CHAPTER 1

1. CHAPTER 1 Introduction to the Revenue Cycle

2. Chapter 1Introduction to the Revenue Cycle • 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: 1.1 Identify three ways that medical insurance specialists help ensure the financial success of physician practices. 1.2 Differentiate between covered and noncovered services under medical insurance policies. 1.3 Compare indemnity and managed care approaches to health plan organization. 1.4 Discuss three examples of cost containment employed by health maintenance organizations. 1.5 Explain how a preferred provider organization works.

4. Learning Outcomes (2) When you finish this chapter, you will be able to: 1.6 Describe the two elements that are combined in a consumer-driven health plan. 1.7 Define the three major types of medical insurance payers. 1.8 Explain the ten steps in the revenue cycle. 1.9 Analyze how professionalism, ethics, and etiquette contribute to career success. 1.10 Evaluate the importance of professional certification for career advancement.

5. Key Terms (1) • accounts payable (AP) • accounts receivable (A/R) • adjudication • benefits • capitation • cash flow • certification • coinsurance • compliance • consumer-driven health plan (CDHP) • copayment • covered services • deductible • diagnosis code • electronic health record (EHR) • ethics • etiquette • excluded services • fee-for-service • healthcare claim • health information technology (HIT) • health maintenance organization (HMO)

6. Key Terms (2) • health plan • indemnity plan • managed care • managed care organization (MCO) • medical coder • medical insurance • medical insurance specialist • medical necessity • network • noncovered services • out-of-network • out-of-pocket • participation • patient ledger • payer • per member per month (PMPM) • PM/EHR • policyholder • practice management program (PMP) • preauthorization

7. Key Terms (3) • preferred provider organization (PPO) • premium • preventive medical services • primary care physician (PCP) • procedure code • professionalism • provider • referral • revenue cycle • schedule of benefits • self-funded (self-insured) health plan • third-party payer

8. 1.1 Working in the Medical Insurance Field (1) • Major trend in healthcare industry is shift of payment responsibility to patients • Many rewarding career paths in the healthcare field require knowledge of medical insurance, reimbursement options, and EHR (electronic health record) systems • Figure 1.1: Rapidly growing employment possibilities in healthcare administrative area: • Health Information Technicians • Medical Assistants • Medical Administrative Support

9. 1.1 Working in the Medical Insurance Field (2) • Financial success of a healthcare facility depends on revenue cycle management to maintain a balance of cash flow through management of accounts receivable and accounts payable • Medical insurance specialists • carefully follow procedures • understand teamwork • communicate effectively • use health information technology

10. 1.1 Working in the Medical Insurance Field (3) • Health information technology (HIT) incorporates practice management programs (PMPs) and electronic health records (EHRs) • Practice management programs (PMPs) streamline scheduling, billing, and financial management • Electronic health record (EHR) • clinical patient health information (diagnosis, etc.) • rapidly being adopted • many are integrated with PMPs (PM/EHR) • Entering data accurately is IMPORTANT!

11. 1.2 Medical Insurance Basics (1) • Medical insurance is a written policy stating terms of an agreement between a policyholder (an individual) and a health plan (an insurance company) • Health plans provide benefits (payments for medical services) • Health plans are often referred to as payers • A third-party payer is a private or government organization insuring or paying for healthcare on behalf of beneficiaries

12. 1.2 Medical Insurance Basics (2) • Insurance policies contain a schedule of benefits that summarizes payments that may be made for medically necessary medical services • Payer’s definition of medical necessity determines coverage and payment • A provider must meet the payer’s professional standards • Providers include physicians, nurse practitioners, physician assistants, therapists, hospitals, laboratories, long-term care facilities, and suppliers such as pharmacies and medical supply companies

13. 1.2 Medical Insurance Basics (3) • Covered services may include primary care, emergency care, medical specialists’ services, and surgery • Preventive medical services include physical examinations, pediatric and adolescent immunizations, prenatal care, and routine screening procedures

14. 1.2 Medical Insurance Basics (4) • Noncovered services are those not included in a plan’s benefits • Excluded services may include: • Dental services, eye care, employment-related injuries, cosmetic procedures, or experimental/investigational procedures • Other specific items such as prescription drugs

15. 1.2 Medical Insurance Basics (5) • Group or individual policies available with varying restrictions and pricing • Other types of health-related insurance available • Disability insurance • Automotive insurance related to injuries • Workers’ compensation (determined by state law)

16. 1.3 Healthcare Plans (1) • An indemnity plan provides protection against loss • Physicians send the healthcare claim—a formal insurance claim reporting data about the patient and services provided—to the payer on behalf of the patient • Patients pay a premium—the periodic payment required to keep the policy in effect

17. 1.3 Healthcare Plans (2) • Most policies have a deductible—the amount the insured pays for covered services before benefits begin • Coinsurance is the percentage of each claim paid by the insured • Some patients must pay out-of-pocket expenses prior to benefits • Fee-for-service is a retroactive charging method based on each service performed

18. 1.3 Healthcare Plans (3) • Managed care offers a more restricted choice of providers and treatments in exchange for lower premiums, deductibles, and other charges • Managed care organizations (MCOs) establish links between provider, patient, and payer • Participation allows provider to contract with health plan to gain more patients and lower fees

19. 1.4 Health Maintenance Organizations (1) • A health maintenance organization (HMO) combines coverage of medical costs and delivery of healthcare for a prepaid premium • Capitation is a fixed prepayment to a provider for all medically necessary contracted services provided to each plan member • Per member per month (PMPM) is the capitated rate

20. 1.4 Health Maintenance Organizations (2) • A network is a group of providers having participation agreements with a health plan • Visits to out-of-network providers are not covered except for emergencies • HMOs often require preauthorization before the patient receives services • When HMO member sees a provider, he or she pays a specified charge called a copayment • HMO members may be required to choose a primary care physician (PCP) to direct all aspects of their care

21. 1.4 Health Maintenance Organizations (3) • Referral is transfer of patient care from one physician to another • Point-of-service (POS) plans allow visits to specialists in the plan’s network without a referral at one level of charge • POS plans also permit patients to receive medical services from non-network providers at a higher level of charge • Exclusive provider organizations (EPO) do not cover care outside of network and do not require referrals to specialists

22. 1.5 Preferred Provider Organizations • A preferred provider organization (PPO) is an MCO where a network of providers supplies discounted treatment for plan members • Most popular type of health plan • Creates a network of physicians, hospitals, and other providers with negotiated discounts • May require preauthorization • Controls use of services • Requires payment of a premium and often of a copayment for visits

23. 1.6 Consumer-Driven Health Plans • A consumer-driven health plan (CDHP) combines a high-deductible health plan with a medical savings plan • The health plan is usually a PPO with a high deductible and low premiums • The savings account is used to pay medical bills before the deductible has been met • Increases patient awareness of healthcare costs

24. 1.7 Medical Insurance Payers • Three major types of medical insurance payers: • Private payers—dominated by large insurance companies • Self-funded (self-insured) health plans—organizations paying for health insurance directly by setting up a fund from which to pay • Government-sponsored healthcare programs—includes Medicare, Medicaid, TRICARE, and CHAMPVA

25. 1.8 The Revenue Cycle (1) • A medical insurance specialist is a staff member who handles billing, checks insurance, and processes payments • To complete their duties, medical insurance specialists follow a 10-step revenue cycle • Series of steps leading to maximum, appropriate, timely payment

26. 1.8 The Revenue Cycle (2) • Step 1 – Preregister patients • Step 2 – Establish financial responsibility • Step 3 – Check in patients • Step 4 – Review coding compliance • A medical coder has specialized training to handle diagnostic and procedural coding • The patient’s primary illness is assigned a diagnosis code • Each procedure the physician performs is assigned a procedure code • Transactions are entered in a patient ledger—a record of a patient’s financial transactions

27. 1.8 The Revenue Cycle (3) • Step 5 – Review billing compliance • Compliance = actions that satisfy official requirements • Step 6 – Check out patients • Step 7 – Prepare and transmit claims • Step 8 – Monitor payer adjudication • Accounts receivable (A/R) is the monies owed to a medical practice • Adjudication is the process of examining claims and determining benefits • Step 9 – Generate patient statements • Step 10 – Follow up payments and collections

28. 1.9 Achieving Success (1) • Professionalism isacting for the good of the public and of the medical practice • Medical ethics are standards of behavior requiring truthfulness, honesty, and integrity • Etiquette is made up of the standards of professional behavior

29. 1.9 Achieving Success (2) • Requirements for success • Knowledge of medical language and coding • Communication skills • Attention to detail • Flexibility • Health information technology skills • Honesty and integrity • Ability to work as a team member • Attributes • Appearance • Attendance • Initiative • Courtesy

30. 1.10 Moving Ahead • Continuing education required for certification so lifelong learning is needed • Certification is recognition of a superior level of skill by an official professional organization • Provides evidence to prospective employers that the applicant has demonstrated a superior level of skill on a national test *end of presentation*