Medical Insurance

1. Medical Insurance Visit Charges and Compliant Billing Chapter 7

2. Learning Outcomes After studying this chapter, you should be able to: Explain the importance of properly linking diagnoses and procedures on health care claims. Describe the use and format of Medicare’s Correct Coding Initiative (CCI) edits. Discuss types of coding and billing errors. Explain major strategies that help ensure compliant billing.

3. Learning Outcomes (Continued) Discuss the use of audit tools to verify code selection. Describe the fee schedules that physicians create for their services. Compare the usual, customary, and reasonable (UCR) and the resource-based relative value scale (RBRVS) methods of determining the fees that insurance carriers pay for providers’ services.

4. Learning Outcomes (Continued) Describe the steps used to calculate RBRVS payments under the Medicare Fee Schedule. Identify the three methods most payers use to pay physicians. Discuss the calculation of payments for participating and nonparticipating providers, and describe how balance billing regulations affect the charges that are due from patients.

5. Key Terms • CCI modifier indicator • CCI mutually exclusive code (MEC) edit • Charge-based fee structure • Code linkage • Conversion factor Advisory opinion Allowed charge Assumption coding Audit Balance billing Capitation rate (cap rate) CCI column 1/column 2 code pair edit

6. Key Terms (Continued) • Geographic practice cost index (GPCI) • Internal audit • Job reference aid • Medicare Physician Fee Schedule (MPFS) • OIG Work Plan • Professional courtesy Correct Coding Initiative (CCI) Documentation template Downcoding Edits Excluded parties External audit

7. Key Terms (Continued) • Retrospective audit • Truncated coding • Upcoding • Usual fee • Usual, customary, and reasonable (UCR) • Write off Prospective audit Provider withhold Relative value scale (RVS) Relative value unit (RVU) Resource-based fee structure Resource-based fee structure relative value scale (RBRVS)

8. Compliant Billing • Medical insurance specialists help ensure maximum reimbursement for medical services by submitting correct insurance claims. • The claims must also be compliant with rules and regulations established by state and federal governments, as well as insurance payers.

9. Diagnoses Procedures

10. Diagnoses Procedures Code Linkage • Each procedure on an insurance claim must be linked to a corresponding diagnosis. • The diagnosis must support the medical necessity of the specific procedure performed.

11. Consequences of Inaccurate Coding or Incorrect Billing • Denied claims • Delays in processing claims • Reduced payments • Fines and other sanctions • Exclusions from payers’ programs • Prison sentences • Loss of medical license

12. Knowledge of Billing RulesMedicare Regulations • CMS publishes Medicare proposed and approved rules in the Federal Register. • CMS also provides the Medicare Carriers Manual (MCM) • The MCM contains the rules and interpretations of Medicare guidelines

13. Knowledge of Billing RulesMedicare Regulations National Correct Coding Initiative (CCI) • CCI is an ongoing process to standardize coding and prevent inappropriate payment for Medicare claims. • A software program contains code edits to detect inappropriate code usage.

14. Knowledge of Billing Rules CCI Edits • Column 1/Column 2 edits • Mutually exclusive code edits • Modifier indicators

15. Knowledge of Billing Rules • The OIG announces an annual work plan as part of the Medicare Fraud and Abuse Initiative. • OIG publishes advisory opinions to clarify complicated, unclear regulations. • OIG maintains the List of Excluded Individuals/Entities.

16. Knowledge of Billing RulesPrivate Payers’ Regulations • Private payers have code edits similar to CCI. • The claims-editing software from different payers vary. It is important for the insurance specialist to monitor claims payment for edits that may have been applied incorrectly.

17. Compliance Errors • Medical necessity errors • Poor linkage between diagnosis and procedure • Billing for experimental procedures • Services at inappropriate level

18. Compliance Errors • Coding errors • Truncated diagnosis codes (not coding to the highest level of specificity) • Codes lacking proper documentation • Errors related to billing • Reporting uncovered services • Using incorrect modifiers • Upcoding

19. Strategies for Compliance • Bundled codes • Global periods • E/M national averages • Modifier use • Professional courtesy and discounts • Job reference aids

20. Audits • Auditing processes monitor coding and billing practices to assure established policies and procedures have been followed. • Auditing and monitoring processes should make it easy for employees to report suspected fraud and abuse.

21. Audits Audit reviews may be • Internal • External

22. Payer Audits Private Payers Government Investigators Accreditation Audits Managed care plans perform audits based on NCQA or URAC guidelines. External Audits External audits are conducted to ensure compliance with coding and billing regulations.

23. Prospective Are done before claims are submitted to payer. Reduce the possibility that claims will be denied or downcoded. Retrospective Are done after RA received from payer. Analyze feedback from payers to identify and address problems. Internal Audits • Internal audits reduce • the chance of an investigation or external audit • potential liability when an external audit occurs

24. Audit Tools Best Practice • Auditing tools based on CMS/AMA Documentation Guidelines for Evaluation and Management Services are recommended for internal audits. • Common tools used are E/M documentation review forms.

25. Comparing Physician Fees and Payer Fees In addition to knowing how to prepare and file health care claims, medical insurance specialists • review patients’ insurance coverage • estimate charges payers will cover • collect some types of patient payments at time of service

26. Comparing Physician Fees and Payer Fees The medical insurance specialist skills should include • how providers and payers set their fees • knowledge of patient financial responsibility • how to calculate charges due from patients • how to effectively communicate with patients

27. Payer Fee Schedules • Charge-based fee structures • What similar providers charge • Resource-based fee structures • How difficult is the procedure? • How much overhead is used? • What is the relative risk?

28. Usual Fees • Providers establish a list of the procedures and services they frequently perform and assign fees. • The usual fees are those fees charged to patients on a routine basis, under typical conditions.

29. UCR Fees • Are based on the fees that many providers have charged for similar services. • Fee data is compiled and marketed by software vendors and publishers. • Payers analyze the collected fee data to determine the percentage of fee ranges they will pay. Usual, Customary, and Reasonable (UCR) UCR usually reflects the prevailing charges

30. RVS Relative Value Scale • Fees based on RVS take into account the relative difficulty of procedures. • More difficult procedures are assigned a higher fee than more simple procedures.

31. RVS Calculating RVS • Each procedure code is assigned a relative value unit (RVU). • The RVU is multiplied by the established conversion factor to determine a fee.

32. RBRVS Resource-Based Relative Value Scale • RBRVS is the payment system used by Medicare. • RBRVS replaces providers’ historical charges with a relative value based on resources -- what each service really costs to provide. • Medicare has implemented RBRVS in phases over a period of years.

33. RBRVS Three components to RBRVS Nationally uniform relative value. 1 The relative value is based on 3 cost elements: 1) Difficulty of procedure 2) Office overhead 3) Cost of malpractice insurance Geographic practice cost index (GPCI). 2 3 Nationally uniform conversion factor.

34. Work, practice expense, and malpractice Work, practice expense, and malpractice Work, practice expense, and malpractice Calculating RBRVS • Determine the procedure code • Use the Medicare fee schedule to find the three RVUs • Use Medicare GPCI to find the three geographic practice cost factors • Multiply each RVU by its GPCI • Add the three adjusted totals • Multiply the sum by the annual conversion factor

35. Payment Methods Most payers use one of these three methods to pay providers: • Allowed charges • Contracted fee schedule • Capitation

36. Payment Methods • Allowed charges • Contracted fee schedule • Capitation Payers will pay the lesser of the allowable or the provider’s billed charges. If the physician participates in the plan, the difference Between the allowable and billed charge is written off. If the physician does not participate in the plan, the patient usually can be billed for the difference.

37. Payment Methods • Allowed charges • Contracted fee schedule • Capitation The payer’s allowed charge and the physician’s billed amount is the same. Large provider groups have a better chance to negotiate better reimbursement than the fixed fees offered by plans. Smaller practices usually must accept the fees or not participate in the plan.

38. Payment Methods • Allowed charges • Contracted fee schedule • Capitation A fixed amount paid to the provider that pays for all contracted services to enrolled members. The plan calculates the payment (capitation or cap rate) based on age and gender.

39. Balance Billing • Participating providers • Payment is limited to the allowed charge • Patients are responsible for coinsurance, co-pays and deductibles. • Non-participating providers • Providers can balance bill for the difference of the insurance payment and the billed charge. Exception: government- sponsored plans