2. CHAPTER © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15 Health Insurance Billing Procedures

3. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-2 Learning Outcomes 15.1Define Medicare and Medicaid. 15.2Discuss TRICARE and CHAMPVA health- care benefits programs. 15.3Distinguish between HMOs and PPOs. 15.4Explain how to manage a workers’ compensation case.

4. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-3 Learning Outcomes (cont.) 15.5List the basic steps of the health insurance claim process. 15.6Describe your role in insurance claims processing. 15.7Apply rules related to the coordination of benefits. 15.8Describe the health-care claim preparation process.

5. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-4 Learning Outcomes (cont.) 15.9Explain how payers set fees. 15.10Complete a Centers for Medicare and Medicaid Service (CMS-1500) claim form. 15.11Identify three ways to transmit electronic claims.

6. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-5 Introduction Health care claims = reimbursement –Accuracy = maximum appropriate payment Medical assistant –Prepare claims –Review insurance coverage –Explain fees –Estimate charges for payers –Prepare claims

7. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-6 Basic Insurance Terminology Medical insurance – written contract between a policy holder and a health plan First Party – the patient or policy holder Premium – the amount of money paid by the policy holder to the insurance carrier Lifetime maximum benefit – a total sum that the health plan will pay out over the patient’s life

8. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-7 Basic Insurance Terminology (cont.) Second Party – the physician who provides medical services Benefits – payment by the insurance carrier for medical services provided Third-party payer – the health plan that agrees to carry the risk of paying for services Deductible – a fixed dollar amount paid or met once a year before third-party payers begin to cover expenses

9. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-8 Basic Insurance Terminology (cont.) Coinsurance – a fixed percentage of coverage charges after the deductible is met Copayment – a small fee that is collected at the time of the visit Exclusions – uncovered expenses Formulary – a list of approved drugs Elective procedure – one not required to sustain life

10. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-9 Basic Insurance Terminology (cont.) Pre-authorization – approval in advance of the need for a specific procedure Pre-certification – determination of whether the proposed procedure is a covered service under the patient’s insurance plan Liability insurance – covers injuries caused by the insured or on their property Disability insurance – insurance that is activated when the insured is injured or disabled

11. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-10 Apply Your Knowledge What is the difference between first party, second party, and third-party payer? ANSWER: The first party is the patient or owner of the policy; the second party is the physician or facility that provides services, and the third-party payer is the insurance company that agrees to carry the risk of paying for approved services. Good Job!

12. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-11 Types of Health Plans Insurance companies –Rules about benefits and procedures Manuals, printed or online Representatives to assist Sources of health plans –Group policies – through employer –Individual plans –Government plans

13. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-12 Fee-for-Service Plans Oldest and most expensive type of plan Covers costs of select medical services Amount charged for services is determined by the physician Amount paid for services is controlled by the insurance carrier

14. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-13 Managed Care Plans Controls both the financing and delivery of health care to policy holders Both policy holders and physicians (participating physicians) are enrolled by the Managed Care Organizations (MCOs) MCOs pay physicians in two ways –Contracted fees –Capitated fees – fixed amount per month to provide contracted services to patients enrolled in the plan

15. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-14 Managed Care Plans (cont.) Preferred Provider Organization (PPO) –A network of providers to perform services to plan members –Physicians in the plan agree to charge discounted fees Health Maintenance Organization (HMO) –Physicians who contract with HMOs are often paid a capitated rate –Patients pay premiums and a small copayment for each office visit

16. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-15 Government Plans Health care –Retirees –Low-income and disadvantaged –Active or retired military personnel and their families Maintain features of managed care plans

17. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-16 Medicare The largest federal program that provides health care to citizens aged 65 and older Managed by the Centers for Medicare and Medicaid Services (CMS) Part A –Hospital insurance available to anyone receiving social security benefits –No premium unless ineligible for social security benefits

18. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-17 Medicare (cont.) Part B –Covers physician services, outpatient services, and many other services –Available to United States citizens and permanent residents 65 and older –Participants must pay a premium

19. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-18 Medicare (cont.) Part C – 1997 –Provides choices in types of plans –Medicare Advantage plans PPO HMO Private Fee for Service (PFFS) Special Needs Plans Medicare Medical Savings plan (MSA) Part D – –Passed in 2003 –Coverage began in 2006 –Prescription drug plan

20. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-19 Medicare Plans Fee-for-Service: The Original Medicare Plan –Allows the beneficiary to choose any licensed physician certified by Medicare –An annual deductible fee –Medicare pays 80 percent and the patient pays 20 percent Medigap plan – secondary insurance

21. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-20 Medicare Advantage Plans  Medicare Managed Care Plans  Medicare Preferred Provider Organization Plans (PPOs)  Medicare Private Fee-for-Service Plans

22. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-21 Medicare Plans (cont.) Recovery Audit Contractor (RAC) Program –Designed to guard the Medicare Trust Fund –Identify improper payments Underpayment Overpayment

23. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-22 Medicaid A health-benefit program designed for: –Low-income –Blind –Disabled patients –Temporary assistance to needy families –Foster children –Children born with disabilities Not an insurance program

24. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-23 Medicaid (cont.) Funded by the federal and state governments Provides assistance such as: –Physician services –Emergency services –Laboratory and x-rays –Skilled nursing facility (SNF) care –Vaccines –Early diagnostic screening and treatment for minors

25. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-24 Medicaid (cont.) Medicaid Accepting Assignment Medi/Medi Physicians agreeing to treat Medicaid patients also agree to the set amount for reimbursements Older or disabled patients unable to pay the difference between the bill and the Medicaid payment may qualify for both Medicaid and Medicare

26. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-25 Medicaid (cont.) Comply with state guidelines –Verify Medicaid eligibility –Ensure that the physician signs all claims –Authorization must be received in advance for medical services except in an emergency –Verify deadlines for claim submissions –Treat Medicaid patients with the same professionalism and courtesy that you extend to other patients

27. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-26 Types of Health Plans Department of Defense Families of uniformed personnel and retirees TRICARE for Life –Medicare-eligible military retirees 65 and older Dependent spouses and children of veterans with disabilities Surviving spouses and dependent children of veterans who died in the line of duty or from service- connected disabilities

28. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-27 Blue Cross and Blue Shield –A nationwide federation of nonprofit and for- profit service organizations that provide prepaid health-care services to subscribers –Specific plans for BCBS can vary greatly because each local organization operates under its own state laws

29. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-28 State Children’s Health Plan (SCHIP) Enacted in 1997 and reauthorized in 2009 State-provided health coverage for uninsured children in families that do not qualify for Medicaid

30. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-29  Covers accidents or diseases incurred in the workplace  By federal law, employers must purchase a minimum amount of workers’ compensation insurance Coverage Includes Basic medical treatment Weekly or monthly amount paid to patient while not employed Rehabilitation costs Types of Health Plans: Workers’ Compensation Verify coverage prior to procedures and treatments.

31. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-30 Apply Your Knowledge A 72-year-old disabled patient is being treated at an office that accepts Medicaid. The total office visit is $165, but Medicaid will only reimburse a set fee of $125. In this situation, what is the most likely solution? a.Bill the patient for the balance due. b.Expect the balance to be paid at the time of service. c.This patient probably has a secondary employer health insurance plan. d.This patient may qualify for the Medi/Medi coverage. ANSWER:

32. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-31 The Claims Process: An Overview Obtains patient information Determines diagnosis and fees based on services provided Records patient payments Prepares health-care claims Reviews the insurer’s processing of the claim Services Provided by the Physician’s Office

33. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-32 The Claims Process: An Overview (cont.) Gathering and reporting patient information Verifying patient’s insurance coverage Recording procedures and services performed Recording applicable diagnosis and codes for each procedure performed Filing insurance claims and billing patients Reviewing and recording payments Tasks Supported by Using a Billing Program

34. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-33 Obtaining Patient Information Insurance information –Current employer –Employer address and telephone number –Insurance carrier and date of coverage –Insurance group plan –Insurance identification number –Name of subscriber or insured Personal information –Name –Home address –Telephone number –Date of birth –Social security number –Emergency contact person

35. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-34 Obtaining Patient Information (cont.) Release signatures –Form to release insurance information to insurance carrier –Form for assignment of benefits Verify eligibility –Check effective date of coverage

36. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-35 Obtaining Patient Information (cont.) Coordination of benefits –Legal clauses to prevent duplication of payment –Primary or main insurance plan pays first –Secondary or supplemental plan pays the deductible and co- payment The Birthday Rule If a husband and wife both have a family insurance plan, the insurance plan of the person born first becomes the primary payer.

37. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-36 Delivering Services Physician’s services –Examines patient –Documents symptoms, diagnosis, and treatment plan in medical record Medical coding –Translates the medical terminology into codes for reimbursement

38. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-37 Delivering Services (cont.) Referrals to other services –The medical assistant Secures authorization from the insurance company for additional services Arranges an appointment for referred services

39. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-38 Preparing the Health-Care Claim Filing the insurance claim –Once prepared, the physician reviews the claim –Usually transmitted to payer electronically Time limits –Vary by company and state –Medicare and Medicaid

40. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-39 Insurer’s Processing and Payment Insurance claims are reviewed for:  Medical necessity  Allowable benefits  Payment and remittance advice

41. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-40 Insurer’s Processing and Payment (cont.) Remittance advice (RA) –Sent with payment to patient and physician –Also known as explanation of benefits (EOB) Information the RA Form –Insured name and identification number –Name of beneficiary –Claim number –Date, place, and type of service –Amount billed and amount allowed –Amount of copayment and payments made –Notation of any services not covered

42. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-41 Reviewing the Insurer’s RA and Payment –Verify all information on the remittance advice (RA) line by line –If a claim is rejected, check the diagnosis codes for accuracy –Track all unpaid claims using either a follow- up log or computer automation

43. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-42 A patient had two appointments in the same week for different ailments. On Monday, the patient complains of back pain and receives a prescription for a muscle relaxant. On Wednesday, the patient complains of hair loss. When the medical assistant files the claims, she accidentally codes the first visit diagnosis (muscle spasm) with the prescribed treatment for the second visit (hair loss) which was an anti-fungal shampoo. The insurance claim is probably rejected for which of the following reasons: Medical necessity Payments Apply Your Knowledge Allowable benefits ANSWER: Very Good!

44. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-43 Fee Schedules and Charges: Medicare Payment Systems—RBRVS Resource-based relative value scale (RBRVS) –Payment system used by Medicare A nationally uniform conversion factor The nationally uniform relative value A geographic adjustment factor The current annual Medicare Fee Schedule (MFS) is published by CMS in the Federal Register

45. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-44 CapitationContracted Fee Schedule Fee Schedules and Charges (cont.) Payment Methods Allowed Charges

46. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-45 Fee Schedules and Charges (cont.) Allowed charges –This represents the most the payer will pay any provider for that work –Other equivalent terms Maximum allowable fee Maximum charge Allowed amount Maximum charge Allowed fee Allowable charge Billing the patient for the difference between the higher usual fee and a lower allowed charge is called balance billing

47. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-46 Fee Schedules and Charges (cont.) Contracted fee schedule –Fixed fee schedules for participating physicians –Non-covered services billed to patient Capitation –The fixed prepayment for each plan member –Non-covered services billed to patient

48. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-47 Fee Schedules and Charges (cont.) Calculating patient charges –Depending on plan, patients may be obligated to pay Premiums and deductibles Copayments and coinsurance Excluded and over-limit services Balance billing

49. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-48 Communication with Patients About Charges A practice may require patients to –Sign an assignment of benefits statement or –Pay in full for services at the time provided Remind patients of financial obligation Ask patients to agree in writing to cost of procedures not covered by plan Advance Beneficiary Notice of Noncoverage (ABN)

50. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-49 Communication with Patients About Charges (cont.) Financial policy –Patient responsibility for payment for services Copayments must be paid before patients leave the office Managed Care Members The patient is responsible for any amounts not covered by the insurance carrier Assigned Claims Unassigned Claims Unless other prior arrangements are made, payment is expected at the time service is delivered

51. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-50 Apply Your Knowledge What do you need to consider when calculating patient charges? ANSWER: You need to consider whether the patient has met the deductible, if the patient has to pay a copayment, if the service is excluded, or if the patient is over his/her limit for services. Nice Job!

52. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-51 Preparing and Transmitting Health-Care Claims HIPAA claims –Electronic –X12 837 Health Care Claim - official name –Information entered is called data elements –Data must be entered in CAPS in valid fields –No prefixes or special characters allowed

53. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-52 Preparing and Transmitting Health-Care Claims Data elements – five major sections –Provider section – Billing and rendering provider Taxonomy information –Subscriber (insured or policyholder) section –Patient (may be the subscriber or another person) and payer section –Claim details –Services

54. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-53 Preparing and Transmitting Health-Care Claims (cont.) Paper claims –A CMS-1500 paper form is used –May be mailed or faxed to the third-party payer –Not widely used as a result of HIPAA requirements –CMS-1500 requires 33 form indicators

55. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-54 Preparing and Transmitting Health-Care Claims (cont.) Transmission of Electronic Claims Three major methods of transmitting claims electronically Direct transmission to the payer Using a clearinghouse Direct data entry Offices and payers exchange information directly by electronic data interchange (EDI) Translates nonstandard data into standard format. Clearinghouse cannot create or modify data Internet-based service that loads data elements directly into the health plan’s computer

56. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-55 Preparing and Transmitting Health-Care Claims (cont.) Generate clean claims by avoiding common errors  or incomplete service facility name, address, and identification for services rendered outside the office or home  Medicare assignment indicator or benefits assignment indicator  part of the name or the identifier of the referring provider  or invalid subscriber’s birth date  information about secondary insurance plans, such as spouse’s payer  payer name and/or payer identifier

57. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-56 Preparing and Transmitting Health-Care Claims (cont.) Claims security –The HIPAA rules Standards for protecting individually identifiable health information when maintained or transmitted electronically –Common security measures Access control, passwords, and log files Backup copies Security policies to handle violations

58. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-57 A medical assistant has two part-time positions, one for a pediatrician and the other for a surgeon. When completing the X12 837, which of the following would be a major difference? a.Provider information b.Taxonomy information c.HIPAA identifiers Apply Your Knowledge The taxonomy information would be very different because the physician preparation and licensing are very different. ANSWER:

59. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-58 In Summary 15.1Medicare provides health care for citizens aged 65 and over, and certain patients under 65 may also qualify for Medicare. Medicaid is a health benefits program for low-income, blind or disabled patients, needy families, foster children, and children born with birth defects. 15.2TRICARE is a health insurance plan for families of uniformed personnel and retirees from the uniformed services. CHAMPVA covers the expenses of families of veterans with total, permanent, service-connected disabilities, as well as the surviving spouses and children of veterans in this same category.

60. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-59 In Summary (cont.) 15.3HMOs generally seek services from a specific group of providers within their plan. PPOs establish a network of providers to perform services for their plan members. 15.4Keep medical and financial records of workers’ compensation cases separate from other employee records; verify coverage and maintain confidentiality. 15.5The claims process consists of obtaining patient information, determining diagnosis and fees, recording charges and codes, preparing the claim, reviewing the processing of the claim and remittance advice, and making sure the payment comes into the office.

61. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-60 In Summary (cont.) 15.6Medical assistants gather and record patient information; verify coverage, record procedures and services performed; file claims; bill patients; and review and record payments. 15.7The rules that determine the coordination of benefits are guidelines for payments from insurance companies. 15.8Preparing the health-care claim consists of filing the claim, setting time limits for filing the claim, reviewing the claim for medical necessity, reviewing for allowable benefits, payment, and remittance advice.

62. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-61 In Summary (cont.) 15. 9Payers set fees based on the amounts that Medicare allows, geographic factors, a uniform conversion factor, practice costs, insurance, and the physician’s work. 15.10The CMS-1500 form contains numbered items that refer to the patient and the patient’s insurance coverage. 15.11Three ways to transmit electronic claims are to –Transmit claims directly to the clearinghouse –Use a clearinghouse to prepare and send claims –Use direct data entry using an Internet-based service

63. © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 15-62 I am always doing that which I can not do, in order that I may learn how to do it. ~ Pablo Picasso End of Chapter 15