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The Medical Billing Cycle

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1. The Medical Billing Cycle. 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.

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The Medical Billing Cycle

learning outcomes

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.

learning outcomes continued

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.

key terms

1-4

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

1-5

Key Terms (Continued)
  • procedure
  • procedure code
  • remittance advice (RA)
  • statement
  • medical coder
  • medical necessity
  • medical record
  • modifier
  • patient information form
  • payer
  • policyholder
  • practice management program (PMP)
  • preferred provider organization (PPO)
  • premium
step 1 in the medical billing cycle preregister patients

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Step 1 in the Medical Billing Cycle: Preregister Patients
  • Patient information gathered via phone or Internet before visit:
    • Name
    • Contact information
    • Reason for the visit
    • Whether patient is new to practice
step 2 in the medical billing cycle establish financial responsibility for visit

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Step 2 in the Medical Billing Cycle: 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
step 2 in the medical billing cycle establish financial responsibility for visit continued

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Step 2 in the Medical Billing Cycle: 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
step 2 in the medical billing cycle establish financial responsibility for visit continued1

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Step 2 in the Medical Billing Cycle: 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
step 3 in the medical billing cycle check in patients

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Step 3 in the Medical Billing Cycle: 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
step 4 in the medical billing cycle check out patients

1-11

Step 4 in the Medical Billing Cycle: 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
step 4 in the medical billing cycle check out patients continued

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Step 4 in the Medical Billing Cycle: 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
step 4 in the medical billing cycle check out patients continued1

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Step 4 in the Medical Billing Cycle: 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
step 5 in the medical billing cycle review coding compliance

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Step 5 in the Medical Billing Cycle: 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
step 6 in the medical billing cycle check billing compliance

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Step 6 in the Medical Billing Cycle: 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