1. The Medical Billing Cycle1
The Medical Billing Cycle

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

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

4. Key Terms accounting cycle accounts receivable (A/R) adjudication
1-4
accounting cycle
accounts receivable (A/R)
adjudication
capitation
coding
coinsurance
consumer-driven health plan (CDHP)
copayment
deductible
diagnosis
diagnosis code
documentation
electronic health records (EHRs)
encounter form
explanation of benefits (EOB)
fee-for-service
health maintenance organization (HMO)
health plan
managed care
Have students define all key terms as an assignment. Then, in class, ask each student to define one key term aloud.
Optional assignment: Have students do an Internet search of one key term and write a short paragraph describing what they learned about that term from looking at a few websites.

5. Key Terms (Continued) medical coder medical necessity medical record
1-5
medical coder
medical necessity
medical record
modifier
patient information form
payer
policyholder
practice management program (PMP)
preferred provider organization (PPO)
premium
procedure
procedure code
remittance advice (RA)
statement
Have students define all key terms as an assignment. Then, in class, ask each student to define one key term aloud.
Optional assignment: Have students do an Internet search of one key term and write a short paragraph describing what they learned about that term from looking at a few websites.

6. Step 1 in the Medical Billing Cycle: 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
Learning Outcome: 1.1 Identify four types of information collected during preregistration.
Pages: 4-5
Information for preregistration can also be obtained by mailing the patient paperwork before the actual visit. The patient can bring it in on the day of the appointment or mail it back prior to the appointment . All these ways help speed up the process of registering a new patient. It lessens the patient’s time in the waiting room. It keeps your day from getting backed up if patients do not arrive a little before their actual appointment time.

7. Step 2 in the Medical Billing Cycle: 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
Learning Outcome: 1.2 Compare fee-for-service and managed care health plans, and describe three types of managed care approaches.
Pages: 5-7
Show examples in your state of fee-for-service and managed care health plans. (Try United Health Group, WellPoint, Aetna, Humana, or Cigna—some of the largest.)
Have students describe plans in which they have participated.

8. Fee-for-Service Health Plans
Step 2 in the Medical Billing Cycle: 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
Learning Outcome: 1.2 Compare fee-for-service and managed care health plans, and describe three types of managed care approaches.
Pages: 5-7
Show examples in your state of fee-for-service and managed care health plans. (Try United Health Group, WellPoint, Aetna, Humana, or Cigna—some of the largest.)
Have students describe plans in which they have participated.
Fee-for-service plans (also called indemnity plans) are more expensive than managed care plans.
Fee-for-service plans usually have deductibles and are more flexible than managed care plans.

9. Types of managed care health plans
Step 2 in the Medical Billing Cycle: 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
Learning Outcome: 1.2 Compare fee-for-service and managed care health plans, and describe three types of managed care approaches.
Pages: 5-7
 Provide students with examples of both types of plans in area. Discuss some of the largest companies. 
Kaiser Foundation Health Plan/Northern California is the largest HMO with 2,722,738 enrollees; followed by Kaiser Foundation Health Plan/Southern California with 2,591,555 enrollees; then PacifiCare of California with 2,260,334 enrollees.  
Total HMO enrollment in the US reached 670 million for the first time while eight plans passed the million-member mark, according to a study by The Interstate Competitive Edge HMO Industry Report.
  Some of the largest PPO’s are Blue Cross and Blue Shield of California, Pacific Foundation for Medical Care, Aetna US Healthcare, Cigna.
  Some of the largest CDHP’s are UnitedHealth Group, Inc. , Aetna Inc., Cigna Healthcare, Humana, Inc., Meritain Health.
  Have students visit major industry websites and compare.

10. Step 3 in the Medical Billing Cycle: 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
Learning Outcome: 1.3 Discuss the activities completed during patient check-in.
Pages: 8-10
Have students fill in the patient information form in Figure 1-2 using their own information. If they do not have insurance information, have them pick a company from one of the sources documents.
Ask students if they would like to discuss their personal experiences regarding check-in at their doctor’s office. They have probably never really thought about the check-in procedure, so this will give them some insight. Ask them if their copay was collected before or after the visit. This helps engage the students early in the course.

11. Step 4 in the Medical Billing Cycle: 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
Learning Outcome: 1.4 Discuss the information contained on an encounter form at check-out.
Pages: 10-13
Have students discuss items that are filled in on an encounter form at check-out.

12. Step 4 in the Medical Billing Cycle: 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
Learning Outcome: 1.4 Discuss the information contained on an encounter form at check-out.
Pages: 10-13
Show the class examples of the ICD-9 coding book and the CPT coding book. Read them a few of the common codes and their descriptions so they have an idea of what the coding process is about. Refer to the figures in the book also. Actual copies of ICD-9 and CPT will help clarify Figures 1.4 and 1.5.

13. Step 4 in the Medical Billing Cycle: 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
Learning Outcome: 1.4 Discuss the information contained on an encounter form at check-out.
Pages: 10-13
Get a blank superbill from a practice in your area to show students that the most common codes are on the superbill.

14. Step 5 in the Medical Billing Cycle: 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
Learning Outcome: 1.5 Explain the importance of medical necessity.
Pages: 13-15
Discuss how medical necessity is related to payment.

15. Step 6 in the Medical Billing Cycle: 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
Learning Outcome: 1.6 Explain why billing compliance is important.
Page: 15
Show an example of a bill that is not in compliance. Explain why an insurance company will not pay for a strep test performed on a patient with a diagnosis of urinary tract infection. Have the students fill out the Encounter Form in Figure 1.6.