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Chapter 6 Insurance and Coding© 2012 The McGraw-Hill Companies, Inc. All rights reserved
Learning outcomes: When you finish this chapter you will be able to6.1 Define medical insurance and coding terminology 6.2 Explain the differences among the types of insurance plans 6.3 Compare and contrast PAR and nonPAR and the methods insurance companies use to determine how much a provider is paid 6.4 Explain diagnostic coding, procedural coding, and coding compliance 6.5 Identify structural changes in coding with the implementation of ICD-10 and explain the advantages of the changes © 2012 The McGraw-Hill Companies, Inc. All rights reserved
Key terms accepting assignment carrier allowed chargeCenters for Medicare and Medicaid Services (CMS) assignment of benefits CHAMPVA balance billing code linkage birthday rule coinsurance Blue Cross and Blue Shield (BCBS) coordination of benefits (COB) capitation copayment (copay) CPT fee-for-service customary fee HCPCS deductible HMO (health maintenance organization) Defense Enrollment Eligibility Reporting System (DEERS) diagnosis-related groups (DRGs) Teaching Strategies: © 2012 The McGraw-Hill Companies, Inc. All rights reserved
Key terms (continued) accepting assignment -- A PAR provider who agrees to accept the allowed charge set forth by the insurance company as payment in full for a service and not bill the patient for the balance allowed charge -- is the most the insurance company will pay any provider for that work and may not be the same as the charged amount assignment of benefits -- agrees to receive payment directly from the patient’s insurance carrier © 2012 The McGraw-Hill Companies, Inc. All rights reserved
Key terms (continued) balance billing -- If the physician decides the patient should absorb the cost, the physician bills the patient for the unclaimed amount birthday rule -- is used as a guideline for determining which of two parents with medical coverage has the primary insurance for a child Blue Cross and Blue Shield (BCBS) -- one of the largest private sector payers in the United States, has both for-profit and nonprofit components capitation -- is the prepayment by the insurance carrier of a fixed (per capita, or per head) amount to a physician to cover the healthcare services for each member of one of its plans for a specified period of time, such as for a month © 2012 The McGraw-Hill Companies, Inc. All rights reserved
Key terms (continued) carrier – Insurance companies that provide the service Centers for Medicare and Medicaid Services (CMS) -- is responsible for setting up the terms of the plan CHAMPVA -- which stands for Civilian Health and Medical Program of the Veterans Administration, is a government health insurance program that covers the expenses of the families of veterans with total, permanent, service-connected disabilities. It also covers surviving spouses and dependent children of veterans who died in the line of duty © 2012 The McGraw-Hill Companies, Inc. All rights reserved
key terms (continued) code linkage -- On correct claims, each reported service is connected to a diagnosis that supports the procedure as necessary to investigate or treat the patient’s condition. Insurance company representatives analyze this connection between the diagnostic and the procedural information coinsurance -- is the percentage of each covered claim that the insured must pay, according to the terms of the insurance policy coordination of benefits (COB) -- in an insurance policy provides that a patient who has two or more insurance policies can have only a maximum benefit of 100 percent of the health costs copayment (copay) -- Every time HMO members visit their physician, they pay a set charge © 2012 The McGraw-Hill Companies, Inc. All rights reserved
Key Terms (continued) CPT -- most commonly used system of procedure codes is found in the Current Procedural Terminology customary fee -- determined by what physicians with similar training and experience in a certain geographic location typically charge for a procedure deductible -- is a certain amount of allowable or covered medical expense the insured must incur before the insurance carrier will begin paying benefits Defense Enrollment Eligibility Reporting System (DEERS) -- used to verify eligibility diagnosis-related groups (DRGs) – Diagnostic groupings are based on the resources that physicians and hospitals have used nationally for patients with similar conditions, taking into account factors such as age, gender, and medical complications © 2012 The McGraw-Hill Companies, Inc. All rights reserved
terms (continued) fee-for-service -- is made by the insurance carrier after the patient has received medical services HCPCS -- The Health Care Financing Administration’s Common Procedure Coding System HMO (health maintenance organization) -- is a medical center or a designated group of physicians that provides medical services to insured persons for a monthly or an annual premium © 2012 The McGraw-Hill Companies, Inc. All rights reserved
6.1. Define medical insurance and coding terminologyThe Medical Insurance Contract Insured Premium Third-Party Payer Coordination of Benefits The Birthday Rule 6.1 Medical insurance is a policy, or certificate of coverage, between a person, called the “policyholder,” and an insurance company, or carrier . The policyholder pays a certain amount of money to the insurance company in return for benefits. Insured. The person who takes out the insurance policy is referred to as the insured . Since a medical insurance policy often covers the insured and the insured’s dependents, in the strict sense of the term, policyholder refers to the person in whose name the policy is written (the person who is responsible for making payments) and the term insured refers to anyone, such as the policyholder or a spouse, covered by the medical policy. Premium. The rate charged to the policyholder for the insurance policy is the premium . Premiums are usually paid by the policyholder on a regular basis—for example, monthly or quarterly. Third-Party Payer- a policy with an insurance company, in which the insurance company agrees to carry the risk of paying for those services, the insurance company is referred to as the “third party” Coordination of Benefits a patient who has two or more insurance policies can have only a maximum benefit of 100 percent of the health costs. If the insurance companies do not communicate with each other, there is the possibility that more than 100 percent of the cost of the covered services will be reimbursed. Under the terms of the coordination-of-benefits clause, one insurance carrier is named the primary carrier. The clause explains how the policy will pay—whether as a primary or secondary carrier—if more than one insurance policy applies to the claim. The Birthday Rule. The birthday rule is used as a guideline for determining which of two parents with medical coverage has the primary insurance for a child. The rule states that the policy of the insured with the earlier birthday in the calendar year is the primary policy © 2012 The McGraw-Hill Companies, Inc. All rights reserved
6.2. Explain the differences among the types of insurance plans.There are many medical insurance plans from which people can choose and many different insurance companies that offer them. Indemnity Plans Managed Care Plans 6.2 Types of Plans Most medical insurance plans fall into one of two categories, depending on their payment arrangements. Plans that use a fee-for-service payment arrangement are mostly indemnity plans. Those that use capitation are generally managed care plans. Indemnity Plans. Under most indemnity plans , the insurance company reimburses medical costs on a fee-for-service basis. This type of plan pays for a percentage of the allowable cost, and the patient is responsible for the remaining portion. Patients receive medical services from the providers they choose, who usually file the required claims for payment on behalf of patients Managed Care Plans. Managed care plans generally use capitation as the basis for making payments to physicians. These plans are the predominant type of medical insurance in the United States. There are two main types of managed care plans—HMOs and PPOs. © 2012 The McGraw-Hill Companies, Inc. All rights reserved
6.3. Compare and contrast PAR and nonPAR and the methods insurance companies use to determine how much a provider is paid. PAR NONPAR 6.3 Plan Participation A physician who joins an insurance plan is a participating (PAR) provider in that plan. As a participating provider, the physician agrees to provide medical services to the insurance plan members according to the plan’s rules and payment schedules. The insurance carrier offers various incentives, such as faster payment, to participating providers A nonparticipating provider, or nonPAR, chooses not to join a particular insurance plan. A nonPAR physician who treats members of a plan does not have to obey the rules or follow the payment schedule of that plan. At the same time, a nonPAR physician will not receive any of the benefits of participation. PAR providers agree to render medical services to plan members according to the plan’s rules and payment schedules; a nonPAR provider is not contractually obligated to abide by the rules or the payment schedule when treating members. • PAR providers receive a direct benefit payment from the insurance carrier through an agreed assignment of benefits; a nonPAR provider collects payment from the patient at the time of service and the patient receives payment from the insurance carrier. • Common types of payment systems used by third-party payers for reimbursing physicians are based on (a) usual, customary, and reasonable (UCR) fees; (b) a relative value scale (RVS); (c) a resource-based relative value scale (RBRVS); or (d) diagnosis-related groups (DRGs). © 2012 The McGraw-Hill Companies, Inc. All rights reserved
6.4. Explain the diagnostic coding, procedural coding, and coding complianceCoding compliance is the process of coding using actions that satisfy federal official requirements and guidelines. Individual carrier guidelines must also be followed in order to be considered compliant. The ICD-9-CM CPT-4 HCPCS 6.4 The ICD-9-CM is used to report patients’ conditions (diagnoses) on insurance claims. Codes consist of three, four, or five numbers and a description. The Alphabetic Index is used first to approximate the correct code for a diagnosis. Next, the Tabular List is used to verify and refine the final code selection. All notations and coding guidelines should be followed. CPT-4 , a publication of the AMA, contains the most widely used system for physicians’ medical services and procedures. There are two levels of procedural codes: CPT-4 and HCPCS, which include temporary codes. CPT-4 codes are required for reporting physician services on insurance claim forms HCPCS codes are used to code supplies, equipment, and procedures not listed in the CPT-4 . © 2012 The McGraw-Hill Companies, Inc. All rights reserved
6.5. Identify structural changes in coding with the implementation of ICD-10 and explain the advantages of the changes. ICD-10 is scheduled for mandated implementation October 1, 2013 ICD-10 will contain substantially more codes from which to choose and the codes will be alphanumeric, containing a letter followed by up to five digits. Clinical details will be noted using a sixth digit. 6.5 Increasing the number of available codes permits a higher level of specificity when reporting disease and will incorporate newly recognized conditions. The tenth edition of the ICD was published by the World Health Organization (WHO) in In the United States, the new ICD-10 is being field tested and reviewed by healthcare professionals. ICD-10-CM is expected to be adopted by the United States as the mandatory code set for diagnostic coding. ICD-10-PCS (the current Volume 3 of ICD-9-CM ) will be used for inpatient procedures. The Department of Health and Human Services has mandated implementation of the new ICD-10 code set by October 1, 2013. More categories and codes than ICD-9-CM . Currently, ICD-10-CM contains more than 187,000 codes, which is a substantial change from the available codes in the ICD- 9-CM set (13,500). ICD-10-PCS will increase from 4,000 codes in ICD-9-CM Volume 3 to approximately 200,000 codes. The creation of more codes allows a higher level of specificity when reporting diseases and newly recognized conditions It will also allow for expansion within categories. • Alphanumeric codes, containing a letter followed by up to five numbers will be used. • A sixth digit is added to capture clinical details. For example, all codes that relate to pregnancy, labor, and childbirth include a digit that indicates the patient’s trimester. • New codes are added to show bilateralness (which side of the body is affected) for a disease or condition that can be involved with the right side, the left side, or both sides. For example, separate codes are listed for a malignant neoplasm of right upper-inner quadrant of the female breast and for a malignant neoplasm of the left upper-quadrant of the female breast. © 2012 The McGraw-Hill Companies, Inc. All rights reserved
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