Most healthcare clients are covered by some form of health insurance. Insurance pays all or part of charges for medical services, depending on the policy.
Codes are used to represent services rendered to a client. Charges submitted to an insurance company must include the correct code for each service in order to be reimbursed.
Current Procedural Terminology (CPT) codes are the most widely accepted codes for reporting medical procedures and services. HCPCS Level I CPT codes are used to report all medical procedures and professional services in ambulatory or outpatient healthcare settings. Accurate coding is essential to reimbursement by third-party payers.
HCPCS, Level II
Standard coding used to identify products, supplies, and services not covered in the HCPCS Level I CPT codes are HCPCS Level II codes. Examples of covered items include ambulance services, prosthetics, and orthotics. Bundled charges are standard reimbursement amounts set for services rendered by one or more providers in treating a specific condition. Accurate coding is essential. If a practice codes services incorrectly, it constitutes fraud.
ICD-9-CM, ICD-10-CM, and ICD-10-PCS
Until October 1, 2015, ICD-9-CM codes were used by healthcare providers to report medical diagnoses and procedures on claims for payment. Since that date, ICD-10-CM codes are required to report medical diagnoses on claims for payment by all healthcare providers. HCPCS Level I CPT codes are required to report medical procedures and professional services in ambulatory and outpatient healthcare settings. ICD-10-PCS codes must be used to report medical procedures in U.S. hospitals inpatient healthcare settings.
Fraud and Abuse Regulations
The following statutes apply to fraud and abuse in the healthcare field: False Claims Act (FCA); Anti-Kickback Statute (AKS); Physician Self-Referral Law (Stark Law); Social Security Act; United States Criminal Code. Inaccurate coding on claims is considered fraud.
You’ll want to look more deeply into the following concepts and understand how they function, including any terms mentioned here that you do not fully understand. We have provided a basic list and some simple definitions to get you started.
Third-party payers are public and private insurance agencies that may be responsible for payment of healthcare charges.
Commercial vs. Government Plans
Commercial health is provided by private or non-profit companies like Aetna, Blue Cross and Blue Shield, and UnitedHealthcare. There are also well-known government plans that cover millions of eligible Americans. Medicare provides federally funded health insurance coverage for citizens over 65 and those who are disabled. Advance Beneficiary Notice (ABN) must be provided to Medicare clients when a service offered will not be covered by Medicare.
Medicaid is a government-funded program covering people who meet requirements concerning income, employment, and other requirements that vary by states. TRICARE and CHAMPVA are government-funded programs that cover military families. The Family Medical Leave Act (FMLA) is a federal law that provides job-protected leave to employees for medical or family reasons. Providers may be asked to fill out paperwork related to FMLA.
Managed Care Organizations
In a managed care system, the coverage group makes a periodic payment to the medical provider, based on a fixed rate per person enrolled for coverage. The policyholders would then be able to seek care from within a network of preferred providers. In instances where the patient would seek out-of-network care, a specialty referral, or an elective surgery, the managed care group would have to issue prior authorization before treatment is obtained.
The providers or case managers of managed care are incentivized to save money by identifying the most affordable and effective treatments. The process requires preauthorization for any medical services, including diagnostic and surgical options, a review of the treatment plan, and an emphasis on discharge planning. There are specific treatment guidelines for high-cost disorders and there is a list of medications that do not require pre-approval.
Employers are required to hold workers compensation insurance in the event that an employee is injured while working. This compensation must cover any costs related to the treatment of the injury, including medical bills as well as a large portion of any lost wages. .
Insurance companies will require the submission of a claim after treatment is administered to issue payment for the services. They typically require unique information for proper submission. The provider and their staff should work directly with the companies to determine their requirements.
Most insurance companies require preauthorization, sometimes called precertification, prior to receiving some types of treatment. This is a part of the contractual obligations that the policyholder is bound to, and is necessary for any specialty referrals, elective surgeries, and any medical equipment that the patient may need.
Before any treatment is sought, the patient can seek a predetermination to learn what may or may not be covered. This is not a requirement, such as the preauthorization, but can be beneficial in the event of payment disputes arising after treatment has been provided.
A preauthorization would be requested from the insurance company by the medical provider’s staff, whereas a predetermination would be requested by the patient.
Submission, Appeals, and Denials
Prior to submission of a claim, the claim form (CMS1500 for most providers) must be completed by the medical assistant. This includes demographic information, the physician information, and details of any services. These are completed using medical codes to describe the diagnosis, treatments, and procedures. They are then submitted to the insurance provider and, if accepted, they are processed for payment.
Denial of a claim may be made for various reasons, including the treatment being a non-covered one or considered elective or cosmetic. In the event the patient believes the denial is unjustified, he or she can request an appeal, or a full and fair review. The insurance provider would provide details on the process for appeal submission.
An Explanation of Benefits (EOB) is a document prepared for the patient by the provider that contains coverage details. Included details are the deductible amount necessary before additional coverage, how much the company allows for the treatment, how much was paid, and any other financial obligations of the patient related to the claim. If any portion of the claim was excluded or unpaid, the EOB would contain the reason for denial.
Healthcare Delivery Models
There are many different healthcare delivery models, including:
Health maintenance organization (HMO): This model covers large groups of people for a monthly premium but also typically requires a copay at the time of service. When physicians are directly employed by the HMO, it is considered a closed-panel HMO. Open panel HMOs establish a network of providers who agree to a contract.
A Preferred Provider Organization (PPO): This is established when a group of hospitals and physicians contract with an insurance company at a discounted rate. They typically do not have contracts for laboratory or pharmaceutical services.
Point-Of-Service (POS): This plan is an HMO that allows individuals to choose a provider from a list of physicians that have preapproved a discounted payment rate.
Patient-Centered Medical Home (PCMH): This model allows all treatment to be coordinated with the patient’s primary care physician. It emphasizes continuity of treatment.
Accountable Care Organization (ACO): These are groups of providers and facilities that volunteer to provide high-quality treatment for those patients covered by Medicare.
Hospice: Hospice is a method of care for the terminally ill. It focuses on all care aspects for the patient rather than just the illness. It assists with easing the physical, emotional, and psychological effects of the illness.
Collaborative Care Model: Collaborative Care Models integrate physical and mental health by focusing on collaboration between all providers of the patient.
Insurance Finance Applications
Contractual requirements of plans: Insurance policies are legally bound by the contract that details which claims the insurance company must be paid for the provider.
Processing insurance payments: When the insurance company receives a properly coded claim, it is their responsibility to issue payment for all covered services in a timely manner. If any portion of the claim is denied, details regarding why should be provided.
Write-off amounts: This is the difference between the actual medical charge and the amount the insurance company is willing to pay. Insurance companies can limit what the professional can charge for a service if the provider uses their network.
Tracking unpaid claims:There should be an organized filing system for tracking all claims, including those that are unpaid. When a claim is received, an accounting record should be created and sent to accounts receivable as money due. A claims register should be created to track claim payment and manage cash flow. Generally, the older a claim is, the less likely it is to be paid.
The Health Information and Portability and Accountability Act (HIPAA) was passed in 1996 and provides a uniform national standard for protection of patient privacy, including cases of electronic transmission of medical information. The act also allocated funds for the investigation of healthcare fraud.