CLAIMS TRAINING BOOT CAMP

PRESENTED BY: RICH HENRIKSEN,

CEO of Nokomis Health, Inc. JUNE 2, 2016

PART 1: CLAIM LIFE CYCLE

TOPICS COVERED IN THIS SECTION

• Life cycle of a medical claim – routine physician visit• Life cycle of a medical claim – hospital emergency admission• Physician and hospital charges• Claim forms: CMS-1500 and UB04• HIPAA EDI data sets: 837, 834, 270, 272, etc.

LIFE CYCLE OF A MEDICAL CLAIM:PHYSICIAN OFFICE, PRE-VISIT

Patient schedules appointment

Office verifies insurance coverage, pre-registers patient

Office or patient obtains prior authorization or referral (if required by plan)

LIFE CYCLE OF A MEDICAL CLAIM:PHYSICIAN OFFICE, TIME OF VISIT

Office checks in patient and collects copay or coinsurance estimate

Patient receives services

Physician dictates visit notes and assigns codes using “superbill” or electronically via clinic management system

LIFE CYCLE OF A MEDICAL CLAIM:PHYSICIAN OFFICE, POST VISIT

Office staff enter charges into practice management system

Office sends claim to clearinghouse via 837P EDI file

Clearinghouse forwards claim to payor

Payor adjudicates claim, sends remittance advice (RA) to provider and explanation of benefits (EOB) to member

Office posts payment and bills member for any remaining financial responsibility

STEP 1: PATIENT REGISTRATION

• Provider records patient’s demographic and insurance information• Provider obtains prior authorization or precertification (if required by

plan), also ensures that referral is present if required• Provider may check patient eligibility from payor either by phone or

electronically• Outbound request is the HIPAA 270 EDI data set• Response from payor is the HIPAA 271 EDI data set

• Provider may collect copayment or a portion of deductible or coinsurance

NOTES ABOUT PATIENT ELIGIBILITY

• Payors receive eligibility files from plan sponsors via HIPAA 834 data set

• Patient data is very difficult to keep “clean” and up to date• Data is often keyed by hand, resulting in errors• Premium payments may be delayed or credited to incorrect

accounts• There are often retroactive adds, changes, and deletes to group

enrollments

STEP 2: PROVIDE SERVICES

• Physician examines patient and orders ancillary services (lab, X-ray, etc.) if needed

• Patient receives ancillary services and the encounter ends• Physician dictates the encounter and marks the services

performed either electronically or on a paper charge ticket (referred to as a “superbill”); often will also select the diagnosis based on a list of common diagnoses

SUPERBILL EXAMPLE

SAMPLE PHYSICIAN DICTATION:PHYSICIAN OFFICESUBJECTIVE: Mom brings patient in today because of sore throat starting last night. Eyes have been very puffy. He has taken some Benadryl when all of this congestion started but with a sudden onset just yesterday. He has had low-grade fever and just felt very run down, appearing very tired. He is still eating and drinking well, and his voice has been hoarse but no coughing. No shortness of breath, vomiting, diarrhea or abdominal pain.PAST MEDICAL HISTORY: Unremarkable. There is no history of allergies. He does have some history of some episodes of high blood pressure, and his weight is up about 14 pounds from the last year.FAMILY HISTORY: Noncontributory. No one else at home is sick.

OBJECTIVE:General: A 13-year-old male appearing tired but in no acute distress.Neck: Supple without adenopathy.HEENT: Ear canals clear. TMs, bilaterally, gray in color. Good light reflex. Oropharynx pink and moist. No erythema or exudate. Some drainage is seen in the posterior pharynx. Nares: Swollen, red. No drainage seen. No sinus tenderness. Eyes are clear.Chest: Respirations are regular and non-labored.Lungs: Clear to auscultation throughout.Heart: Regular rhythm without murmur.Skin: Warm, dry and pink, moist mucous membranes. No rash.

SAMPLE PHYSICIAN DICTATION:PHYSICIAN OFFICE (CONTINUED) LABORATORY: Strep test is negative. Strep culture is negative.RADIOLOGY: Water's View of the sinuses is negative for any sinusitis or acute infection.ASSESSMENT: Upper respiratory infection.PLAN: At this point just treat symptomatically. I gave him some samples of Levall for the congestion and as an expectorant. Push fluids and rest. May use ibuprofen or Tylenol for discomfort.

STEP 3: CHARGE CAPTURE

• Billing staff enter procedure codes and diagnoses codes (if not already recorded) into billing system

• Records may be audited for level of service assignment and other reviews may be conducted prior to billing

STEP 4: CLAIM SUBMISSION

• Billing staff create batch file for submission to payor, either directly or through clearinghouse

• Outbound claims file is the HIPAA 837 EDI data set• Most claims go through several claim edits before payor

accepts claim, ensuring completeness and accuracy• Billing software claim edits• Clearinghouse edits• Payor edit

CLAIM FORM TYPES

• Providers other than pharmacies use one of the following two claim forms:• CMS-1500 – professional claim form – used by physicians,

therapists, and other professionals• UB-04 – institutional claim form – used by facilities

including hospitals, surgery centers, skilled nursing facilities, home health agencies, some transportation providers, etc.

PROFESSIONAL CLAIM FORM: CMS-1500

• CMS-1500 (HCFA-1500) insurance claim form is used for reporting physician (professional services) and supplier information

• Information spaces on the claim are referred to as an “item”• Most payors require CMS-1500 information to be submitted

electronically; this is the HIPAA 837P (professional) data set

SAMPLE PROFESSIONAL CLAIM FORM (CMS-1500)

STEP 5-1: PAYOR RECEIVES CLAIM

• Payor receives electronic claims directly from providers, more typically through claim clearinghouses such as WebMD (now Emdeon)

• Payor must enter paper claims manually into its claim system (or via scanning software)

STEP 5-2: PAYOR ADJUDICATES CLAIM

• Payor passes claim through multiple edits prior to payment• Is member active and eligible for the date of service?• Are all required data elements present and accurate?• Is the physician in-network for this member?• Are the services a covered benefit for this member?• Are the procedure codes subject to bundling, downcoding, code edit denials, etc.? Payors

often use proprietary software and external vendors to search for claim savings, often under the umbrella of “fraud, waste and abuse”

• Is there a different primary payor?• Is the claim related to a motor vehicle accident or a workers compensation injury?• Is this a duplicate or corrected claim?• Has the patient met his/her annual or lifetime maximums for this service?

STEP 5-3: PAYOR DETERMINES PAYMENT

• Payor calculates allowed amount based on contract rate or applicable fee schedule, then applies member responsibility to calculate plan payable/ member payable amounts

• Most payors reimburse physicians the lesser of the billed charge for each code or the fee maximum that the payor has set for that code

• Other than large physician groups, most payor contracts do not specify the fee maximums; physicians can obtain a sampling of fee maximums upon request

• The difference between the allowed amount and billed charges is “provider discount,” which the provider must by contract write off

• Providers who do not participate with a health plan (“out of network”) are typically reimbursed according to the payor’s “usual and customary” charge allowance for that region; the physician may balance bill the member for the unpaid portion of the bill, up to billed charges

STEP 5-4: PAYOR MAKES PAYMENT

• Payor remits payment (check or electronic funds transfer) to physician along with Remittance Advice (RA) which shows how each claim line was adjudicated

• The electronic version of the RA is the HIPAA 835 EDI data set• Allowed amounts are shown, which are separated into payor and patient

liability• Discounts, denials, other disallowed charges are shown with reason codes

• Payor sends Explanation of Benefits (EOB) to member

SAMPLE REMITTANCE ADVICE (RA)

SAMPLE EXPLANATION OF BENEFITS (EOB)

STEP 6: PHYSICIAN POSTS PAYMENT AND BILLS MEMBER FOR AMOUNTS DUE• Payments are posted either electronically or manually• The patient is billed for their financial responsibility (unless already

collected)• Physician office may compare actual payment with expected

payment to ensure that payor is paying according to contract• Physician office researches and responds to claim denials by

submitting corrected claims, appeals, additional documentation, etc.

HOSPITAL ENCOUNTERS

Patients commonly receive services from multiple providers during a hospital encounter, resulting in multiple claims

HospitalAnesthesiologist

ER physician

Attending MD

CRNA

Pathologist

Surgeon Radiologist

Specialty consult

FACILITY CLAIM FORM: UB-04

• The Uniform Bill 2004 (UB-04) is also known as the HCFA-1450 and replaced the UB-92 in 2005

• The UB-04 is used for both inpatient and outpatient facility services• The National Uniform Billing Committee (NUBC) establishes and maintains a complete list of

the allowable data elements and codes used on the UB-04 claim• The UB-04 contains 81 form locators (FLs)

• A FL is a data field• Some FLs must be completed, some are used only when applicable to specific claims, and

others are reserved for future use• The UB-04 has 22 service lines on a single form

• The UB-04, when submitted electronically, can accept 450 service lines

SAMPLE UB-04

PHYSICIAN CHARGES

• Each clinic has its own fee schedule (the amount that they charge for each CPT or HCPCS (procedure) code)o Each code typically has only one chargeo Physicians charge the same amount to all payors, although each payor

may reimburse at a different amounto The exception to this rule is for non-participating Medicare providers, who are limited

to charging the Medicare Limiting Chargeo Physicians often use RBRVS to set their feeso Physicians can update their fees at any time, but most do so annually (or

less often)

SAMPLE PHYSICIAN CHARGEMASTER (SELECTED CODES)CPT Code Description Charge

99201 New patient visit, level 1 $60.0099202 New patient visit, level 2 $100.0099203 New patient visit, level 3 $145.0099204 New patient visit, level 4 $220.0099205 New patient visit, level 5 $275.0099211 Established patient visit, level 1 $30.0099212 Established patient visit, level 2 $60.0099213 Established patient visit, level 3 $100.0099214 Established patient visit, level 4 $145.0099215 Established patient visit, level 5 $195.0081005 Urinalysis $8.0082310 Calcium test; total $13.0090707 Measles, mumps, rubella vaccine $104.00

HOSPITAL CHARGEMASTER

• The hospital chargemaster is the hospital’s “catalog” of all services that are provided by that hospital

• Organized by department – the following are included for each itemo Hospital’s item number (for internal use)o Department number (determines which cost center is credited with the revenue for

that item)o Item description – used for claim detailo Price (charge) per unito Cost (sometimes – depends on hospital’s cost accounting system)o Revenue code (always)o HCPCS codes, if required because of that item’s revenue code

HOSPITAL CHARGEMASTER (CONTINUED)

• A typical chargemaster has thousands of items• Some states, such as Calif., require hospitals to make their chargemasters

public• There are many types of charge lines

o Recurring charges (room)o Charges tied to order entry (lab, pharmacy, x-ray)o Time-based charges (OR, anesthesia)o Items for which the charge varies from patient to patient (implants)o Charges which do not require HCPCS or CPT codeso Charges for which the HCPCS or CPT code is assigned at the chargemaster levelo Charges for which the HCPCS or CPT code is assigned by HIM

SAMPLE HOSPITAL CHARGEMASTER (SELECTED CODES)

Item #

Description Cost center

Rev code

HCPCS code

Charge Notes

101670

ICU DAILY 1220 0206 $3,479.00 Room charge, no HCPCS needed

105657

CBC 3430 0300 85025 $104.00 CPT code in the chargemaster

667765

SEQUENTIAL COMPRESSION SLEEVE

1330 0270 $196.00 Supply charge, no HCPCS or CPT code needed

273309

INJ ENOXAPARIN SODIUM

4480 0636 J1650 $13.35 Drug charge with HCPCS code

246639

GUAIFENESIN 4480 0250 $1.50 Drug charge with no HCPCS code

334789

OR LEVEL 3, FIRST 15 MIN

6310 0360 Assigned by HIM for OP claims

$3,540.00 CPT code not in chargemaster, assigned by HIM on case by case basis

HOSPITAL CLAIM: CHARGE CAPTURE

• Charges are accumulated through interfaces with main hospital information system

• Lab tests, radiology services, pharmacy, other ancillary services: each department’s information system passes information to main billing system which pulls associated procedure codes and charge information for each test or procedure

• Room charges – automatic if patient is in bed at midnight (or less)• Operating room charges – may be manually entered or may be

automatic based on OR scheduling system• Supplies – manually entered by applicable department

HOSPITAL CODING

• Health information management (HIM, formerly known as the medical records department) staff review records after patient is discharged and assign these codes to the entire encounter:o ICD-10 diagnosis codeso ICD-10 procedure codes (if applicable)o CPT codes for surgeries, interventional procedures

• Other procedure codes reside in the chargemaster and are automatically brought forward to the claim

HIPAA EDI – ELECTRONIC DATA INTERCHANGES

• Most payors now require providers to submit claims electronically• Many payors also require providers to accept remittance advices (RAs) electronically• Providers and payors use the HIPAA electronic data interchange (EDI, or X12) sets to

accomplish this• Some providers use clearinghouses to send and receive EDI data sets; whether they

send claims directly to payors or through a clearinghouse depends on the provider’s billing system and how it is configured

• Historically version 4010 was being used; on Jan. 1, 2012 the newest version 5010 became effective; 5010 allows for the larger field size of ICD-10 as well as other improvements

KEY HIPAA EDI DATA SETS USED BY PROVIDERS

Key HIPAA EDI sets used by providers and payors include:• 270 EDI Health Care Eligibility/Benefit Inquiry – used to inquire about the health care benefits and

eligibility associated with a subscriber or dependent; sent from provider to payor• 271 EDI Health Care Eligibility/Benefit Response – used to respond to an inquiry about health care

benefits and eligibility associated with a subscriber or dependent; sent from payor to provider• 276 EDI Health Care Claim Status Request – used by provider to request the status of a claim• 277 EDI Health Care Claim Status Notification – used by payor to notify provider regarding the

status of a claim, or to request additional information from provider regarding a claim• 278 EDI Health Care Service Review Information – used to transmit health care service

information for the purpose of request for review, certification, notification or reporting the outcome of a health care services review

KEY HIPAA EDI DATA SETS USED BY PROVIDERS(CONTINUED)

• 835 EDI Health Care Claim Payment/Advice Transaction Set – used to send a remittance advice or explanation of payment from payor to provider

• 837 EDI Health Care Claim Transaction Set - used by providers to submit claim billing information to payors; not used for retail pharmacy

• EDI Retail Pharmacy Claim Transaction (NCPDP Telecommunications Standard version 5.1) – used to submit retail pharmacy claims from pharmacy to payor

KEY HIPAA EDI DATA SETS USED BY EMPLOYERS AND PLAN SPONSORS

• 834 EDI Benefit Enrollment and Maintenance Set – used to manage enrollment information; sent from employer, union, group sponsor, etc. to payor

• 820 EDI Payroll Deducted and other Group Premium Payment for Insurance Products – used to make premium payment for insurance products; can be used to order a financial institution to make a payment to payee

NATIONAL PRACTITIONER IDENTIFIERS (NPIS)

• The National Practitioner Identifier (NPI) is a HIPAA Administrative Simplification Standard

• NPI is a 10-digit numeric identifier assigned to both individuals and groups/facilities; most payors require NPIs on all claims

• Payors used to assign their own provider numbers, so that a provider used to have many different numbers

• Problems arose when payors required legacy provider numbers in addition to or in lieu of NPIs; most payors now require providers to use NPIs only on their claims

CLAIM ANALYSIS TIPS

• Include modifiers when analyzing claims that can be split into technical and professional components (TC and 26 modifiers)

• When studying an encounter, be sure to pull all related claims• Watch for duplicate, denied, and corrected claims• UB04 claims are sometimes “rolled up”’ by the payor, especially if payment is a

fixed rate amount that applies to the entire claim• Watch for interim UB04 claims (typically for ongoing outpatient services or lengthy

inpatient admissions)• Consider “allowed” versus “paid” when conducting financial analyses• Consider whether claims are secondary or apply to supplemental products

PART 2: CODING

HEALTHCARE CODING OVERVIEW – MAJOR TYPES OF CODES USED IN THE HEALTHCARE INDUSTRY TODAY

• International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM) (retired Sep. 30, 2015)

• ICD-9 diagnosis• ICD-9 procedure

• ICD-10-CM (implemented Oct. 1, 2015)• ICD-10 diagnosis• ICD-10-PCS (Procedure Coding System)

• HCFA Common Procedure Coding System (HCPCS)• Level 1 – Current Procedural Terminology, 4th Edition (CPT-4 or CPT)• Level II – HCPCS Level II or HCPCS

• Revenue codes• Medicare Severity Diagnosis Related Groups (MS-DRGs)• Ambulatory Patient Classifications (APCs)

WHY IS MEDICARE RELEVANT FOR COMMERCIAL CODING AND REIMBURSEMENT?

• Most health plans follow at least a portion of Medicare coding and billing guidelines

• Many health plans base their reimbursement methods on Medicare’s methods• Some key Medicare terms

• CMS – the Centers for Medicare and Medicaid Services, formerly known as the Health Care Financing Administration (HCFA); this federal agency is under the Secretary of Health and Human Services and administers the Medicare program

• Medicare carriers and intermediaries – private organizations and companies which contract with CMS to administer the Medicare program

ICD CODES: OVERVIEW

• The International Classification of Diseases (ICD) is updated and maintained by the World Health Organization (WHO)

• ICD-9-CM developed in 1970s• WHO’s 9th revision of ICD (ICD-9) had attained wide international recognition by 1970s• The U.S. National Center for Health Statistics, part of Centers for Disease Control,

modified ICD-9 with clinical information• These clinical modifications provided a way to classify morbidity data for indexing of

medical records, medical case reviews, and ambulatory and other medical care programs, as well as for basic health statistics

• Result was the International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM), commonly referred to as ICD-9, which precisely delineates the clinical picture of each patient

ICD CODES: OVERVIEW (CONTINUED)

• WHO has developed 10th revision of ICD• Has been in use in most other countries since 1990s• Notable improvements in content and format over ICD-9-CM

• addition of information relevant to ambulatory and managed care encounters• expanded injury codes• creation of combination diagnosis/symptom codes to reduce the number of codes needed to

fully describe a condition• greater specificity in code assignment• will allow further expansion than was possible with ICD-9-CM• allows providers to better identify certain patients with specific conditions that will benefit

from tailored disease management programs, such as asthma, diabetes, and hypertension• allows for better understanding of relationship of cost to specific medical conditions

TRANSITION FROM ICD-9 TO ICD-10

• ICD-10 includes two sets of codes• ICD-10-CM – diagnosis codes

• Volume 1 – tabular listing• Volume 2 – index

• ICD-10-PCS (Procedure Coding System) – procedure codes, only for inpatient (for Medicare – other payors may require ICD-10-PCS for outpatient claims billed on a UB04)

• After many delays, ICD-10 transition occurred on Oct. 1, 2015 for all covered entities, including health plans, clearinghouses, and providers

• To accommodate ICD-10, CMS mandated transition from version 4010 to version 5010 of the electronic health standards for HIPAA transactions; deadline was Jan. 1, 2012

ICD-10-CM FORMAT

• Index• Alphabetical list of terms and their corresponding code

• Index to Diseases and Injuries (main index)• Index to External Causes of Injury• Neoplasm Table• Tabular list• Table of Drugs and Chemicals

• Sequential, alphanumeric list of codes divided into chapters based on body system or condition

• Contains categories, subcategories, and valid codes

ICD-10-CM FORMAT

• First character of a 3-character category is a letter• Second and third characters may be numbers or alpha characters• A three-character category without further subclassification is equivalent to

a valid three-character code• Subcategories are either four or five characters and include either letters

or numbers• Codes may be four, five, or six characters in length, in which each level of

subdivision after a category is a subcategory• The final level of subdivision is a valid code and may be either a letter or

number

ICD-10 DIAGNOSIS CODING GUIDELINES

• Identify each service, procedure, or supply with an ICD-10 diagnosis code to describe the diagnosis, symptom, complaint, condition, or problem

• Code the principal diagnosis first, followed by the secondary, tertiary, and so on• Code any coexisting conditions that affect the treatment of the patient for that

visit or procedure as supplementary information• Do not code a diagnosis that is no longer applicable• Providers should code only the current condition that prompted the patient’s visit• Many times a patient has a long list of chronic complaints that are not the reason

for the specific visit; providing nonessential information of this nature can cloud the determination of medical necessity and delay payment

ICD-10 DIAGNOSIS CODING GUIDELINES CON’T

• Chronic complaints should be coded only when the patient has received treatment for the condition

• When the diagnostic statement identifies an acute condition, providers should use the code that specifies “acute” whenever it is available

• Providers should be as specific as possible in specifying diagnosis (i.e., code to the highest level of specificity)

• When the diagnostic statement is general or generic, coders need to investigate further• If the information is not available in the record, coders should ask questions of the

physician or care provider• Coders should code only what is documented in the medical record or chart

ICD-10-CM DIAGNOSIS CODES – MAJOR CATEGORIES

Chapter 1. Certain Infectious and Parasitic Diseases (A00-B99)Chapter 2. Neoplasms (C00-D49)Chapter 3. Diseases of the Blood and Blood-forming Organs and Certain Disorders Involving the Immune Mechanism (D50-D89)Chapter 4. Endocrine, Nutritional and Metabolic Diseases (E00-E89)Chapter 5. Mental, Behavioral, and Neurodevelopmental Disorders F01-F99)Chapter 6. Diseases of the Nervous System (G00-G99)Chapter 7. Diseases of the Eye and Adnexa (H00-H59)Chapter 8. Diseases of the Ear and Mastoid Process (H60-H95)Chapter 9. Diseases of the Circulatory System (I00-I99)Chapter 10. Diseases of the Respiratory System (J00-J99)Chapter 11. Diseases of the Digestive System (K00-K95)Chapter 12. Diseases of the Skin and Subcutaneous Tissue (L00-L99)Chapter 13. Diseases of the Musculoskeletal System and Connective Tissue (M00-M99)Chapter 14. Diseases of the Genitourinary System (N00-N99)Chapter 15. Pregnancy, Childbirth and the Puerperium (O00-O9A)Chapter 16. Certain Conditions Originating in the Perinatal Period (P00-P96)Chapter 17. Congenital Malformations, Deformations and Chromosomal Abnormalities (Q00-Q99)Chapter 18. Symptoms, Signs and Abnormal Clinical and Laboratory Findings, Not Elsewhere Classified (R00-R99)Chapter 19. Injury, Poisoning and Certain Other Consequences of External Causes (S00-T88)Chapter 20. External Causes of Morbidity (V00-Y99)Chapter 21. Factors Influencing Health Status and Contact With Health Services (Z00-Z99)

ICD-10-CM DIAGNOSIS CODES – EXAMPLE

Chapter 7. Diseases of the Eye and Adnexa (H00-H59)

H00-H05 Diseases of eyelid, lacrimal system and orbitH10-H11 Disorders of conjunctivaH15-H22 Disorders of sclera, cornea, iris and ciliary bodyH25-H28 Disorders of lensH30-H36 Disorders of choroid and retinaH40-H42 GlaucomaH43-H44 Disorders of vitreous body and globeH46-H47 Disorders of optic nerve and visual pathwaysH49-H52 Disorders of ocular muscles, binocular movement, accommodation and refractionH53-H54 Visual disturbances and blindnessH55-H57 Other disorders of eye and adnexaH59 Intraoperative and postprocedural complications and disorders of eye and adnexa, not elsewhere classified

ICD-10-CM DIAGNOSIS CODES – EXAMPLE (CONTINUED)

H52 Disorders of refraction and accommodationH52.0 Hypermetropia

H52.229 Regular astigmatism, unspecified eyeH52.00 Hypermetropia, unspecified eye H52.3 Anisometropia

and aniseikoniaH52.01 Hypermetropia, right eye H52.31

AnisometropiaH52.02 Hypermetropia, left eye H52.32

AnisekoniaH52.03 Hypermetropia, bilateral H52.4 Presbyopia

H52.1 Myopia H52.5 Disorders of accommodation

H52.10 Myopia, unspecified eye H52.51 Internal ophthalmoplegia (complete) (total)

H52.11 Myopia, right eyeH52.511 Internal ophthalmoplegia (complete) (total), right eyeH52.12 Myopia, left eyeH52.512 Internal ophthalmoplegia (complete) (total), left eyeH52.13 Myopia, bilateralH52.513 Internal ophthalmoplegia (complete) (total), bilateral

H52.2 AstigmatismH52.519 Internal opthalmoplegia (complete) (total), unspecified eyeH52.20 Unspecified astigmatism H52.52 Paresis of

accommodation H52.201 Unspecified astigmatism, right eye H52.521

Paresis of accommodation, right eye H52.202 Unspecified astigmatism, left eye H52.522

Paresis of accommodation, left eye H52.203 Unspecified astigmatism, bilateral H52.523,

Paresis of accommodateion, bilateral H52.209 Unspecified astigmatism, unspecified eye H52.529

Paresis of accommodation, unspecified eyeH52.21 Irregular astigmatism H52.53

Spasm of accommodation H52.211 Irregular astigmatism, right eyeH52.531 Spasm of accommodation, right eye H52.212 Irregular astigmatism, left eyeH52.532 Spasm of accommodation, left eye H52.213 Irregular astigmatism, bilateralH52.533 Spasm of accommodation, bilateral H52.219 Irregular astigmatism, unspecified eyeH52.534 Spasm of accommodation, unspecified eye

H52.22 Regular astigmatism H52.6 Other disorders of refraction

H52.221 Regular astigmatism, right eye H52.7 Unspecified disorders of refraction

H52.222 Regular astigmatism, left eyeH52.223 Regular astigmatism, bilateral

ICD-9 DIAGNOSIS CODES: CATEGORIES

Code Category001-139 Infectious and parasitic diseases140-239 Neoplasms240-279 Endocrine, nutritional and metabolic diseases, and immunity disorders280-289 Diseases of the blood and blood-forming organs290-319 Mental, behavioral and neurodevelopmental320-389 Diseases of the nervous system and sense organs390-459 Diseases of the circulatory system460-519 Diseases of the respiratory system520-579 Diseases of the digestive system580-629 Diseases of the genitourinary system630-679 Complications of pregnancy, childbirth, and the puerperium680-709 Diseases of the skin and subcutaneous tissue710-739 Diseases of the musculoskeletal system and connective tissue740-759 Congenital anomalies760-779 Certain diseases originating in the perinatal period780-799 Symptoms, signs, and ill-defined conditions800-999 Injury and poisoningE000-E999

Supplementary classification of external causes of injury and poisoning

V01-V91 Supplementary classification of factors influencing health status and contact with health services

ICD-9 DIAGNOSIS CODES: EXAMPLE

360-379 Disorders of the eye and adnexa360 Disorders of the globe361 Retinal detachments and defects362 Other retinal disorders363 Chorioretinal inflammations, scars, and other

disorders of choroid364 Disorders of iris and ciliary body365 Glaucoma366 Cataract367 Disorders of refraction and accommodation368 Visual disturbances369 Blindness and low vision370 Keratitis371 Corneal opacity & other disorders of cornea372 Disorders of conjunctiva373 Inflammation of eyelids374 Other disorders of eyelids375 Disorders of lacrimal system376 Disorders of the orbit377 Disorders of the optic nerve and visual pathways378 Strabisimus and other disorders of binocular eye

movements379 Other disorders of eye

380-389 Diseases of the ear and mastoid process

320-389 Diseases of the nervous system and sense organs

320-326 Inflammatory diseases of the central nervous system327 Organic sleep disorders330-337 Hereditary and degenerative diseases of the central nervous system338 Pain339 Other headache syndromes340-349 Other diseases of the central nervous system350-359 Disorders of the peripheral nervous system

ICD-9 DIAGNOSIS CODES: EXAMPLE (CONTINUED)

367 Disorders of refraction and accommodation367.0 Hypermetropia

Far-sightednessHyperopia

367.1 MyopiaNear-sightedness

367.2 Astigmatism367.20 Astigmatism, unspecified367.21 Regular astigmatism367.22 Irregular astigmatism

367.3 Anisometropia and aniseikonia367.31 Anisometropia367.32 Aniseikonia

367.4 Presbyopia367.5 Disorders of accommodation

367.51 Paresis of accommodation Cycloplegia367.52 Total or complete internal opthalmoplegia367.53 Spasm of accommodation

367.8 Other disorders of refraction and accommodation367.81 Transient refractive change367.89 Other Drug-induced disorders of refraction and accommodation Toxic disorders of refraction and accommodation

367.9 Unspecified disorder of refraction and accommodation

Coders should code to the5th digit wherever possible(highest level of specificity)

V CODES

• V-codes are used for supplementary classification of factors influencing health status and contact with health services

• V-codes range from V01-V91• Can be one or two digits following the decimal• Used for circumstances other than a disease or injury classifiable with

ICD-9 diagnosis codes• V-codes are reported in the ICD-9 diagnosis fields on CMS-1500 and UB-

04• V-codes are not used in place of procedure codes

THREE MAIN WAYS THAT GIVE RISE TO USE OF V-CODES

• When a person who is not currently sick encounters the health services for some specific purpose• to act as a donor of an organ or tissue• to receive prophylactic vaccination• to discuss a problem which is in itself not a disease or injury

• When a person with a known disease or injury, whether it is current or resolving, encounters the healthcare system for a specific treatment of that disease or injury

• dialysis for renal disease• chemotherapy for malignancy• cast changes

• When some circumstance or problem is present which influences the person’s health status but is not in itself a current illness or injury

• a personal history of certain diseases• a person with an artificial heart valve in situ

V-CODES: CATEGORIES

Code CategoryV01-V06

Persons with potential health hazards related to communicable disease

V07-V09

Persons with need for isolation, other potential health hazards and prophylactic measures

V10-V19

Persons with potential health hazards related to personal and family history

V20-V29

Persons encountering health services in circumstances related to reproduction & development

V30-V39

Liveborn infants according to type of birth

V40-V49

Persons with a condition influencing their health status

V50-V59

Persons encountering health services for specific procedures and aftercare

V60-V69

Persons encountering health services in other circumstances

V70-V82

Persons without reported diagnosis encountered during examination and investigation of individuals and populations

V83-V84

Genetics

V85 Body mas indexV86 Estrogen receptor statusV87 Other specified personal exposures and history presenting hazards to healthV88 Acquired absence of other organs and tissueV89 Other suspected conditions not foundV90 Retained foreign bodyV91 Multiple gestation placenta status

V-CODES: EXAMPLEV30-39 Liveborn infants according to the type of birth

The following fourth-digit subdivisions are for use with categories V30-V39:0 Born in hospital1 Born before admission to hospital2 Born outside hospital and not hospitalized

The following two fifth-digit subdivisions are for use with the forth digit .0, born in hospital:0 Delivered without mention of cesarean delivery1 Delivered by cesarean delivery

V30 Single livebornV31 Twin, mate livebornV32 Twin, mate stillbornV33 Twin, unspecifiedV34 Other multiple, mates all livebornV35 Other multiple, mates all stillbornV36 Other multiple, mates live- and stillbornV37 Other multiple, unspecifiedV39 Unspecified

Normal newborn girl, born in hospital, vaginal delivery = V30.00

Normal twins, born in hospital by cesarean delivery = V31.01 for each infant

E CODES

• Used for supplementary classification of external causes of injury and poisoning• Provided to permit the classification of environmental events, circumstances, and

conditions as to the cause of injury, poisoning, and other adverse effects• When use of an E-code is applicable, it is intended that the E-code is used in addition to

a code from one of the main chapters of ICD-9, indicating the nature of the condition• Reported in the ICD-9 diagnosis fields on CMS-1500 and UB-04• E-codes not used consistently, although

• required on death records for deaths arising from injury• primarily used by trauma centers• not required by Medicare

E-CODES:CATEGORIES

Code Category

E000 External cause status

E001-E030 Activity

E800-E848 Transport accidents

E849 Place of occurrence

E850-E858 Accidental poisoning by drugs, medicinal substances, and biologicals

E860-E869 Accidental poisoning by other solid and liquid substances, gases, and vapors

E870-E876 Misadventures to patients during surgical and medical care

E878-E879 Surgical and medical procedures as the cause of abnormal reaction of patient or later complication, without mention of misadventure at the time of procedure

E880-E888 Accidental falls

E890-E899 Accidents caused by fire and flames

E900-E909 Accidents due to natural and environmental factors

E910-E915 Accidents caused by submersion, suffocation, and foreign bodies

E916-E928 Other accidents

E939 Late effects of accidental injury

E930-E949 Drugs, medicinal and biological substances causing adverse effects in therapeutic use

E950-E959 Suicide and self-inflicted injury

E960-E969 Homicide and injury purposely inflicted by other persons

E970-E978 Legal intervention

E979 Terrorism

E980-E989 Injury undetermined whether accidentally or purposely inflicted

E990-E999 Injury resulting from operations of war

E-CODES: EXAMPLEE906 Other injury caused by animals

E906.0 Dog biteE906.1 Rat biteE906.2 Bite of nonvenomous snakes and lizardsE906.3 Bite of other animal except arthropod

CatsMoray eelRodents, except ratsShark

E906.4 Bite of nonvenomous arthropodInsect bite NOS

E906.5 Bite by unspecified animalAnimal bite NOS

E906.8 Other specified injury caused by animalButted by animalFallen on by horse or other animal, not being riddenGored by animalImplantation of quills of porcupinePecked by birdRun over by animal, not being riddenStepped on by animal, not being ridden

E906.9 Unspecified injury caused by animal

ICD-10-PCS FORMAT

• Each character of ICD-10-PCS (procedure coding system) has a specific meaning. Placement of characters is based on the following schema:1 Section2 Body System3 Root Operation4 Body Part5 Approach6 Device7 Qualifier

• Used to document procedures performed during the encounter• Ranked in priority of significance• Used only on UB-04 claims• A claim may or may not have an ICD-10 procedure code

ICD-10-PCS PROCEDURE CODES – MAJOR CATEGORIES

Medical and Surgical-Related Sections0 Medical and Surgical1 Obstetrics2 Placement2 Administration3 Measurement and Monitoring4 Extracorporeal Assistance and Performance5 Extracorporeal Therapies6 Osteopathic7 Other Procedures8 Chiropractic9 Imaging

Ancillary SectionsC Nuclear MedicineD Radiation TherapyE Physical Rehabilitation and Diagnostic AudiologyG Mental HealthH Substance Abuse Treatment

ICD-10-PCS PROCEDURE CODES – EXAMPLE

080 – Medical and Surgical – Eye – Alteration

Section: 0 – Medical and SurgicalBody system: 8 – EyeOperation: 0 – Alteration: Modifying the anatomic structure of a body part without affecting the function of the body part

Body Part Approach DeviceQualifier

N – Upper Eyelid, Right 0 – Open 7 – Autologous Tissue SubstituteZ – No Qualifier

P – Upper Eyelid, Left 3 – Percutaneous J – Synthetic SubstituteQ – Lower Eyelid, Right X – External K – Nonautologous Tissue SubstituteR – Lower Eyelid, Left Z – No Device

-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------080N07Z: Medical and Surgical Eye Alteration Upper Eyelid, Right Open Autologous Tissue Substitute No Qualifier080N0JZ: Medical and Surgical Eye Alteration Upper Eyelid, Right Open Synthetic Substitute No Qualifier080N0KZ: Medical and Surgical Eye Alteration Upper Eyelid, Right Open Nonautologous Tissue Substitute No Qualifier080N0ZZ: Medical and Surgical Eye Alteration Upper Eyelid, Right Open No Device No Qualifier080N37Z: Medical and Surgical Eye Alteration Upper Eyelid, Right Percutaneous Autologous Tissue Substitute No Qualifier080N3JZ: Medical and Surgical Eye Alteration Upper Eyelid, Right Percutaneous Synthetic Substitute No Qualifier

ICD-9 PROCEDURE CODES

• 2 digits followed by a decimal, then no, 1, or 2 digits• Used to document procedures performed during the encounter• Ranked in priority of significance• Used only on UB-04 claims• A claim may or may not have an ICD-9 procedure code

ICD-9 PROCEDURE CODES – CATEGORIESCode Category

00 Procedures and interventions, not elsewhere classified

01-05 Operations on the nervous system

06-07 Operations on the endocrine system

08-16 Operations on the eye

17 Other miscellaneous diagnostic and therapeutic procedures1

18-20 Operations on the ear

21-29 Operations on the nose, mouth, and pharynx

30-34 Operations on the respiratory system

35-39 Operations on the cardiovascular system

40-41 Operations on the hemic and lymphatic system

42-54 Operations on the digestive system

55-59 Operations on the urinary system

60-64 Operations on the male genital organs

65-71 Operations on the female genital organs

72-75 Obstetrical procedures

76-84 Operations on the musculoskeletal system

85-86 Operations on the integumentary system

87-99 Miscellaneous diagnostic and therapeutic procedures

ICD-9 PROCEDURE CODES – EXAMPLE

08-16 Operations on the eye08 Operations on eyelids09 Operations on lacrimal system10 Operations on conjunctiva11 Operations on cornea12 Operations on iris, ciliary body, sclera, and

anterior chamber13 Operations on lens14 Operations on retina, choroid, vitreous, and

posterior chamber15 Operations on extraocular muscles16 Operations on orbit and eyeball

ICD-9 PROCEDURE CODES – EXAMPLE (CONTINUED)

14 Operations on retina, choroid, vitreous, and posterior chamber14.0 Removal of foreign body from posterior segment of eye

Excludes: removal of surgically implanted material (14.6)14.00 Removal of foreign body from posterior segment of eye, not otherwise

specified14.01 Removal of foreign body from posterior segment of eye with use of

magnet14.02 Removal of foreign body from posterior segment of eye without use of

magnet14.1 Diagnostic procedures on retina, choroid, vitreous, and posterior chamber

14.11 Diagnostic aspiration of vitreous14.19 Other diagnostic procedures on retina, choroid, vitreous, and posterior

chamber14.2 Destruction of lesion of retina and choroid

Includes: destruction of chorioretinopathy or isolated chorioretinal lesionExcludes: that for repair of retina (14.31-14.59)14.21 Destruction of chorioretinal lesion by diathermy14.22 Destruction of chorioretinal lesion by cryotherapy14.23 Destruction of chorioretinal lesion by xenon arc photocoagulation14.24 Destruction of chorioretinal lesion by laser photocoagulation14.25 Destruction of chorioretinal lesion by photocoagulation of unspecified type14.26 Destruction of chorioretinal lesion by radiation therapy14.27 Destruction of chorioretinal lesion by implantation of radiation source14.29 Other destruction of chorioretinal lesion Destruction of lesion of retina and choroids NOS

Coders should code to the4th digit wherever possible(highest level of specificity)

ICD-9 PROCEDURE CODES – EXAMPLE (CONTINUED)

14.3 Repair of retinal tearIncludes: repair of retinal defectExcludes: repair of retinal detachment (14.41-14.59)

14.31 Repair of retinal tear by diathermy14.32 Repair of retinal tear by cryotherapy14.33 Repair of retinal tear by xenon arc photocoagulation14.34 Repair of retinal tear by laser photocoagulation14.35 Repair of retinal tear by photocoagulation of unspecified type14.39 Other repair of retinal tear

14.4 Repair of retinal detachment with scleral buckling and implant14.41 Scleral buckling with implant14.49 Other scleral buckling

Scleral buckling with:air tamponaderesection of scleravitrectomy

14.5 Other repair of retinal detachmentIncludes: that with drainage

14.51 Repair of retinal detachment with diathermy14.52 Repair of retinal detachment with cryotherapy14.53 Repair of retinal detachment with xenon arc photocoagulation14.54 Repair of retinal detachment with laser photocoagulation14.55 Repair of retinal detachment with photocoagulation of unspecified type14.59 Other

ICD-9 PROCEDURE CODES – EXAMPLE (CONTINUED)14.6 Removal of surgically implanted material from posterior segment of eye14.7 Operations on vitreous

14.71 Removal of vitreous, anterior approachOpen sky techniqueRemoval of vitreous, anterior approach (with replacement)

14.72 Other removal of vitreousAspiration of vitreous by posterior sclerotomy

14.73 Mechanical vitrectomy by anterior approach14.74 Other mechanical vitrectomy14.75 Injection of vitreous substitute

Excludes: that associated with removal (14.71-14.72)14.79 Other operations on vitreous

14.8 Implantation of epiretinal visual prosthesis14.81 Implantation of epiretinal visual prosthesis14.82 Removal of epiretinal visual prosthesis14.83 Revision or replacement of epiretinal visual prosthesis

14.9 Other operations on retina, choroid, and posterior chamber

BILLING FORMS THAT USE ICD-10

• Professional (CMS-1500)• ICD-10-CM (diagnosis codes)

• Institutional (UB-04)• ICD-10-CM (diagnosis codes)• ICD-10-PCS (procedure codes)

• All claims, whether CMS-1500 or UB-04, must have at least one ICD-10 diagnosis code

• On UB-04, the first diagnosis code must describe the principal reason for the care provided

• If additional facts are required to substantiate the care provided, providers should list the ICD-10 codes in the order of their importance

IMPLICATIONS FOR CHARGEMASTER AND REIMBURSEMENT

• Not used by providers to set charges• ICD-10 codes alone are not typically tied to payor fee schedules,

although (rarely) some payors used ICD-9 procedure codes to negotiate outpatient facility reimbursement

• ICD-10 codes drive MS-DRGs, which drive inpatient reimbursement for Medicare and many other payors

COMPARISON OF ICD-9 AND ICD-10 DIAGNOSIS CODING

ICD-9-CM diagnosis codes ICD-10-CM diagnosis codes3-5 characters in length 3-7 characters in lengthApproximately 13,000 codes Approximately 68,000 available codesFirst digit may be alpha (E or V) or numeric; digits 2-5 are numeric

First digit is alpha; digits 2 and 3 are numeric; digits 4-7 are alpha or numeric

Limited space for adding new codes Flexible for adding new codesLacks detail Very specificLacks laterality Allows laterality and bi-lateralityDifficult to analyze data due to non-specific codes

Specifically improves coding accuracy and richness of data for analysis

Codes are non-specific and do not adequately define diagnoses needed for medical research

Detail improves the accuracy of data used for medical research

Does not support interoperability Supports interoperability and the exchange of health data between the U.S. and other countries

COMPARISON OF ICD-9 AND ICD-10 PROCEDURE CODING

ICD-9-CM procedure codes ICD-10-CM procedure codes3-4 numbers in length 7 alpha-numeric characters in lengthApproximately 3,000 codes Approximately 72,600 available codesBased on outdated technology Reflects current usage of medical terminology and

devicesLimited space for adding new codes Flexible for adding new codesLacks detail Very specificLacks laterality Allows lateralityGeneric terms for body parts Detailed descriptions for body partsLacks description of method and approach for procedures

Provides detailed descriptions of method and approach for procedures

Limits DRG assignment Allows expansion of DRG definitions to recognize new technologies and devices

Lacks precision to adequately define procedures

Precisely defines procedures with detail regarding body part, approach, any device used, and qualifying information

HOW ARE ICD-9 AND ICD-10 DIFFERENT?

Diagnosis ICD-9 ICD-10Precordial chest pain 786.51 R07.2

Asthma, acute exacerbation 493.92 J45.21 Mild, intermittent, w/ acute exacerbation

J45.41 Moderate, persistent, w/ acute exacerbation

V45.51 Severe, persistent, w/ acute exacerbation

Thumb laceration, w/o nail damage, initial encounter

883.0 S61.011A Laceration w/o FB, Rt.

S61.012A Laceration w/o FB, Lt.

WHAT ARE HCPCS CODES?

• Level I – CPT-4 (Current Procedural Terminology, 4th Edition)• Level II – HCPCS/National codes• (Level III – local codes – retired in 2003)

LEVEL 1 – CPT-4

• Developed and maintained by the American Medical Association (AMA)• Five-digit codes with descriptions• Developed in 1966• Updated annually by the AMA• Six major sections:

• Evaluation and management (E&M) (99201-99499)• Anesthesiology (00100-01999)• Surgery (10040-69990)• Radiology (70010-79999)• Pathology and laboratory (80048-89399)• Medicine (90281-99199 and 99500-99999)

• Procedures are divided into subsections according to body part, service, or diagnosis

LEVEL 1I – HCPCS CODES

• HCFA developed the second level of HCPCS codes because CPT does not contain all the codes needed to report medical services and supplies

• These codes always begin with a single letter (A through V) followed by 4 numeric digits

• Updated annually by CMS

LEVEL 1I – HCPCS CODES (CONTINUED)

Grouped by type of service or supply they representA codes – ambulance, transportation and supplies K codes – temporary DME codes

B codes – enteral and parenteral nutrition L codes – orthotics and prostheticsC codes – temporary hospital codes M codes – medical servicesD codes – dental P codes – pathology, laboratory and blood productsE codes – durable medical equipment (DME) Q codes – temporary procedures, services, drugs and suppliesG codes – temporary procedures, services, drugs R codes – radiology transport

and suppliesH codes – mental health S codes – private payor and Medicaid codesJ codes – drugs T codes – Medicaid codesQ codes – temporary procedures, services, drugs V codes – vision, audiology, and speech-language pathology services

and supplies

CPT CODES – E&M EXAMPLEEvaluation and management (E/M)Office or other outpatient servicesNew patient

99201 Office or other outpatient visit including for the evaluation and management of a new patient, which requires these three key components:

• a problem focused history;• a problem focused examination; and• straightforward medical decision making.

99202 Office or other outpatient visit including for the evaluation and management of a new patient, which requires these three key components:

• an expanded problem focused history;• an expanded problem focused examination; and• straightforward medical decision making.

99203 Office or other outpatient visit including for the evaluation and management of a new patient, which requires these three key components:

• a detailed history;• a detailed examination; and • medical decision making of low complexity.

99204 Office or other outpatient visit including for the evaluation and management of a new patient, which requires these three key components:

• a comprehensive history;• a comprehensive examination; and • medical decision making of moderate complexity.

99205 Office or other outpatient visit including for the evaluation and management of a new patient, which requires these three key components:

• a comprehensive history;• a comprehensive examination; and • medical decision making of high complexity.

CPT CODES – SURGICAL EXAMPLE

Eye and ocular adnexaEyeball

Removal of eyeSecondary implant(s) proceduresRemoval of foreign body 65205 Removal of foreign body, external eye; conjunctival superficial 65210 conjunctival embedded (includes concretions), subconjunctival, or scleral

nonperforating 65220 corneal, without slit lamp 65222 corneal, with slit lamp 65235 Removal of foreign body, intraocular; from anterior chamber or lens

65260 from posterior segment, magnetic extraction, anterior or posterior route 65265 from posterior segment, nonmagnetic extraction

LEVEL II HCPCS CODES - EXAMPLE

Dental proceduresDiagnostic

Clinical oral evaluationRadiographs

D0210 Intraoral – complete series (including bitewings)D0220 Intraoral – periapical – first filmD0230 Intraoral – periapical – each additional filmD0240 Intraoral – occlusal filmD0250 Extraoral – first filmD0260 Extraoral – each additional filmD0270 Bitewing – single filmD0272 Bitewings – two filmsD0274 Bitewings – four filmsD0290 Posterior-anterior or lateral skull and facial bone survey filmD0310 SialographyD0320 Tempromandibular joint arthrogram, including injectionD0321 Other temporomandibular joint films, by reportD0322 Tomographic surveyD0330 Panoramic filmD0340 Cephalometric film

Test and laboratory examinations…

IMPLICATIONS FOR CHARGEMASTER AND REIMBURSEMENT• Most payors set physician fee schedules based on CPT and HCPCS codes• CPT and HCPCS codes also used to reimburse most non-physician health

professionals (e.g., optometrists, therapists, audiologists)• CMS established Relative Value Units (RVUs) for most CPT codes; this is the basis

for Medicare payment• Most payors have adopted RVUs as their basis for reimbursing physicians• Many clinics have adopted RVUs as the basis for setting fees• Many clinics use RVUs to compensate physicians within their practice• This topic will be covered in depth in reimbursement section

MODIFIERS

• Modifiers are used to identify circumstances that alter or enhance the description of a service or supply

• There are two levels of modifiers – one for each level of codes• Level I (CPT) modifiers• Level II (HCPCS/National) modifiers

• Some modifiers have an impact on reimbursement by either reducing or increasing the allowed amount for the code that it is modifying

• Procedure codes may have multiple modifiers

LEVEL I (CPT) MODIFIERS

• Two numeric digits which are added to the five-digit CPT code• Maintained and updated annually by the AMA• Commonly used modifiers

• -26 professional component• -TC technical component• -25 separate, distinct E&M service• -50 bilateral procedure• -51 multiple procedures• -80 assistant surgeon

LEVEL II HCPCS MODIFIERS

• Two alphabetic digits (AA-VP) which are added to the alpha/numeric HCPCS code

• These are recognized by carriers nationally• Maintained and updated annually by CMS• Example

• E1 upper left, eyelid• E2 lower left, eyelid• E3 upper right, eyelid• E4 lower right, eyelid

• Both HCPCS and CPT modifiers are used interchangeably

REVENUE CODES

• Used on UB-04• Groups similar types of charges into one line• Every item in a hospital chargemaster must have one revenue code

attached• Certain revenue codes require CPT/HCPCS codes• If a CPT/HCPCS code is available, it should be used• Hospitals should use the highest level of specificity of revenue code• Always four digits

REVENUE CODES - EXAMPLES

0120 Room & board/semi-private0121 Med/Surg/Gyn/2 beds0122 OB/2 beds0123 Peds/2 beds0124 Psych/2 beds0125 Hospice/2 beds0126 Detox/2 beds0127 Oncology/2 beds0128 Rehab/2 beds0129 Other/2 beds

0400 Other imaging svc/general0401 Diagnostic mammography0402 Ultrasound0403 Screening mammography0404 PET scan0409 Other image scan

0610 MRI – general0611 MRI – brain0612 MRI – spine0614 MRI – other0615 MRA – head and neck0616 MRA – lower extremities0618 MRA – other0619 MRT – other

HOSPITAL CHARGEMASTER

• The hospital chargemaster is the hospital’s “catalog” of all services that are provided by that hospital

• Organized by department – the following are included for each item• Hospital’s item number (for internal use)• Department number (determines which cost center is credited with the

revenue for that item)• Item description – used for claim detail• Price (charge) per unit• Cost (sometimes – depends on hospital’s cost accounting system)• Revenue code (always)• HCPCS codes, if required because of that item’s revenue code

HOSPITAL CHARGEMASTER (CONTINUED)

• A typical chargemaster has thousands of items• Some states, such as Calif., require hospitals to make their chargemasters

public• There are many types of charge lines

• Recurring charges (room)• Charges tied to order entry (lab, pharmacy, x-ray)• Time-based charges (OR, anesthesia)• Items for which the charge varies from patient to patient (implants)• Charges which do not require HCPCS or CPT codes• Charges for which the HCPCS or CPT code is assigned at the chargemaster level• Charges for which the HCPCS or CPT code is assigned by HIM

SAMPLE HOSPITAL CHARGEMASTER (SELECTED ITEMS)Item # Description Cost

centerRev code

HCPCS code

Charge Note

3112451 OR Level 1 charge for first 30 minutes

100120 0360 Assigned by HIM

$2,500 Example of a timed charge for OR time

5172457 Pacemaker, dual chamber, rate responsive

100120 0275 C1785 $10,000 Example of a HCPCS code that could be in the chargemaster

3172471 Implant spine miscellaneous

100120 0278 N/A Manual Sample of an open code, in which supply implants are charged and priced using the hospital’s assigned markup schedule

3174526 Pack, cardiovascular custom

100120 0272 $1,500 Sample line in the chargemaster with no HCPCS code; field is left blank

9115487 EEG during nonintracranial surgery

100240 0740 95955 $750 Example of an outsourced service (not part of OR) that needs charge capture

SAMPLE HOSPITALITEMIZATION & UB ROLLUP

DRGS

• The Diagnosis Related Group, or DRG, system uses ICD-10-CM diagnosis and procedure codes as well as patient demographic information to classify each inpatient hospital admission into one of 753 clinically cohesive groups that demonstrate similar consumption of hospital resources and length-of-stay patterns

• Has been used by Medicare since 1983 to reimburse hospitals for inpatient admissions• Certain types of hospitals are excluded from Medicare’s DRG reimbursement system; these include

psychiatric hospitals or units, rehabilitation hospitals or units, children’s hospitals, long-term care hospitals and cancer hospitals

• CMS administers the DRG system and issues all rules and changes• DRGs are updated each October 1

• Base rates, wage indices, weights, and other DRG components are adjusted• Codes are re-mapped• New DRGs are created• DRGs are retired

DRGS

• One problem with DRGs has been the historical inability to account for severity differences within a DRG

• As a result, several severity-adjusted DRG systems have been developed

• APR-DRGs (All-Patient Refined DRGs) – four severity subclasses for each DRG

• APS-DRGs (All-Payer Severity-adjusted DRGs) – measures resource intensity• MS-DRGs (Medicare Severity DRGs) – used by CMS; three severity tiers for

most DRGs

CCS AND MCCS

• In MS-DRGs, many DRGs are split into one, two, or three related MS-DRGs based on whether any one of the secondary diagnoses has been categorized as an MCC, a CC, or no CC

• CMS identified those diagnoses whose presence as a secondary diagnosis leads to substantially increased hospital use; they then categorized this CC list into three different levels of severity

• MCCs (Major complications or comorbidities) – reflect the highest level of severity• CCs (Complications and comorbidities) – represent the next level of severity• Non-CCs – lowest level of severity; diagnosis codes that do not significantly affect

severity of illness and resource use and do not affect DRG assignment

MS-DRGS

• Current MS-DRG system is version 32, used for fiscal year 2015• Many payors have adopted MS-DRGs for reimbursement• Successful MS-DRG coding requires physicians and medical staff

to provide complete and detailed documentation, and health information management (medical records) staff to fully understand the medical conditions for which they are responsible

• Key to accurate coding (and therefore to maximizing reimbursement) is assignment of secondary diagnosis codes

USES FOR MS-DRGS

• Reimbursement• Evaluation of quality of care: since all cases in an MS-DRG are clinically similar, analysis of

treatment protocols, related conditions or demographic distribution can be done• clinical best-practice models can be designed around MS-DRGs• benchmarking and outcome analysis can be conducted using the MS-DRG clinical framework• quality reviews can be performed to assess coding practices and physician documentation• ongoing education of physicians, coders, nurses and utilization review personnel can be guided

by the results of MS-DRG analyses• Evaluation of utilization of services: each MS-DRG represents the average resources needed

to treat patients grouped to that MS-DRG relative to the national average of resources used to treat all Medicare patients

MS-DRG ASSIGNMENT

• MS-DRGs are assigned using the following considerations• The principal ICD-10 diagnosis code• Secondary ICD-10 diagnosis codes• The principal ICD-10 procedure code (when applicable)• Secondary ICD-10 procedure codes (when applicable)• Gender• Discharge status• Presence or absence of MCCs/CCs• Birth weight for neonates

• One MS-DRG is assigned to each inpatient stay

MS-DRG ASSIGNMENT (CONTINUED)

• Health information management coders review the patient’s chart upon discharge and assign the ICD-10 codes which determine MS-DRG

• Grouper software calculates the MS-DRG based on the above considerations; grouper software is usually updated annually

• Sometimes there are discrepancies between a hospital’s resultant MS-DRG and the MS-DRG calculated by a payor due to the use of different grouper versions

MS-DRG ORGANIZATION

• There are 25 major diagnostic categories (MDCs), which are each organized into two sections:

• Surgical – this section classifies all surgical conditions based upon operating room procedures

• Medical – this section classifies all diagnostic conditions based upon diagnosis codes

• MDCs are mutually exclusive and in general are organized by major body system and/or associated with a particular medical specialty

MDCS01 Diseases and disorders of the nervous system02 Diseases and disorders of the eye03 Diseases and disorders of the ear, nose, mouth and throat04 Diseases and disorders of the respiratory system05 Diseases and disorders of the circulatory system06 Diseases and disorders of the digestive system07 Diseases and disorders of the hepatobiliary system and pancreas08 Diseases and disorders of the musculoskeletal system and connective tissue09 Diseases and disorders of the skin, subcutaneous tissue and breast10 Endocrine, nutritional and metabolic diseases and disorders11 Diseases and disorders of the kidney and urinary tract12 Diseases and disorders of the male reproductive system13 Diseases and disorders of the female reproductive system14 Pregnancy, childbirth and the puerperium15 Newborns and other neonates with conditions originating in the perinatal period16 Diseases and disorders of the blood, blood forming organs and immunological disorders17 Myeloproliferative diseases and disorders, poorly differentiated neoplasm18 Infectious and parasitic diseases, systemic or unspecified sites19 Mental diseases and disorders20 Alcohol/drug use and alcohol/drug induced organic mental disorders21 Injuries, poisonings and toxic effects of drugs22 Burns23 Factors influencing health status and other contacts with health services24 Multiple significant trauma25 Human immunodeficiency virus infections

MS-DRG EXAMPLE

MDC 02 Diseases and disorders of the eyeSurgical MS-DRGsMS- DRG 113 Orbital procedures w CC/MCC

Relative weight: 1.8611Geometric Mean LOS: 3.7Arithmetic Mean LOS: 5.1Operating room procedures:14.21 14.22 14.26 14.27 14.2914.31 14.32 14.39 14.41 14.4914.51 14.52 14.53 14.54 14.5514.59 14.9National unadjusted payment $10,916.24

MS-DRG 114 Orbital procedures w/o CC/MCCMS-DRG 115 Extraocular procedures except orbitMS-DRG 116 Intraocular procedures w CC/MCCMS-DRG 117 Intraocular procedures w/o CC/MCC

MS-DRG EXAMPLE (CONTINUED)

MDC 02 Diseases and disorders of the eyeMedical MS-DRGsMS-DRG 121 Acute major eye infections w CC/MCC

Relative weight: 1.0635Geometric Mean LOS: 3.9Arithmetic Mean LOS: 5.0Principal diagnosis 360.00 360.01 360.02 360.04360.13 360.19 370.00 370.03370.04 370.05 370.06 370.55375.01 375.31 375.32 376.01376.02 376.03 376.04National unadjusted payment $6,237.94

MS-DRG 122 Acute major eye infections w/o CC/MCCMS-DRG 123 Neurological eye disordersMS-DRG 124 Other disorders of the eye w MCCMS-DRG 125 Other disorders of the eye w/o MCC

SAMPLEMS-DRG WEIGHTS

MS-DRG Description

Relative

weight

National unadjust

ed payment

232 Coronary bypass w PTCA w/o MCC 5.5976 $32,833

662 Minor bladder procedures w MCC 3.0042 $17,621

663 Minor bladder procedures w CC 1.5285 $8,965

664 Minor bladder procedures w/o CC/MCC

1.2406 $7,277

766 Cesarean section w/o CC/MCC 0.7562 $4,435

775 Vaginal delivery w/o complicating diagnosis

0.5643 $3,310

795 Normal newborn 0.1724 $1,011

007 Lung transplant 9.2986 $54,541

468 Revision of hip or knee replacement w/o CC/MCC

2.7652 $16,219

MS-DRGS AS BENCHMARKING

• Hospital casemix index is calculated as total weights / number of admissions

• MS-DRGs can be used for• Comparing average charges across hospitals – regardless of size• Reimbursement across payors – regardless of payment method• Resource utilization and cost across hospitals• Identifying types of services provided by a hospital

APCS

• The Ambulatory Payment Classification, or APC, system uses CPT and HCPCS codes to classify outpatient hospital admissions clinically cohesive groups that demonstrate similar consumption of hospital resources

• Has been used by Medicare since 2000 to reimburse hospitals for certain outpatient services• Certain types of hospitals are excluded from Medicare’s APC reimbursement system; these

include Maryland hospitals (for certain services), critical access hospitals, hospitals located outside of the 50 US states, and Indian Health Service hospitals

• CMS administers the APC system and issues all rules and changes• APCs are updated each year

• Base rates, wage indices, weights, and other APC components are adjusted• Codes are re-mapped• New APCs are created• APCs are retired

FEATURES OF APCS

• Approximately 700 procedural APCs and 350 drug APCs• Like DRGs, each APC reflects procedures that are comparable both clinically and in resource use• Reimbursement by Medicare is at lesser of billed charges or the APC fee schedule amount, adjusted for

geographic differences • Procedure-based APC groups are assigned a relative weight• Relative weight is based on median cost (operating and capital) for the grouped services• Weights are converted to payment rates using conversion factors• Assignment of APC code is driven by CPT and HCPCS codes• Patient can have multiple APCs on one claim, although multiple surgeries are paid the full APC amount for the

highest APC, and all others are paid at 50% of the APC rate• Status indicators tell why there is no payment for a HCPCS code; for example, the code may be paid under a lab

fee schedule, or the code may be considered to be bundled as part of a procedure and therefore not separately payable

APCS - EXAMPLE0130 – Level I Laparoscopy

RW 40.6743Payment rate (national) $3,016.93Includes these CPTs:

38129 Laparoscopic procedures, spleen38589 Laparoscopic procedures, lymphatic system43289 Laparoscopic procedures, esophagus43648 Lap revise/remove eltrd antrum43659 Laparoscopic procedures, stomach44238 Laparoscopic procedures, intestine44979 Laparoscopic procedures, appendectomy45499 Laparoscopic procedures, rectum47379 Laparoscopic procedures, liver47560 Laparoscopy with cholangiogram47561 Laparoscopy with cholangiogram and biopsy47579 Laparoscopic procedures, biliary49320 Laparoscopy, diagnostic biopsy separate procedure49321 Laparoscopy, biopsy49322 Laparoscopy, aspiration49323 Laparoscopic drainage of lymphocele

APCS – EXAMPLE (CONTINUED)0130 – Level I Laparoscopy

Includes these CPTs (list continued from previous slide):49324 Laparoscopic insertion of permanent IP catheter49325 Laparoscopic revision of permanent IP catheter49329 Laparoscopic procedure, abdomen/per/oment49659 Laparoscopic hernia repair50541 Laparoscopic procedures, ablate renal cyst50549 Laparoscopic procedures, renal 50949 Laparoscopic procedures, ureter51999 Laparoscopic procedures, bladder54699 Laparoscopy procedures, testis55559 Laparoscopy procedures, spermatic cord58545 Laparoscopic myomectomy58578 Laparoscopic procedures, uterus58679 Laparoscopic procedures, oviduct-ovary59898 Laparoscopic procedures, OB care/ delivery60659 Laparoscopy procedures, endocrine

APCS – EXAMPLE (CONTINUED)

0131 – Level II LaparoscopyRW 50.9538Payment rate (national) $3,779.40

0132 – Level III LaparoscopyRW 73.8696Payment rate (national) $5,479.13

CLAIM FORM TYPES

• Providers other than pharmacies use one of the following two claim forms:• CMS-1500 – professional claim form – used by physicians, therapists, and other

professionals• UB-04 – institutional claim form – used by facilities including hospitals, surgery

centers, skilled nursing facilities, home health agencies, some transportation providers, etc.

SAMPLE PROFESSIONALCLAIM FORM (CMS-1500)

SAMPLE PHYSICIAN CHARGEMASTER (SELECTED CODES)CPT code Description Charge99201 New patient visit, level 1 $60.0099202 New patient visit, level 2 $100.0099203 New patient visit, level 3 $145.0099204 New patient visit, level 4 $220.0099205 New patient visit, level 5 $275.0099211 Established patient visit, level 1 $30.0099212 Established patient visit, level 2 $60.0099213 Established patient visit, level 3 $100.0099214 Established patient visit, level 4 $145.0099215 Established patient visit, level 5 $195.0081005 Urinalysis $8.0082310 Calcium test; total $13.0090707 Measles, mumps, rubella vaccine $104.00

SUPERBILL EXAMPLE

FACILITY CLAIM FORM: UB-04

• The Uniform Bill 2004 (UB-04) is also known as the HCFA-1450 and replaced the UB-92 in 2005

• The UB-04 is used for both inpatient and outpatient facility services• The National Uniform Billing Committee (NUBC) establishes and maintains a

complete list of the allowable data elements and codes used on the UB-04 claim• The UB-04 contains 81 form locators (FLs)

• A FL is a data field• Some FLs must be completed, some are used only when applicable to specific

claims, and others are reserved for future use• The UB-04 has 22 service lines on a single form

• The UB-04, when submitted electronically, can accept 450 service lines

SAMPLE UB-04

HOSPITAL CODING

• Health information management (HIM, formerly known as the medical records department) staff review records after patient is discharged and assign these codes to the entire encounter:

• ICD-10 diagnosis codes• ICD-10 procedure codes• CPT codes for surgeries, interventional procedures

• Other procedure codes reside in the chargemaster and are automatically brought forward to the claim

PART 3: PHYSICIAN AND HOSPITAL REIMBURSEMENT

TOPICS COVERED IN THIS SECTION

• Hospital reimbursement models• Physician reimbursement models• Provider/plan contracting issues

HOSPITAL REIMBURSEMENT – OVERVIEW

• Hospitals charge the same amount per service to all patients regardless of payor source

• Each payor utilizes its own method for reimbursing the hospital• Hospitals write off the difference between charges and reimbursement as

“discount”• Some hospitals’ aggregate discounts are 70+% of charges, meaning they collect

only 30% of gross revenue; the remainder is discount• Payment can be greater than billed charges, depending on the contract terms• Self-pay patients and patients with no coverage are expected to pay full billed

charges, less any charity discount

INPATIENT VERSUS OUTPATIENT STATUS

• Inpatient versus outpatient: the admitting physician must admit patients specifically to “inpatient” status

• Patients must meet admission criteria (intensity of service and severity of illness)

• If patient does not meet inpatient criteria and if physician has not ordered inpatient services, then the patient’s status is outpatient

• Services may be similar between inpatient and outpatient but reimbursement can be dramatically different

COMMON INPATIENT REIMBURSEMENT METHODS

• DRG (Diagnosis Related Groups)• MS-DRGs (Medicare Severity DRGs)• Per case• Per diem• Percent discount• Carve outs• Outlier provisions

INPATIENT: DRG

• DRG = Diagnosis Related Groups• Medicare transitioned to MS-DRGs (Medicare Severity DRGs) in 2008• Health information management (medical records) staff assign ICD-10 diagnosis and procedure

codes to the entire encounter after patient is discharged• DRGs are a derivation of ICD-10 diagnosis and procedure codes, as well as other demographic

information• Each admission has only one DRG• Each DRG has a relative weight, which is updated annually by CMS• Hospital and payor agree on a base rate (“weight of 1.00” amount or “conversion factor”), which is

multiplied by each admission’s DRG weight to determine reimbursement• Charges don’t matter, other than for outlier threshold determination• Length of stay doesn’t matter, other than for outlier threshold determination

INPATIENT: DRG

Commercial payors negotiate the following with the hospital• DRG weight of 1.00 payment rate (eg, conversion factor)• DRG grouper version• Outlier provision

• typically, payment is percent discount on the entire admission once a charge or length of stay threshold is met• DRG weight of one payment method no longer applies

• Carve outs; separate, additional payment for high-cost drugs and devices (typically percent discount on the carve out items)• Implants and devices• High-cost drugs

• Separate reimbursement methods (typically per diem or percent discount) for non-typical, high-cost, variable length-of-stay admission types:• Inpatient rehab• Neonatal intensive care, levels II, III, IV• Mental health• Chemical dependency

INPATIENT: MS-DRG

• In MS-DRGs, many DRGs are split into one, two, or three related MS-DRGs based on whether any one of the secondary diagnoses has been categorized as an MCC, a CC, or no CC

• CMS identified those diagnoses whose presence as a secondary diagnosis leads to substantially increased hospital use; they then categorized this CC list into three different levels of severity

• MCCs (Major complications or comorbidities) – reflect the highest level of severity• CCs (Complications and comorbidities) – represent the next level of severity• Non-CCs – lowest level of severity; diagnosis codes that do not significantly

affect severity of illness and resource use and do not affect DRG assignment

INPATIENT: SAMPLE MS-DRG REIMBURSEMENT

MS-DRG

Description Relative weight

National unadjusted

payment662 Minor bladder procedures w

MCC3.0042 $17,621

663 Minor bladder procedures w CC 1.5285 $8,965

664 Minor bladder procedures w/o CC/MCC

1.2406 $7,277

466 Revision of hip or knee replacement w MCC

5.1513 $30,215

467 Revision of hip or knee replacement w CC

3.4231 $20,078

468 Revision of hip or knee replacement w/o CC/MCC

2.7652 $16,219

INPATIENT: PER STAY

• Per stay (also known as per admission rate)• Fixed rate for entire admission• Can be organized into categories such as OB, medical, surgical

with different rates for each category• Charges and length of stay don’t matter, other than for outlier

threshold determination• Often there is no “lesser of” language, so the hospital is paid the

per stay rate regardless of charges

INPATIENT: PER STAY

• What is negotiated• Categories and definitions; varies from hospital to hospital and plan to plan, but typical

categories and definitions include:• Medical (defined as DRG type or bed type revenue code)• Surgical (defined as DRG type or presence of surgical revenue code or bed type revenue code)• OB (DRG – can be split into vaginal and C-section)• Normal newborn (DRG or revenue code; often paid at $0 if OB rate is intended to cover both mom

and baby)• Cardiac (DRG or ICD-10 – can be split into bypass, PTCA, other categories)

• Rates for each category• Outlier provision

• typically, payment is percent discount on the entire admission once a charge or length of stay threshold is met

• Alternatively, can have additional per diem included with per stay amount, beginning on threshold day through day of discharge

• Per stay payment method no longer applies

INPATIENT: PER STAY

• What is negotiated (continued)• Carve outs; separate, additional payment for high-cost drugs and devices (typically

percent discount on the carve out items)• Implants and devices• High-cost drugs

• Separate reimbursement methods (typically per diem or percent discount) for non-typical, high-cost, variable length-of-stay admission types:

• Inpatient rehab• Neonatal intensive care, levels II, III, IV• Mental health• Chemical dependency

INPATIENT: PER DIEM

• Fixed payment per day of hospital service• Can be organized into categories such as OB, medical, surgical with

different rates for each category• Charges and length of stay don’t matter, other than for outlier

threshold determination• Often there is no “lesser of” language, so the hospital is paid the per

stay rate regardless of charges

INPATIENT: PER DIEMWHAT IS NEGOTIATED• Categories and definitions; varies from hospital to hospital and plan to plan, but typical categories and

definitions include• Medical (defined as DRG type or bed type revenue code)• Surgical (defined as DRG type or presence of surgical revenue code or bed type revenue code)• OB (DRG – can be split into vaginal and C-section)• Normal newborn (DRG or revenue code; often paid at $0 if OB rate is intended to cover both mom and baby)• ICU / CCU (defined as bed type revenue code)• Pediatrics (defined as bed type revenue code)• Rehab per diem (DRG or revenue code)• NICU per diems – levels II, III, IV (revenue code)• Mental health per diems (DRG or revenue code – can be split into psych, chemical dependency)

• Rates for each category• Outlier provision

• typically, payment is percent discount on the entire admission once a charge or length of stay threshold is met• Per diem payment method no longer applies

• Carve outs; separate, additional payment for high-cost drugs and devices (typically percent discount on the carve out items)

• Implants and devices• High-cost drugs

INPATIENT: PERCENT OF CHARGES

• Payment based on flat discount from billed charges• What is negotiated

• Discount rate• Categories of service, if different rates apply to various service lines

• Typically used for PPOs• Often used by rural hospitals and by national health plans that

don’t have a lot of business with a hospital

INPATIENT: OTHER METHODS

• Min/max contracts with per diems, per stay, or DRG weight of one• typically for PPOs• rates are negotiated, then a corridor is set up to guarantee the PPO a discount (so a payor never

pays more than billed charges) but also so the hospital never gets hit with a deep discount on any given admission

• typical min/• Surgical case add-on

• Fixed amount per surgical admission paid in addition to med/surg per diem• Can mix and match reimbursement methods within a contract

• Example A:• Per diems for medical, surgical, pediatrics, ICU/CCU• Per stay for vaginal delivery, C-section

• Example B:• DRG weight of one for medical, surgical• Per case rate for vaginal delivery, C-section, normal newborn• Per diem for NICU, rehab, mental health

HOSPITAL FINANCIAL INCENTIVES BASED ON REIMBURSEMENT METHOD

Reimbursement type Economic incentive Other issuesCharges, % of charges Do as much as you can, keep

patient as long as you canRaise charges as high as you can

Per diem Keep patient as long as you can but do as little for them as you can

Charges don’t matter

DRG Admit and then discharge patient as quickly as possible, do as little for them as possible

Charges don’t matter, but must have accurate coding to get to the highest DRG

Per stay Admit and then discharge patient as quickly as possible, do as little for them as possible

Charges don’t matter, coding doesn’t matter

SAMPLEHOSPITALRATE SHEET

VARIATION IN PAY TYPE AND AMOUNT BYPAYOR - EXAMPLEInpatient, 3 day stay, 3-vessel cardiac bypass, total charges = $40,000

Payor Pay Method

Allowed Discount

Medicare MS-DRG $18,000 $22,000Medicaid DRG $15,000 $25,000HMO 1 Per diem $8,000 $32,000HMO 2 Cardiac

case rate$25,000 $15,000

PPO 1 Percent discount

$32,000 $8,000

Self pay Charges $40,000 $0

COMMON HOSPITAL PAYMENT METHODS – OUTPATIENT

• Historically, most outpatient services were paid at a percent of charges

• Many rural hospitals are still paid at >90% of charges by HMOs and PPOs for outpatient services

• Outpatient is much more difficult to set up on per visit rates due to the large variability in types of services, although some plans use APCs to establish fixed outpatient rates

COMMON HOSPITAL PAYMENT METHODS – OUTPATIENT

• Typical categories include• ER (defined by rev code, CPT, or APC)• CT (rev code, CPT, ICD-10 procedure code or APC)• MRI (rev code, CPT, ICD-10 procedure code or APC)• Outpatient surgery (CPT, old Medicare ASC grouper, APC)• Therapies (rev code, CPT, APC)• Default % of charges for all else

MEDICARE HOSPITAL PAYMENT METHODS – OUTPATIENT

• Medicare reimburses hospitals based on several methods• Fee schedules

• Outpatient lab• Ambulance• Physical, speech, occupational therapy• Screening and diagnostic mammography

• Dialysis composite rate• End stage renal disease dialysis, drugs, supplies

• APCs (Ambulatory Payment Classification)• Surgery• Radiology• Clinic services (provided within the hospital)• Emergency services• Cancer chemotherapy administration and drugs• Most all other outpatient services

APC REIMBURSEMENT

• Reimbursement by Medicare is at lesser of billed charges or the APC fee schedule amount, adjusted for geographic differences

• Procedure-based APC groups are assigned a relative weight• Relative weight is based on median cost (operating and capital) for the grouped

services• Weights are converted to payment rates using conversion factors• Assignment of APC code is driven by CPT and HCPCS codes• Patient can have multiple APCs on one claim, although multiple surgeries are paid

the full APC amount for the highest APC, and all others are paid at 50% of the APC rate

• Status indicators tell why there is no payment for a HCPCS code; for example, the code may be paid under a lab fee schedule, or the code may be considered to be bundled as part of a procedure and therefore not payable separately

SAMPLEHOSPITALRATE SHEET

HOSPITAL CONTRACTING ISSUES

• Most hospitals want payments that are at least equal to their Medicare payment; often they want HMO payment to be at least 10-30% higher, and PPO payment to be 20-50% higher

• 2015 national Medicare DRG weight of one is $5,865 (which is then adjusted for geography, also add-ons for teaching hospitals and hospitals that serve a large number of insured patients); 2007 rate was $4,869

• Hospitals talk with payors about “cost-shifting” – the idea that commercial payors must pay for the losses that hospitals incur in Medicare and Medicaid business; most hospitals’ revenue mix is 30-40% Medicare and Medicaid

• A good benchmark for health plans to use in calculating hospital reimbursement is the hospital’s cost to charge ratio – this comes from the Medicare cost report which “steps down” all allowable hospital costs to revenue centers

• Hospitals may be more willing to give deeper discounts (lower rates) to a health plan if they are granted exclusivity in a market

HOSPITAL CONTRACTING ISSUES (CONTINUED)

• Term of hospital contracts varies by payor and hospital• National PPO contracts may be evergreen (in effect until terminated) or have auto-renew

provisions• HMO and PPO agreements typically have 1, 2 or 3 year terms with provisions for rate

increases in years 2 and 3• Rural hospital contracts are typically evergreen or have auto-renew provisions

• Most hospital contracts are silent regarding excessive charges• This is an issue for payors using % of charge payment methods• Smart contractors should limit charges to an external benchmark; this is rarely done

INCOME STATEMENT: ABBOTT-NORTHWESTERN HOSPITAL, MINNEAPOLIS

2013 2012 2011 2010Inpatient Revenue $1,806,314,759 $1,896,682,509 $1,925,319,946 $1,826,334,967

Outpat Revenue $922,863,614 $881,638,457 $847,356,491 $819,803,660Total Pt Revenue $2,729,178,373 $2,778,320,966 $2,772,676,437 $2,476,963,490Discounts $1,739,980,629 $1,831,279,355 $1,853,341,397 $1,755,218,915Net Pt Revenue $989,197,744 $947,041,611 $919,335,040 $890,919,712Tot Operating Exp $1,075,946,706 $1,024,537,458 $976,757,925 $928,294,135Operating Income/ (Loss)

($86,748,962) ($77,495,847) ($57,422,885) ($37,374,423)

Tot Non-Pt Rev $141,894,209 $118,284,383 $90,772,217 $86,738,854Tot Other Expense ($8,112) $0 $0 $0Net Income / (Loss) $55,153,359 $40,788,536 $33,349,332 $49,364,431Discount % 63.8% 65.9% 66.8% 70.9%

INCOME STATEMENT: SCRIPPS MERCY HOSPITAL, SAN DIEGO

2013 2012 2011 2010Inpatient Revenue $2,197,520,424 $2,019,839,539 $1,871,409,399 $1,630,788,157Outpat Revenue $597,048,601 $567,175,150 $486,790,449 $437,062,591Total Pt Revenue $2,794,569,025 $2,587,014,689 $2,358,199,848 $2,067,850,748Discounts $2,094,357,157 $1,856,796,227 $1,730,570,902 $1,507,492,983Net Pt Revenue $700,211,868 $730,218,462 $627,628,946 $560,357,765Tot Operating Exp $686,640,363 $677,408,011 $602,657,046 $567,615,147Operating Income/ (Loss)

$13,571,505 $52,810,451 $24,971,900 ($7,257,382)

Tot Non-Pt Rev $27,551,821 $16,549,107 $17,768,199 $17,572,853Tot Other Expense $0 $0 $0 $0Net Income / (Loss) $41,123,326 $69,359,558 $42,740,099 $10,165,236Discount % 74.9% 71.8% 73.4% 72.9%

INCOME STATEMENT: MEMORIAL SLOAN-KETTERING CANCER CENTER, NEW YORK

2013 2012 2011 2010Inpatient Revenue $1,476,898,626 $1,484,529,514 $1,368,709,434 $1,263,740,718Outpat Revenue $2,569,790,903 $2,271,652,490 $2,105,758,843 $1,804,360,306Total Pt Revenue $4,046,689,529 $3,756,182,004 $3,474,468,277 $3,068,101,024Discounts $2,167,809,498 $2,011,343,383 $1,770,663,877 $1,614,617,787Net Pt Revenue $1,878,880,031 $1,744,838,621 $1,703,804,400 $1,453,483,237Tot Operating Exp $2,263,848,401 $2,156,503,534 $1,996,280,796 $1,836,696,782Operating Income/ (Loss)

($384,968,370) ($411,664,913) ($292,476,396) ($383,215,545)

Tot Non-Pt Rev $568,898,788 $528,198,245 $498,618,281 $467,034,573Tot Other Expense ($166,258,582) $17,578,332 $44,600,933 $28,638,564Net Income / (Loss) $350,189,000 $98,955,000 $161,540,952 $55,182,464Discount % 53.6% 53.5% 51.0% 52.6%

HOSPITAL COST TO CHARGE RATIOS

Hospital 2013 2012 2011 2010

Abbott-Northwestern

39.4% 36.9% 35.2% 35.1%

Scripps Mercy

24.6% 26.1% 25.6% 27.5%

Memorial Sloan-Kettering

55.9% 57.4% 57.5% 59.9%

HOSPITAL WEIGHT OF ONE

Hospital Charges per 1.00

Cost per 1.00

Medicare allowed per 1.00

Medicare gain /

(loss) per 1.00

Abbott-Northwestern

$28,257 $8,356 $7,410 ($946)

Scripps Mercy

$50,256 $9,479 $9,145 ($334)

Memorial Sloan-Kettering

$37,142 $14,542 $12,101 ($2,441)

PHYSICIAN REIMBURSEMENT

• Like hospitals, physicians typically charge the same amount to all patients for the same CPT code regardless of payor

• Physicians write off the difference between billed charges and allowed amount as discount

• Most payors pay according to “lesser of” logic, meaning they pay the lesser of billed charges or the fee maximum in effect for that CPT code

• Reimbursement is made per CPT and HCPCS code

PHYSICIAN REIMBURSEMENT METHODS

• Fee schedule• Most payor fee schedules are based on CPT and HCPCS Level II codes• Most payors use Resource-Based Relative Value System (RBRVS) to help them develop

their fee schedules• Fee schedules are typically “fee maximums;” for each code subject to the fee schedule,

the payor reimburses the provider the lesser of provider’s billed charges or the fee maximum listed in the fee schedule

• Number of fee schedules in use varies by plan; some plans have a single fee schedule, others have hundreds of fee schedules

• Percent of charges• Typically used for CPTs and HCPCS codes that have no relative value• Sometimes payors will agree to reimburse “must-have” clinics on a percent of charge

basis; not common

PHYSICIAN REIMBURSEMENT METHODS

• Capitation• Not widely used• Capitation = monthly payment to a group of providers for each member assigned to that

group of providers• Covers a defined set of services; no additional reimbursement to clinic if they provide

services that are covered under capitation• Typically used only for HMOs (not PPOS), since the insurer is bearing risk • Not typically used by self-funded plan sponsors• Need to have members designate a primary care clinic or care system for capitation to

work• Referrals are typically tightly managed in a capitated model

PHYSICIAN CONTRACTING

• Unless the physician group is large enough to negotiate terms with the payor, most payors do not negotiate with providers• Fee schedule is generally “take it or leave it”• Rates are not specified in the contract• Payor may update the fee schedule at any time without notifying provider• Necessary because most payors contract with thousands of providers; it would be

impossible to manage so many unique fee schedules• Most physician agreements are either evergreen or auto renew for consecutive

terms• Some payors maintain a small number of fee schedules, others have hundreds of

fee schedules• Depends on market strength of payor and their ability to get physicians to sign with them

SAMPLE PHYSICIAN CONTRACT

Typical payment language in payor/ physician contracts:Pursuant to the terms of the applicable Plan, Payor or its agent and the Eligible Person shall pay to Participating Provider the lesser of Participating Provider's charges customarily billed to other patients or the amounts set forth in the applicable Fee Schedule as full payment of any claim submitted by Participating Provider for Covered Services furnished to Eligible Persons pursuant to such Plan.The schedule of maximum reimbursement amounts pursuant to which Payors shall pay Participating Providers to provide Medically Appropriate Covered Services shall be the lesser of the following: • the then current Fee Schedule of CHN, samples of which may be provided from

time to time or supplied upon request from Provider; • any applicable state, federal or other mandated fee schedule; or • the actual fees or charges of Provider.

VARIATION IN PAY TYPE AND AMOUNT BY PAYOR - EXAMPLE

Office visit, established patient, level 3 (99213)Charges = $125

Payor Pay Method

Allowed Discount

Medicare RBRVS $75.00 $50.00Medicaid Fee

schedule$40.00 $85.00

HMO 1 Fee schedule, fee max $80

$80.00 $45.00

HMO 2 Fee schedule, fee max $110

$110.00 $15.00

PPO 1 Fee schedule, fee max $140

$125.00 $0.00

Self pay Charges $125.00 $0

NEW REIMBURSEMENT METHODS

• Payors are developing many new reimbursement methods that are not solely fee-for-service based

• New reimbursement models are focused on rewarding physicians and hospitals for “good” outcomes and the achievement of quality and cost goals

• Historically payors sometimes offered quality bonuses if providers met certain goals, such as A1C testing, immunization rates, limited use of high-tech imaging services, etc.

• New methods include shared risk through the use of Accountable Care Organizations, “pay for performance,” and penalties for adverse outcomes

NEW CMS REIMBURSEMENT METHODS

• CMS has begun to transform itself from a passive payer of services into an active purchaser of higher quality, affordable care

• The overarching goal is to foster joint clinical and financial accountability in the healthcare system

• CMS has launched and is exploring many new reimbursement models such as:• Voluntary “pay for performance program,” named the Physician Quality Reporting System

(PQRS) which provides for bonus payments to physicians for achieving quality goals• “Meaningful Use”, which means providers can receive bonus payments if they can

demonstrate that they are using certified electronic health record (EHR) technology in ways that can be measured significantly in quality and in quantity

• New reimbursement models for patients with dual (Medicare and Medicaid) membership such as capitation and managed fee-for-service

CMS VALUE-BASED PURCHASING GOALS

Value-Based Purchasing – appropriate incentives encouraging all healthcare providers to deliver higher quality care at lower total costs; goals include:• Financial Viability—where the financial viability of the traditional Medicare fee-for-service program is protected

for beneficiaries and taxpayers.• Payment Incentives—where Medicare payments are linked to the value (quality and efficiency) of care provided.• Joint Accountability—where physicians and providers have joint clinical and financial accountability for

healthcare in their communities.• Effectiveness—where care is evidence-based and outcomes-driven to better manage diseases and prevent

complications from them.• Ensuring Access—where a restructured Medicare fee-for-service payment system provides equal access to high

quality, affordable care.• Safety and Transparency—where a value based payment system gives beneficiaries information on the quality,

cost, and safety of their healthcare.• Smooth Transitions—where payment systems support well coordinated care across different providers and

settings.• Electronic Health Records—where value driven healthcare supports the use of information technology to give

providers the ability to deliver high quality, efficient, well coordinated care.

MEDICARE PAYMENT REFORM

Congress passed the Medicare Access & CHIP Reauthorization Act (MACRA) in 2015• Stabilized Medicare physician pay through the repeal of the

sustainable growth rate formula• Under the proposed rule, physicians can choose between two

different pathways of payment models• Alternative payment models – voluntary; physicians enrolling in these

alternative payment and delivery models are exempt from MIPS• Merit-based incentive payment system (MIPS) – modified fee-for-service

model which consolidates former reporting programs to provide greater flexibility

• CMS issued proposed rules on April 27, 2016; comments are due by June 27, 2016

RESOURCE-BASED RELATIVE VALUE SYSTEM

• Medicare RBRVS was developed through the 1980s and implementation began in 1992 as a 5-year phase-in from UCR (lower of usual, customary, or reasonable charges)

• Result of the phase-in is that reimbursement for cognitive and E/M services was increased, but procedural reimbursement was decreased

• This meant an increase in reimbursement to primary care physicians and a decrease in reimbursement to specialists

• Now there is one fee schedule for all physician services based on CPT code – the same reimbursement applies regardless of the physician’s specialty – only difference is geographic adjustments

COMPONENTS OF RBRVS

• Physician work• Time, mental effort, skill of physician• 55% of the total physician cost

• Practice expense• Staff costs, rent, utilities, supplies, etc.• 42% of the total physician cost

• Professional liability insurance (PLI) expense • Malpractice insurance• 3% of the total physician cost

PHYSICIAN WORK – COMPRISED OF:

• Time required to perform the service• Technical skill and physical effort• Mental effort and judgment• Psychological stress associated with the physician’s concern about iatrogenic risk

to the patient• Total physician work = “intraservice work” and “preservice and postservice work”

• Intraservice work• For office visits = the patient encounter time• For hospital visits = time spent on the patient’s floor• For surgical procedures = the period from the initial incision to the closure of the incision

PHYSICIAN WORK – COMPRISED OF: (CONTINUED)

• Total physician work = “intraservice work” and “preservice and postservice work” (continued from previous slide)• Preservice and postservice work

• Work prior to and following provision of a service• Surgical preparation time• Writing or reviewing records• Discussion with other physicians

• For surgical procedures, the total work period is the same as the global surgical period, including recovery room time, normal postoperative hospital care, and office visits after discharge, as well as preoperative and intraoperative work

• Each year the AMA/Specialty RVS Update Committee (RUC) submits recommendations to CMS for physician work relative values based on CPT coding changes to be included in the Medicare payment schedule

• Each year CMS has relied heavily on these recommendations when establishing interim values for new and revised CPT codes

PRACTICE EXPENSE

• Comprised of practice overhead: expenses such as rent, utilities, staff, supplies, billing system costs, etc.

• Procedures which can be performed in a physician’s office as well as in a hospital have two practice expense relative values:• Facility practice expense relative values – includes

• Physician offices• Freestanding imaging centers• Independent pathology labs

• Non-facility practice expense relative values – includes• Hospitals• Ambulatory surgery centers• Skilled nursing facilities• Partial hospitals• All other non-facility sites

PRACTICE EXPENSE (CONTINUED)

• Procedures which can be performed in a physician’s office as well as in a hospital have two practice expense relative values (continued):• Non-facility practice expense weights are lower than facility practice expense weights

because there will be a separate claim from the facility; • Total claims per service for “facility” procedures = 1• Total claims per service for “non-facility” procedures = 2

• Sample practice expense weight for facility and non-facilityNon-facility Facility

Incision of breast lesion (19020) 8.85 4.30Repair superficial wounds (12001) 1.51 0.37Drainage of tonsil abscess (42700) 3.84 2.27

PROFESSIONAL LIABILITY INSURANCE (PLI) COMPONENT

• Includes cost of professional liability insurance (malpractice insurance)• Based on the risk factors associated with each CPT code• Independent of the physician’s specialty

TOTAL RVU

• Total Relative Value Units = sum of work, practice expense, and PLI

EXAMPLE RVU WEIGHTS

99201, new patient E/M, level 1 1.2399202, new patient E/M, level 2 2.1099203, new patient E/M, level 3 3.0599204, new patient E/M, level 4 4.6499205, new patient E/M, level 5 5.83

99211, established patient E/M, level 1 0.5699212, established patient E/M, level 2 1.2399213, established patient E/M, level 3 2.0499214, established patient E/M, level 4 3.0399215, established patient E/M, level 5 4.09

12002, repair superficial wound(s) 3.0921340, treatment of nose fracture 22.9533513, CABG, vein-4 72.2771010, chest x-ray 0.6371010-26, chest x-ray prof component 0.2671010-TC, chest x-ray technical component 0.37

GEOGRAPHIC PRACTICE COST INDICES (GPCIS)

• GPCIs are used to account for regional differences in physician costs – are used to adjust Medicare payment upward for high-cost regions and downward for low-cost regions

• GPCIs updated every 3 years (at a minimum)• Includes these factors:

• Cost of living• Proxy data sources are used to measure physician income• Measures geographic differences in the earnings of all college-educated workers based on census data

• Practice expense• Reflects differences in physicians’ office rents and employee wages• Designed to measure geographic variation in the unit costs per square foot (e.g., rent) and cost per

hour (e.g., staff salary) that the physician faces• Reflects only the differences in practice expense costs across geographic areas relative to the national

average• Malpractice insurance (MP)

• Based on rolling 3-year averages of each state’s malpractice costs

GEOGRAPHIC PRACTICE COST INDICES (GPCIS) (CONTINUED)

• Composite GPCI (also called a geographic adjustment factor, or GAF), is arrived at by weighting each GPCI by the share of Medicare payments accounted for by the work, practice expense, and MP components

• Example: CPT 12001, repair superficial wound• Work RVU = 0.84• Practice expense RVU (non-facility) = 1.58• MP RVU = 0.11• MN Work GPCI = 1.000• MN PE GPCI = 1.020• MN MP GPCI = 0.319• Total RVU for MN is (0.84*1.000)+(1.58*1.020)+(0.14*0.319)=2.4867• MN 2015 Medicare allowed = 2.4867*$35.8013 = $89.03

CONVERSION FACTORS

• Medicare conversion factor (CF) is the same for all physicians across the US• Conversion factors have changed very little over past 13 years

2015 - $35.8013 2008 - $38.08702014 - $35.8228 2007 - $37.89752013 - $34.0230 2006 - $37.89752012 - $34.0376 2005 - $37.89752011 - $33.9764 2004 - $37.33742010 - $36.0846 2003 - $36.78562009 - $36.0666

HISTORICAL ALLOWED AMOUNT – 99213 (MID-LEVEL E&M VISIT, ESTABLISHED PT)2015 - $72.94 2007 - $62.032014 - $73.08 2006 - $51.752013 - $72.81 2005 - $51.752012 - $70.46 2004 - $51.122011 - $68.97 2003 - $49.622010 - $66.74 2002 - $48.832009 - $61.31 2001 - $50.822008 - $61.95 2000 - $50.12

HISTORICAL ALLOWED AMOUNT – 27332 (REMOVAL OF KNEE CARTILAGE)2015 - $661.82 2007 - $570.352014 - $652.69 2006 - $602.232013 - $648.48 2005 - $602.232012 - $638.20 2004 - $588.252011 - $630.94 2003 - $644.912010 - $609.88 2002 - $628.872009 - $588.61 2001 - $644.502008 - $570.35 2000 - $586.08

RBRVS

• Conversion factor is updated each year by CMS• Most payors have adopted RBRVS as their method of reimbursing physicians• Some use GPCIs, others do not• Typical HMO conversion factor is $45-$65+ – varies by product and by region• Typical PPO conversion factor is $45-$70+ - varies by product and region• Some payors will override RBRVS for certain codes, such as allergy injections, E/M

visits, etc. – typically to increase payment for primary care services

RBRVS TO SET FEES

• Many physician practices use RBRVS for setting fees• Typical primary care CF is $60-$80• Typical specialty CF is $80-$95++

RBRVS TO COMPENSATE PHYSICIANS

• Many clinics use RBRVS to compensate physicians within their practice• Is not dependent on payor mix and thereby does not economically penalize a

physician who sees a higher share of government-paying patients• Usually only the physician work portion of the RVU is used• A conversion factor may be established for compensation• Bonuses can also be prorated based on each physician’s work RVUs compared with

the clinic’s total work RVUs

• HCFA has not set RVUs for most HCPCS Level II codes, most lab codes, and many codes that are “unspecified” or “other”

• Vendors have used HCFA’s method to set RVUs and have set weights for every CPT and HCPCS Level II code

• Vendor datasets are excellent resource for lab, supplies, etc

SERVICES FOR WHICH NO RVU IS ESTABLISHED

THANK YOU!For more information please contact:

Rich Henriksenrhenriksen@nokomishealth.com

612.825.2342

www.nokomishealth.com