPC and what it means to be a member of the AAPC.

4. Coding As A Profession Evolution of the coding profession
Certification opens doors
consultants
educators
medical auditors
The coding profession has evolved significantly over the past several decades into a career path with unlimited possibilities. Many professionals who have learned coding have also gone on to roles as consultants, educators, or medical auditors. There are endless possibilities in an ever changing field. 4

5. Coding As A Profession What is coding?
Coding is the process of translating a written or dictated medical record into a series of numeric or alpha-numeric codes.
Every time a patient receives health care, a record is maintained of the observations, medical or surgical interventions, and treatment outcomes. This record includes information the patient provides concerning his or her symptoms and medical history, the results of examinations, reports of X-rays and laboratory tests, diagnoses, and treatment plans. Medical records and health information technicians organize and evaluate these records for completeness and accuracy.
Coding is the process of translating this written or dictated medical record into a series of numeric or alpha-numeric codes.
Coders regularly communicate with physicians and other health care professionals to clarify diagnoses or to obtain additional information. Coders often use computer programs to tabulate and analyze data to improve patient care, better control cost, provide documentation for use in legal actions, or use in research studies.

6. Coding As A Profession Physician-based coders Hospital-based coders
medical coders
coding specialists
Hospital-based coders
health information coders
medical record coders
coder/abstractors
Technicians who specialize in coding are called medical coders or coding specialists. Medical coders assign a code to each diagnosis and procedure by using a classification system. Coders may use several reimbursement systems, such as those required for ambulatory settings, physician offices, or long-term care. Most coders specialize in coding patients' medical information for insurance purposes.
Physician based coders review charts, assign CPT, HCPCS and ICD-9-CM codes for insurance billing. This is tied directly into physician reimbursements and careful thought to assigning the correct codes is essential for physician livelihood.
Technicians who specialize in coding for hospitals are called health information coders, medical record coders, coder/abstractors, or coding specialists. These technicians assign a code to each diagnosis and procedure, relying on their knowledge of disease processes. Coders then use classification systems to assign the patient to one of several hundred “Medicare severity diagnosis-related groups," or MS-DRGs. The MS-DRG determines the amount for which the hospital will be reimbursed if the patient is covered by Medicare or other insurance programs using the MS-DRG system. 6

7. Coding As A Profession Rapidly changing profession
updates and policies are changed as often as quarterly
increasing use of electronic health records (EHR) will continue to broaden and alter the job responsibilities
The coding profession is unique and, once mastered, continuing education must be ongoing. Code updates and policies are changed as often as quarterly. It remains important to stay abreast of these changes to insure proper coding and payments.
The increasing use of electronic health records (EHR) will continue to broaden and alter the job responsibilities of coders. For example, with the use of EHRs, coders must be familiar with EHR computer software, maintaining EHR security, and analyzing electronic data to improve healthcare information.
Coders also may assist with improving EHR software usability and may contribute to the development and maintenance of health information networks. The role of a coder may also become more of an auditor as they review the documentation in the encounter and how the code was assigned.
In addition to mastering anatomy and terminology, coders must be very detailed oriented. Simple words such as “if” “and/or” can completely change a code selection. Special attention to the many guidelines when learning the codes is necessary. 7

8. Hospital vs. Physician Services
Physician-based medical coding
CPT®
HCPCS
ICD-9-CM Volumes 1 & 2
Hospital-based medical coding
ICD-9-CM Volume 1, 2, & 3
MS-DRGs
APCs
When you visit a physician in the office, you typically get one bill from the physician. Although, you may also get a second bill from another physician such as a radiologist. When you visit the hospital, you typically get a bill from the hospital and from each one of the physician’s involved in your care.
Codes for physician services report the work and overhead of the physician regardless of where the work is performed. A physician can provide inpatient or outpatient services and can provide those services in a clinic, ambulatory surgery center, hospital, or other location. The physician’s services are reported using CPT, HCPCS, and ICD-9-CM Volumes 1 and 2. Physician services are typically billed on a CMS-1500 form.
Codes for hospital services report the technical component of services provided in the hospital facility or in a building owned by the hospital. These services are to cover the cost of the hospital itself and the overhead of the equipment, technicians, nurses, and other supplies provided by the hospital. Hospital services are reported using ICD-9-CM Volume 1, 2, and 3 and grouped into payment classification systems such as MS-DRGs and APCs. Hospitals typically bill on a UB-04 form. 8

9. Hierarchy of Providers
Physician
Physician Assistant (PA)
Nurse Practitioner (NP)
Physician services are provided by a variety of medical providers. Each provider has differing levels of education.
Physicians undergo four years of college and four years of medical school, plus three to five years of residency. Residency is training in a specialty of practice. A physician can continue training in a subspecialty, referred to as a fellowship.
Physicians often have mid-level providers working in the same office. Mid-level providers include physician
assistants (PA) and nurse practitioners (NP). Mid-level providers are known also as physician extenders because they extend the work of a physician. Physician Assistants are licensed to practice medicine with physician supervision. A PA program takes approximately 26½ months to complete. Nurse Practitioners have a Master’s Degree in Nursing.
Mid-level providers often are reimbursed at a lower rate then Physicians. Although the scope of practice varies by state, mid-level providers will require oversight by a physician.
Each state will have regulations on the scope of practice that can be performed by each level of provider.
Radiology Tech
Physical Therapist
Lab Tech
Nurses

10. Payers Self-pay Insurance Private (commercial) insurance
BCBS
Aetna
Cigna
Etc
Government insurance
Medicare
Medicaid
TriCare
Although some patients will pay in full for their own medical expenses, most patients will have some type of insurance coverage. As a coder, it is important to understand the individual payers may specify coding requirements.
Insurance carriers are broken down into two groups, private and governmental. Private carriers can also be referred to as commercial carriers and may also provide governmental plans, such as a Medicare Advantage plan in addition to private plans.
Commercial carriers can offer both group and individual plans. Group plans are often offered through employers. Individual plans are purchased directly from the insurance carrier. Examples of commercial carries include BCBS, Aetna, Cigna, United Healthcare, and many others.
Some government insurers include Medicare, Medicaid and TriCare. Medicare is administered by the Centers for Medicare and Medicaid Services (CMS). Medicaid is a combination of Federal and State resources, and TriCare is for the armed forces and their families.

11. Medicare Part A – Inpatient hospital care
Part B – Outpatient medical care
Part C – Medicare Advantage
Part D – Prescription drug coverage
Medicare is broken into several parts:
Part A covers inpatient hospital care, as well as care provided in skilled nursing facilities, hospice care, and home health care.
Part B covers medically necessary physician services, outpatient care, and other medical services not covered by Part A. Coders working in physician offices will mainly work with Part B Medicare.
Part C is also called Medicare Advantage. This coverage is managed by private insurers and may include a combination of Part A, Part B and sometimes Part D services.
Part D is a prescription drug coverage program available to Medicare beneficiaries.

12. RBRVS Resource cost components: physician work practice expense
professional liability insurance
In 1992, Medicare significantly changed the way it pays for physicians' services. Changing its basis of payments on charges, the federal government established a standardized physician payment schedule based on a resource-based relative value scale often referred to as RBRVS.
In the RBRVS system, payments for services are determined by the resource costs needed to provide service. The cost of providing each service is divided into three components: physician work, practice expense and professional liability insurance.
Payments are then calculated by multiplying the combined costs of a service by a conversion factor. The conversion factor is a monetary amount that is determined annually by the Centers for Medicare and Medicaid Services (CMS). Payments are also adjusted for geographical differences. 12

13. RBRVS Physician work component 53 percent
The factors used to determine physician work include the time it takes to perform the service:
technical skill and physical effort
required mental effort and judgment
stress due to the potential risk to the patient
The physician work component accounts for about 53 percent of the total relative value for each service.
The factors used to determine physician work include the time it takes to perform the service;
the technical skill and physical effort;
the required mental effort and judgment; and
stress due to the potential risk to the patient.
The initial physician work relative values were based on the results of a Harvard University study. 13

14. RBRVS Practice expense component
44 percent
Site of service
Facility
Non-facility
Professional liability insurance (PLI)
4 percent
The practice expense component of the RBRVS accounts for 44 percent of the total relative value for each service. Practice expense relative values are resource based and differ by site of service because, for example, the expense of providing a service in the hospital may be different than the expense of providing the same service in a physician’s office.
On January 1, 2000, CMS implemented the resource-based professional liability insurance (PLI) relative value units. The PLI component of the RBRVS accounts for 4 percent of the total relative value for each service. 14

15. RBRVS
2010 Non-Facility Pricing Amount [(Work RVU * Work GPCI) + (Transitioned Non-Facility PE RVU * PE GPCI) + (MP RVU * MP GPCI)] * Conversion Factor (CF)
2010 Facility Pricing Amount [(Work RVU * Work GPCI) + (Transitioned Facility PE RVU * PE GPCI) + (MP RVU * MP GPCI)] * CF
The basic formula for physicians is work expense plus non facility practice expense plus malpractice, each multiplied by the geographic practice cost index. Once the total RVUs are calculated, it is multiplied by the conversion factor.
The formula for facility pricing is the same, except facility practice expense is used instead of non-facility practice expense. The reason for the differences in facility vs non facility amount is due to resources. A physician utilizes less resources in a facility therefore the work expense is less for services performed in a facility.
The conversion factor for June 1, 2010 – November 30, 2010 is $ The conversion factor is usually updated annually, but may be adjusted throughout the year based on legislation changes. 15

16. Atlanta
0.48 Work RVU * Work GPCI Tr Non-Fac PE RVU * PE GPCI
MP RVU * MP GPCI
= Total RVU
Total RVU x Conversion Factor (CF) = Fee
Let’s look at an example using the tables in your textbook. We will calculate the fee for a new patient visit at a clinic in Atlanta. Since the service is provided at a clinic, we will use the non-facility practice expense.
From the RVU table for E/M codes, we see a new patient visit has 0.48 work RVUs, 0.57 Non-Facility Practice expense RVUs, and 0.03 Malpractice RVUs.

17. Atlanta
0.48 Work RVU * Work GPCI Tr Non-Fac PE RVU * PE GPCI
MP RVU * MP GPCI
= Total RVU
Total RVU x Conversion Factor (CF) = Fee
Next, we look at the table for the 2010 Geographic Practice Cost Indices by State to get the GPCIs for Atlanta. According to the table, the Work GPCI is 1.009, the Practice Expense GPCI is 1.014, and the Malpractice GPCI is

18. Atlanta
0.48 * = * = 0.578
* = 0.025
= Total RVU
Total RVU x Conversion Factor (CF) = Fee
After multiplying the RVUs and GPCIs, then adding the totals together, we get a total RVU of

19. Atlanta
0.48 * = * = 0.578
* = 0.025
= Total RVU
Total RVU x Conversion Factor (CF) = Fee
1.087 x $ = $40.08
Now the total RVUs are multiplied by the conversion factor. We will use the stated conversion factor for June – November 2010 of $ This gives us a total fee of $40.08.
Keep in mind these values do change from year to year.

20. Medical Necessity Services or supplies that:
are proper and needed for the diagnosis or treatment of your medical condition,
are provided for the diagnosis, direct care, and treatment of your medical condition,
meet the standards of good medical practice in the local area, and
aren’t mainly for the convenience of you or your doctor.
As we all know, just because there is a fee set for a code, that doesn’t mean the provider will be reimbursed. In order for a carrier to reimburse a service, they have to believe it is medically necessary. According to CMS, the definition of medical necessity is services or supplies that:
are proper and needed for the diagnosis or treatment of your medical condition,
are provided for the diagnosis, direct care, and treatment of your medical condition,
meet the standards of good medical practice in the local area, and
aren’t mainly for the convenience of you or your doctor.

21. National Coverage Determinations
National Coverage Determinations (NCD) help to spell out CMS policies on when Medicare will pay for items or services
Each Medicare Administrative Carrier (MAC) is then responsible for interpreting national policies into regional policies
LCD’s only have jurisdiction within their regional area
There are regulations that govern medical necessity found in the Social Security Act. CMS develops policies based on items or services that are covered by the Act. CMS is not allowed to cover any items or services unless it has been put through the legal requirements.
The statutory and policy framework within which National Coverage Decisions are made may be found in title XVIII of the Social Security Act (the Act), and in Medicare regulations and rulings.
National Coverage Determinations, or NCDs, describe whether specific medical items, services, treatment, procedures, or technologies can be paid for under Medicare.
Medicare Administrative Contractors are responsible for interpreting national policies into regional policies. These are called Local Coverage Determinations, or LCDs. LCDs only have jurisdiction within their regional area. 21

22. Sample LCD
Here, we have an LCD for Vitamin D Assay Testing from Highmark Medicare Services, which is a CMS contractor for the Mid-Atlantic states. This snapshot shows the contractor name and numbers and what type of MAC contractor they are.

23. Sample LCD
The next section of the LCD explains when the service is indicated or considered medically necessary.

24. Sample LCD
Then there is a section on coverage limitations.

25. Sample LCD
This section of the LCD describes the specific CPT codes to which the policy applies.

26. Sample LCD
If you are providing this service and the patients diagnosis does not support the medical necessity requirements per this particular policy your practice would be responsible for obtaining an ABN (Advance Beneficiary Notification). Practices should check policies quarterly to maintain compliance.
Other carriers may or may not recognize ABN forms and careful research is needed to determine use outside of Medicare. In some instances, Health Plan Contracts may have a “hold harmless” clause found within the language that prohibits the billing to the patient for anything other than copays or deductibles. 26

27. Advance Beneficiary Notice
Providers are responsible for obtaining an ABN prior to providing the service or item to a beneficiary.
The form must be filled out in its entirety as well as the cost to the patient and the reason why Medicare may deny the service
Only the approved Form CMS-R-131 is valid and the forms may not be altered
Providers should use an ABN when a Medicare beneficiary requests or agrees to receive a procedure or service that Medicare may not cover. The ABN is a standardized form that explains to the patient why Medicare may deny the particular service or procedure. Additionally, an ABN protects the provider’s financial interest by creating a paper trail that CMS requires before a provider can bill the patient for payment if Medicare denies coverage for the stated service or procedure.
Providers are responsible for obtaining an ABN prior to providing the service or item to a beneficiary. The form must be filled out in its entirety as well as the cost to the patient and the reason why Medicare may deny the service. Only the approved Form CMS-R-131 is valid and the forms may not be altered in any way other than to put the practice information in the header area. 27

28. HIPAA
National standards for electronic health care transactions and code sets;
National unique identifiers for providers, health plans, and employers;
Privacy and Security of health data.
As we discussed in the beginning, the Healthcare industry is heavily regulated. HIPAA is the Health Insurance Portability and Accountability Act of HIPAA is a five part Act, but the part most concerning to the position of a medical coder is Title II, also known as Administration Simplification.
Administration Simplification addresses national standards for electronic transactions and code sets; establishes unique identifiers for providers, health plans, and employers to be used nationally; and provides federal protection for the privacy of personal health information.

29. HIPAA National Standards x12 Code Sets 4010 5010 eff. Jan. 1, 2012
HCPCS
CPT®
CDT
ICD-9-CM (ICD-10-CM eff. Oct. 1, 2013)
NDC
HIPAA designated National standards for electronic health care transactions to improve the efficiency and effectiveness of the health care system. Currently, the version used for electronic transactions such as enrollment, eligibility, payment and remittance advice is referred to as ASC x12 version Effective January 1, 2010, this will be replaced by x
The code sets mandated by HIPAA include HCPCS, CPT, CDT, ICD-9-CM, and NDC. Effective October 1, 2013, ICD-9-CM will be replaced by ICD-10-CM.
It is important to remember that although HIPAA mandates the use of the specified code sets, it does not mandate the use of its conventions or guidelines, except for the ICD-9-CM.

30. HITECH
The Health Information Technology for Economic and Clinical Health Act
Promote the adoption and meaningful use of health information technology
Strengthened HIPAA
Patient audit trail
The Health Information Technology for Economic and Clinical Health (HITECH) Act, enacted as part of the American Recovery and Reinvestment Act of 2009, was signed into law on February 17, 2009, to promote the adoption and meaningful use of health information technology. 
Subtitle D of the HITECH Act addresses the privacy and security concerns associated with the electronic transmission of health information, in part, through several provisions that strengthen the civil and criminal enforcement of the HIPAA rules.  HITECH strengthened HIPAA rules and established more responsibility for business associates complying with HIPAA.
HITECH also allows patients to request an audit trail of health information made through and electronic record. 30

31. HIPAA
Large Health Care Provider Restricts Use of Patient Records Covered Entity: Multi-Hospital Healthcare Provider Issue: Impermissible Use
A nurse practitioner who has privileges at a multi-hospital health care system and who is part of the system’s organized health care arrangement impermissibly accessed the medical records of her ex-husband.  In order to resolve this matter to OCR’s satisfaction and to prevent a recurrence, the covered entity: terminated the nurse practitioner’s access to its electronic records system; reported the nurse practitioner’s conduct to the appropriate licensing authority; and, provided the nurse practitioner with remedial Privacy Rule training.
On the website for the Office of Civil Rights, you can find case examples of violations of the HIPAA privacy act. This example from the website shows where a Nurse Practitioner accessed her ex-husbands medical records. She was reported to the licensing authority.
More case examples of violations can be found on the OCR website.

32. Need for Compliance Benefits of a compliance plan:
faster, more accurate payment of claims
fewer billing mistakes
diminished chances of a payer audit
last chance of running afoul of self-referral and antikickback statutes
increased accuracy of physician documentation that may result from a compliance program actually may assist in enhancing patient care.
show the physician practice is making a good faith effort to submit claims appropriately
sends a signal to employees that compliance is a priority while providing a means to report erroneous or fraudulent conduct, so that it may be corrected.
The OIG acknowledges that patient care is, and should be, the first priority of a physician practice. However, a practice’s focus on patient care can be enhanced by the adoption of a voluntary compliance program.
A voluntary compliance provides physician practices with many benefits including faster and more accurate payment of claims, diminished changes of payer audits, and sending a signal to employees that compliance is a priority.
Although a compliance plan is currently voluntary, the Patient Protection and Affordable Health Care Act of 2010 will require physicians who treat Medicare and Medicaid Beneficiaries to establish a compliance plan. The effective date will be set by future legislation. 32

33. OIG Compliance Plan Conduct internal monitoring and auditing.
Implement compliance and practice standards.
Designate a compliance officer or contact.
Conduct appropriate training and education.
Respond appropriately to detected offenses and develop corrective action.
Develop open lines of communication with employees.
Enforce disciplinary standards through well-publicized guidelines.
On October 5, 2000, the OIG published The OIG Compliance Program for Individual and Small Group Physician Practices as a guidance for physician practices to create their own. There are seven key actions to a successful compliance program. These include:
Conduct internal monitoring and auditing through the performance of periodic audits.
Implement compliance and practice standards through the development of written standards and procedures.
Designate a compliance officer to monitor compliance efforts and enforce practice standards.
Conduct appropriate training and education on practice standards and procedures.
Respond appropriately to detected violations through the investigation of allegations and the disclosure of incidents to appropriate government entities.
Develop open lines of communication with staff meetings, newsletters, and other lines of communication; and
Enforce disciplinary standards through well publicized guidelines.

34. OIG Workplan Published yearly Outlines priorities
Targets areas for improvement
Another report published by the OIG is the OIG Work Plan. The OIG Work Plan is published each year, in October. It outlines the OIGs priorities for the fiscal year ahead.
A medical coder should be aware of the OIG Work Plan to know where the OIG’s focus is going to be in the coming year. 34

35. OIG Work Plan – FY 2011
Evaluation and Management Services During Global Surgery Periods
We will review industry practices related to the number of E&M services provided by physicians and reimbursed as part of the global surgery fee. CMS’ Medicare Claims Processing Manual, Pub. No , ch. 12, § 40, contains the criteria for the global surgery policy. Under the global surgery fee concept, physicians bill a single fee for all of their services that are usually associated with a surgical procedure and related E&M services provided during the global surgery period. We will determine whether industry practices related to the number of E&M services provided during the global surgery period have changed since the global surgery fee concept was developed in 1992.
(OAS; W ; various reviews; expected issue date: FY 2011; work in progress)
This example from the 2011 OIG Work Plan lets providers know they should look at their policies and charges for evaluation and management services during the postoperative periods to ensure compliance. This was also in the 2010 OIG Work Plan and a report outlining the review is expected to be released in Fiscal Year 2011.
Source: OIG 2011 Work Plan; 35

36. OIG Work Plan – FY 2011
Appropriateness of Medicare Payments for Polysomnography
We will review the appropriateness of Medicare payments for sleep studies. Sleep studies are reimbursable for patients who have symptoms consistent with sleep apnea, narcolepsy, impotence, or parasomnia in accordance with the CMS Medicare Benefit Policy Manual, Pub. No. 102, ch. 15, § 70. Medicare payments for polysomnography increased from $62 million in 2001 to $235 million in 2009, and coverage was also recently expanded. We will also examine the factors contributing to the rise in Medicare payments for sleep studies and assess provider compliance with Federal program requirements.
(OEI; ; expected issue date: FY 2012; new start)
This example shows focus on sleep studies. Sleep studies will be reviewed because payments increased from $62 million in 2001 to $235 million in They will examine why there was such a large increase in providing of services. The expected issue date for a report is Fiscal Year 2012.
Source: OIG 2011 Work Plan;

37. AAPC and You Founded in 1988 for physician-based medical coders
Over 100,000 Members Worldwide
Over 69,000 Certified Members
Over 450 local chapters across the United States
AAPC was founded in 1988 to provide education and professional certification to physician-based medical coders, and to elevate the standards of medical coding by providing student training, certification, and ongoing education, networking, and job opportunities.
The AAPC has a membership base of over 100,000 worldwide, of which more than 69,000 are certified.
AAPC offers over 450 local chapters across the United States and in the Bahamas. Through local chapters AAPC members can obtain continuing education, gain leadership skills, and network. 37

38. 2010 Salary Survey
AAPC credentialed coders have proven mastery of all code sets, Evaluation and Management principles and documentation guidelines. CPC’s and other AAPC credentialed coders represent the best in physician based medical coding.
The quality of the AAPC certifications, along with the strength in its membership numbers, offers certified AAPC members credibility in the workforce—as well as higher wages. According to the 2010 AAPC Salary Survey, salaries for credentialed coders rose 1.2 percent from the previous year, to an average of $45,404. Even non-certified coders benefited from their affiliation with AAPC, with a 1.2 percent average salary gain to $37,746.
Welcome to AAPC! 38