CHAPTER © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1 Introduction to the Medical Billing Cycle

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. Learning Outcomes When you finish this chapter, you will be able to: 1.1Explain the reason that employment opportunities for medical insurance specialists in physician practices are increasing rapidly. 1.2Describe covered services and noncovered services under medical insurance policies. 1.3Compare indemnity and managed care approaches to health plan organization. 1.4Cite three examples of cost containment under health maintenance organizations. 1.5Define a preferred provider organization. 1-2

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. Learning Outcomes (Continued) When you finish this chapter, you will be able to: 1.6State the two elements that are combined in a consumer-driven health plan. 1.7Recognize the three major types of medical insurance payers. 1.8List the ten steps in the medical billing cycle. 1.9Define professionalism. 1.10Explain the purpose of certification. 1-3

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. Key Terms accounts receivable (A/R) adjudication benefits capitation coinsurance compliance consumer-driven health plan (CDHP) copayment covered services 1-4 deductible diagnosis code ethics etiquette excluded services fee-for-service health care claim health maintenance organization (HMO) health plan indemnity plan managed care

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. Key Terms (Continued) managed care organization (MCO) medical coder medical insurance medical insurance specialist medical necessity network noncovered services open-access plan out-of-network out-of-pocket 1-5 participation patient ledger Patient Protection and Affordable Care Act (PPACA) payer per member per month (PMPM) point-of-service (POS) plan policyholder practice management program (PMP)

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. Key Terms (Continued) preauthorization preexisting condition preferred provider organization (PPO) premium preventive medical services primary care physician (PCP) procedure code professionalism provider 1-6 referral schedule of benefits self-funded (self-insured) health plan third-party payer

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.1 The Medical Insurance Field 1-7 Spending on health care in the United States is rising due to the cost of advances in medical technology and an aging population There are many job opportunities in the health care field as a result A TRILLION DOLLAR industry! –12 zeros!

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.2 Medical Insurance Terms 1-8 Medical insurance is a written policy that states the terms of an agreement between a policyholder (an individual) and a health plan (an insurance company, plan or program that provides some form of medical insurance) –Dependents Person other than the insured who is covered under a health plan –Wife, children…? Health plans provide benefits (payments for medical services) Health plans are often referred to as payers A third-party payer is a private or government organization that insures or pays for health care on behalf of beneficiaries

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.2 Medical Insurance Terms (Continued) 1-9 Insurance policies contain a schedule of benefits that summarizes payments that may be made for medical services Payer’s definition of medical necessity determines coverage and payment A provider must meet the payer’s professional standards –Providers include physicians, nurse-practitioners, physician assistants, therapists, hospitals, laboratories, long-term care facilities, and suppliers such as pharmacies and medical supply companies May be individuals, groups, or organizations

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.2 Medical Insurance Terms (Continued) 1-10 Covered services may include primary care, emergency care, medical specialists’ services, and surgery. These are listed in the policy. Preventive medical services include physical examinations, pediatric and adolescent immunizations, prenatal care, and routine screening procedures Not all covered services have the same benefits

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.2 Medical Insurance Terms (Continued) 1-11 Noncovered services are –those not paid for by a health plan Excluded services may include: –Dental services, eye care, employment-related injuries, cosmetic procedures, or experimental procedures –Some other specific items –A preexisting condition a medical condition diagnosed before the policy took effect

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.3 Health Care Plans 1-12 An indemnity plan provides protection against loss Physicians send the health care claim—a formal insurance claim that reports data about the patient and the services provided—to the payer on behalf of the patient Patients pay a premium –the periodic payment they are required to make to keep a policy in effect

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.3 Health Care Plans (Continued) 1-13 Most policies have a deductible –the amount that the insured pays on covered services before benefits begin Coinsurance is the percentage of each claim that the insured pays Some patients must pay out-of-pocket expenses prior to benefits –Example on page 9 Fee-for-service is a charging method based on each service performed –Figure 1.2, page TEN

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.3 Health Care Plans (Continued) 1-14 Managed care offers a more restricted choice of providers and treatments in exchange for lower premiums, deductibles, and other charges Managed care organizations (MCOs) establish links between provider, patient, and payer –How many MCOs may a doctor choose to participate in? Thinking it Through, page 10

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.4 Health Maintenance Organizations 1-15 A health maintenance organization (HMO) combines coverage of medical costs and delivery of health care for a prepaid premium Participation means that a provider has contracted with a health plan to provide services to the plan’s beneficiaries Capitation is a fixed prepayment to a provider for all necessary contracted services provided to each plan member –Per member per month (PMPM) is the capitated rate –Figure 1.3, page 11

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.4 Health Maintenance Organizations (Continued) 1-16 A network is a group of providers having participation agreements with a health plan –Visits to out of-network providers are not covered HMOs… –Health Maintenance Organization… often require preauthorization before the patient receives many types of services When HMO members see a provider, they pay a specified charge called a copayment HMO members choose a primary care physician (PCP), who directs all aspects of their care

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.4 Health Maintenance Organizations (Continued) 1-17 Open-access plans are those HMOs… –Health Maintenance Organization… that allow visits to specialists in the plan’s network without a referral A point-of-service (POS) plan permits patients to receive medical services from non-network providers for a greater charge Thinking it Through, page 14

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.5 Preferred Provider Organizations 1-18 A preferred provider organization (PPO) is an MCO… –Managed Care Organization… where a network of providers supply discounted treatment for plan members –Most popular type of health plan –Creates a network of physicians, hospitals, and other providers with negotiated discounts –Requires payment of a premium and often of a copayment for visits –Does NOT require referrals or PCPs… Primary Care Physicians Thinking it Through, page 16

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.6 Consumer-Driven Health Plans 1-19 A consumer-driven health plan (CDHP) combines a high-deductible health plan with a medical savings plan –The health plan is usually a PPO… Preferred Provider Organization… – with a high deductible and low premiums –The savings account is used to pay medical bills before the deductible has been met

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.7 Medical Insurance Payers 1-20 Three major types of medical insurance payers: 1.Private payers—dominated by large insurance companies 2.Self-funded (self-insured) health plans— organizations that pay for health insurance directly and set up a fund from which to pay 3.Government-sponsored health care programs— includes Medicare, Medicaid, TRICARE, and CHAMPVA The Patient Protection and Affordable Care Act (PPACA) is health system reform legislation that introduced significant benefits for patients

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.8 The Medical Billing Cycle 1-21 A medical insurance specialist is a staff member who handles billing, checks insurance, and processes payments To complete their duties, medical insurance specialists follow a 10-step medical billing cycle –This cycle is a series of steps that leads to maximum, appropriate, timely payment

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.8 The Medical Billing Cycle (Continued) 1-22 Step 1 – Preregister patients Step 2 – Establish financial responsibility for visits –Who is primary payer? Step 3 – Check in patients Step 4 – Check out patients –A medical coder is a staff member with specialized training who handles diagnostic and procedural coding –The patient’s primary illness is assigned a diagnosis code

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.8 The Medical Billing Cycle (Continued) 1-23 Step 4 – Check out patients (continued) –Each procedure the physician performs is assigned a procedure code –Transactions are entered in a patient ledger—a record of a patient’s financial transactions Step 5 – Review coding compliance –Compliance means actions that satisfy official requirements Step 6 – Check billing compliance Step 7 – Prepare and transmit claims

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.8 The Medical Billing Cycle (Continued) 1-24 Step 8 – Monitor payer adjudication –Accounts receivable (A/R) is the monies owed to a medical practice –Adjudication is the process of examining claims and determining benefits Step 9 – Generate patient statements Step 10 – Follow up patient payments and handle collections A practice management program (PMP) is business software that organizes and stores a medical practice’s financial information

© 2012 The McGraw-Hill Companies, Inc. All rights reserved. 1.9 Working Successfully 1-25 Professionalism is acting for the good of the public and the medical practice Medical ethics are standards of behavior requiring truthfulness, honesty, and integrity –Thinking it Through, page 29 Etiquette is comprised of the standards of professional behavior

© 2012 The McGraw-Hill Companies, Inc. All rights reserved Moving Ahead 1-26 Certification is the recognition of a superior level of skill by an official organization –Provides evidence to prospective employers that the applicant has demonstrated a superior level of skill on a national test