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 • 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

5. 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

6. 1-6 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

7. 1-7 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

8. 1-8 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

9. 1-9 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

10. 1-10 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

11. 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

12. 1-12 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

13. 1-13 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

14. 1-14 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

15. 1-15 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