CHAPTER © 2011 The McGraw-Hill Companies, Inc. All rights reserved. 1 The Medical Billing Cycle

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. Learning Outcomes When you finish this chapter, you will be able to: 1.1Identify four types of information collected during preregistration. 1.2Compare fee-for-service and managed care health plans, and describe three types of managed care approaches. 1.3Discuss the activities completed during patient check-in. 1.4Discuss the information contained on an encounter form at check-out. 1.5Explain the importance of medical necessity. 1-2

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. Learning Outcomes (Continued) When you finish this chapter, you will be able to: 1.6Explain why billing compliance is important. 1.7Describe the information required on an insurance claim. 1.8List the information contained on a remittance advice. 1.9Explain the role of patient statements in reimbursement. 1.10List the reports created to monitor a practice’s accounts receivable. 1-3

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. Key Terms accounting cycle accounts receivable (A/R) adjudication capitation coding coinsurance consumer-driven health plan (CDHP) copayment deductible diagnosis 1-4 diagnosis code documentation electronic health records (EHRs) encounter form explanation of benefits (EOB) fee-for-service health maintenance organization (HMO) health plan managed care

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. Key Terms (Continued) medical coder medical necessity medical record modifier patient information form payer policyholder practice management program (PMP) preferred provider organization (PPO) premium 1-5 procedure procedure code remittance advice (RA) statement

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. 1.1 Step 1: Preregister Patients 1-6 Patient information gathered via phone or Internet before visit: –Name –Contact information –Reason for the visit –Whether patient is new to practice

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. 1.2 Step 2: Establish Financial Responsibility for Visit 1-7 Many patients have medical insurance, which is an agreement between a policyholder and a health plan To secure medical insurance, policyholders pay premiums to payers, which are health plans such as government plans and private insurance

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. 1.2 Step 2: Establish Financial Responsibility for Visit (Continued) 1-8 Fee-for-Service Health Plans –Policyholders are repaid for medical costs –Requires payment of coinsurance –Usually a deductible must be paid before benefits begin Managed Care Health Plans –Managed care organizations control both financing and delivery of health care –Have contracts with both patients and providers

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. 1.2 Step 2: Establish Financial Responsibility for Visit (Continued) 1-9 Types of managed care health plans –Preferred provider organization (PPO): provider network for plan members; discounted fees –Health maintenance organization (HMO): pays fixed amounts called capitation payments to contracted providers; patients must pay a small fixed fee called a copayment per visit –Consumer-driven health plan (CDHP): combines a health plan with a high deductible with a policyholder's savings account

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. 1.3 Step 3: Check In Patients 1-10 Patients complete the patient information form that contains personal, employment, and medical insurance information Patient identity is verified Time-of-service payments due before treatment are collected

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. 1.4 Step 4: Check Out Patients 1-11 Every time a patient is treated by a health care provider, a record, known as documentation, is made of the encounter This chronological medical record, or chart, includes information that the patient provides

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. 1.4 Step 4: Check Out Patients (Continued) 1-12 Diagnoses and Procedures –A diagnosis is the physician’s opinion of the nature of the patient’s illness or injury –Procedures are the services performed –Coding is the process of translating a description of a diagnosis or procedure into a standardized code A patient’s diagnosis is communicated to a health plan as a diagnosis code A procedure code stands for a particular service, treatment, or test A modifier is a two-digit character that is appended to a CPT code to report special circumstances

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. 1.4 Step 4: Check Out Patients (Continued) 1-13 The diagnosis and procedure codes are recorded on an encounter form, also known as a superbill A practice management program (PMP) is a software program that automates the administrative and financial tasks required to run a medical practice

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. 1.5 Step 5: Review Coding Compliance 1-14 A physician, medical coder, or medical insurance specialist assigns codes The documented diagnosis and medical services should be logically connected, so that the medical necessity of the charges is clear to the insurance company –Medical necessity is treatment by a physician for the purpose of preventing, diagnosing, or treating an illness, injury, or its symptoms in an appropriate manner

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. 1.6 Step 6: Check Billing Compliance 1-15 Each charge, or fee, for a visit is represented by a specific procedure code The provider’s fees for services are listed on the medical practice’s fee schedule Medical billers use their knowledge to analyze what can be billed on health care claims

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. 1.7 Step 7: Prepare and Transmit Claims 1-16 Medical practices produce insurance claims to receive payment PMPs generate health care claims for electronic transmittal

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. 1.8 Step 8: Monitor Payer Adjudication 1-17 When a claim is received by a payer, it is reviewed following a process known as adjudication—a series of steps designed to judge whether it should be paid The document explaining the results of the adjudication process is called a remittance advice (RA) or explanation of benefits (EOB)

© 2011 The McGraw-Hill Companies, Inc. All rights reserved. 1.9 Step 9: Generate Patient Statements 1-18 A statement lists all services performed, along with the charges for each service Statements list the amount paid by the health plan and the remaining balance that is the responsibility of the patient

© 2011 The McGraw-Hill Companies, Inc. All rights reserved Step 10: Follow Up Patient Payments and Handle Collections 1-19 The accounting cycle is the flow of financial transactions in a business PMPs are used to track accounts receivable (AR)—monies that are coming into the practice PMPs are also used to create day sheets, monthly reports, and outstanding balances reports