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Health Information Technology and Management

Richard Gartee

CHAPTER

Health Information

Technology and Management

Healthcare Coding

and

Reimbursement

9





Richard Gartee

Pretest (True/False)

• CPT-4 codes are used to bill for disease and illness.

• Medicare Part B provides medical insurance and helps pay for doctors’ services and outpatient care.

• When a healthcare claim is adjudicated, it means that it has been rejected and the claim is either denied or suspended.

• Subscriber, insured party, enrollee, member, and beneficiary are all terms that refer to the primary person who is named on a health insurance card.





Richard Gartee

Insurance Billing Terms

• Patient account

– Hospitals create a new account for each episode of care.

– Medical practices create a new account on the first visit and use the

same account for the life of the patient (except for family accounts).

• Guarantor

– The person, often the patient, responsible for paying amounts not

covered by insurance.

– May also be a parent, guardian, or spouse.

• Health plan / Payers

– May be a for-profit or not-for-profit insurance company, employer self-

insurance fund, or government program such as Medicare.

– Although not technically health plans, government programs are set

up in the registration computer system the same way.





Richard Gartee


(continued) • Subscriber (insured party, enrollee, member, or

beneficiary)

– The primary person who is named on the health insurance card.

– That person’s insurance ID is used to determine eligibility and during

claims processing to determine which dependents and services are

covered.

– The beneficiary is the person who is entitled to receive benefits from

the plan, and may also include spouses and children (dependents).

• Member number, policy number, or insurance ID

– A unique ID assigned by a health plan to each policy or by a

government program to each participant.

– Some plans assign a unique member number to each dependent as

well.





Richard Gartee


(continued) • Group number

– A number used to further identify the policy and the benefits to

which a patient is entitled.

– Generally used in cases where insurance is obtained through an

employer who has negotiated special rates and coverage.

• Claims

– Bills submitted to insurance plans for healthcare services or

supplies.

• Assignment of benefits

– A document signed by the patient during registration that authorizes

the plan to pay a doctor directly.





Richard Gartee


(continued) • Adjudication

– The processing of a claim by a health plan in which coded information

in the claim is compared to a set of coding rules, or claim edits, and a

list of covered benefits.

– Claims that do not meet the computer criteria are denied or

suspended.

• Explanation of benefits (EOB) / Remittance advice

– An explanation of the items and the amounts being paid that are

communicated to the provider.

– An EOB is also sent to the patient.

• Allowed amount

– An established amount that providers will receive from all parties for

each service.





Richard Gartee


(continued)

• Remittance / Reimbursement

– The amount the provider receives from the insurance plan.

• Adjustments (contractual adjustment or write-down

adjustment)

– An entry made in the patient accounting system to reduce the

original charge to the allowed amount based on the provider’s

contractual agreement with the health plan.





Richard Gartee


(continued)

• Coordination of benefits (crossover or piggyback

claims)

– The process by which two or more health plans determine which

plan pays first and how much the other plans pay.

– The primary plan will adjudicate the claim first and determine the

allowed amount for the services billed.

– The secondary claim will include information about what the

primary plan allowed, paid, and denied.

– Claims that are transferred electronically from the primary to the

secondary plan are called crossover or piggyback claims.





Richard Gartee


(continued) • Copay / Coinsurance amount

– The portion of the charges, usually a fixed amount per visit, that a

patient is required to pay.

– Coinsurance is a percentage of the allowed amount determined

after the health plan has adjudicated a claim.

• Deductible

– A fixed minimum that the patient must pay, usually within a calendar

year, before the plan begins paying.

– Some plans have several deductibles, for example, one amount for

doctor visits and another deductible for hospital stays.





Richard Gartee


(continued)

• Patient billing

– Amounts that are determined to be the responsibility of the

patient are sent on a bill.

– Different than a statement, which is a list of charges, payments,

and adjustments posted to the account during the period

covered by the statement.





Richard Gartee

Codes For Billing

• Standardized codes required for

healthcare transactions, such as insurance

claims and remittance advice

• HCPCS/CPT-4 codes

– Procedure codes assigned for services

rendered and supplies used.

• ICD-9-CM codes (and ICD-10)

– Diagnosis codes assigned to represent

disease or medical condition treated.





Richard Gartee

Overview of Codes

• CPT-4 (Current Procedural Terminology,

4th edition)

– Numeric standardized codes for reporting

medical services, procedures, and treatments

performed by medical staff

– Five digits long and numeric





Richard Gartee

Figure 9-3 Small sample of CPT-4 codes.





Richard Gartee

Overview of Codes (continued)

• HCPCS (Healthcare Common Procedure

Coding System)

– Coding system used for billing for procedures,

services, and supplies

– Includes CPT-4 codes





Richard Gartee

Figure 9-4 Small sample of HCPCS supply codes and administration codes.





Richard Gartee


• Procedure modifier codes

– Two-digit codes used in conjunction with

HCPCS/CPT-4 codes for billing purposes

• ABC codes (Alternative Medicine Billing)

– Used to bill for alternative medicine (e.g.

acupuncturists, message therapists, etc.)

– Not part of the CPT or HCPCS code sets

– Only accepted by some payers





Richard Gartee

Figure 9-5 Small sample of procedure modifier codes.





Richard Gartee


• ICD-9-CM (Intl Classification of Diseases -

9th version - Clinical Modification)

– System of standardized codes developed

collaboratively by WHO (World Health

Organization) and 10 international centers

– The modifier “CM” provides way to code patient

clinical information; makes codes useful for

indexing medical records, medical case reviews,

and communicating a patient’s condition precisely





Richard Gartee

Figure 9-6 Small sample of ICD-9-CM codes.





Richard Gartee


• DRG (Diagnosis-Related Group)

– Used to classify ICD-9-CM codes into 25

major diagnostic categories (MDCs)

– Old DRG system had 538 codes

– Newer MS-DRG system has 745 codes

(MS-DRG: Medicare Severity--Diagnosis-Related Group)





Richard Gartee

ICD-9 and ICD-10 Comparison

ICD-9: lacks specificity in info conveyed in codes

ICD-10: characters in code identify right versus left, initial encounter versus subsequent, and other clinical info

ICD-9: some chapters are full, impeding the ability to add new codes

ICD-10: increased character length

ICD-9: does not address new medical knowledge

ICD-10: uses full code titles and reflects advances in medical knowledge and technology





Richard Gartee

ICD-9 and ICD-10 Comparison

(cont.) ICD-9 ICD-10

Length 3-5 characters 3-7 characters

Number of

Codes

Approximately 13,000 Approximately 68,000

Digits Digit 1 is alpha or numeric;

digits 2-5 are numeric

Digit 1 is alpha; digits 2 and 3 are

numeric; digits 4-7 are alpha or

numeric

Example 780.01 S52.521A





Richard Gartee

Reimbursement Methods

• Fee for service

– Control what provider can charge

• Allowed amount

– Discounted fees agreed to by provider for

services

– Listed on EOB





Richard Gartee


(continued)

• Managed care

– Control patients’ utilization of services (i.e. HMO -- Health

Maintenance Organization)

– Developed to help control costs of use of healthcare

services

– Designed to make PCP (primary care physician) into

gatekeepers who control access to additional services

– HMOs act as both insurer and provider

– HMO patients must use HMO for all services, except

emergencies





Richard Gartee


(continued)

• Capitation

– Flat rate paid to provider by HMO based on per

member per month (i.e. head count)

– Receive a flat rate per member per month from

the HMO regardless if the provider sees the

patient

• PPO (Preferred Provider Organization)

– Allows patients to use both PPO and non-PPO

providers, but pay more when going out of

network





Richard Gartee


(continued)

• Government-funded health plans

– Largest payers in U.S.

– Include: CHAMPVA (Civilian Health and Medical Program of Veterans

Affairs)

VA (Veterans Administration)

TRICARE (active duty military, retirees, and dependents)

IHS (Indian Health Services)

FECA (Federal Employee Compensation Act)

WC (Workers’ Compensation)

Medicaid, Medicare





Richard Gartee


(continued)

Medicare -- Largest and most significant govt program!

• Part A (hospital insurance)

– Covers inpatient hospital stays and skilled nursing

facilities

– Most beneficiaries do not pay premiums (previously

collected as Medicare taxes)

– Reimburses hospitals per discharge based on a

prospective payment system (PPS)





Richard Gartee


(continued) • Part B (medical insurance)

– Covers professional services

– Beneficiaries pay premium

– Uses fee-for-service model based on resource-based

relative value scale (RBRVS)

Relative value * dollar amount conversion factor = amount

allowed for each procedure

RBRVS varies the relative value based on wage and geography





Richard Gartee


(continued)

• Part C (Medicare Advantage Plans)

– HMO/PPO plans authorized by Medicare

– Patient pays HMO a premium, which supplies all of

patient’s Part A, Part B, Medigap, and sometimes Part

D coverage

• Part D (prescription drug coverage)

– Helps patients purchase prescription drugs at lower

cost

– Patients pay premium to private insurance plans for

this coverage





Richard Gartee


(continued)

• Medigap (Medicare supplemental insurance)

– Supplemental private insurance

– Pays portion of Medicare claims and deductibles for

which patient is responsible





Richard Gartee


(continued) • Prospective Payment System (PPS)

– Hospitals do not bill insurance plans in same way as

physicians, nor are reimbursements calculated the

same way

– Hospitals use UB-04 claim form instead of CMS-1500

form

– Hospital claim coders must identify principal diagnosis

and associate revenue codes with procedures

– Not used for children’s hospitals, cancer hospitals, or

critical access hospitals





Richard Gartee


(continued)

• Other Medicare PPS

– Inpatient psychiatric hospital prospective

payment system

– Long-term care hospital prospective payment

system

– Skilled nursing facility prospective payment

system

– Home health prospective payment system





Richard Gartee


(continued)

• Outpatient PPS

– Reimburses hospital outpatient services

– Does not use DRGs or apply to doctor’s offices

– Determines payment based on procedures that are

assigned to an APC (Ambulatory Payment Classification)

Relative weights represent resource requirements of service

Calculates reimbursement from RW of APC times national

conversion factor; adjusts for wage and geographic differences

– Allows outpatient claim to have multiple APCs





Richard Gartee


(continued)

• Medicare Part A and MS-DRGs

– PPS uses DRGs to determine reimbursement

for inpatient stays

– PPS determines DRG from principal

diagnosis

Assigns a higher DRG if relevant diagnoses of

comorbidities or complications exist

MS-DRGs better account for medical severity of

health-related situations





Richard Gartee


(continued)

• Medicare Part A and MS-DRGs (continued)

– DRG code assigned RW

Reflects average relative costliness of group’s cases

compared with costliness for average Medicare case

– PPS adjusts RW of DRG for geographic and

wage differences

– Hospital reimbursement calculated by multiplying

hospital’s PPS rate (operating and capital base

rate) times RW of DRG code





Richard Gartee

Fraud and Abuse Examples

• Medically unnecessary services performed to increase

reimbursement

• Upcoding, or deliberately incorrectly coding hospital

claim to trick Grouper software into assigning higher

DRG

• Unbundling, or coding components of a comprehensive

service as several HCPCS codes instead using

comprehensive code

• Billing for services not provided

• Billing for levels of service not supported by

documentation in patient’s health record

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