CHAPTER 6

1. Visit Charges and Compliant Billing CHAPTER 6

2. Chapter 6Visit Charges and Compliant Billing • See the ten-step Revenue Cycle figure (at the beginning of the chapter). • This chapter focuses on the following steps: • Preregister patients • Establish financial responsibility • Check in patients • Review coding compliance • Review billing compliance • Check out patients • Prepare and transmit claims • Monitor payer adjudication • Generate patient statements • Follow up payments and collections

3. Learning Outcomes (1) When you finish this chapter, you will be able to: 6.1 Explain the importance of code linkage on healthcare claims. 6.2 Describe the use and format of Medicare’s Correct Coding Initiative (CCI) edits and medically unlikely edits (MUEs). 6.3 Discuss types of coding and billing errors. 6.4 Appraise major strategies that help ensure compliant billing.

4. Learning Outcomes (2) When you finish this chapter, you will be able to: 6.5 Discuss the use of audit tools to verify code selection. 6.6 Describe the fee schedules that physicians create for their services. 6.7 Compare the methods for setting payer fee schedules. 6.8 Calculate RBRVS payments under the Medicare Fee Schedule.

5. Learning Outcomes (3) When you finish this chapter, you will be able to: 6.9 Compare the calculation of payments for participating and nonparticipating providers, and describe how balance billing regulations affect the charges that are due from patients. 6.10 Differentiate between billing for covered versus noncovered services under a capitation schedule. 6.11 Outline the process of patient checkout.

6. Key Terms (1) • adjustment • advisory opinion • allowed charge • assumption coding • audit • balance billing • capitation rate (cap rate) • CCI column 1/column 2 code pair edit • CCI modifier indicator • CCI mutually exclusive code (MEC) edit • charge-based fee structure • code linkage • computer-assisted coding (CAC) • conversion factor • Correct Coding Initiative (CCI) • documentation template • downcoding • edits

7. Key Terms (2) • excluded parties • external audit • geographic practice cost index (GPCI) • internal audit • job reference aid • medically unlikely edits (MUEs) • Medicare Physician Fee Schedule (MPFS) • OIG Work Plan • professional courtesy • prospective audit • provider withhold • Recovery Audit Contractor (RAC) • relative value scale (RVS) • relative value unit (RVU) • resource-based fee structure • resource-based relative value scale (RBRVS) • retrospective audit

8. Key Terms (3) • truncated coding • upcoding • usual, customary, and reasonable (UCR) • usual fee • walkout receipt • write off • X modifiers

9. 6.1 Compliant Billing • Diagnoses and procedures must be correctly linked on healthcare claims so payers can analyze the connection and determine the medical necessity of charges • Code linkage—connection between a service and a patient’s condition or illness • The diagnosis must support the billed service as necessary to treat or investigate the patient’s condition • See Figure 6.1

10. 6.2 Knowledge of Billing Rules (1) • To prepare correct claims, it is important to know payers’ billing rules as stated in patients’ medical insurance policies and participation contracts • Correct Coding Initiative (CCI)—computerized Medicare system that controls improper coding that would lead to inappropriate payment for Medicare claims • Edits—computerized system that identifies improper or incorrect codes

11. 6.2 Knowledge of Billing Rules (2) • CCI edits—code combinations used by computers in the Medicare system to check claims • CCI column 1/column 2 code pair edit– Medicare code edit where CPT codes in column 2 will not be paid if reported on the same day as the column 1 code (see Figure 6.2) • CCI mutually exclusive code (MEC) edit—both services represented by MEC codes that could not have been done during one encounter • CCI modifier indicator—number showing if the use of a modifier can bypass a CCI edit

12. 6.2 Knowledge of Billing Rules (3) • Medically unlikely edits (MUEs)—units of service (UOS) edits used to lower the Medicare fee-for-service paid claims error rate • example is a MUE edit that rejects a claim for a hysterectomy on a male patient • OIG Work Plan—annual list of planned projects • http://oig.hhs.gov/publications/workplan.asp • Determine billing problems through sampling • Advisory opinion—opinion issued by CMS or the OIG that becomes legal advice • Excluded parties—individuals or companies not permitted to participate in federal healthcare programs (after found guilty of fraud)

13. 6.3 Compliance Errors (1) • Claims are rejected because of: • Medical necessity errors (to be medically necessary, services must be deemed necessary and consistent with the diagnosis) • Truncated coding—diagnoses not coded at the highest level of specificity • Mismatch between the gender or age of the patient and the selected code when the code involves selection for either criterion • Assumption coding—reporting undocumented services the coder assumes have been provided due to the nature of the case or condition

14. 6.3 Compliance Errors (2) • Claims are rejected because of (continued): • Altering documentation after services are reported • Coding without proper documentation • Reporting services provided by unlicensed or unqualified clinical personnel • Coding a unilateral service twice instead of choosing the bilateral code • Not satisfying the conditions of coverage for a particular service, such as the physician’s direct supervision of a physician assistant’s work • Billing noncovered services

15. 6.3 Compliance Errors (3) • Claims are rejected because of (continued): • Billing overlimit services • Unbundling • Using an inappropriate modifier or no modifier when one is required • Always assigning the same level of E/M service • Billing a consultation instead of an office visit • Billing invalid/outdated codes • Upcoding—using a procedure code that provides a higher reimbursement rate than the correct code—may lead to the payer downcoding (payer’s review and reduction of a procedure code) • Billing without proper signatures on file

16. 6.4 Strategies for Compliance (1) • Major strategies to ensure compliant billing: • Carefully define bundled/packaged codes and know global periods • Benchmark the practice’s E/M codes with national averages • Use modifiers appropriately, including X modifiers (HCPCS modifiers that define specific subsets of modifier 59) • Be clear on professional courtesy and discounts to uninsured and low-income patients • Maintain compliant job reference aids and documentation templates

17. 6.4 Strategies for Compliance (2) • Professional courtesy—providing free services to other physicians and their families • Job reference aid—list of a practice’s frequently reported procedures and diagnoses • Computer-assisted coding (CAC)—feature that allows a software program to assist in assigning codes • Documentation template—form used to prompt a physician to document a complete review of systems (ROS) and a treatment’s medical necessity

18. 6.5 Audits (1) • Monitoring the coding and billing process is done to ensure adherence to established policies and procedures • Audit--a formal examination or methodical review

19. 6.5 Audits (2) External audit—audit conducted by an outside organization • Private-Payer Postpayment Audits • Payer’s auditor reviews medical records • Recovery Audit Contractor (RAC)—program designed to audit Medicare claims. RAC looks for the following when performing an audit: • obvious “black and white” coding errors • medically unnecessary treatment or wrong setting of care where information in the medical record does not support the claim • multiple or excessive number of units billed

20. 6.5 Audits (3) Internal audit—self-audit conducted by a staff member or consultant (see Figure 6.4) • Prospective audit—internal audit of claims conducted before transmission • Retrospective audit—internal audit conducted after claims are processed and RAs (remittance advice) have been received

21. 6.6 Physician Fees • Physicians set their fee schedules in relation to the fees that other providers charge for similar services • Usual fee—normal fee charged by a provider • Be prepared to answer patient questions about provider fees: • What services are covered? • What are the billing rules? • What is the patient responsible for paying? • Be prepared to update the practice’s fee schedule (list of charges for each service) when new codes are released

22. 6.7 Payer Fee Schedules (1) Payers use two main methods to establish the rates they pay providers: • charge-based fee structure • resource-based fee structure • Charge-based fee structure—fees based on typically charged amounts • Based on the fees that providers of similar training and experience have charged for similar services • Creates a schedule known as usual, customary, and reasonable (UCR) fees—setting fees by comparing usual fees, customary fees, and reasonable fees for each geographic area

23. 6.7 Payer Fee Schedules (2) • Resource-based fee structure—fee structures built by comparing three factors: difficulty, overhead, and risk • Relative value scale (RVS)—system of assigning unit values to medical services based on their required skill and time • In an RVS, each procedure in a group of related procedures is assigned a relative value based on the complexity of related procedures • The relative value system can be used to assign a relative value, known as the relative value unit (RVU)—factor assigned to a medical service based on the relative skill and required time • Conversion factor—amount used to multiply a relative value unit to arrive at a charge

24. 6.7 Payer Fee Schedules (3) • Resource-based relative value scale (RBRVS)—relative value scale for establishing Medicare charges (calculating a value based on what each service really costs to provide). Three parts: • The nationally uniform RVU: The relative value is based on three cost elements— the physician’s work, the practice cost (overhead), and the cost of malpractice insurance • A geographic adjustment factor: A geographic adjustment factor called the geographic practice cost index (GPCI)—Medicare factor used to adjust providers’ fees in a particular geographic area • A nationally uniform conversion factor: Medicare uses it to make adjustments according to changes in the cost of living index

25. 6.8 Calculating RBRVS Payments (4) • Each part of the RBRVS (relative values, GPCI, and conversion factor)—is updated every year by CMS • Medicare Physician Fee Schedule (MPFS)—the RBRVS-based allowed fees

26. 6.8 Calculating RBRVS Payments (5) • Steps used to calculate Medicare payments under the MPFS (see Figure 6.6): • Determine the procedure code for the service • Use the MPFS to find three RVUs—work, practice expense, and malpractice—for the procedure • Use the Medicare GPCI list to find the three geographic practice cost indices • Multiply each RVU by its GPCI to calculate the adjusted value • Add the three adjusted totals, and multiply the sum by the annual conversion factor to determine the payment

27. 6.9 Fee-Based Payment Methods Payers use one of three methods to pay providers: • Allowed charges (maximum charge a plan pays for a service or procedure) • Balance billing—billing the patient to collect the difference between a provider’s usual fee and a payer’s lower allowed charge • Write off—to deduct an amount from a patient’s account • Contracted fee schedule (established fixed fee schedule with participating providers) • Capitation (per-member charge for each patient in the plan)

28. 6.10 Capitation • Capitation rate (or cap rate)--periodic prepayment to a provider for specified services to each plan member • Prepaid fixed monthly payment to the provider for each plan member (patient) in a capitation contract, for all covered services • Provider withhold—amount withheld from a provider’s payment by an MCO • To cover the capitated plan’s unanticipated medical expenses • Returned to the provider at the end of year if the plan’s financial goals are achieved

29. 6.11 Collecting TOS Payments and Checking Out Patients (1) Financial transactions recorded in the PMP: • Charges – amount of bill for services performed by provider • Payments – monies received from health plans and patients • Adjustments – changes to a patient’s account

30. 6.11 Collecting TOS Payments and Checking Out Patients (2) • Payment methods • Cash, Check, Credit or debit card (must follow Payment Card Industry Data Security Standards) • Time-of-service (TOS) payments--fees collected from the patient before he/she leaves the office • TOS payments are entered in the PMP, and the patient is given a walkout receipt • Walkout Receipt(see Figure 6.7) • Summarizes services and charges as well as any payments made • Patient can use walkout receipt to report charges to their insurance company *end of presentation*