The Medical Billing Cycle

1. 1 The Medical Billing Cycle

2. 1-2 Learning Outcomes When you finish this chapter, you will be able to: 1.1 Identify four types of information collected during preregistration. 1.2 Compare fee-for-service and managed care health plans, and describe three types of managed care approaches. 1.3 Discuss the activities completed during patient check-in. 1.4 Discuss the information contained on an encounter form at check-out. 1.5 Explain the importance of medical necessity.

3. 1-3 Learning Outcomes (Continued) When you finish this chapter, you will be able to: 1.6 Explain why billing compliance is important. 1.7 Describe the information required on an insurance claim. 1.8 List the information contained on a remittance advice. 1.9 Explain the role of patient statements in reimbursement. 1.10 List the reports created to monitor a practice’s accounts receivable.

4. 1-4 Key Terms • accounting cycle • accounts receivable (A/R) • adjudication • capitation • coding • coinsurance • consumer-driven health plan (CDHP) • copayment • deductible • diagnosis • diagnosis code • documentation • electronic health records (EHRs) • encounter form • explanation of benefits (EOB) • fee-for-service • health maintenance organization (HMO) • health plan • managed care

5. 1-5 Key Terms (Continued) • medical coder • medical necessity • medical record • modifier • patient information form • payer • policyholder • practice management program (PMP) • preferred provider organization (PPO) • premium • procedure • procedure code • remittance advice (RA) • statement

6. 1-6 1.1 Step 1: Preregister Patients • Patient information gathered via phone or Internet before visit: • Name • Contact information • Reason for the visit • Whether patient is new to practice

7. 1-7 1.2 Step 2: Establish Financial Responsibility for Visit • Many patients have medical insurance, which is an agreement between a policyholder and a health plan • To secure medical insurance, policyholders pay premiums to payers, which are health plans such as government plans and private insurance

8. 1-8 1.2 Step 2: Establish Financial Responsibility for Visit (Continued) • Fee-for-Service Health Plans • Policyholders are repaid for medical costs • Requires payment of coinsurance • Usually a deductible must be paid before benefits begin • Managed Care Health Plans • Managed care organizations control both financing and delivery of health care • Have contracts with both patients and providers

9. 1-9 1.2 Step 2: Establish Financial Responsibility for Visit (Continued) • Types of managed care health plans • Preferred provider organization (PPO): provider network for plan members; discounted fees • Health maintenance organization (HMO): pays fixed amounts called capitation payments to contracted providers; patients must pay a small fixed fee called a copayment per visit • Consumer-driven health plan (CDHP): combines a health plan with a high deductible with a policyholder's savings account

10. 1-10 1.3 Step 3: Check In Patients • Patients complete the patient information form that contains personal, employment, and medical insurance information • Patient identity is verified • Time-of-service payments due before treatment are collected

11. 1-11 1.4 Step 4: Check Out Patients • Every time a patient is treated by a health care provider, a record, known as documentation, is made of the encounter • This chronological medical record, or chart, includes information that the patient provides

12. 1-12 1.4 Step 4: Check Out Patients(Continued) • Diagnoses and Procedures • A diagnosis is the physician’s opinion of the nature of the patient’s illness or injury • Procedures are the services performed • Coding is the process of translating a description of a diagnosis or procedure into a standardized code • A patient’s diagnosis is communicated to a health plan as a diagnosis code • A procedure code stands for a particular service, treatment, or test • A modifier is a two-digit character that is appended to a CPT code to report special circumstances

13. 1-13 1.4 Step 4: Check Out Patients(Continued) • The diagnosis and procedure codes are recorded on an encounter form, also known as a superbill • A practice management program (PMP) is a software program that automates the administrative and financial tasks required to run a medical practice

14. 1-14 1.5 Step 5: Review Coding Compliance • A physician, medical coder, or medical insurance specialist assigns codes • The documented diagnosis and medical services should be logically connected, so that the medicalnecessity of the charges is clear to the insurance company • Medical necessity is treatment by a physician for the purpose of preventing, diagnosing, or treating an illness, injury, or its symptoms in an appropriate manner

15. 1-15 1.6 Step 6: Check Billing Compliance • Each charge, or fee, for a visit is represented by a specific procedure code • The provider’s fees for services are listed on the medical practice’s fee schedule • Medical billers use their knowledge to analyze what can be billed on health care claims

16. 1-16 1.7 Step 7: Prepare and Transmit Claims • Medical practices produce insurance claims to receive payment • PMPs generate health care claims for electronic transmittal

17. 1-17 1.8 Step 8: Monitor Payer Adjudication • When a claim is received by a payer, it is reviewed following a process known as adjudication—a series of steps designed to judge whether it should be paid • The document explaining the results of the adjudication process is called a remittance advice (RA) or explanation of benefits (EOB)

18. 1-18 1.9 Step 9: Generate Patient Statements • A statement lists all services performed, along with the charges for each service • Statements list the amount paid by the health plan and the remaining balance that is the responsibility of the patient

19. 1-19 1.10 Step 10: Follow Up PatientPayments and Handle Collections • The accounting cycle is the flow of financial transactions in a business • PMPs are used to track accounts receivable (AR)—monies that are coming into the practice • PMPs are also used to create day sheets, monthly reports, and outstanding balances reports