The Medical Billing Cycle

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Learning Outcomes When you finish this chapter, you will be able to: 1.1

Identify four types of information collected during preregistration.

1.2

1.5

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.

Explain the importance of medical necessity.

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Learning Outcomes (Continued)

1-3

When you finish this chapter, you will be able to: 1.6

1.7

1.8

1.9

1.10

Explain why billing compliance is important.

Describe the information required on an insurance claim.

List the information contained on a remittance advice.

Explain the role of patient statements in reimbursement.

List the reports created to monitor a practice’s accounts receivable.

• • • • • • • • • • accounting cycle accounts receivable (A/R) adjudication capitation coding coinsurance consumer-driven health plan (CDHP) copayment deductible diagnosis Key Terms • • • • • • • • • diagnosis code documentation electronic health records (EHRs) encounter form explanation of benefits (EOB) fee-for-service health maintenance organization (HMO) health plan managed care

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Key Terms (Continued) • • • • • • • • • • 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

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• Step 1 in the Medical Billing Cycle: Preregister Patients Patient information gathered via phone or Internet before visit: – Name – Contact information – Reason for the visit – Whether patient is new to practice

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Step 2 in the Medical Billing Cycle:

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Establish Financial Responsibility for Visit • • 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

Step 2 in the Medical Billing Cycle: Establish Financial Responsibility for Visit (Continued)

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• • 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

Step 2 in the Medical Billing Cycle: Establish Financial Responsibility for Visit (Continued)

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• 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

In Patients • • • 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

Out Patients • • 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

Out Patients (Continued) • 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

Out Patients (Continued) • • 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

Step 5 in the Medical Billing Cycle: Review Coding Compliance

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• • 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

Billing Compliance • 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

Step 7 in the Medical Billing Cycle:

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Prepare and Transmit Claims

• Medical practices produce insurance claims to receive payment • PMPs generate health care claims for electronic transmittal

Step 8 in the Medical Billing Cycle:

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Monitor Payer Adjudication

• • 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)

Step 9 in the Medical Billing Cycle:

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Generate Patient Statements

• • 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

Step 10 in the Medical Billing Cycle: Follow Up Patient

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Payments and Handle Collections • • • 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