Chapter 4 - Coding/Revenue Cycle

Question 1

Accept assignment

Answer 1

provider accepts as payment in full whatever is paid on the claim by the payer (except for any copayment and/or coinsurance amounts)

Question 2

accounts receivable

Answer 2

the amount owed to a business for services or goods provided

Question 3

Accounts receivable aging report

Answer 3

shows the status (by date) of outstanding claims from each payer, as well as payments due from payments

Question 4

accounts receivable management

Answer 4

assists providers in the collection of appropriate reimbursement for services rendered; includes functions such as insurance verification/eligibility and preauthorization of services

Question 5

allowed charges

Answer 5

the maximum amount the payer will reimburse for each procedure or service, according to the patients policy

Question 6

ANSI ASC X12N

Answer 6

an electronic format standard that uses a variable-length file format to process transactions for institutional, professional, dental, and drug claims

Question 7

appeal

Answer 7

documented as a letter, signed by the provider, explaining why a claim should be reconsidered for payment

Question 8

assignment of benefits

Answer 8

the provider receives reimbursement directly from the payer

Question 9

bad debt

Answer 9

accounts receivable that cannot be collected by the provider or a collection agency

Question 10

beneficiary

Answer 10

the person eligible to receive health care benefits

Question 11

birthday rule

Answer 11

determines coverage by primary and secondary policies when each parent subscribes to a different health insurance plan

Question 12

case management

Answer 12

development of patient care plans to coordinate and provide care for completed cases in a cost-effective manner

Question 13

charge description master (CDM)

Answer 13

see chargemaster

Question 14

chargemaster

Answer 14

document that contains a computer-generated list of procedures, services, and supplies with charges for each; chargemaster data are entered in the facility’s patient accounting system, and charges are automatically posted to the patient’s bill (UB-04)

Question 15

chargemaster maintenance

Answer 15

process of updating and revising key elements of the chargemaster (or charge description master [CDM]) to ensure accurate reimbursement

Question 16

chargemaster team

Answer 16

team of representatives from a variety of departments who jointly share responsibility for updating and revising the chargemaster to ensure accuracy

Question 17

claims adjudication

Answer 17

comparing a claim to payer edits and the patient’s health plan benefits to verify that the required information is available to process the claim; the claim is not a duplicate; payer rules and procedures have been followed; and procedures performed or services provided are covered benefits

Question 18

claims adjustment reason code (CARC)

Answer 18

reason for denied claim as reported on the remittance advice or explanation of benefits

Question 19

claims attachment

Answer 19

medical report substantiating a medical condition

Question 20

claims denial

Answer 20

unpaid claim returned by third-party payers because of beneficiary identification errors, coding errors, diagnosis that does not support medical necessity of procedure/service, duplicate claims, global days of surgery E/M coverage issue, NCCI edits, and other patient coverage issues (e.g., procedure or service required preauthorization, procedure is not included in patient’s health plan contract, such as cosmetic surgery)

Question 21

claims processing

Answer 21

sorting claims upon submission to collect and verify information about the patient and provider

Question 22

claims rejection

Answer 22

unpaid claim returned by third-party payers because it fails to meet certain data requirements such as missing data (e.g., patient name, policy number); rejected claims can be corrected and resubmitted for processing

Question 23

claims submission

Answer 23

the transmission of claims data (electronically or manually) to payers or clearinghouses for processing

Question 24

clean claim

Answer 24

a correctly completed standardized claim (e.g., CMS-1500 claim)

Question 25

clearinghouse

Answer 25

agency or organization that collects, processes and distributes health care claims after editing and validating them to ensure that they are error-free, reformatting them to the payer’s specifications, and submitting them electronically to the appropriate payer for further processing to generate reimbursement to the provider

Question 26

closed claim

Answer 26

claims for which all processing, including appeals, has been completed

Question 27

coinsurance

Answer 27

also called coinsurance payment; the percentage the payment pays for covered services after the deductible has been met and the copayment has been paid

Question 28

common data file

Answer 28

abstract of all recent claims filed on each patient

Question 29

concurrent review

Answer 29

review for medical necessity of tests and procedures ordered during an inpatient hospitalization

Question 30

Consumer Credit Protection Act of 1968

Answer 30

was considered landmark legislation because it launched truth-in-lending disclosures that required creditors to communicate the cost of borrowing money in a common language so that consumers could figure out the charges, compare costs, and shop for the best credit deal

Question 31

coordination of benefits (COB)

Answer 31

provision in group health insurance policies that prevents multiple insurers from paying benefits covered by other policies; also specifies that coverage will be provided in a specific sequence when more than one policy covers the claim

Question 32

covered entity

Answer 32

private sector health plans (excluding certain small self-administered health plans), managed care organizations, ERISA-covered health benefit plans (Employee Retirement Income Security Act of 1974), and government health plans (including Medicare, Medicaid, Military Health System for active duty and civilian personnel; Veterans Health Administration, and Indian Health Service programs); all health care clearinghouses; and all health care providers that choose to submit or receive transactions electronically

Question 33

data analytics

Answer 33

tools and systems that are used to analyze clinical and financial data, conduct research, and evaluate the effectiveness of disease treatments

Question 34

data mining

Answer 34

extracting and analyzing data to identify patterns, whether predictable or unpredictable

Question 35

data warehouse

Answer 35

database that use reporting interfaces to consolidate multiple databases, allowing reports to be generated from a single request; data is accumulated from a wide range of sources within an organization and is used to guide management decisions

Question 36

day sheet

Answer 36

also called manual daily accounts receivable journal; chronological summary of all transactions posted to individual patient ledgers/accounts on a specific day

Question 37

deductible

Answer 37

amount for which the patient is financially responsible before an insurance policy provides coverage

Question 38

delinquent account

Answer 38

see past due account

Question 39

delinquent claim

Answer 39

claim usually more than 120 days past due; some practices establish time frames that are less than or more than 120 days past due

Question 40

delinquent claim cycle

Answer 40

advances through various aging periods (20 days, 60 days, 90 days, and so on), with practices typically focusing internal recovery efforts on older delinquent accounts (e.g., 120 days or more)

Question 41

denied claim

Answer 41

claim returned to the provider by payers due to coding errors, missing information, and patient coverage issues

Question 42

discharge planning

Answer 42

involves arranging appropriate health care services for the discharge patient (e.g., home health care)

Question 43

downcoding

Answer 43

assigning lower-level codes than documented in the record

Question 44

electronic data interchange (EDI)

Answer 44

computer-to-computer exchange of data between provider and payer

Question 45

electronic flat file format

Answer 45

series of fixed-length records (e.g., 25 spaces for patient’s name) submitted to payers to bill for health care services

Question 46

electronic funds transfer (EFT)

Answer 46

system by which payers deposit funds to the provider’s account electronically

Question 47

Electronic Funds Transfer Act

Answer 47

established the rights, liabilities, and responsibilities of participants in electronic funds transfer systems

Question 48

Electronic Healthcare Network Accreditation Commission (EHNAC)

Answer 48

organization that accredits clearinghouses

Question 49

electronic media claim

Answer 49

see electronic flat file format

Question 50

electronic remittance advice (ERA)

Answer 50

remittance advice that is submitted to the provider electronically and contains the same information as paper-based remittance advice; providers receive the ERA more quickly

Question 51

encounter form

Answer 51

financial record source document used by providers and other personnel to record treated diagnoses and services rendered to the patient during the current encounter

Question 52

Equal Credit Opportunity Act

Answer 52

prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance, or good faith exercise of any rights under the Consumer Credit Protection Act

Question 53

Fair Credit and Charge Card Disclosure Act

Answer 53

amended the Truth in Lending Act, requiring credit and charge card issuers to provide certain disclosures in direct mail, telephone, and other applications and solicitations for open-end credit and charge accounts and under other circumstances; this law applies to providers that accept credit card s

Question 54

Fair Credit Billing Act

Answer 54

federal law passed in 1975 that helps consumers resolve billing issues with card issuers; protects important credit rights, including rights to dispute billing errors, unauthorized use of an account, and charges for unsatisfactory goods and services; cardholders cannot be hold liable for more than $50 of fraudulent charges made to a credit card

Question 55

Fair Credit Reporting Act

Answer 55

protects information collected by consumer reporting agencies such as credit bureaus, medical information companies, and tenant screening services; organizations that provide information to consumer reporting agencies also have specific legal obligations, including the duty to investigate disputed information

Question 56

Fair Debt Collection Practices Act (FDCPA)

Answer 56

specifies what a collection source may and may not do when pursuing payment of past due accounts

Question 57

guarantor

Answer 57

person responsible for paying health care fees

Question 58

integrated revenue cycle (IRC)

Answer 58

combining revenue cycle management with clinical, coding, and information management decisions because of the impact on financial management

Question 59

litigation

Answer 59

legal action to recover a debt; usually a last resort for a medical practice

Question 60

manual daily accounts receivable journal

Answer 60

also called the day sheet; a chronological summary of all transactions posted to individual patient ledgers/accounts on a specific day

Question 61

metrics

Answer 61

standards of measurement, such as those used to evaluate an organization’s revenue cycle to ensure financial viability

Question 62

noncovered benefit

Answer 62

any procedure or service reported on a claim that is not included on the payer’s master benefit list, resulting in denial of the claim; also called non-covered procedure or uncovered benefit

Question 63

nonparticipating provider (nonPAR)

Answer 63

does not contract with the insurance plan; patients who elect to receive care from nonPARs will incur higher out-of-pocket expenses

Question 64

open claim

Answer 64

submitted to the payer, but processing is not complete

Question 65

out-of-pocket payment

Answer 65

established by health insurance companies for a health insurance plan; usually has limits of $1,000 or $2,000; when the patient has reached the limit of an out-of-pocket payment (e.g., annual deductible) for the year, appropriate patient reimbursement to the provider is determined; not all health insurance plans include an out-of-pocket payment provision

Question 66

outsource

Answer 66

contract out

Question 67

participating provider (PAR)

Answer 67

contracts with a health insurance plan and accepts whatever the plan pays for procedures or services performed

Question 68

past-due account

Answer 68

one that has not been paid within a certain time frame (e.g., 120 days); also called delinquent account

Question 69

patient account record

Answer 69

also called patient ledger; a computerized permanent record of all financial transactions between the patient and the practice

Question 70

patient ledger

Answer 70

see patient account record

Question 71

pre-admission certification (PAC)

Answer 71

review for medical necessity of inpatient care prior to the patient’s admission

Question 72

pre-admission review

Answer 72

see preadmission certification

Question 73

preauthorization

Answer 73

health plan review that grants prior approval health care services

Question 74

precertification

Answer 74

see preauthorization

Question 75

pre-existing condition

Answer 75

any medical condition that was diagnosed and/or treated within a specified period of time immediately preceding the enrollee’s effective date of coverage

Question 76

primary health insurance

Answer 76

associated with how a health insurance plan is billed – the insurance plan responsible for paying health care insurance claims first is considered primary

Question 77

prior approval

Answer 77

see preauthorization

Question 78

prior authorization

Answer 78

see preauthorization

Question 79

prospective review

Answer 79

reviewing appropriateness and necessity of care provided to patients prior to administration of care

Question 80

Provider Remittance Notice (PRN)

Answer 80

remittance advice submitted by Medicare to providers information about a claim

Question 81

Quarterly Provider Update (QPN)

Answer 81

published by CMS to simplify the process of understanding proposed or implemented instructional, policy, and changes to its programs, such as Medicare

Question 82

remittance advice remark code (RARC)

Answer 82

additional explanation of reasons for denied claims

Question 83

resource allocation

Answer 83

distribution of financial resources among competing groups (e.g., hospital departments, state health care orgnizations)

Question 84

resource allocation monitoring

Answer 84

uses data analytics to measure whether a health care provider or organization achieves operational goals and objectives within the confines of the distribution of financial resources, such as appropriately expending budgeted amounts as well as conserving resources and protecting assets while provided quality patient care

Question 85

retrospective review

Answer 85

reviewing appropriateness and necessity of care provided to patients after the administration of care

Question 86

revenue code

Answer 86

a four-digit code that indicates location or type of service provided to an institutional patient; reporting in FL 42 of UB-04

Question 87

revenue cycle auditing

Answer 87

assessment process that is conducted as a follow-up to revenue cycle monitoring so that areas of poor performance can be identified and corrected

Question 88

revenue cycle management

Answer 88

process facilitates and providers use to ensure financial viability

Question 89

revenue cycle monitoring

Answer 89

involves assessing the revenue cycle to ensure financial viability and stability using metrics (standards of measurement)

Question 90

secondary health insurance

Answer 90

billed after primary health insurance has paid contracted amount, and often contains the same coverage as a primary health plan

Question 91

source document

Answer 91

the routing slip, charge slip, encounter form, or superbill from which the insurance claim was generated

Question 92

superbill

Answer 92

term used for an encounter form in the physician’s office

Question 93

suspense

Answer 93

pending

Question 94

Truth in Lending Act

Answer 94

see Consumer Credit Protection Act of 1968

Question 95

two-party check

Answer 95

check made out to both patient and provider

Question 96

unassigned claim

Answer 96

generated for providers who do not accept assignment; organized by year

Question 97

unauthorized service

Answer 97

services that are provided to a patient without proper authorization or that are not covered by a current authorization

Question 98

unbundling

Answer 98

submitting multiple CPT codes when one code should be submitted

Question 99

utilization managment

Answer 99

method of controlling health care costs and quality of care by reviewing the appropriateness, efficiency, and medical necessity of care provided to patients prior to the administration of care

Question 100

utilization review

Answer 100

see utilization management

Question 101

value-added network (VAN)

Answer 101

clearinghouse that involves value-added vendors, such as banks, in the processing of claims; using a VAN is more efficient and less expensive for providers than managing their own systems to send and receive transactions directly from numerous entities

Question 102

Revenue Cycle Management

Answer 102

is the process by which health care facilities and providers ensure their financial viability by increasing revenue, improving cash flow, and enhancing the patient’s experience (including quality of patient care). In a physician practice, revenue cycle management is also called accounts receivable managment.

Question 103

Revenue cycle management includes the following features, typically in this order:

Answer 103

-Appointment schedule
-patient registration
-charge capture (or data capture)
-Diagnosis and procedure/service coding and auditing
-patient discharge processing
-billing and claims processing
-resubmitting claims
-third party payer reimbursement posting
-appeals process
-patient billing
-self-pay reimbursement posting
-collections
-collections reimbursement posting

Question 104

appointment scheduling (for provider office encounters)

Answer 104

or physician ordering (for inpatient admission or outpatient services as documented by the responsible physician

Question 105

patient registration

Answer 105

-appropriate consents for treatment and release of information are obtained
-patient demographic, financial, and health care insurance information is collected (e.g., copayments)
-patient’s insurance coverage is validated and utilization management is performed (e.g., clinical reviews) to determine medical necessity
-pre-admission clearance (e.g., pre-certification, preauthorization, screening for medical necessity) is provided

Note: when registering for outpatient services such as laboratory tests, patients provide the health care facility with requisition forms (e.g., physician orders) for procedures/services. Occasionally, patients forget to provide the paper-based requisition form, and providers and facilities who have implemented an electronic health record (EHR) can retrieve the electronic requisition from the EHR so that the registration process is not delayed

Question 106

charge capture (or data capture)

Answer 106

(Providers use chargemasters or encounter forms to select procedures or services provided. Ancillary departments, such as the laboratory, use automated systems that link to the chargemasters)

Question 107

Diagnosis and procedure/service coding and auditing

Answer 107

(Assignment of appropriate ICD-10-CM and ICD-10-PcS or CPT/HCPCS level II codes is performed by qualified personnel, such as medical coders; computer-assisted coding (CAC) software generated codes are audited for accuracy; for inpatient stays, DRGs or MS-DRGs are determined; for outpatient encounters, ApCs are determined; assignment of DRGs, MS-DRGs, and APCs are audited to ensure accuracy; provider documentation is reviewed to ensure accuracy of code and DRG/APC assignment.)

Question 108

patient discharge processing

Answer 108

patient information is verified, discharge instructions are provided, patient follow-up visit is scheduled, consent forms are reviewed for signatures, and patient policies are explained to the patient

Question 109

Billing and claims processing

Answer 109

all patient information and codes are input into the billing system, and CMS-1500 or UB-04 claims are generated and submitted to third party payers. When submitted claims are incomplete or contain erroneous data, they are classified as a rejected claim or a denied claim. Such claims must be edited to correct them for resubmission

Question 110

claims rejections

Answer 110

are unpaid claims that fail to meet certain data requirements, such as missing data (e.g., patient name, policy number). Rejected claims can be corrected and resubmitted for processing

Question 111

claims denials

Answer 111

are unpaid claims that contain beneficiary identification errors (e.g., policy number does not match patient name), coding errors, diagnoses that do not support medical necessity of procedures/services performed, duplicate claims, global days of surgery E/M coverage issues (e.g., claim for E/M service submitted when service fell within global surgery period, for which provider is not eligible for payment), national correct coding initiative (NCCI) edits and outpatient code editor (OCE) issues (that result in a denied claim), and other patient coverage issues (e.g., procedure or service required preauthorization; procedure is not included in patient’s health plan contract, such as cosmetic surgery

Question 112

Denied claims

Answer 112

are reviewed, and determination is made about whether to submit an appeal letter for reconsideration of payment. Denied claims are often categorized as technical or clinical, and that results in the need for appropriate health care facility staff involvement in the appeals process
-technically denied claims usually include errors in payer name or address or codes, and health insurance and billing staff can generate such appeals
-clinically denied claims include not meeting medical necessity for procedures/services reported, not having to obtain written preauthorized for procedures/services performed (but having obtained telephone preauthorization from the payer), and incorrect codes reported; coding and clinical staff need to be involved in generating these appeals

Question 113

resubmitting claims

Answer 113

before reimbursement is received from third-party payers, late charges, lost charges, or corrections to previously processed CMS-1500 or UB-04 claims are entered, and claims are resubmitted to payers – this may results in payment delays and claims denials and rejections

Question 114

third-party payer reimbursement posting

Answer 114

payment from third-party payers is posted to appropriate accounts to reconcile charges with payments, and rejected claims are resubmitted with appropriate documentation; this process includes electronic remittance, which involves receiving reimbursement from third-party payers electronically; third-party payer contractual adjustments are made to patient accounts, such as the difference between allowed amounts and the actual charge treatment

Question 115

appeals process

Answer 115

analysis of reimbursement received from third-payers identifies variations in expected payments or contracted rates and may result in submission of appeal letters to payyers

Question 116

patient billing (self pay)

Answer 116

balances are billed to the patient; these include deductibles, copayments, and non-covered charges

Question 117

self pay reimbursement posting

Answer 117

self-pay balances received from patients are posted to appropriate accounts

Question 118

collections

Answer 118

payments not received from patients in a timely manner result in collection letters being mailed to patients until payment is received; if payment is still not received, the account is turned over to an outside collections agency

Question 119

collections reimbursement posting

Answer 119

payments received from patients are posted to appropriate accounts

Question 120

integrated revenue cycle management

Answer 120

revenue cycle managment has traditionally been associated with just the financial management of a health care facility or a provider’s medical practice. Today an integrated revenue cycle (IRC) is developed by facilities and providers because clinical, coding, and information management decisions impact financial management. When case and utilization management, clinical documentation improvement, coding, and health information management are integrated into the revenue cycle management process, there is an opportunity to improve third party payer reimbursement
Example: a patient registers for an outpatient radiology procedure at her local hospital. The appropriate radiology procedure requisition from the patient’s primary care provider was given to the hospital registration associate, who confirmed health plan coverage of this procedure. The patient undergoes the radiology procedure, and a review of the results leads to the hospital’s radiologist performing a magnetic resonance imaging (MRI). Upon submission of the hospital claim for the radiology procedure and the MRI, the billing department receives a remittance advice that delineated payment of the radiology procedure but denial of the MRI because pre-certification was required. With an integrated revenue cycle, the radiologist is prompted by the electronic health record to obtain pre-certification prior to performing the MRI. This results in the patient returning to the hospital’s registration office to undergo the pre-certification process, ensuring that the hospital is paid for the MRI.

Question 121

Quarterly Provider Updates (QPUs)

Answer 121

to simplify the processes of understanding proposed or implemented changes to its programs (e.g., Medicare, Medicaid, CHIP). The following are published in QPUs:
-Regulations and major policies implemented or cancelled, such as revisions to the Medicare National Coverage Determinations (NCDs)
-New and revisited manual instructions, such as revisions to the Medicare Claims Processing Manual
-Regulations that establish or modify the way CMS administers its programs, such as revisions to Medicare’s fee-for-service payment regulations
QPUs are published to clarify regulations, policies, and instructions that may impact providers or suppliers of services or the individuals enrolled or entitled to benefits under CMS programs. CMS generally limits the number of days it publishes regulations and notices in the Federal Register to the fourth Friday of each month. This adds an element of predictability to its communications and reduces the time it takes to research changes (and implement changes in the health care setting). Because statutory requriements mandate some of CMS’s regulatory work (e.g., annual revision to ICD-10-CM and ICD-10-PCS coding systems), such notices may be published in the Federal Register on a day other than the fourth Friday of the month. For example, the new October 1, 2015 compliance date for implementing ICD-10-CM and ICD-10-PCS was published in the Thursday, August, 4, 2014, edition of the Federal Register, to extend the implementation date by one year

Question 122

Utilization management (or utilization review)

Answer 122

is a method of controlling health care costs and quality of care by reviewing the appropriateness and necessity of care provided to patients prior to the administration of care (prospective review) or after care has been provided (retrospective review).

Question 123

case management

Answer 123

involves the development of patient care plans for the coordination and provision of care for complicated cases in a cost-effective manner. Utilization management activities:
-pre-admission certification (PAC) or pre-admission review
-preauthorization
-concurrent review
-discharge planning

Question 124

preadmission certification (PAC) or preadmission review

Answer 124

a review for medical necessity of inpatient care prior to the patient’s admission

Question 125

preauthorization

Answer 125

a review by health plans to grant prior approval for reimbursement of health care services (e.g., durable medical equipment, prescription medications, surgical procedures, treatment plans). preauthorization is also known as pre-certification, prior approval, or prior authorization

Question 126

concurrent review

Answer 126

a review for medical necessity of tests and procedures ordered during an inpatient hospitalization

Question 127

discharge planning

Answer 127

involves arranging appropriate health care services for the discharged patient (e.g., home health care)

Question 128

revenue cycle monitoring

Answer 128

involves assessing the revenue cycle to ensure financial viability and stability using the following metrics, which are standards of measurement:
-cash flow
-days in accounts receivable
-percentage of accounts receivable older than 30, 60, 90, and 120 days
-net collection rate
-denial rate

Question 129

cash flow

Answer 129

total amount of money transferred into and out of business; measure of liquidity, which is the amount of capital available for investment and expenditures

Question 130

days in accounts receivable

Answer 130

number of days outstanding money is owed to the organization; measure of how long it usually takes for a service/procedure to be paid by all financially responsible parties, such as third-party payers, government health programs, and patients

Ex: Last year, the medical practice’s gross charges for procedures/services totaled $750,000.00. The current accounts receivable (A/P) are $95,000, and the credit balance (from the previous year) is $9,500. The formula for calculating
Days in A/R = [Receivables - (Credit Balance)] / [Gross Charges / 365 days]
Thus
[$95,000 - ($9,500)] / [$750,000 / 365] = $85,000 / $2,055 = 42 days.
According to national standards, A/R should average 35 days or less. Therefore, this medical practice needs to audit its revenue cycle to identify and improve areas of poor performance so that the number of days in A/R decreases

Question 131

net collection rate

Answer 131

percentage received of allowed reimbursement; measure of the organization’s effectiveness in collection reimbursement
Example: the hospital’s payments received is $945,000. Refunds paid to payers and patients (for charges not supported by documentation in the patient record) total $30,000. The total charge for inpatient and outpatient services is $1,500,000. Total write-offs are $525,000. The formula for calculating the Net Collection Rate = [(Payments - Refunds) / (Charges - Write-offs)] x 100.
Thus [($945,000 - $30,000) / ($1,500,000 - $525,000)] x 100 = [$$915,000 / $975,000] x 100 = 0.938 x 100 = 93.8 percent.
The calculated net collection rate of 93.8 percent is very poor, which means the hospital needs to audit its revenue cycle to identify and correct areas of poor performance such as chargemaster accuracy, filing claims in a timely manner, obtaining preauthorization, and so on

Question 132

denial rate

Answer 132

percentage of claims denied by payers; measure of the organization’s effectiveness in submitting clear claims, which are claims paid in full upon initial submission; the formula for calculating the denial rate = [total dollar amount of denied claims / total dollar amount; denial rates should be less than 5 percent
Example: the hospital’s total dollar of denied claims is $250,000, and the total dollar amount of claims submitted is $2,500,000. The formula for calculating the
Denial Rate = [total dollar amount of denied claims / total dollar amount of claims submitted] x 100.
Thus
[$250,000 / $2,500,000] x 100 = 10 percent. The calculated denial rate of 10 percent is unacceptable, which means the hospital needs to audit its revenue cycle to identify and correct areas of filing claims in a timely manner, following up on rejected and unpaid claims, and so on

Question 133

Revenue Cycle auditing

Answer 133

is an assessment process that is conducted as a follow-up to revenue cycle monitoring so that areas of poor performance can be identified and corrected. Auditing processes include:
-compliance monitoring
-denials and rejections management
-tracking submitted claims and appeals for denied claims
-posting late charges and lost charges

Question 134

compliance monitoring

Answer 134

level of compliance with established managed care contracts is monitored; provider performance per managed care contractual requirement is monitored; compliance risk is monitored

Question 135

denials and rejections management

Answer 135

claims denials and rejections are analyzed to prevent future denials/ rejections are analyzed to prevent future denials/rejections; denied rejected claims are resubmitted with appropriate data and/or documentation

Question 136

tracking resubmitted claims and appeals for denied claims

Answer 136

resubmitted claims and appealed claims are tracked to ensure payment by payers

Question 137

posting late charges and lost charges

Answer 137

performed after reimbursement for late claims is received and appeals for denied claims have been exhausted

Question 138

Resource allocation

Answer 138

is the distribution of financial resources among competing groups (e.g., hospital departments, state health care organizations

Question 139

Resource allocation monitoring

Answer 139

uses data analytics to measure whether a health care provider or organization achieves operational goals and objectives within the confines of the distribution of financial resources, such as appropriately expending budgeted amounts as well as conserving resources and protecting assets while providing quality patient care

Question 140

data analytics

Answer 140

are tools and systems that are used to analyze clinical and financial data, conduct research, and evaluate effectiveness of disease treatments:
-Data warehouses
-data mining

Question 141

data warehouses

Answer 141

databases that are reporting interfaces to consolidate multiple databases, allowing reports to be generated from a single request; data is accumulated from a wide range of sources within an organization and is used to guide management decisions

Question 142

data mining

Answer 142

extracting and analyzing data to identify patterns, whether predictable or unpredictable

Question 143

Example 1:

Answer 143

The quality manager at a medical center has been charged with performing a study to determine the quality of care and costs of providing procedures and services to the practice’s patient population. The manager will access and study clinical and financial data that is located in reports generated by the facility’s electronic health record, and preestablished criteria will be used when conducting the study. The manager submits a report request to the information technology department, which then uses a data warehouse to generate the results. The request submitted by the manager is specific as to patient demographics, conditions, procedures and services, and so on. The manager uses the generated reports to conduct data mining, which results in the identification of quality-of-care issues associated with providing patient care as well as procedures/services that are profitable and nonprofitable. The manager then prepares a report of findings for discussion with the quality management committee (consisting of facility staff and physicians). The result is an action plan to:

Eliminate deficiencies in quality of care to its patient population (e.g., in-service education to facility staff, purchase of technologically advanced equipment)

Increase the number of profitable procedures/services (e.g., increase human and other resources)

Decrease or eliminate nonprofitable procedures/services (e.g., partner with another health care organization that offers such procedures/services)

Question 144

example 2

Answer 144

The Department of Veterans Affairs (VA) provides health care services to almost three million veterans annually, but veterans nationwide have traditionally not had equitable access to these services. Congress enacted legislation in 1996 requiring the VA to develop a plan for equitably allocating resources to “ensure that veterans who have similar economic status and eligibility priority and who are eligible for medical care have similar access to such care regardless of the region of the United States in which such veterans reside.” In response, the VA implemented the Veterans Equitable Resource Allocation (VERA) resource allocation monitoring system to improve equity of access to veterans’ health care services. VERA allocated resources to regional VA health care networks, known as Veterans Integrated Service Networks (VISN), which allocate resources to their hospitals and clinics. The VA continuously assesses the effectiveness of VERA by monitoring changes in health care delivery and overseeing the network allocation process used to provide veterans with equitable access to services.

Question 145

Encounter form and chargemaster

Answer 145

along with registration, the encounter form and chargemaster (or charge description master, or CDM) serve as the starting point for medical coding and patient billing of health care services and procedures. Each healthcare setting
(e.g., physician office, hospital outpatient department) creates an encounter form or chargemaster unique to its organization. The ongoing maintenance of each is necessary to ensure the accurate reporting of medical codes for reimbursement purposes. Although medical codes are routinely updated, the organization’s encounter form or chargemasater committee reviews them to ensure that appropriate codes are associated with services and procedures provided. This helps eliminate the possibility of reporting erroneous or outdated medical codes, reducing the incidence of claim denials

Question 146

Example

Answer 146

The hospital’s chargemaster committee contains members from information technology and all of the facility’s ancillary departments (e.g., radiology, pathology, and laboratory). A patient is registered for hospital outpatient radiology treatment, and the radiologist cannot locate an appropriate CPT code (or description) for the new service on the electronic chargemaster. The radiologist contacts the chargemaster committee chairperson, who has the hospital switchboard operator announce a “chargemaster stat meeting” in the radiology department.

Available members of the committee gather to talk with the radiologist about the new service, the medical coding representative selects an appropriate CPT code, and the electronic chargemaster is updated in “real time” to reflect the change. Hence, the radiologist will be able to select an appropriate code for the next patient who presents for the same new service. Although these “stat” meetings may appear to be inconvenient, they are necessary to the financial viability of the organization. If the radiologist had selected an unlisted CPT code (instead of the specific CPT code added by the chargemaster committee), the third-party payer would have initially denied the claim pending submission of copies of patient records for review.

Question 147

encounter form

Answer 147

is the financial record source document used by health care providers and other personnel to record treated diagnoses and services rendered to the patient during the current encounter. In the physician’s office, it is also called a superbill; in the hospital it is called a chargemaster

Question 148

chargemaster (or charge description master [CDM])

Answer 148

is a document that contains a computer-generated list of procedures, services, and supplies with charges for each. Chargemaster form data are entered in a health care facility’s (e.g., hospital) patient accounting system, and charges are automatically posted to the patient’s claim. The claim is then submitted to the payer to generate payment for inpatient, ancillary, and other services (e.g., emergency department, laboratory, radiology, and so on)

Question 149

The chargemaster allows the facility or provider to accurately and efficiently submit a claim to the payer for services rendered, and it usually contains the following:

Answer 149

-department code
-service code
-service description
-revenue code
-charge amount
-relative value units (RVUs)

Question 150

Department code

Answer 150

refers to the specific ancillary department where the service is performed

Question 151

service code

Answer 151

internal identification of specific service rendered

Question 152

service description

Answer 152

narrative description of the service, procedure, or supply

Question 153

revenue code

Answer 153

UB-04 revenue code that is assigned to each procedure, service, or product

Question 154

charge amount

Answer 154

dollar amount facility charges for each procedure, service or supply

Question 155

relative value units (RVUs)

Answer 155

numeric value assigned to a procedure; based on difficulty and time consumed

Question 156

revenue code

Answer 156

is a four-digit preprinted on a facility’s chargemaster to indicate the location or type of service provided to an institutional patient. (Revenue codes are reported in form locator 42 of the UB-04 claim)

Question 157

chargemaster maintenance

Answer 157

is the process of updating and revising key elements of the chargemaster (or charge description master [CDM]) to ensure accurate reimbursement. Because a chargemaster allows a health care facility to capture charges as procedures are performed and services are provided, inaccurate and outdated chargesmasters can result in claims rejections, fines, and penalties (for submitting false information on a claim), and overpayment or underpayment

Question 158

chargemaster team

Answer 158

jointly shares the responsibility of updating and revising the chargemaster to ensure its accuracy, and consists of representatives of a variety of departments, such as coding compliance financial services (e.g., billing department), health information management, information services, other departments (e.g., laboratory, pharmacy, radiology, and so on), and physicians. Chargemaster maintenance requires expertise in billing regulations, clinical procedures, coding guidelines, and patient record documentation. While the entire chargemaster is reviewed periodically (e.g., annually to incorporate coding updates), the chargemaster team could be gathered any time a new procedure or service is offered by the facility so that appropriate data can be added to the chargemaster

Question 159

Personnel who render services to institutional patients (e.g., nursing, laboratory, radiology)

Answer 159

enter data into the commercial software product. The data reside in the patient’s computerized account; upon discharge from the institution, the data are verified by billing office personnel and transmitted electronically as a UB-04 claim to a third-party payer. When submitted directly to the payer, the claim is processed to authorize reimbursement to the facility

Question 160

a clearinghouse

Answer 160

is an agency or organization that collects, processes and distributes claims. The claims are edited and validated to ensure that they are error-free, reformatted to the specifications of the payer, and submitted electronically to the appropriate payer for further processing to generate reimbursement to the facility

Question 161

example

Answer 161

During an inpatient admission, the attending physician documents an order in the patient’s record for a blood glucose level to be performed by the laboratory. The patient’s nurse processes the order by contacting the laboratory (e.g., telephone or computer message), which sends a technician to the patient’s room to perform a venipuncture (blood draw, or withdrawing blood from the patient’s arm using a syringe). The blood specimen is transported to the laboratory by the technician where the blood glucose test is completed. The technician enters the results into the electronic health record using a computer, and UB-04 data elements are populated from the patient’s account. This data resides in the electronic health record until it is verified by the billing office (at patient discharge) and is then transmitted to a clearinghouse that processes the claim and submits it to the third-party payer. The clearinghouse also uses the network to send an acknowledgment to the institution upon receipt of the submitted claim.

Question 162

processing an insurance claim

Answer 162

the processing of an insurance claim is initiated when the patient contacts a health care provider’s office and schedules an appointment. (procedures for obtaining information on new and established patients are discussed next in this chapter). The insurance claim used to report professional and technical services is known as the CMS-1500 claim (hospitals and other health care facilities generate the UB-04 claim for inpatient stays and outpatient encounters, which is covered in ch. 11)

Question 163

The provider’s claim for payment is generating from information located on the patient’s encounter form (or superbill)

Answer 163

ledger/account record, and source document (e.g., patient record or chart). Information from these documents is transferred to the CMS-1500 claim. Such information includes patient and insurance policy identification, CPT and HCPCS level II codes and charges for procedures and/or services, and ICD-10-CM codes for diagnoses treated and/or managed during the encounter.

Question 164

The selection of CPT and HCPCS level II codes for procedures, services, and diagnoses is discussed later chapters.

Answer 164

The CMS-1500 claim requires responses to standard questions pertaining to whether the patient’s condition is related to employment, an auto accident, or any other accident; additional insurance coverage, use of an outside laboratory; and whether the provider accepts assignment.

Question 165

To accept assignment

Answer 165

means the provider agrees to accept what the insurance company allows or approves as payment in full for the claim. The patient is responsible for paying any copayment and/or coinsurance amounts
To accept assignment sometimes is confused with assignment of benefits, which means the patient and/or insured authorizes the payer to reimburse the provider directly

Question 166

health insurance plans may include an out-of-pocket payment provision

Answer 166

which usually has limits of $1,000 or $2,000. The physicians office manager must be familiar with the out-of-pocket payments provision of a patient’s health insurance plan so that when the patient has reached the limit of an out-of-pocket payment for the year, appropriate patient reimbursement to the provider is determined. The patient may still be responsible for antoher out-of-pocket provision, such as 20% of the cost for services or procedures performed. (not all health insurance plans include an out-of-pocket payments provision)

Question 167

example

Answer 167

Mary Smith’s annual deductible has been met for her health insurance plan, but Mary is still required to pay a $20 copayment per encounter. Thus, the office staff no longer collects an annual deductible out-of-pocket payment from Mary; however, they do continue to collect a $20 copayment for each encounter (e.g., office visit).

Question 168

Note

Answer 168

the Affordable Care Act (Obamacare) eliminated the pre-existing conditions clause, which determined patient eligibility for health plan coverage. Thus, coverage for treatment of pre-existing conditions (e.g., asthma, diabetes melllius, hypertension) begins as of the health plan’s effective date. (prior to Obamacare, treatment of pre-existing conditions was not covered until one year after the health plan’s effective date

Question 169

management of accounts receivable.
accounts receivable management assists providers in the overall collection of appropriate reimbursement for services rendered, and includes the following functions:

Answer 169

-insurance verification and eligibility (confirming the patient’s health insurance plan and eligibility information with the with the third-party payer to determine the patient’s financial responsibility for services rendered)
-patient and family counseling about insurance payment issues (assessing patient financial requirements; advising patients and families about insurance benefits, copayments, and other financial obligations; resolving patient billing questions and complaints; adjusting accounts as necessary; and establishing financial arraignments for patients as necessary
-patient and family assistance with obtaining community resources (assisting patients in researching financial resources, housing, transportation, and medications and pharmaceutical supplies)
-preauthorization of services (contracting third-party payers to obtain approval before services are provided, ensuring appropriate reimbursement)
-capturing charges and posting payments (entering charges for services and procedures in the billing system, entering adjustments to patient accounts for payments received, generating balance receipts, reconciling daily work batches, preparing an audit trail, and preparing bank deposits
-billing and claims submission (completing, submitting, and processing CMS-1500 claims for payment; and researching and resolving claims payment delay issues)
-account follow-up and payment resolution (reviewing explanation of benefits and remittance advice documents, contacting payers to resolve claims, denials, resubmitting CMS-1500 claims, responding to payer and patient correspondence, following up on assigned accounts, and using collection techniques to maintain current accounts, including monitoring for delinquent payments

Question 170

priorauthorization

Answer 170

is a prior review of health care services (e.g., durable medical equipment, prescription drugs, surgical procedures, or treatment plans) related to an episode of care by a health plan to determine medical necessity. The health plan requires preauthorization prior to a patient receiving certain services, except in an emergency. (preauthorization is also called precertification, prior approval, or prior authorization). In addition, health plans may also require referral approvals prior to a patient receiving health care services from a specialist. The failure to obtain preauthorization or referral approval from health plans prior to providing certain services usually results in denial of payment for reported services; this means the provider will not receive reimbursement for services provided to patients

Question 171

To obtain preauthorization, the provider (or staff) contacts the patient’s health plan to determine whether preauthorization for a health care service is needed. The process of obtaining preauthorization varies among health plans and typically involves the completion and faxing of the plan’s preauthorization form. Some health plans (e.g., United Healthcare) have implemented an electronic preauthorization and referral process, which streamlines the process and reduces provider administrative costs (HIPPA mandated the method for submitting health care services preauthorization review requests, and the transaction method is abbreviated as ASC X12N 278.

Answer 171

It is part of the electronic submission of Medical Documentation (esMD) prior authorization program, which was implemented as a result of the 2011Investing in Innovations Initiative
After review of submitted preauthorization and referral approval documentation or transactions, the health plan approves or rejects the submission. The health plan may also request additional information. When a preauthorization or referral approval request is rejected, the provider may submit an appeal

Question 172

example

Answer 172

A health plan precertifies inpatient medical admissions and certain procedures, assists with discharge planning, and provides inpatient and outpatient medical case management. The patient is required to call the health plan prior to a scheduled (nonemergency) inpatient hospital or skilled nursing facility admission, prior to a maternity inpatient hospital admission, and within 48 hours after a hospital emergency department encounter or urgent inpatient hospital admission. If the medical services are not precertified, the patient is responsible for the entire cost of care determined not to be medically necessary. A monetary penalty is assigned if medical services are determined to be medically necessary but not precertified.

Because the health care benefits management program is included in the patient’s health plan contract, it is the patient’s responsibility to obtain preauthorization (precertification) of medical services. Otherwise, the responsible provider would initiate preauthorization of medical services (via fax or electronic transmission, if permitted).

Question 173

Example 2

Answer 173

Medicare mandates physician certification of inpatient services of hospitals (other than inpatient psychiatric facilities), which requires

(1)
authentication of the practitioner order (physician certifies that inpatient services were ordered in accordance with Medicare regulations, are reasonable and necessary, and are appropriately provided in accordance with the 2-midnight benchmark regulation;

(2)
reason for inpatient services (e.g., hospitalization for inpatient medical treatment);

(3)
estimated time the patient requires inpatient hospitalization; and

(4)
plans for posthospital care, if appropriate.

Certification begins with the order for inpatient admission and must be completed, signed, dated, and documented in the patient record prior to discharge (except for outlier cases, which is discussed in Chapter 9 of this textbook).

Question 174

Completing the CMS-1500

Answer 174

the insurance specialist completes the claim (e.g., identify the type of insurance, patient’s sex, patient’s relationship to insured, provider’s federal tax identification number, and so on). The CMS-1500 claim includes several areas that require the signature of the patient and the provider. When submitting claims, “SIGNATURE ON FILE” can be substituted for patient’s signature (as long as the patient’s signature is actually on file in the office). The completed claim is proofread and double-checked for accurate (e.g., verification that signature statement is on file, and so on). Any supporting documentation that has to be attached to the claim is copied from the patient’s chart (e.g., operative report) or developed (e.g., letter delineating unlisted service provided, referred to in the CPT coding manual as a “special report”)

Question 175

The Privacy Act of 1974 prohibits

Answer 175

payers from notifying providers about payments or rejection information on claims for which the provider did not accept the assignment. Therefore, providers who do not accept assignment of Medicare benefits do not receive a copy of the Medicare Summary Notice (MSN) information (called a provider remittance notice, or PRN) that is sent to the Medicare beneficiary (patient). Information released to providers is limited to whether the claim was received, processed, and approved or denied. To assist in an appeal of a denied claim, the patient must furnish the nonparticipating provider with a copy of the MSN. In addition, a letter signed by the patient must accompany the request for review. If the beneficiary writes the appeal, the provider must supply supporting documentation (e.g., copy of patient record)

Question 176

Managing new Patients

Answer 176

the interview and check-in procedure for a patient who is new to the provider’s practice is more extensive than for a returning (or established) patient. The purpose of the new patient interview and check-in procedure is to obtain information, schedule the patient for an appointment, and generate a patient record. Basic office policies and procedures (e.g., copayments must be paid at the time of visit) should also be explained to each new patient. (to increase office efficiency, mail new patients an information form to be completed and brought to the office 15 minutes prior to the schedules appointment

Question 177

Step 1: preregister the patient who calls to schedule an appointment. After determining that the patient has contacted the appropriate office, obtain the following information:

Answer 177

-Patient’s name (last, first, and middle initial)
-Home address and telephone
-Name of employer, as well as employer’s address and telephone number
-Date of birth
-Guarantor (person responsible for paying the charges)
NOTE: for a minor child, obtain the name, address and signature of the patient or guardian
-social security number
-spouse’s name, occupation, and place of employment
-referring provider’s name
-emergency contact (e.g., relative), including address and telephone number
-health insurance information (so the claim can be processed
-name and phone number of health insurance company
-name of policyholder (which is the person in whose name the insurance policy is issued)
-health insurance identification number, which is sometimes the policyholder’s social security number (SSN)
- health insurance group number
-whether health care treatment must be preauthorized
NOTE: instruct the patient to bring the health insurance card to the appointment because the office will need to make a copy of its front and back. The card contains the subscriber’s insurance and group number, as well as payer telephone numbers and provider network information

Question 178

Be sure to explain office policies regarding appointment cancellations, billing and collections (e.g., copayments are to be paid at the time of the office visit), and health insurance filing.

Answer 178

(the patient is responsible for copayments and/or deductibles, but does not pay more than the allowed negotiated charge.) Patients may ask whether the provider participates in their health insurance plan. A participating provider (PAR) contracts with a health insurance plan and accepts whatever the plan pays for procedures or services performed. pars are not allowed to bill patients for the difference between the contracted rate and their normal fee

Question 179

nonparticipating provider (nonPAR) (or out-of-network provider) does not contract with the insurance plan, and patients who elect to receive care from nonPARs will incur higher out-of-pocket expenses. The patient is usually expected to pay the difference between the insurance payment and the provider’s fee

Answer 179

Example 1: Dr. Smith is a participating provider (PAR). Kathe Barton is treated by Dr. Smith in the office, for which a $50 fee is charged $40 is the allowable charge. Dr. Smith collects an $8 copayment from the patient and is reimbursed a total of $40.
PAR provider write-off amount = $10 (only allowed to bill the $40)

Example 2: Dr. Jones is a nonparticipating provider (nonPAR). Lee Noffsker is treated by Dr. Jones in the office, for which a $50 fee is charged. Dr. Jones colellects a $7.60 copayment from the patient and is reimbursed a total of $38 (because Dr. Jones does not participate in the health insurance plan and can collect the difference between Dr. Jones’s fee the patient patient’s coinsurance plus the insurance payment)
nonPAR provider write-off amount =$12

Question 180

Managed care alert

Answer 180

prior to scheduling an appointment with a specialist, a managed care patient must obtain a referral from the primary care provider or case manager (e.g., preauthorization number is required). In addition, depending on the managed care plan, certain procedures and services must be preauthorized before the patient undergoes treatment

Question 181

Step 2: upon arrival for the office appointment, have the patient complete a patient registration form

Answer 181

the patient registration form is used to create the patient’s financial and medical records. Be sure to carefully review the completed form for identification, financial, health insurance, and medical history information. Sometimes patients do not know how to answer a question or they feel that the requested information does not apply to their situation. If information is missing, be sure to interview the patient appropriately to complete the form.
NOTE: it is fraudulent for patients to withhold information about secondary health insurance coverage, and penalties may apply

Question 182

Step 3

Answer 182

photocopy the front and back of the patient’s insurance identification card(s), and file the copy in the patient’s financial record

Question 183

step 4: confirm the patient’s insurance information and eligibility status by contacting the payer via telephone, Internet, or fax. (Payer contact information can be found on the insurance card.) Collect copayment from the patient

Answer 183

Note: per HIPAA privacy standards, when contacting the payer to verify insurance eligibility and benefit status, be prepared to provide the following information:
-beneficiary’s last name and first initial
-beneficiary’s date of birth
-beneficiary’s health insurance claim number (HICN)
-beneficiary’s gender

Question 184

step 5: enter all information using computer data entry software. Verify information with the patient or subscriber, and make appropriate changes

Answer 184

when the patient has more than once policy, perform a coordination of benefits (COB) to be sure the patient has correctly determined which policy is primary, secondary, and so on. The determination of primary or secondary status for patients with two or more commercial policies is different for adults than for children
-adult patient named as policyholder: The patient is the policyholder
-adult patient named as dependent on policy: the patient is a dependent on the insurance policy
Example: Mary Jones works for Anywhere College and is enrolled in group health insurance’s family plan. Mary is named as the primary policyholder on this plan. Mary’s husband, Bill is a full-time collect student and is named a dependent on Mary’s health insurance plan (Bill does not have other health insurance coverage)

Question 185

Primary versus secondary insurance

Answer 185

primary health insurance is the insurance plan responsible for paying health care insurance claims first.

Question 186

Secondary health insurance

Answer 186

is the insurance plan that is billed after the primary insurance plan has paid its contracted amount (e.g., 80 percent of billed charges) and the provider’s office has received a remittance advice from the primary payer (depending on the office policy, providers may be required to submit secondary claims to Medicare)
NOTE: certain insurance plans are always considered primary to other plans (e.g., workman’s compensation insurance is primary to an employee’s group health care plan if the employee is injured on the job). Determination of primary and secondary coverage for one or more government-sponsored programs are discussed in detail in the respective Medicare, Medicaid, and TRICARE chapters)

Question 187

Provider offices should share with patient’s their policy about submitting claims to a secondary payer, which is often courtesy service because providers are often not required to submit claims to secondary payers.

Answer 187

Large provider group practices might employ insurance specialists who process secondary payer claims, but smaller group practices often require patients to submit secondary claims because projected reimbursement may not justify employing dedicated staff for such processing (even though such processing results in faster reimbursement by secondary payers)

Question 188

When the patient is responsible for submitting claims to secondary payers, they are responsible for submitting an explanation of benefits (EOB) received from the primary payer. The EOB communicates to the secondary payer the reimbursement amount the provider received from the primary payer; then, the secondary payer calculates any additional reimbursement to be paid to the provider (or to the patient)

Answer 188

both primary and secondary health insurance plans provide reimbursement for qualified procedures or services, only, which are those that meet medical necessity. If the patient’s primary payer denies coverage due to a determination that procedures and services were not covered (because they did not meet medical necessity provisions), the secondary payer is likely to do the same. When patients are covered by group health insurance plans (e.g., employer health plans), reimbursement cannot exceed the total cost of procedures and services rendered

Question 189

Example:

Answer 189

Cindy Thomas has two health insurance policies: a group health insurance plan through her full-time employer and another group health insurance plan through her husband’s employer. Cindy’s health plan through her own employer is primary, and the health plan through her husband’s employer is secondary. When Cindy receives health care services at the doctor’s office, the office first submits the insurance claim to Cindy’s employer’s health plan; once that health plan has paid, the insurance claim can be submitted to Cindy’s secondary health insurance (husband’s group health insurance plan).
NOTE: total reimbursement cannot exceed the total charges for health care services rendered by Cindy’s doctor

Question 190

child of divorced parents:

Answer 190

the custodial parent’s health plan is primary. If the parents are remarried, the custodial parent’s health plan is primary, the custodial stepparent’s plan is secondary, and the noncustodial parent’s health plan is tertiary (third). An exception is made if a court order specifies that a particular parent must cover the child’s medical expenses

Question 191

child living with both parents

Answer 191

if each parent subscribes to a different health plan, the primary and secondary policies are determined by applying the birthday rule. Physician office staff must obtain the birth day of each policyholder because the birthday rule states that the policyholder whose birth month and day occurs earlier in the calendar year holds the primary policy for dependent children. The year of birth is not considered when applying the birthday rule determination. If the policyholders have identical birthdays, the policy in effect the longest is considered primary

Question 192

gender rule

Answer 192

some self-funded health plans use the gender rule, which states that the father’s health plan is always primary when a child is covered by both parents. This provision can cause problems if one parent’s coverage uses the birthday rule and the other uses the gender rule. Be sure to contact the health plan administrators to determine which rule to follow

Question 193

Step 6 create a new patient’s medical record

Answer 193

NOTE: at this point, clinical assessment and/or treatment of the patient is performed, after which the provider documents all current and pertinent diagnoses, services rendered, and special follow-up instructions on the encounter form. The medical record and encounter form are then returned to the employee responsible for checking out patients

Question 194

generate the patient’s encounter form

Answer 194

the minimum information entered on the encounter form at this time is the date of service, patient’s name, and balance due on the account
attach the encounter form to the front of the patient’s medical record so that it is available for clinical staff when the patient is escorted to the treatment area.
if patient scheduling is performed on the computer, generate encounter forms for all patients scheduled on a given day by selecting the “print encounter forms” function from the computer program

Question 195

Managing established patients

Answer 195

depending the provider’s plan of treatment, either schedule a return appointment when checking out the patient or when the patient contacts the office.
Example: the highlighted in this example indicates that a follow-up visit is scheduled only if the patient contacts the office.
S: patient describes stomach pain and vomiting
O: abdominal exam reveals mild tenderness. The throat is red.
A: Flu
P: Bed rest, return to office if symptoms worsen
(SOAP notes are typically used in a provider’s office to document patient visits. S=subjective, O=objective, A=assessment, and P=plan. SOAP notes are discussed in chapter 10)
Managed care alert: approximately one week prior to an appointment with a specialist for nonemergency services, the status of preauthorization for care must be verified. If the preauthorization has expired, the patient’s nonemergency appointment may have to be postposed until the required treatment reports have been filed with the primary care provider or case manager and a new preauthorization for additional treatment has been obtained

Question 196

step 2: verify the patient’s registration information when the patient registers at the front desk

Answer 196

as the cost of health care increases and competition for subscribers escalates among insurers, many employers who pay a portion of health care costs for their employees purchase health insurance contracts that cover one a three- or six-month period. Therefore, it is important o ask all returning (or established) patients if there have been any changes in their name, address, phone number, employer, or health insurance plan. If the answer is yes, a new registration form should be completed and computerized patient database should be updated

Question 197

step 3

Answer 197

collect copayment from the patient

Question 198

step 4: generate an encounter form for the patient’s current visit
attach the encounter form to the front of the patient’s medical record so it is available for clinical staff when the patient is escorted to the treatment area

Answer 198

NOTE: once clinical assessment and/or treatment has been completed, the patient enters the post-clinical phase of the visit. Services and diagnosis(es) are selected on the encounter form, and the patient’s medical record and encounter form are given to the employee responsible for checking out patients

Question 199

Managing office insurance finances: the following procedure are the same for new and established patients

Answer 199

step 1: assign CPT and HCPCS level II (national) codes to procedures and services, and assign ICD-10-CM codes to diagnoses documented on the encounter form

Question 200

step 2: used the completed encounter form or chargemaster to determine the charges for procedures performed and/or services provided, and total all charges

Answer 200

coding tip: make sure that diagnoses, procedures, and services selected on the encounter form are documented in the patient’s medical record reporting codes on the insurance claim

Question 201

step 3: post all charges to the patient account record (or patient ledger) and the daily accounts receivable journal (or day sheet), either manually or using practice managment software (for provider office encounters). (charges for hospital-based encounters are managed by the patient billing department)

Answer 201

Note: practice management software makes use of the patient ledge and manual daily accounts receivable journal (or day sheet) obsolete. However, discussion about these items, with figures, is included to familiarize students with them in the event that they are required to use them on the job

Question 202

the patient ledger known as

Answer 202

the patient account record in a computerized system, is a permanent record of all financial transactions between the patient and the practice. The charges, along with personal or third-party payments, are all posted on the patient’s account
Each procedure performed must be individually described and prices on the patient’s ledger/account record
the manual daily accounts receivable journal, also known as the day sheet, is a chronologic summary of all transactions posted to individual patient ledgers/accounts on a specific day

Question 203

step 4: complete the insurance claim
review completed claims prior to submission to ensure accuracy

Answer 203

Example: upon reviewing recently completed claim for newborn care, Barbara noticed the patient (policyholder) was 58 years old. Upon further review, Barbara discovered that during the pregnancy the policyholder’s 28-year-old daughter had used her mother’s health insurance information. The result was the denial of all previous claims paid to the provider, and the provider was required to pay back all reimbursement paid by the payer. Although the provider was allowed to bill the patient for unpaid claims, the patient was unable to pay and the account was submitted to collections for processing

Question 204

step 5

Answer 204

submit supporting documentation with the claim (e.g., copies of operative reports, pathology reports, and written authorization). For electronic claims, check with the payer to determine how to submit attachments (e.g., fax, postal mail, scanned image)

Question 205

step 6: obtain the provider’s signature on the claim, if manually processed. Special arrangements maybe made with some payers to allow the provider’s name to be keyboarded or a signature stamp to be used. No signature is possible on electronic claims

Answer 205

Note: in july, 2000, federal electronic signature legislation was enacted. Physicians who contract with government and/or managed care plans are considered to have valid signatures on file

Question 206

step 7

Answer 206

retain a copy of the claim and copies of the attachment(s) in the practice’s insurance files. Electronic claims are stored in the practice’s computer

Question 207

Step 8:

Answer 207

log completed claims in an insurance registry. Be sure to include the date the claim was filed with the payer. For computerized claims processing, medical practice managment software should generate a claims log

Question 208

step 9

Answer 208

mail or electronically send the claims to the third-party payer

Question 209

step 10

Answer 209

post payment(s) to the patient’s account
the source of each payment should be identified, either as third-party payment (e.g., name of payer and payment type) or patient’s payment (e.g., cash, check, credit card, money order, personal check)

Question 210

step 11: bill the patient for the coinsurance or copayment amounts not paid at the start or end of the encounter

Answer 210

copayments (fixed payment amounts for an office visit, outpatient encounter, or outpatient surgery) are obtained from the patient at the beginning or end of the encounter, depending on office policy. Coinsurance amounts may be billed to patients after services are provided

The patient’s health insurance policy may stipulate a coinsurance payment (e.g., percent of charges) or a copayment (e.g,. $20). Health care providers bill patients for coinsurance amounts after reimbursement from the third-party payer has been received and posted

Question 211

Example:

Answer 211

a patient received health care services on July 1, totaling $500. the patient’s health care plan requires a 20 percent coinsurance payment directly to the provider at the time services were provided. The coinsurance amount is based on the payer’s established reasonable charge of $300. So, the patient paid $60 at the time services were provided. The provider accepted assignment of the payer’s established the reasonable charge of $300. On September 1, the provider received a $450 check from the payer. The overpayment was $150, which the provider must pay back to the payer.
NOTE: to save the expense of mailing invoices, ask patients to pay their portion of the bill as they depart the office

Question 212

Insurance Claim Cycle

Answer 212

The cycle of a claim consists of four stages:
-Claims submission and electronic data interchange (EDI)
-Claims processing
-claims adjudication
-payment
For claims assigned a “pending status” by the payer, the provider can respond by correcting errors and omissions on the claim and resubmitting for reconsideration. When the claim is denied (or rejected), the provider can appeal the payer’s decision and resubmit the claim for reconsideration, attaching supporting documentation to justify procedures or services provided

Question 213

Claims Submission and Electronic Data Interchange (EDI)

Answer 213

The cycle of an insurance claim begins in the provider’s office when the health insurance specialist completes CMS-1500 claims using medical managment software. Clams submission is the electronic or manual transmission of claims data to payers or clearinghouses for processing
NOTE: providers can purchase software from a vendor, contract with a billing service or clearinghouse that will provide software or programming support, or use HIPPA-compliant free billing software that is supplied by Medicare administrative contractors

Question 214

A clearinghouse processes or facilitates the processing of nonstandard data elements into standard data elements (e.g., electronic claim). Clearinghouses also convert standard transactions (e.g., electronic remittance advice) received from payers to nonstandard formats (e.g., remittance advice that looks like an explanation of benefits) so providers can read them.

Answer 214

Clearinghouses use secure networks to receive and remit electronic transactions that flow among payers, providers, and employees. A value-added network (VAN) is a clearinghouse that involves value-added vendors, such as banks, in the processing of claims. Using a VAN is more efficient and less expensive for providers than managing their own systems to send and receive transactions directly from numerous entities.
NOTE: health care clearinghouses perform centralized claims processing for providers and health care plans. They receive claims processing for providers and health care plans. They receive claims from providers, transmit claims to payers, receive remittance advice and payment instructions from payers, and transmit that information to providers (all in a HIPAA-compliant format). A health care clearinghouse also conducts eligibility and claim status queries in the format prescribed by HIPAA.

Question 215

When selecting a clearinghouse, it is important to determine which one processes a majority of claims for health plans billed by the provider. Although a provider might be able to contract with just one clearinghouse if a health plan does not require submission of claims to a specific clearinghouse, some plans have established their own clearinghouses, and providers must submit claims to them. Clearinghouses typically charge providers a start-up fee, a monthly flat fee, and/or a per-claim transaction fee based on volume. They also offer additional services, such as claims status tracking, insurance eligibility determination, and secondary billing services. (Providers may also want to determine whether a clearinghouse is accredited by the Electronic Healthcare Network Accreditation Commission [EHNAC])

Answer 215

Clearinghouses process claims in an electronic flat file format, which rquires conversion of CMS-1500 claims data to a standard format. Providers can also use software to convert claims to an electronic flat file format (or electronic media claim) which is a series of fixed-length records (e.g., 25 spaces for patient’s name) submitted to payers as a bill for health care services)

Question 216

Example:

Answer 216

insurance claims processing is simplified by using a clearinghouse, which allows for direct entry of claims data online or batch uploading of claims completed using medical practice management software. (Batch uploading includes all CMS-1500 claims generated for a given period of time, such as 24 hours) The clearinghouse generates reports to facilitate claims tracking, from submission through payment or denial (e.g., patient roster reports to ensure claims for all patients treated on a given day were submitted)

Question 217

Electronic Data Interchange (EDI)

Answer 217

Electronic data interchange (EDI) is the computer-to-computer transfer of data between providers and third-party payers (or providers and health care clearinghouses) in a data format agree upon by sending and receiving parties. HIPAA’s administrative simplification provisions directed the federal government to adopt national electronic standards for the automated transfer of certain health care data among health care payers (e.g., Medicare administrative contractors), payers, (e.g., BCBS), and providers (e.g., hospitals, physicians). These provisions enable the entire health care industry to communicate electronic data using a single set of standards. (Electronic claims data submission has almost entirely replaced the paper-based claims processing). Health care providers submit standard transactions for eligibility, authorization, referrals, claims, or attachments to any payer. This “simplifies” clinical, billing, and other financial applications and reduces costs. Three electronic formats are supported for health care claims transactions:
-UB-04 flat file format
-national standard format (NSF)
-ANSI ASC X12N 837 format (American National Standards Institute, Accredited Standards Committee, Insurance Subcommittee X12, claims validation table 837)

Question 218

Note:

Answer 218

ANSI ASC X12N is an electronic format standard that uses a variable length file format to process transactions for institutional, professional, dental, and drug claims. The ANSI organization facilitates the development of standards for health informatics and other industries (e.g., international exchange of goods and services)

Question 219

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) mandated national standards for the electronic exchange of administrative and financial health care transactions (e.g., CMS-1500 claim) to improve the efficiency and effectiveness of the health care system. Standards were adopted for the following transactions:

Answer 219

-Eligibility for a health plan
-Enrollment and disenrollment in a health plan
-First report of injury
-Health care payment and remittance advice
-Health claim status
-Health claims and equivalent encounter information
-health claims attachments
-Health plan premium payments
-Referral certification and authorization
-Coordination of Benefits (COB)

Question 220

Covered entities are required to use mandated national standards when conducting any of the defined transactions covered under the HIPAA. Covered entities process electronic claims and include all private-sector health plans (excluding certain small self administered health plans)

Answer 220

managed care organizations; ERISA-covered health (those covered by the Employee Retirement Income Security Act of 1974); government health plans (including Medicare, Medicaid, Military Health System for active duty and civilian personnel, Veterans Health Administration, and Indian Health Service programs); all health care clearinghouses; and all health care providers that choose to submit or receive these transactions electronically
NOTE: HIPAA’s health care transaction standards require covered entities to submit electronic transactions using the same format

Question 221

the following are advantages of electronic claims processing:

Answer 221

-reduction in payment turnaround time
-reduction in claims submission error rates
Electronic claims are submitted directly to the payer after being checked for accuracy by billing software or a health care clearinghouse, and this audit/edit process reduces the normal rejection rate to 1 to 2 percent. The audit/edit process results in a clean claim, which contains all required data elements needed to process and pay the claim (e.g., valid diagnosis and procedure/service codes, modifiers, and so on). In addition, if electronic claim is rejected due to an error or omission, the provider is notified, and the claim can be edited and resubmitted for processing

Question 222

Electronic claims are submitted using the following transmission media:

Answer 222

-Dial-up (telephone line or digital subscriber line [DSL] is used for claims submission, and providers install software on office computers)
-Extranet (direct submission of claims to payers using Internet technology that emulates a system connection; provider can access information about collaborating parties only, such as payer and patient data elements)
-Internet (secure transmission of claims over the Internet, eliminating the need for additional software)
-Magnetic tape, disc, or compact disc media (physical movement of transmissions from one location to another using media)
NOTE: claims submitted via facsimile (fax) are not electronic transmissions because the information exchanged did not exist in electronic form before the transmission

Question 223

electronic submission of Medicare Claims by Providers

Answer 223

The insurance claim is electronically transmitted in data “packets” (called batches) from the provider’s computer modem to the Medicare administrative contractor’s modem over a telephone line. Medicare administrative contractors perform a series of initial edits (called front-end edits or pre-edits), which determine whether the claims in a batch meet basic requirements of the HIPAA standard. If errors are detected at this level, the entire batch of claims is rejected and returned to the provider for correction and resubmission. Claims that pass initial edits are reedited to compare data with implementation guide requirements in those HIPAA claim standards. If errors are detected at this level, individual claims containing errors are rejected and returned to the payer for correction and resubmission. Once the claim has passed the first two levels of edits, each claim undergoes a third editing process for compliance with Medicare coverage and payment policy requirements. Edits at this level could result in rejection of individual claims and be returned to the provider for correction. If individual claims are denied, the reason for the denial is communicated to the provider. Upon successful transmission of claims, and acknowledgment report is generated and either transmitted to the provider or placed in an electronic mailbox for downloading by the provider.

Question 224

Claims attachments

Answer 224

is a set of supporting documentation or information associated with a health care claim or patient encounter. Claims attachment information can be found in the remarks or notes field of an electronic claim.

Question 225

claims are used for

Answer 225

-medical evaluation for payment
-past payment audit or review
-quality control to ensure access to care and quality of care
NOTE: claims are sometimes delayed or rejected because the payer needs to obtain a copy of patient records for review prior to making a determination. In this situation, the provider is notified of the request for information and has an opportunity to submit supporting documentation from the record to justify the medical necessity of procedures or services performed. This delay in claims processing can sometimes be avoided if the practice contacts payers to request a list of CPT and HCPCS level II codes that require supporting documentation

Question 226

Example 1

Answer 226

CPT modifiers are reported on claims to provide clarification about procedures and services performed, and they are entered as two-digit numbers. Providers that submit supporting documentation when reporting the following modifiers on claims assist the payer in making payment determinations:
-22 (increased procedural services)
-53 (discontinued procedure)
-59 (distinct procedural service)
Example 2:
When a provider performs a procedure for which there is no CPT or HCPCS level II code and an unlisted code is reported on the claim, supporting documentation must be submitted (e.g., copy of operative report)

Question 227

HIPAA Alert

Answer 227

traditionally, claims attachments containing medical documentation that supported procedures and services reported on claims were copied from patient records and mailed to payers. Providers now submit electronic attachments with electronic claims or send electronic attachments in response to requests for medical documentation to support claims submitted (e.g., scanned images of paper records)

Question 228

How to avoid resubmitting claims

Answer 228

delayed claims contain incomplete and inaccurate information and require resubmission after correction, which delays payment to the provider. Although hospitals and large group practices collect data about these problems and address them, smaller provider practices often do not have the tools to evaluate their claims submission processes. A major reason for delays in claims processing is incompleteness or inaccuracy of the information necessary to coordinate benefits among multiple payers. If the remittance advice from the primary payer is not attached to the claim submitted to the secondary payer, delays will also result.

Question 229

coordination of benefits (COB)

Answer 229

is a provision in group health insurance policies intended to keep multiple insurers from paying benefits covered by other policies; it also specifies that coverage will be provided in a specific sequence when more than one policy covers the claim. Some payers electronically transfer data to facilitate the coordination of benefits on a submitted claim. (Medicare calls this concept “crossover.”) Becoming educated about how to correctly process claims for crossover patients will reduce payment delays and improve accounts receivable

Question 230

claims processing

Answer 230

involves sorting claims upon submission to collect and verify information about the patient and provider. Clearinghouses and payers use software to automate the scanning and imaging functions associated with claims processing. Scanning technology “reads” the information reported on the claim and converts it to an image so that claims examiners can analyze, edit, and validate the data. The claims examiner views the image (or electronic data if submitted in that format) on a split computer screen that contains the claim on the top half of information verification software on the bottom half.

Question 231

Note:

Answer 231

edits and validation at the claims processing stage are limited to verification of insured status, patient identification number and demographic information, provider identification number, and the like. If analysis of the claim reveals incorrect or missing information that cannot be edited by the claims examination, the claim is rejected and returned to the provider. The provider can correct the errors and omissions and resubmit the claim for processing.

Question 232

claims adjudication

Answer 232

after the claim has been validated by the payer’s claims examiner, it undergoes the claims adjudication process, in which the claim is compared to payer edits and the patient’s health plan benefits to verify that the:
-required information is available to process the claim
-claim is not a duplicate
-payer rules and procedures have been followed
-procedures performed or services provided are covered benefits

Question 233

the payer analyzes each claim for patient and policy identification and compares data with its computerized data. Claims are automatically rejected if the patient and subscriber names do not match exactly with names in the computerized database. Use of nicknames or typographical errors on claims will cause rejection and return, or delay in reimbursement to the provider, because the claim cannot be matched.

Answer 233

Procedure and service codes reported on the claim are compared with the policy’s master benefit list to determine if they are covered. Any procedure or service reported on the claim that is not included on the master benefit list is a noncovered benefit, and will result in denial (rejection) of the claim. This means that the patient’s insurance plan will not reimburse the provider for having performed those procedures or services. Procedures and services provided to a patient without proper authorization from the payer, or that were not covered by a current authorization, are unauthorized services. This means that the payer requires the provider to obtain preauthorization before performing certain procedures and services; and because it was not obtained, the claim is denied (rejected).

Question 234

Note

Answer 234

patients can be billed for non-covered procedures but not for unauthorized services. Providers process denials of unauthorized services as a business loss.

Question 235

managed care alert

Answer 235

for managed care claims, both procedures and dates of service are verified to ensure that the services performed were both preauthorized and performed within the preauthorized time frame

Question 236

The payer matches procedure and service codes (e.g., CPT) with diagnosis codes reported on the CMS-1500 claim to ensure the medical necessity of all procedures and services provided. Any procedure or service that is not medically necessary is denied. The claim is also checked against the common data file, which is an abstract of all claims filed on each patient.

Answer 236

this process determines whether the patient is receiving concurrent care for the same condition by more than one provider, and it identifies services that are related to recent surgeries, hospitalizations, or liability coverage.
NOTE: payers will identify a claim as third party liability responsibility based on review of codes. For example, submitting a claim on a patient who was injured in an automobile accident will trigger the payer to identify the automobile accident will trigger the payer to identify the automobile insurance as the primary payer on the claim

Question 237

a determination is also made as to allowed charges, which is the maximum amount the payer will allow for each procedure or service, according to the patient’s policy. If no irregularity or inconsistency is found on the claim, the allowed charge for each covered procedure is determined. Allowed charges vary from policy to policy, and they are less than or equal to the fee charged by the provider. This means that payment is never greater than the fee submitted by the provider.

Answer 237

This means that payment is never greater than the fee submitted by the provider. A determination of the patient’s annual deductible, copayment, and/or coinsurance amounts is also made. The deductible is the total amount of covered medical expenses a policyholder must pay each year out-of-pocket before the insurance company is obligated to pay any benefits. A policyholder (or subscriber) is the person in whose name the insurance policy is issued; a beneficiary is eligible to receive health care benefits and includes the policyholder (subscriber) and eligible dependents. Coinsurance is the percentage the patient pays for covered services after the deductible has been met and the copayment has been paid. For example, with an 80/20 plan, the insurance company pays 80 percent and the patient pays 20 percent. A copayment (or copay) is the fixed amount the patient pays each time health care services are received

Question 238

Example 1

Answer 238

adam appel is a patient of Dr. Phillips. Adam received preventive services for an annual physical examination on April 7. The third-party payer determined the allowed charge for preventive services to be $112, for which the payer reimbursed the physician 80 percent of that amount. Adam is responsible for paying the remaining 20 percent directly to the physician. Thus, the physician will receive a check in the amount of $89.60 from the payer, and the patient will pay $22.40 to the physician

Question 239

Example 2

Answer 239

the patient underwent office surgery on September 8, and the third-party payer determined the allowed charge to be $680. The patient paid on the 20 percent coinsurance at the time of the office surgery. The physician and patient each received a check for $544, and the patient signed the check over to the physician. The overpayment was $544, and the physician must reimburse the third-party payer.

Question 240

Once the claims adjudication process has been completed, the payer generates a remittance advice that contains information about payment, denials and pending status of claims.

Answer 240

If a claim is denied, the provider can appeal the decision by resubmitting the claim and attaching supporting documentation. Claims that are assigned pending status contain errors and omissions, and providers can correct those problems and resubmit the claim for processing

Question 241

example

Answer 241

CPT contains laboratory panel codes (e.g., electrolyte panel), which bundle several laboratory tests into one code number. Some payers prefer to receive claims that contain individual code numbers for each laboratory test performed as part of the panel (e.g., carbon dioxide, chloride, potassium, and sodium). The payer’s rationale is that a provider could order a series of tests and call it a panel, which is reimbursed at a higher rate than individual tests, even if not all of the panel tests were actually performed

Question 242

During the adjudication process, the status location of a claim can be monitored and providers can track claims within a health plan’s internal claims processing, adjudication, and payment systems

Answer 242

(HIPPA standardized the status locations for all health care transactions.) Providers can even verify, through a batch transmission, the status of multiple claims. Providers can also verify patient’s insurance coverage and eligibility for services, and they can find out when to expect reimbursement for claims processed

Question 243

Note

Answer 243

physician claims are adjudicated by line item (not for total charges), which means that payers bundle and edit code numbers for individual procedures and services. Because rules and procedures vary among payers, what one payer bundles, another may not. In addition, payers routinely change the rules and procedures that affect coverage policies and reimbursement to the provider. Another concern is that payers often do not apply official coding guidelines for diagnosis and procedure/service coding. Thus, CPT and HCPCS level II codes reported on a claim are sometimes changed by the payer, affecting payment to the provider

Question 244

payment of claims

Answer 244

Once the adjudication process has been finalized, the claim is either denied or approved for payment. A remittance advice (RA) is sent to the provider, and an explanation of benefits (EOB) is mailed to the policyholder and/or patient. A remittance advice submitted to the provider electronically is called an electronic remittance advice (ERA).

Question 245

Providers use remittance advice information to process payments and adjustments to patient accounts.

Answer 245

The remittance advice should be reviewed to make sure there are no processing errors (e.g., code changes, denial of benefits, and so on). (Patients should review EOBs to find out whether claims were paid; if denied, the patient should contact the provider’s office to determine whether the claim was resubmitted, requested information was sent to the payer, and so on). After reviewing the remittance advice and posting payments and adjustments, any code changes, denials and partial payments should be followed up on. The payer may need additional information to make a determination about a claim, and prompt compliance with such requests will expedite payment.

Question 246

EFT (Electronic funds transfer)

Answer 246

It is common for payers to include multiple patients on one remittance advice and to send the provider one check for multiple claims. Providers also have the option of arranging for electronic funds transfer (EFT), which means that payers deposit funds to the provider’s account electronically

Question 247

PRN (provider remittance notice)

Answer 247

Medicare calls the remittance advice a PRN and the explanation of benefits a Medicare Summary Notice (MSN)

Question 248

State prompt payment laws and regulations

Answer 248

The Prompt Payment Act of 1982 requires federal agencies to pay their bills on time or risk paying penalty fees if payments are late. Many states also have enacted prompt pay laws that apply to health insurance plans, requiring them to either pay or deny claims within a specified time frame (e.g., electronic claims must typically be paid within 30 days). In addition, many states apply penalty fees for late payments.

Question 249

A federal regulation requires that Medicare Advantage organization (previously called Medicare Choice M+C, or Medicare Part C) make prompt payments for services provided by nonparticipating providers. Such organizations must pay 95% of clean claims within 30 days of submission, and the organization must pay interest on clean claims not paid within 30 days. (all other claims must be paid or denied within 60 days from the date of the recepit)

Answer 249

Medicare claims must also be paid promptly by Medicare administrative contractors. Clean claims must be paid or denied within 30 days from receipt, and interest must be paid on claims that are paid after 30 days. The count stats on the day after the receipt date and ends on the date payment is made
EX: If a clean claim received October 1 of this year is paid within 30 days, the Medicare requirement is met

Question 250

Interpreting a Remittance Advice (REMIT) and an Explanation of Benefits (EOB)

Answer 250

Third-party payers review submitted claims to determine whether services are covered by the patient’s insurance plan (e.g., cosmetic surgery is usually not covered) and for coordination of benefits to determine which payer is responsible for reimbursement (e.g., services provided to a patient treatment for a work-related injury are reimbursed by the employer’s workers’ compensation payer). Once a payer has completed the claims adjudication (decision-making) process, the claim is denied or approved for payment. The provider receives a remittance advice (remit), and the patient receives an explanation of benefits (EOB). (some payers send providers and EOB instead of a remittance advice.) The remit and EOB each contains information about denied services, reimbursed services, and the patient’s responsibility for payment (e.g., copayment).

Question 251

The remittance advice typically includes the following items:

Answer 251

-Third-party payer’s name and contract number
-Electronic data interchange (EDI) information, including EDI exchange number, date and time remittance advice was generated, and EDI receipt identifier
-Provider’s name and mailing address
-Adjustments applied to the submitted claim (e.g., reduced payment, partial payment, zero payment, and so on)
-Amount and date of payment
-Patient’s reference number, name and health insurance contract number, claim date, internal control number, paid status (e.g., primary, secondary, supplemental), claim total, and amount paid
-Date and place of service, procedure/service code, units, charge(s), provider identification number, allowable changes, deductible and coinsurance amounts, amount paid, and reasons (to explain payment amount)

Question 252

The explanation of benefits typically includes the following items:

Answer 252

-Third-party payer’s name, mailing address, and telephone number
-Date the EOB was generated, payer’s identification number, contract number and benefit plan
-Patient’s name and mailing address
-Details of services reported on claim, including claim number, name of provider, date of service, amount charged, amount not covered by plan, amount allowed by plan, copayment and/or deductible amounts (that are the responsibility of the patient), amount paid under plan’s benefits, and any remark codes (e.g., reason for denied claim)
-Benefit plan payment summary information, including provider’s name and amount paid under plan’s benefits
-Summary information about plan deductible and out-of-pocket amounts (paid by patient)
-Statement (at the bottom or top)that says THIS IS NOT A BILL

Question 253

Yesterday: Traditional Claims Processing

Answer 253

Payers received health claim forms by mail, and they were opened, date-stamped, sorted, and grouped according to physician specialty. Data from the claim forms were keyed into a claims database, and the validity of the claim was determined. If valid, payment was mailed to the physician. If not valid, an exception report was printed, the claim was manually retrieved from the file system and faxed to a review panel of physicians. The physician may have received a request for information from the payer so that further review could occur piror to approval for payment

Question 254

Today: Electronic Claims Processing

Answer 254

Claims are generated using medical practice management software for electronic routing and processing. Tracking of claims is automated; when a claim has to be retrieved for review, instead of searching through paper files, the image is quickly located and viewed onscreen. Medicare has enforced the mandatory submission of electronic claims ,, which means paper claims are denied

Question 255

Maintaining Insurance Claim Files

Answer 255

CMS requires providers to retain copies of any government insurance claims are copies of all attachments filed by the provider for a period of six years (unless state law stipulates a longer period.) (the provider could be audited during that period)
Note: Medicare Conditions of Participation require providers to maintain medical records for at least 5 years, and state retention laws are sometimes stricter (e.g., New York State requires medical records to be maintained for at least 6 years)

Question 256

CMS stipulated in March 1992 that providers and billing services filing claims electronically can comply with this federal regulation by retaining the financial source document

Answer 256

(routing slip, charge slip, encounter form, or superbill) from which the insurance claim was generated. In addition, the provider should keep the e-mailed report of the summary of electronic claims received from the insurance company

Question 257

It is recommended that the following types of claims and files be securely stored as electronic claims files (e.g., folders created using a computer) or manual claims files (e.g., labeled folders):

Answer 257

-Open claims
-closed claims
-Remittance advice documents
-unassigned claims
-denied/rejected claims

Question 258

open claims

Answer 258

are organized by month and insurance company and have been submitted to the payer, but processing is not complete. Open claims include those that were rejected (denied) due to an error or omission (because they must be reprocessed)

Question 259

closed claims

Answer 259

are filed according to year and insurance company and include those for which all processing, including appeals, and has been completed

Question 260

Remittance advice documents

Answer 260

are organized according to date of service because payers often report the results of insurance claims processed on different patients for the same date of service and provider. This mass report is called a batched remittance advice.
Example: Samantha Bartlett contacts the office to request a copy of the transmittal notice for the last date of service. Because the information is on a batched remittance advice, the insurance specialist makes a copy of the page on which Samantha’s information is found. Using the copy, the insurance specialist removes patients’ information other than Samantha’s, and mails the redacted (edited) copy to Samantha. The rest of the copy, which contains other patients’ information, is shredded
Note: If a patient requests a copy of the remittance advice received by the provider, all patient identification except that of the requesting patient must be removed

Question 261

unassigned claims

Answer 261

are organized by year and are generated for providers who do not accept assignment; the file includes all unassigned claims for which the provider is not obligated to perform any follow-up work

Question 262

denied claims and rejected claims

Answer 262

are unpaid claims that have been returned to the provider by clearinghouses or third-party payers. Payers usually explain the reasonn a claim has been denied in the remittance advice (remit) or explanation of benefits (EOB), such as coding errors, missing information, and patient coverage issues. Denied/rejected claims are considered open claims until the appeal process for reconsideration of payment has been exhausted

Question 263

Tracking Unpaid claims

Answer 263

the insurance specialist is responsible for tracking insurance claims submitted to third-party payers and clearinghouses, and tracking unpaid claims is especially important. To ensure that claims are processed in a timely manner (and payment is received), effective claims tracking requires the following:
-Maintaining an electronic copy of each submitted claim
-Logging information about claims submitted in an insurance claims registry (e.g., using medical practice management software)
-Reviewing the remittance advice (remit) to ensure that accurate reimbursement was received

Question 264

The remittance advice contains reason codes for denied claims (claims returned to the provider by payments due to coding errors, missing information, and patient coverage issues; e.g., incorrect policy number, invalid CPT code), which

Answer 264

are interpreted by the insurance specialist. If the claim was denied because the service is not covered by the payer, the claim is not resubmitted. (a bill is mailed to the patient, who receives an explanation of benefits from the payer that indicates the reason for the denial) If the claim was denied due to errors, a corrected claim is submitted to the payer. The insurance specialist should care fully review the entire claim prior to resubmission because processing of the original claim was halted by the payer (or clearing house) upon activation of a reason for denial. Other errors may exist in the claim, which need to be corrected prior to resubmission

Question 265

Remittance Advice Reconciliation

Answer 265

When the remittance advice and payment are received, retrieve the claim(s) and review and post payments to the patient accounts. Be sure to post the date payment was received, amount of payment, processing date, and any applicable transmittal notice number. Claims containing no errors are moved to the closed claims file. Batched remittance advices are placed in the batched remittance advice file)

Question 266

Denied Claims and the Appeals Process

Answer 266

It is important to process claims denials as they are identified to recoup lost revenue for the provider. According to the Optum’s Denial Management: Field-Tested Techniques That get Claims Paid, by Elizabeth W. Woodcock, MBA, FACMPE, CPC effective claims denial management

Question 267

Field-Tested Techniques That get Claims Paid, by Elizabeth W. Woodcock, MBA, FACMPE, CPC effective claims denial management includes the following:

Answer 267

-Identification
-Management
-Monitoring
-Prevention

Question 268

Identification

Answer 268

identify the reason for claims denials and rejections; correct the issues that resulted in denied/rejected claims; interpret claims adjustment reason codes (CARC) (reasons for denied/rejected claim as reported on the remittance advice or explanation of benefits) and remittance advice remark codes (RARC) (additional explanation of reasons for denied/rejected claims); for example, when a procedure code is inconsistent with the reported reason for the procedure code is inconsistent with the procedure (diagnosis), the claim will be denied because the diagnosis does not meet medical necessity for the procedure performed

Question 269

Management

Answer 269

design a work process that resolves denied/rejected claims, such as sorting by type (e.g., coding issues); forwarding denied claims to the appropriate staff person (e.g., coder); and implement a standard work process for processing denied/rejected claims (e.g., determining which types of denials are most common)

Question 270

Monitoring

Answer 270

maintain a log of denied/rejected claims and the response to each, routinely review the log to follow-up on the status of corrected claims that were resubmitted and appeals of denied claims, review samples of submitted appeals to identify work processes that need revision, and proactively review claims prior to submission to ensure accuracy and to reduce claims denials/rejections by clearinghouses and third-party payers

Question 271

Prevention

Answer 271

involve provider staff, providers, and patient at the appropriate level of the claims process to ensure submission of accurate claims and successful appeals of denied claims; for example, if payer preauthorization are not obtained prior to providing services, conduct in-service education to retrain staff

Question 272

an appeal is documented as a letter signed by the provider explaining why a claim should be reconsidered for payment. If appropriate, include copies of medical record documentation. Be sure the patient has signed a release-of-information authoriation

Answer 272

Note: Medicare appeals are not called redeterminations or reconsideration, per BIPA-mandated changes

Question 273

Appealing Denied Claims
A remittance advice may indicate that payment was denied for a reason other than processing an error. The reason for denials may include:

Answer 273

-procedure or service not medically necessary
-pre-existing condition not covered
-noncovered benefit
-termination of coverage
-failure to obtain preauthorization
-out-of-network provider used
-lower level of care could have been provided
-incorrect codes or incorrectly linked codes reported on claim
-bundled service or global period service is not eligible for separate payment, or
-claim contained incomplete information or another insurance plan is primary
Note: When questioning the payer about a remittance advice that includes multiple patients, circle the pertinent patient information. Do not use a highlighter, because payer scanning equipment does not recognize highlighted information

Question 274

The following steps should be taken to appeal each type of denial:

Answer 274

-Procedure or service not medically necessary
-pre-existing condition
-noncovered benefit
-termination of coverage
-failure to obtain preauthorization
-out of network provider used
-lower level of care could have been provided
-incorrect codes or incorrectly linked codes reported on claim
-bundled service or global period service is not eligible for separate payment
-claim contained incomplete information or another insurance plan is primary

Question 275

Procedure or service not medically necessary

Answer 275

the payer has determined that the procedure performed or service rendered was not medically necessary based on information submitted on the claim. To respond, first review the original source document (e.g., patient record) for the claim to determine whether significant diagnosis codes or other important information have been clearly documented or may have been overlooked. Next, write an appeal letter to the payer providing the reasons the treatment is medically necessary
Note: If the medical record does not support medical necessity, discuss the case with the office manager and provider

Question 276

Pre-existing condition

Answer 276

the payer has denied this claim based on the wording of the pre-existing condition clause in the patient’s insurance policy. A pre-existing condition is any medical condition that was diagnosed and/or treated within a specified period of time immediately preceding the enrollee’s effective date of coverage. The wording associated with these clauses varies from policy to policy (e.g., length of time pre-existing condition clause applies). It is possible for an insurance company to cancel a policy (or at least deny payment on a claim) if the patient failed to disclose pre-existing conditions. Respond to this type of denial by determining whether the condition associated with treatment for which the claim was submitted was indeed pre-existing. If it is determined that an incorrect claim was submitted was indeed pre-existing. If it is determined that an incorrect diagnosis code was submitted on the original claim, for example, correct the claim and resubmit it for reconsideration of payment
Note: Beginning in 2014, health insurance plans cannot refuse to cover individuals or charge more because of pre-existing condition. An exception includes grandfathered individual health insurance plans, which individuals purchase privately (not through an employer). Office staff must be familiar with federal regulations regarding insurance coverage of preexisting conditions when a patient changes jobs and/or an employer switches insurance plans

Question 277

Non-covered benefit

Answer 277

The claim was denied based on a list developed by the insurance company that includes a description of items covered by the policy as well as those excluded. Excluded items may include procedures such as cosmetic surgery. Respond to this type of denial by determining whether the treatment submitted on the claim for payment is indeed excluded from coverage. If it is determined that an incorrect procedure code was submitted, for example, correct the claim and resubmit it for reconsideration of payment along with a copy of medical record documentation to support the code change

Question 278

termination of coverage

Answer 278

the payer has denied this claim because the patient is no longer covered by the insurance policy. Respond to this type of denial by contacting the patient to determine appropriate coverage, and submit the claim accordingly. For example, a pateint may have changed jobs and may no longer be covered by a former employer’s health insurance plan. The office needs to obtain correct insurance payer information and submit a claim accordingly. This type of denial reinforces the need to interview patients about current addresses, telephone number, employment, and insurance coverage each time they come to the office for treatment

Question 279

failure to obtain preauthorization

Answer 279

many health plan require patients to call a toll-free number located on the insurance card to obtain prior authorization for particular treatments. Problems can arise during an emergency situation where there is a lack of communication between provider and health plan (payer), because treatment cannot be delayed while awaiting preauthorization. Although such a claim is usually paid, payment might be less and/or penalties may apply because preauthorization was not obtained. If failure to obtain preauthorization was due to a medical emergency, it is possible to have penalties waived. Respond to this situation by requesting a retrospective review of a claim, and be sure to submit information explaining special circumstances that might not be evident from review of the patient’s charge
Example: The patient was admitted to the labor and delivery unit for an emergency c-section. The patient’s EOB contained a $250 penalty notice (patient’s responsibility) and a reduced payment to the provider (surgeon). The remittance advice stated that preauthorization for the surgical procedure (c-section) was not obtained. The provider appealed the claim, explaining the circumstances of the emergency surgery, and the payer waived the $250 penalty and reimbursed the provider at the regular rate

Question 280

Out-of-network provider used

Answer 280

the payer has denied payment because treatment was provided outside the provider network. This means that the provider is not eligible to receive payment for the services/procedures performed. Respond to this denial by writing a letter of appeal explaining why the patient sought treatment from outside provider network (e.g., medical emergency when patient was out of town). Payment received could be reduced and penalties could also apply
Note: Failure to obtain preauthorization and out-of-network provider used are not restricted to managed care plans

Question 281

lower level of care could ave been provided:

Answer 281

This type of denial applies when
-care rendered on an inpatient basis is normally provided on an outpatient basis
-outpatient surgery could have been performed in a provider’s office, or
-skilled nursing care could have been performed by a home health agency
Respond to this type of denial by writing a letter of appeal explaining why the higher level of care was required. Be prepared to forward copies of the patient’s chart for review by the insurance payer

Question 282

Incorrect codes or incorrectly linked codes reported on claim

Answer 282

when the payer denies payment because an incorrect code (e.g., CPT code reported on the Medicare claim instead of HCPCS level II G code) was reported or the diagnosis and procedure/service codes are incorrectly linked on a claim, resubmit the claim with correct codes and/or correct linkage of diagnosis to procedure/service codes

Question 283

bundled service or global period service is not eligible for separate payment

Answer 283

the payer will deny reimbursement when it is determined that multiple CPT and/or HCPCS level II codes were reported when just one code should have been reported for a bundled service. Likewise, the payer will deny payment for claims that contain codes for services that are not eligible for separate payment because they were performed during a global period.

Question 284

Claim contained incomplete information or another insurance plan is primary

Answer 284

When the payer denies payment because the claim was incomplete, resubmit the claim with complete information. When another insurance plan is primary, submit the claim to that third-party payer; when a remittance advice (RA) is received from the primary payer, submit a claim with a copy of the RA to the secondary payer
Note: As a last resort, and after all levels of appeals for which payment should have been made are denied, consider contacting the CEO of the responsible third-party payer. In this appeal letter, explain the reason for appeal and attach copies of all previous appeals correspondence, patient record documentation, and related payer requirements and coding guidelines. Send this high-level appeal using certified mail to the CEO’s office
Note: When a patient presents with a new insurance card during a visit, edit third-party payer information in the patient’s file so that claims are submitted to the appropriate payer

Question 285

Credit and collections

Answer 285

Health care providers establish patient billing policies to routinely collect payments from patients that are due at the time services are delivered (e.g., copayments). Because most of a provider’s fees are reimbursed by insurance plans, implementing consistent credit and collection practices is crucial to the operation of the organization

Question 286

Credit

Answer 286

Ideally, all payments are collected at the time the patient receives health care services. The reality is the alternate payment options are offered to patients (e.g., credit card billing, payment plans, and so on) to improve the organization’s accounts owed to a business for services or good provided.) Accounts receivable are the amounts owed to a business for services or goods provided).

Question 287

If credit arrangements are available for patients, they must be consistently offered to all patients in accordance with the following federal laws:

Answer 287

-consumer credit protection act of 1968 (or truth in lending act)
-electronic funds transfer act
-Equal credit opportunity act
-fair credit and charge card disclosure act
-fair credit billing act
-fair credit reporting act
-fair debt collection practices act (FDCPA)

Question 288

consumer credit protection act of 1968 (truth in lending act)

Answer 288

which requires providers to make certain written disclosures concerning all finance charges and related aspects of credit transactions (including disclosing finance charges expressed as an annual percentage rate; it required creditors to communicate the cost of borrowing money in a common language so that consumers could figure out the charges, compare costs, and shop for the best credit deal

Question 289

Electronic funds transfer act

Answer 289

which establishes the rights, liabilities, and responsibilities of participants in electronic fund transfer systems. Financial institutions are required to adopt certain practices respecting such matters as transaction accounting, preauthorized transfers. (This law applies to financial institutions that partner with providers to process electronic funds transfers)

Question 290

equal credit opportunity act

Answer 290

which prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance, or good-faith exercise of any rights under the consumer credit protection act

Question 291

fair credit and charge card disclosure act

Answer 291

which amended the Truth in Lending Act and requires credit and charge card issuers to provide certain disclosures in direct mail, telephone, and other applications and solicitations for open-eded credit and charge accounts and under other circumstances
(this applies to providers that accept credit cards)

Question 292

fair credit billing act

Answer 292

which amended the Truth in Lending Act and requires prompt written acknowledgment of consumer billing complaints and investigation of billing errors by creditors

Question 293

Fair Credit Reporting Act

Answer 293

which protects information collected by consumer reporting agencies such as credit bureaus, medical information companies, and tenant screening services. Organizations that provide information to consumer reporting agencies also have specific legal obligations, including the duty to investigate disputed information

Question 294

Fair debt collection practices act (FDCPA)

Answer 294

which states that third-party debt collectors are prohibited from employing deceptive or abusive conduct in the collection of consumer debts incurred for personal, family, or household purposes. Such collectors may not, for example, contact debtors at odd hours, subject them to repeated telephones calls, threaten legal action that is not actually contemplated or reveal to other persons the existence of debts
Note: The provider is also responsible for adhering to any state laws that affect credit and collection policies

Question 295

Collections

Answer 295

As important as it is for a provider’s employees to adhere to billing policies (e.g., verify current insurance information for each patient at the time of visit, following up on past-due accounts is crucial to the success of the business

Question 296

A past due account (Or delinquent account)

Answer 296

is one that has not yet been paid within a certain time frame (e.g., 120 days).

Question 297

Providers also track the status delinquent claims

Answer 297

which have not been paid within a certain time frame (also about 120 days)

Question 298

The delinquent claim cycle advances through aging periods

Answer 298

(e.g., 30 days, 60 days, 90 days, and so on) and providers typically focus internal recovery efforts on older delinquent claims (e.g., 120 days or more). As a result, many accounts in the earlier stages of the delinquency cycle are overlooked as they begion to age

Question 299

Problem: coding errors

Answer 299

-downcoding (assigning lower-level codes then documented in the record)
-incorrect code reported (e.g., incomplete code)
-Incorrect coding system used (CPT code reported when HCPCS level II national code should have been reported)
-medical necessity does not correspond with procedure and service codes
-Unbundling (submitting multiple CPT codes when just one code should have been submitted
-unspecified diagnosis codes are reported

Question 300

Problem: delinquent payment

Answer 300

payment is overdue, based on practice policy

Question 301

Problem: Denied claim

Answer 301

-Medical coverage cancelled
-Medical coverage lapsed beyond renewal date
-Medical coverage policy issues prevent payment (e.g., pre-existing condition, noncovered benefit)
-No-fault, personal injury protection (PIP), automotive insurance applies
-Payer determines that services were not medically necessary
-procedure performed was expiremental and therefore not reimbursable
-services should have been submitted to workers’ compensation payer
-services were not preauthorized, as required under the health plan
-Services were provided before medical coverage was in effect

Question 302

Problem: lost claim

Answer 302

claim was not received by payer

Question 303

Problem: Overpayment

Answer 303

-Payer may apply offsets to future provider payments to recoup funds
-payer overpays provider’s fee or managed care contract rate
-provider receives payment intended for patient
-provider receives duplicate payments from multiple payers
-payment is received on a claim not submitted by the provider

Question 304

Problem: Payment errors

Answer 304

-Patient is paid directly by the payer when the provider should have been paid
-patient cashes a two-party check in error (check made out to both patient and provider)

Question 305

Problem: pending claim (suspense)

Answer 305

-claim contains errors
-need for additional information
-review required by payer (e.g., high reimbursement, utilization management, complex procedures)

Question 306

Problem: Rejected claim

Answer 306

-also called soft denials
-claim contains a technical error (e.g., transposition of numbers, missing or incorrect data, duplicate charges or dates of service)
-payer instructions when submitting the claim were not followed
-resubmitted claim is returned (consider submitting a review request to payer)

Question 307

Delinquent claims

Answer 307

awaiting payer reimbursement are never outsourced. They are resolved with the payer

Question 308

The best way to deal with delinquent claims is to prevent them by:

Answer 308

-verifying health plan identification on all payments
-Determining each patient’s health care coverage (e.g., to ensure that pre-existing condition is not submitted for reimbursement on the claim)
-Electronically submitting a clean claim that contains no errors
-contacting the payer to determine that the claim was received
-reviewing records to determine whether the claim was paid, denied, or is in suspense (pending) (e.g., subject to recovery of benefits paid in error on another patient’s claim)
-submitting supporting documentation requested by the payer to support the claim

Question 309

payers establish time frames after which they will. not process a claim.

Answer 309

Such as 180 days from the date of service. Once the claims submission date has passed, it is extremely difficult to obtain reimbursement from the payer, and the provider is prohibited from billing the patient for payment

Question 310

To determine whether a claim is delihnquent, generate an accounts receivable aging report

Answer 310

this shows the status, (by date) of outstanding claims from each payer, as well as payments due from patients.

Question 311

At this point many practices outsource (contract out) delinquent accountws to a ful-service collections agency that utilizes collection tactics

Answer 311

including written contracts and multiple calls from professional collectors (Collection agencies are regulated by federal laws, such as FDCPA, which specifies what a collection source may or may not due when pursuing payment of past-due accounts) Agencies that collect past-due charges directly from patients can add a fee to the delinquent account balance if the practice originally notified the patient that a fee would be added if the account was sent to an outside collection source for resolution

Question 312

An account receivable that cannot be collected by the provider or a collection agency is called a bad debt

Answer 312

to deduct a bad debt, the amount must have been previously included in the provider’s income. Providers cannot deduct bad debts for money they expected to receive but did not (e.g., for money owed for service performed) because that amount was never included in their income

Question 313

litigation (legal action)

Answer 313

to recover debt is usually a last resort for a medical practice. If legal action is taken, it usually occurs in small claims court where individuals can sue for money only without a lawyer (each state establishes limits for small claims, ranging from $2,000-$25,000)

Question 314

Example:

Answer 314

An insurance company mails a check in the amount of $350 to the patient because the physician who treated the patient is a nonparticipating provider (nonPAR) for that health plan. The check is reimbursement for CRNA anesthesia services provided to the patient during outpatient surgery. The patient cashes the check and spends it on a weekend vacation. When the patient receives the bill for CRNA anesthesia services, the money received from the insurance company is not longer available to pay it. That account becomes delinquent and is outsourced to a collection agency, which attempts to collect the payment. The collection agency is unable to obtain payment from the patient, and the amount is considered a “bad debt” for the provider’s practice.

Question 315

Ten steps to an effective collection process

Answer 315

1. call the patient within one week after providing services to determine patient satisfaction, and mention that an invoice for the outstanding balance is payable upon receipt.
2. mail a duplicate invoice ten days after the due date with “past due” stamped on it to alert that the due date has passed
3. mail a reminder letter with a duplicate invoice as the second overdue notice to remind the patient that the account needs attention.
4. make the first collection call, determine the reason for nonpayment and obtain a promise to pay
5. mail the first collection letter to the patient
6. make a second collection call to the patient to request full payment, and obtain a promise to pay
7. mail the second collection letter
8. make the third collection phone call, and explain that the account will be submitted to a collection agency if payment is not made
9. mail the final collection letter, and state that the account is being turned over to a collection agency
10. submit the account to a collection agency

Question 316

State insurance regulators

Answer 316

insurance is regulated by the individual states, not the federal government. State regulatory functions include registering insurance companies, overseeing compliance and penalty provisions of the state insurance code, supervising insurance company formation within the state, and monitoring the reinsurance market. State regulators ascertain that all authorized insurance companies meet and maintain financial, legal, and other requirements for doing business in the sate. Regulators also license a number of insurance-related professionals, including agents, brokers, and adjusters.

Question 317

If the practice has a complaint about an insurance claim, contact the state insurance regulatory agency (e.g., state insurance commission) for resolution.

Answer 317

Although the commissioner will usually review a health care policy to determine whether the claims denial was based on legal provisions, the commissioner does not have legal authority to require payer to reimburse certain claims

Question 318

Example

Answer 318

An insurance company mails a check in the amount of $350 to the patient because the physician who treated the patient is a nonparticipating provider (nonPAR) for that health plan. The check is reimbursement for CRNA anesthesia services provided to the patient during outpatient surgery. The patient cashes the check and spends it on a weekend vacation. When the patient receives the bill for CRNA anesthesia services, the money received from the insurance company is not longer available to pay it. That account becomes delinquent and is outsourced to a collection agency, which attempts to collect the payment. The collection agency is unable to obtain payment from the patient, and the amount is considered a “bad debt” for the provider’s practice.

Question 319

improper payments information act (IPIA) of 2002

Answer 319

IPIA legislated the Comprehensive Error Rate Testing (CERT) program, which was implemented in 2003 to access and measure improper payments in the Medicare fee-for-service program. CERT produces a national paid claims error rate, which is used to target improvement efforts.

Question 320

Summary

Answer 320

An insurance company mails a check in the amount of $350 to the patient because the physician who treated the patient is a nonparticipating provider (nonPAR) for that health plan. The check is reimbursement for CRNA anesthesia services provided to the patient during outpatient surgery. The patient cashes the check and spends it on a weekend vacation. When the patient receives the bill for CRNA anesthesia services, the money received from the insurance company is not longer available to pay it. That account becomes delinquent and is outsourced to a collection agency, which attempts to collect the payment. The collection agency is unable to obtain payment from the patient, and the amount is considered a “bad debt” for the provider’s practice.

Question 321

Revenue is defined as the total amount of money that a business receives from its normal operations over a period of time
(such as a year)

Answer 321

Revenue cycle management (RCM) is, therefore, a key financial process that is crucial for healthcare providers to receive payment from patients and third-party payers for their services. In a physician practice, revenue cycle management is also called accounts receivable management

Question 322

Medical practices have many operating expenses (also called overhead) that need to be paid

Answer 322

cash flow is the cash that a business has generated and has available for use, especially to pay expenses. An essential aspect for timely cash flow includes proper management of the revenue cycle

Question 323

The following is a list of common expenses that are incurred to operate a medical office

Answer 323

-salaries and benefits
-facility expenses (rent/mortgage, taxes, utilities, maintenance)
-information technology (computers, EHR, billing software, patient portal, telephone)
-medical equipment and supplies
-administrative supplies
-furniture
-professional liability insurance

Question 324

functions of revenue cycle management

Answer 324

the goal of revenue cycle management is to develop a strategy to make sure the provider is paid the full amount for services as quickly as possible. Implementing a revenue cycle strategy starts with identifying the three main functions: identify revenue, generate revenue and collect revenue

Question 325

identify revenue

Answer 325

-make sure the p0hysicans are properly reimbursed for the services they provide by carefully documenting all services rendered
-code the services properly in order for the practice to receive the highest reimbursement
-determine if you are undercharging for services.

Question 326

generate revenue

Answer 326

-reduce gaps in scheduling by sending appointment reminders because missed appointments equal lost revenue
-encourage patients to make appointments who are overdue for follow-up care
-utilize advance practice progviders (physician assistants and nurse practitioners) to see patients

Question 327

collect revenue

Answer 327

-verify the patients current insurance information and eligibility so claims are filed correct
-follow up on claims that have been denied or underpaid
-collect copays, and balances due from patients up front
-offer payment plans

Question 328

Features of Revenue Cycle Managmenet

Answer 328

the front desk staff, healthcare provider, and billing office staff all play an important role in the revenue cycle.

Question 329

Front Desk Staff

Answer 329

when an appointment is scheduled, the administrative staff will handle the scheduling, verify the insurance eligibility, and establish the patient account

During the patient registration, accurate demographic and insurance information is obtained

The patient is also asked to sign consent forms for treatment and release of information
The Notice of Privacy Practices is reviewed with the patient by front desk staff.
An important role of the front desk staff is requesting up-front payment from patients. These can include copays, unpaid balances from previous visits, payment for non-covered services, and payment from uninsured patients.
Discharge activities include providing instructions to the patient and scheduling any follow up visits

Question 330

physician/ healthcare provider

Answer 330

the provider must complete charge capture duties, which document all services provided to the patient. The provider records all diagnoses that have been monitored, evaluated, or treated

Question 331

billing office staff

Answer 331

the medical coder will assign the most appropriate codes for all diagnoses that were evaluated and all services, procedures, and supplies that were provided for maximum reimbursement
claims processing involves entering patient and provider data into the billings software and transmitting the medical claims to third-party payers
third-party payer reimbursement posting is done when the remittance advice is received from the insurance companies. Payments are posted to patient accounts, and contractual adjustments are made.
Resubmission of claims is necessary for any claims that are rejected by the payers, and appeals are filed for any claims that are denied.
Patients are billed for balances owed for deductibles, copays, coinsurance and non-covered services.
Patient payments that are received are posted to their accounts.
Collection activities for past-due balances will include letters and phone calls. After a certain time has passed, an account may be turned over to an outside collection agency
Payments received resulting from collection attempts are posted to patient accounts

Question 332

Registration form

Answer 332

A patient registration form, also called an intake sheet, is used to create the patient’s financial record. After the patient completes the form, it’s important to review it for accuracy and completeness. If any information is missing, the patient should be interviewed appropriately to complete the form. The administrative staff must gather current demographic and insurance information from all patients so that the practice will be able to file an accurate insurance claim later. Any mistakes will result in a delay in reimbursement. At every subsequent visit, the patient should be asked to verify and update the information on this form.

It’s a good idea to include a photo of the patient on the registration form to prevent medical identity theft. Medical identity theft is particularly vicious kind of crime. Medical facilities are vulnerable to this threat because their databases can be a target of computer hackers and unauthorized users.

Question 333

Examples of medical identity theft include:

Answer 333

-patients without health insurance assume another person’s identity and receive free medical care courtesy of that person’s insurance policy
-healthcare providers submit fake billings using stolen Medicare numbers
-an employee steals information and sells it for financial gain
-dishonest healthcare employees call in narcotics prescriptions in a patient’s name and pick up the prescriptions themselves

Question 334

Demographic information is used to identify the patient and includes

Answer 334

-full name
-electronic medical record number (EMRN)
-former names, maiden names, AKA
-DOB
-gender
-race/ethnicity
-preferred language
-ssn
-address
-phone numbers
-email address
-marital status
-occupation
-responsible party, if applicable
-emergency contact name/number
-preferred pharmacy

Question 335

a patient’s insurance coverage often changes from year to year, so be sure to verify the information every time an established patient makes an appointment.

Answer 335

If the patient has coverage under more than one health insurance plan, gather information for all possible payment sources – primary, secondary, and tetiary insurance

Question 336

health insurance information includes:

Answer 336

name of the third-party payer
-name of the primary subscriber
-patients relationship to primary subscriber
-individual identification number
-group identification number
-copy of the insurance card (front and back)

Question 337

primary insurance

Answer 337

this is the insurance responsible for paying insurance claims first

Question 338

secondary insurance

Answer 338

this is the insurance responsible for any payment remaining after the primary insurance plan has paid its contracted amount to the provider

Question 339

tertiary insurance

Answer 339

this is the insurance in the third position and will cover any costs not already paid by the primary and secondary coverages. Tertiary insurance is rare, and most medical offices will only submit claims to primary and secondary insurance plans

Question 340

encounter form

Answer 340

an encounter form is a very important document used in a medical office and lists the patient’s diagnoses and the services rendered to the patient during the office visit. An encounter form can be customized to include unique requirements of each physician’s office
When medical codes are part of the encounter form, ongoing maintenance of the form is required because these codes are routinely deleted, revised, and updated. Reviewing the form on a regular basis prevents the reporting of erroneous medical codes, reducing the incidence of denied claims.
Coding and billing staff use this form to initiate, prepare, and submit medical claims to insurance payers
In addition, patients are often given a print-out of the encounter form as a receipt for payment.

Question 341

Chargemaster

Answer 341

a chargemaster, also called a charge desription master or CDM, is at the heart of the revenue cycle for hospitals, serving as the starting point for billing payers and patients. A chargemaster is a computer database that stores information about services, procedures, supplies, prescription drugs, diagnostic tests, equipment fees, and room charges, along with the charges for each. Hospitals use the chargemaster to create a summary of services and charges that are then used to create a claim for payers, and to bill the patient. Hospital executives also use chargemaster data to track service volume, costs and revenue

Each hospital determines its own chargemaster prices, and most hospitals have a chargemaster team to manage the process. The team typically includes the Cheif Financial Officer, chargemaster director, representatives of various departments and physicians. The team also partners with coders and billers to make sure medical documentation and coding practices align with the chargemaster to avoid missing charges and lost revenue

Question 342

Four Stages of an insurance claim cycle

Answer 342

after the patients encounter takes place, the insruance claim cycle begins. This cycle consists of four stages:
1. claims submission, including electronic data interchange (EDI)
2. Claims processing
3. claims adjudication, including rejected and denied claims
4. payments

Question 343

Claims submission

Answer 343

is the transmission of claims data to payers for processing. The health insurance specialist will code the diagnoses and procedures and post the provider’s charges using a computerized billing system. The billing system may be a component of the electronic health record or a separate software program. The insurance claim can then be submitted electronically, or a paper claim form can be generated

Question 344

Electronic Data Interchange (EDI)

Answer 344

EDI is the computer-to-computer transfer of data between providers and third-party payers. EDI uses a single set of standards to enable the entire healthcare industry to communicate electronic transactions that include eligibility, preauthorizations, payments, claims and referrals. All payers accept electronic claims, and EDI has almost entirely replaced the processing of paper claims. To facilitate electronic claims submission, most providers utilize a clearinghouse.

Question 345

A clearinghouse acts as the middleman in the claims submission process, making it easier for provider to submit claims to many different insurance carriers. The provider’s medical billing software creates the claims, which are often submitted in a group0 at the end of each day. This is referred to as a batch. A batch of claims is uploaded to the clearinghouse via electronic files. The clearinghouse’s software then scrubs (or reviews) the claims for accuracy. Any claims with errors go back to the provider to correct and resubmit.

Answer 345

Once it accepts the electronic claims, the clearinghouse securely transmits them to the specified payers with which it has already established secure connection that meets current formatting standards. A unique identifier, called the payer I.D., is assigned to each insurance carrier by the Centers for Medicare and Medicaid Services. The payer I.D. tells the clearinghouse which insurance carrier should receive the claim. The payer I.D. is often found on the patient’s insurance card

Question 346

Claims processing

Answer 346

the clearinghouse uses scanning technology to read the information on the claim to analyze and verify the data before it is transmitted to the insurance carriers. However, if the analysis reveals incorrect or missing information, the claim is rejected and returned to the provider. The provider can correct the errors and resubmit the claim for processing. Claims that can be corrected and resubmitted include data entry errors, invalid codes, a diagnosis-gender discrepancy, or an age related discrepancy. Clean claims are then submitted to carriers for reimbursement

Question 347

Claims adjudication

Answer 347

every insurance claim undergoes a process to determine whether the insurance company should pay it or not, and this process is known as adjudication. Part of the process includes verifying that the patient is eligible for benefits under the policy. The company also determines whether the policy covers the procedures, services and supplies the patient received. Any procedure or service reported on the claim that is not included on the policy’s master benefit list is a non-covered benefit and will not be paid. The last step is determining whether the diagnoses justify the treatment provided – in other words – necessity. At the end of the process, the insurance company will either make a payment, or it will explain why it isn’t responsible for paying the claim.

Question 348

Rejected claims

Answer 348

two of the biggest obstacles affecting the revenue cycle are insurance claim rejections and claim denials. These two terms, however, do not mean the same thing. Therefore, not having a clear understanding of their differences can have a negative impact on the revenue cycle

Question 349

Insurance claims that are rejected can’t be processed by insurance companies as they were never entered into their computer systems because they failed to meet specific data requirements, These errors can be corrected, and the health insurance specialist can resubmit the claim

Answer 349

These errors can include
-data entry errors (YYP4020322 entered as YYP4020233)
-incorrect patient gender (a hysterectomy was submitted for a male patient)
-patient cannot be identified (the name is different)
-missing information (date of birth)
-invalid medical code

Question 350

Denied Claims, on the other hand, were received and processed by the payer and a negative determination was made. A denied claim cannot be resubmitted. It requires the provider to file an appropriate appeal or request reconsideration. With this type of denial, the provider might need to involve the patient in the resolution of the problem

Answer 350

-patient was not covered by the policy on the date of service
-patient has not responded to a request for information from the payer
-procedure or service is not medically necessary
-insurance company is not the primary payer
-policy does not cover the service or procedure
-prior authorization was not obtained
-claim was a duplicate
-the payer’s time frame for filing a claim has passed

Question 351

Payment

Answer 351

after the insurance carrier processes the claim, it send payment directly to the provider. A remittance advice (RA) is also generated and sent to the provider to explain how the reimbursements were determined. The RA usually contains the claim information for multiple patients. A summary of the payment is also sent to the patient and is called an explanation of benefits (EOB)
Some clearinghouses offer an electronic remittance advice (ERA) and electronic funds transfer (EFT) services. ERA is the electronic version of the paper-style remittance advice. EFT is the direct deposit of reimbursements into the provider’s designated bank account

Question 352

Remittance Advice

Answer 352

a remittance advice is as document that the third-party payer send the provider to explain how they determined the reimbursement for a claim. The amount that an insurance company pays for the services in a claim depends on the policy’s allowable charges.
Remittance advice also tells the provider how much the patient is responsible for payer, such as any remaining deductible, copayment, and/or coinsurance..
The billing specialist should review the remittance advice carefully for “reason codes” or “remarks” for denied claims. IF a claim was denied due to coverage issues, the claim cannot be resubmitted and a bill is mailed to the patient with the reason for the denial (for example, coverage was terminated).
Once the remittance advice is reviewed, the billing specialist can post the insurance payment and any patient liability amount to the appropriate patient account

Question 353

New patient registration

Answer 353

obtaining proper reimbursement is everyone’s business in a medical office. From the moment the patient first requests an appointment until the provider receives payment, the entire office staff must work to capture complete and accurate information
It’s helpful to ask new patients to come in a few minutes early to fill out paperwork. They’ll need to complete a registration form with their demographic and insurance information, and office staff will scan or copy their insurance card, front and back.. They’ll sign an authorization for insurance billing, which allows release of medical information to the insurance carrier and assigns insurance benefits to the physician.

Question 354

The administrative staff should also:

Answer 354

-ask the patient to supply previous medical records from other providers prior to the appointment
-ask the patient to bring all insurance cards to the first appointment
-inform the patient of the provider’s payment policy, including whether copays are due at the time of service.
To increase office efficiency, mail or email new patients the registration paperwork to be completed and brought to the office at the scheduled appointment

Question 355

New patient insurance consideration

Answer 355

new patients should always be asked for the name of the guarantor on their account. The guarantor is the person who ultimately accepts financial responsibility to pay the patient’s bill. In most cases the guarantor is the adult patient who is receiving the service If the patient is a minor, the guarantor will be the child’s parent or legal guardian. In the case of an incapacitated adult, this could be a family member or caregiver. The guarantor should not be confused with the subscriber of the insurance. This may or may not be the same person
If the new patient has coverage under more than one health insurance plan, gather information for all possible payment sources. Coordination of benefits (orCOB) is an important concept to understand. IT applies when an individual is covered by more than one insurance policy. The important point to remember is that th payments made by all the insurance companies may not exceed 100% of the total bill.

Question 356

Here is an example of more than 100% of the bill payments

Answer 356

Charge for Office Visit: $120

Claim submitted to insurance #1 (Primary insurance): $120
Claim submitted to insurance #2 (Secondary insurance): $120
Insurance #1 paid: $120
Insurance #2 paid: $120
TOTAL PAID: $240

The medical biller submitted identical claims to both insurance companies, and the physician was reimbursed more money than the actual bill. To prevent this, it’s the responsibility of the medical biller to “coordinate the benefits.” The medical biller should bill the primary insurance for the full amount, and bill the secondary insurance only for any balance remaining after the primary insurance has made their payment and sent the remittance advice.

Question 357

Finally, when a child is covered by bother parents’ insurance policies, use the birthday rule to determine which health insurance coverage is the primary payer.

Answer 357

Look at the birth month and day of both parents-not the year- and whoever’s birthday comes earlier in the calendar year is the one whose insurance is used as the primary payer. So, if the mother was born January 22 and the father was born July 7, the mother’s insurance would be primary.

Question 358

Collection of patient balances

Answer 358

implementing consistent collection practices is crucial to the operation of the practice. In order to ensure that patients pay their bill, it’s important for medical offices to follow some consistent collection practices.

Question 359

Run an accounts receivable aging report

Answer 359

use the report to determine which payments are past due from patients. A claim cycle typically advances through aging periods (30 days, 60 days, 90 days, and 120 days.) An account is consi8derd past-due or delinquent if the patient hasn’t paid the balance in full or requested payment plan within a certain period of time, usually 120 days

Question 360

Communicate the office financial policies with patients

Answer 360

do more than hand patients statement of financial responsibility. A discussion about the financial policies is time well spent, especially since patients with high-deductible health plan may not understand their coverage

Question 361

Train the Staff

Answer 361

front-desk staff should be trained to speak with patients, and answer questions appropriately and professionally with the goal of collecting payments at the time of service

Question 362

Mail statements every 30 days

Answer 362

practices can also post account information on the patient portal

Question 362

offer payment option

Answer 362

make payments as convenient as possible. Patients should be able to remit payments in several ways; mailing a check or money order, calling the billing office with credit or debit card information, or paying online with a credit or debit card

Question 363

Offer payment plans when appropriate

Answer 363

the payment plan is a wonderful tool to keep past-due balances under control, but once in place it needs monitoring

Question 364

Use an outisde collection agency

Answer 364

severely delinquent accounts with large balance can be transferred to an outside collection agency. After that, the provider will only receive a percentage of any amounts the agency collects

Question 365

Fiar debt collection practices

Answer 365

the Fair Debt Collection Practices Act (FDCPA) addresses what a debt collector may or may not due when pursuing payment of past due accounts. For example, a debt collector cannot:
-communicate with the debtor at inconvenient hours
-Contact the debtor at the debtor’s place of employment
-discuss the patient’s medical bill with anyone other than the patient
-threaten legal action that is not actually contemplated
-telephone repeatedly with the intent to annoy or harass
The Fair Debt Collection Act also provides for private rights of action against debt collectors, and permits debtors to recover actual damages, statutory damages, and attorney’s fees for violations of its terms

Question 366

What is price transpaency

Answer 366

simply put, price transparency, is letting patients know in advance what they are going to have to pay for healthcare services, including out-of-pocket costs. Certain patients, especially those who are self-pay or have high deductible health plans, are particularly sensitive to the cost of medical care.
Few industries provide a service to consumers without first estimating the cost. All too often in healthcare, patients are surprised by unexpected and expensive bills for the care they received. If patients know what something is going to cost, they can make better decisions and are more likely to pay the bill when it becomes due. Therefore, price transparency makes it easier for providers to collect what they are owed and maximize their reimbursement

Question 367

Price transparency and Physician Practices

Answer 367

Effective January 2021 the Centers of Medicare and Medicaid Services (CMS) requires hospitals to publish comprehensive list of their standard charges in a consumer-friendly format. They must also disclose their rate information, all physicians should heed patient demand for price transparency to stay competitive. Physicians who provide readily accessible pricing information that is easily understood will improve patient satisfaction and grow market share

Question 368

Improving price transparency:
Physicians can create a successful price transparency program by implementing the following:

Answer 368

-Perform preauthorizations and verify eligibility – these will determine the patient’s payment responsibility.
-Explain the charges – ensure the patient is educated as to insurance benefits and what to expect as far as out-of-pocket costs
-train staff – make information about prices readily available to patients for common procedures or services they anticipate receiving
-screen patients – identify the patient who is at a higher risk for being unable to pay. Determine if there is a funding source for which they may qualify and help them secure that funding
-offer payment solutions – include technology that supports online and mobile bill payments. Thanks to the popularity of digital payment solutions, such as Zelle, Paypal, Venmo, and Apple Pay, consumers are expecting this technology across all industries, including healthcare. Offering patients a link in a text or email message4 that they can click through to make a payment from their smartphone, tablet, or other device gives them an easy way to pay for their medical bills

Question 369

reasons