7 Visit Charges and Compliant Billing
Learning Outcomes <ul><li>When you finish this chapter, you will be able to: </li></ul><ul><li>7.1 Explain the importance ...
Learning Outcomes (Continued) <ul><li>When you finish this chapter, you will be able to: </li></ul><ul><li>7.5  Discuss th...
Learning Outcomes (Continued) <ul><li>When you finish this chapter, you will be able to: </li></ul><ul><li>7.9  Discuss th...
Key Terms <ul><li>advisory opinion </li></ul><ul><li>allowed charge </li></ul><ul><li>assumption coding </li></ul><ul><li>...
Key Terms (Continued) <ul><li>excluded parties </li></ul><ul><li>external audit </li></ul><ul><li>geographic practice cost...
Key Terms (Continued) <ul><li>truncated coding </li></ul><ul><li>upcoding </li></ul><ul><li>usual, customary, and reasonab...
7.1 Compliant Billing <ul><li>Diagnoses and procedures must be correctly linked on health care claims so payers can analyz...
7.2 Knowledge of Billing Rules <ul><li>To prepare correct claims, it is important to know payers’ billing rules as stated ...
7.2 Knowledge of Billing Rules (Continued) <ul><li>CCI mutually exclusive code (MEC) edit— both services represented by ME...
7.2 Knowledge of Billing Rules (Continued) <ul><li>OIG Work Plan— OIG’s annual list of planned projects </li></ul><ul><li>...
7.3 Compliance Errors <ul><li>Claims are rejected or downcoded because of: </li></ul><ul><ul><li>Medical necessity errors ...
7.3 Compliance Errors (Continued) <ul><li>Upcoding— use of a procedure code that provides a higher payment </li></ul><ul><...
7.4 Strategies for Compliance <ul><li>Major strategies to ensure compliant billing: </li></ul><ul><ul><li>Carefully define...
7.4 Strategies for Compliance (Continued) <ul><li>Professional courtesy— providing free services to other physicians </li>...
7.5 Audits <ul><li>Monitoring the coding and billing process is done to ensure adherence to established policies and proce...
7.5 Audits (Continued) <ul><li>External audit— audit conducted by an outside organization </li></ul><ul><li>Internal audit...
7.6 Physician Fees <ul><li>Physicians set their fee schedules in relation to the fees that other providers charge for simi...
7.7 Payer Fee Schedules <ul><li>Payers use two main methods to establish the rates they pay providers </li></ul><ul><ul><l...
7.7 Payer Fee Schedules (Continued) <ul><li>Payers that use a charge-based fee structure also analyze charges using one of...
7.7 Payer Fee Schedules (Continued) <ul><li>The relative value system can be used to assign a relative value, known as the...
7.7 Payer Fee Schedules (Continued) <ul><li>Resource-based relative value scale   (RBRVS)— relative value scale for establ...
7.8 Calculating RBRVS Payments <ul><li>Each part of the RBRVS—the relative values, the GPCI, and the conversion factor—is ...
7.8 Calculating RBRVS Payments (Continued) <ul><li>The following steps are used to calculate the RBRVS payments under the ...
7.9 Fee-Based Payment Methods <ul><li>In addition to setting various fee schedules, payers use one of three main methods t...
7.9 Fee-Based Payment Methods (Continued) <ul><li>Balance billing— collecting the difference between a provider’s usual fe...
7.10 Capitation <ul><li>The  capitation rate  (or  cap rate ) is the   periodic prepayment to a provider for specified ser...
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Survey of Medical Insurance pp ch07

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  • Teaching Notes:   Have students define all key terms as an assignment. Then, in class, ask each student to define one key term aloud.   Optional assignment: Have students do an Internet search of one key term and write a short paragraph describing what they learned about that term from looking at a few websites.
  • Teaching Notes:   Have students define all key terms as an assignment. Then, in class, ask each student to define one key term aloud.   Optional assignment: Have students do an Internet search of one key term and write a short paragraph describing what they learned about that term from looking at a few websites.
  • Teaching Notes:   Have students define all key terms as an assignment. Then, in class, ask each student to define one key term aloud.   Optional assignment: Have students do an Internet search of one key term and write a short paragraph describing what they learned about that term from looking at a few websites.
  • Learning Outcome: 7.1 Explain the importance of properly linking diagnoses and procedures on health care claims. Page: 236 Teaching Notes:   Have your students explain the importance of accurate code linkage in their own words.
  • Learning Outcome: 7.2 Describe the use and format of Medicare’s Correct Coding Initiative (CCI) edits and medically unlikely edits (MUEs). Pages: 236-241 Teaching Notes:   Ask your students to identify the bases for the coding policies of the CCI. (Coding conventions in CPT; Medicare’s national and local coverage and payment policies; national medical societies’ coding guidelines; Medicare’s analysis of standard medical and surgical practice.)
  • Learning Outcome: 7.2 Describe the use and format of Medicare’s Correct Coding Initiative (CCI) edits and medically unlikely edits (MUEs). Pages: 236-241 Teaching Notes:   Ask your students to explain CCI mutually exclusive code (MEC) edits in their own words.
  • Learning Outcome: 7.2 Describe the use and format of Medicare’s Correct Coding Initiative (CCI) edits and medically unlikely edits (MUEs). Pages: 236-241 Teaching Notes:   Direct your students to look at the most recent edition of the OIG Work Plan. (http://oig.hhs.gov/publications/workplan.asp)
  • Learning Outcome: 7.3 Discuss types of coding and billing errors. Pages: 242-243 Teaching Notes:   Provide your students with some examples of claims that would be rejected or downcoded by payers, and have them identify why.
  • Learning Outcome: 7.3 Discuss types of coding and billing errors. Pages: 242-243 Teaching Notes:   Have your students explain the difference between upcoding and downcoding.
  • Learning Outcome: 7.4 Explain major strategies that help ensure compliant billing. Pages: 243-247 Teaching Notes:   Have your students debate the priorities of the different strategies for compliance.
  • Learning Outcome: 7.4 Explain major strategies that help ensure compliant billing. Pages: 243-247 Teaching Notes:   Have your students debate the risks and rewards of offering professional courtesy.
  • Learning Outcome: 7.5 Discuss the use of audit tools to verify code selection. Pages: 247-252 Teaching Notes:   Discuss the items that the RAC initiative looks for 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.)
  • Learning Outcome: 7.5 Discuss the use of audit tools to verify code selection. Pages: 247-252 Teaching Notes:   Ask your students to distinguish between the four different types of audits listed here.
  • Learning Outcome: 7.6 Describe the fee schedules that physicians create for their services. Pages: 253-254 Teaching Notes:   Have your students explain the reason(s) why they think physicians establish a list of their usual fees for the procedures and services they frequently perform.
  • Learning Outcome: 7.7 Compare the usual, customary, and reasonable (UCR) and the resource-based relative value scale (RBRVS) methods of determining the fees that insurance carriers pay for providers’ services. Pages: 255-257 Teaching Notes:   Have your students assess the merits of the three factors that resource-based fee structure are built on. (See the three factors on this slide.)
  • Learning Outcome: 7.7 Compare the usual, customary, and reasonable (UCR) and the resource-based relative value scale (RBRVS) methods of determining the fees that insurance carriers pay for providers’ services. Pages: 255-257 Teaching Notes:   Have your students debate the possible advantages and disadvantages of using the UCR method to structure fees.
  • Learning Outcome: 7.7 Compare the usual, customary, and reasonable (UCR) and the resource-based relative value scale (RBRVS) methods of determining the fees that insurance carriers pay for providers’ services. Pages: 255-257 Teaching Notes:   Provide your students with examples of calculating a RVU. (See the Example on page 255 for a reference.)
  • Learning Outcome: 7.7 Compare the usual, customary, and reasonable (UCR) and the resource-based relative value scale (RBRVS) methods of determining the fees that insurance carriers pay for providers’ services. Pages: 255-257 Teaching Notes:   Ask your students to identify the three parts to an RBRVS fee. ((1) The nationally uniform RVU; (2) A geographic adjustment factor; (3) A nationally uniform conversion factor.)
  • Learning Outcome: 7.8 Describe the steps used to calculate RBRVS payments under the Medicare Fee Schedule. Pages: 257-258 Teaching Notes:   Go over the example of calculating a Medicare payment (Figure 7.7) with your students.
  • Learning Outcome: 7.8 Describe the steps used to calculate RBRVS payments under the Medicare Fee Schedule. Pages: 257-258 Teaching Notes:   Supply new information for your students to use to calculate a Medicare payment. (Use Figure 7.7 as a reference to create a scenario.)
  • Learning Outcome: 7.9 Discuss the calculation of payments for participating and nonparticipating providers, and describe how balance billing regulations affect the charges that are due from patients. Pages: 258-261 Teaching Notes:   Have your students identify three things that will affect whether a provider actually receives the allowed charge or not. ((1) The provider’s usual charge for the procedure or service; (2) The provider’s status in the particular plan or program; (3) The payer’s billing rules.) Go over the example of calculating an allowed charge. (Example is on page 259.)
  • Learning Outcome: 7.9 Discuss the calculation of payments for participating and nonparticipating providers, and describe how balance billing regulations affect the charges that are due from patients. Pages: 258-261 Teaching Notes:   Have students explain the concept of balance billing in their own words.
  • Learning Outcome: 7.10 Differentiate between billing for covered versus noncovered services under a capitation schedule. Pages: 261-263 Teaching Notes:   Have your students debate the advantages and disadvantages of operating under a capitation system.
  • Survey of Medical Insurance pp ch07

    1. 1. 7 Visit Charges and Compliant Billing
    2. 2. Learning Outcomes <ul><li>When you finish this chapter, you will be able to: </li></ul><ul><li>7.1 Explain the importance of properly linking diagnoses and procedures on health care claims. </li></ul><ul><li>7.2 Describe the use and format of Medicare’s Correct Coding Initiative (CCI) edits and medically unlikely edits (MUEs). </li></ul><ul><li>7.3 Discuss types of coding and billing errors. </li></ul><ul><li>7.4 Explain major strategies that help ensure compliant billing. </li></ul>7-2
    3. 3. Learning Outcomes (Continued) <ul><li>When you finish this chapter, you will be able to: </li></ul><ul><li>7.5 Discuss the use of audit tools to verify code selection. </li></ul><ul><li>7.6 Describe the fee schedules that physicians create for their services. </li></ul><ul><li>7.7 Compare the usual, customary, and reasonable (UCR) and the resource-based relative value scale (RBRVS) methods of determining the fees that insurance carriers pay for providers’ services. </li></ul><ul><li>7.8 Describe the steps used to calculate RBRVS payments under the Medicare Fee Schedule. </li></ul>7-3
    4. 4. Learning Outcomes (Continued) <ul><li>When you finish this chapter, you will be able to: </li></ul><ul><li>7.9 Discuss the calculation of payments for participating and nonparticipating providers, and describe how balance billing regulations affect the charges that are due from patients. </li></ul><ul><li>7.10 Differentiate between billing for covered versus noncovered services under a capitation schedule. </li></ul>7-4
    5. 5. Key Terms <ul><li>advisory opinion </li></ul><ul><li>allowed charge </li></ul><ul><li>assumption coding </li></ul><ul><li>audit </li></ul><ul><li>balance billing </li></ul><ul><li>capitation rate (cap rate) </li></ul><ul><li>CCI column 1/column 2 code pair edit </li></ul><ul><li>CCI modifier indicator </li></ul><ul><li>CCI mutually exclusive code (MEC) edit </li></ul>7-5 <ul><li>charge-based fee structure </li></ul><ul><li>code linkage </li></ul><ul><li>computer-assisted coding (CAC) </li></ul><ul><li>conversion factor </li></ul><ul><li>Correct Coding Initiative (CCI) </li></ul><ul><li>documentation template </li></ul><ul><li>downcoding </li></ul><ul><li>edits </li></ul>
    6. 6. Key Terms (Continued) <ul><li>excluded parties </li></ul><ul><li>external audit </li></ul><ul><li>geographic practice cost index (GPCI) </li></ul><ul><li>internal audit </li></ul><ul><li>job reference aid </li></ul><ul><li>medically unlikely edits (MUEs) </li></ul><ul><li>Medicare Physician Fee Schedule (MPFS) </li></ul><ul><li>OIG Work Plan </li></ul><ul><li>professional courtesy </li></ul>7-6 <ul><li>prospective audit </li></ul><ul><li>provider withhold </li></ul><ul><li>Recovery Audit Contractor (RAC) </li></ul><ul><li>relative value scale (RVS) </li></ul><ul><li>relative value unit (RVU) </li></ul><ul><li>resource-based fee structure </li></ul><ul><li>resource-based relative value scale (RBRVS) </li></ul><ul><li>retrospective audit </li></ul>
    7. 7. Key Terms (Continued) <ul><li>truncated coding </li></ul><ul><li>upcoding </li></ul><ul><li>usual, customary, and reasonable (UCR) </li></ul><ul><li>usual fee </li></ul><ul><li>write off </li></ul>7-7
    8. 8. 7.1 Compliant Billing <ul><li>Diagnoses and procedures must be correctly linked on health care claims so payers can analyze the connection and determine the medical necessity of charges </li></ul><ul><li>Code linkage— connection between a service and a patient’s condition or illness </li></ul>7-8
    9. 9. 7.2 Knowledge of Billing Rules <ul><li>To prepare correct claims, it is important to know payers’ billing rules as stated in patients’ medical insurance policies and participation contracts </li></ul><ul><li>Correct Coding Initiative (CCI)— computerized Medicare system that prevents overpayment </li></ul><ul><ul><li>CCI edits— code combinations used by computers in the Medicare system to check claims </li></ul></ul><ul><li>CCI column 1/column 2 code pair edit– Medicare code edit where CPT codes in column 2 will not be paid if reported in the same way as the column 1 code </li></ul>7-9
    10. 10. 7.2 Knowledge of Billing Rules (Continued) <ul><li>CCI mutually exclusive code (MEC) edit— both services represented by MEC codes that could not have been done during one encounter </li></ul><ul><li>CCI modifier indicator— number showing if the use of a modifier can bypass a CCI edit </li></ul><ul><li>Medically unlikely edits (MUEs)— units of service edits used to lower the Medicare fee-for-service paid claims error rate </li></ul>7-10
    11. 11. 7.2 Knowledge of Billing Rules (Continued) <ul><li>OIG Work Plan— OIG’s annual list of planned projects </li></ul><ul><li>Advisory opinion— opinion issued by CMS or the OIG that becomes legal advice </li></ul><ul><li>Excluded parties— individuals or companies not permitted to participate in federal health care programs </li></ul>7-11
    12. 12. 7.3 Compliance Errors <ul><li>Claims are rejected or downcoded because of: </li></ul><ul><ul><li>Medical necessity errors </li></ul></ul><ul><ul><li>Coding errors </li></ul></ul><ul><ul><li>Errors related to billing </li></ul></ul><ul><li>Truncated coding— diagnoses not coded at the highest level of specificity </li></ul><ul><li>Assumption coding— reporting undocumented services the coder assumes have been provided due to the nature of the case or condition </li></ul>7-12
    13. 13. 7.3 Compliance Errors (Continued) <ul><li>Upcoding— use of a procedure code that provides a higher payment </li></ul><ul><li>Downcoding— payer’s review and reduction of a procedure code </li></ul>7-13
    14. 14. 7.4 Strategies for Compliance <ul><li>Major strategies to ensure compliant billing: </li></ul><ul><ul><li>Carefully define bundled codes and know global periods </li></ul></ul><ul><ul><li>Benchmark the practice’s E/M codes with national averages </li></ul></ul><ul><ul><li>Keep up to date through ongoing coding and billing education </li></ul></ul><ul><ul><li>Be clear on professional courtesy and discounts to uninsured/low-income patients </li></ul></ul><ul><ul><li>Maintain compliant job reference aids and documentation templates </li></ul></ul><ul><ul><li>Audit the billing process </li></ul></ul>7-14
    15. 15. 7.4 Strategies for Compliance (Continued) <ul><li>Professional courtesy— providing free services to other physicians </li></ul><ul><li>Job reference aid— list of a practice’s frequently reported procedures and diagnoses </li></ul><ul><li>Computer-assisted coding (CAC)— allows a software program to assist in assigning codes </li></ul><ul><li>Documentation template— form used to prompt a physician to document a complete review of systems (ROS) and a treatment’s medical necessity </li></ul>7-15
    16. 16. 7.5 Audits <ul><li>Monitoring the coding and billing process is done to ensure adherence to established policies and procedures </li></ul><ul><li>An important compliance activity involves audits </li></ul><ul><ul><li>An audit is a formal examination or review </li></ul></ul><ul><ul><li>Recovery Audit Contractor (RAC)— program designed to audit Medicare claims </li></ul></ul>7-16
    17. 17. 7.5 Audits (Continued) <ul><li>External audit— audit conducted by an outside organization </li></ul><ul><li>Internal audit— self-audit conducted by a staff member or consultant </li></ul><ul><li>Prospective audit— internal audit of claims conducted before transmission </li></ul><ul><li>Retrospective audit— internal audit conducted after claims are processed and RAs have been received </li></ul>7-17
    18. 18. 7.6 Physician Fees <ul><li>Physicians set their fee schedules in relation to the fees that other providers charge for similar services </li></ul><ul><li>Usual fee— normal fee charged by a provider </li></ul>7-18
    19. 19. 7.7 Payer Fee Schedules <ul><li>Payers use two main methods to establish the rates they pay providers </li></ul><ul><ul><li>Charge-based fee structure— fees based on typically charged amounts </li></ul></ul><ul><ul><li>Resource-based fee structure— fee structures built by comparing three factors: </li></ul></ul><ul><ul><ul><li>(1) how difficult it is for the provider to do the procedure, </li></ul></ul></ul><ul><ul><ul><li>(2) how much office overhead the procedure involves, and </li></ul></ul></ul><ul><ul><ul><li>(3) the relative risk that the procedure presents to the patient and to the provider </li></ul></ul></ul>7-19
    20. 20. 7.7 Payer Fee Schedules (Continued) <ul><li>Payers that use a charge-based fee structure also analyze charges using one of the national databases </li></ul><ul><ul><li>Usual, customary, and reasonable (UCR)— setting fees by comparing usual fees, customary fees, and reasonable fees </li></ul></ul><ul><ul><li>Relative value scale (RVS) —system of assigning unit values to medical services based on their required skill and time </li></ul></ul>7-20
    21. 21. 7.7 Payer Fee Schedules (Continued) <ul><li>The relative value system can be used to assign a relative value, known as the relative value unit </li></ul><ul><ul><li>Relative value unit (RVU)— factor assigned to a medical service based on the relative skill and required time </li></ul></ul><ul><li>Conversion factor —amount used to multiply a relative value unit to arrive at a charge </li></ul>7-21
    22. 22. 7.7 Payer Fee Schedules (Continued) <ul><li>Resource-based relative value scale (RBRVS)— relative value scale for establishing Medicare charges </li></ul><ul><ul><li>Geographic practice cost index (GPCI)— Medicare factor used to adjust providers’ fees in a particular geographic area </li></ul></ul>7-22
    23. 23. 7.8 Calculating RBRVS Payments <ul><li>Each part of the RBRVS—the relative values, the GPCI, and the conversion factor—is updated each year by CMS </li></ul><ul><li>Medicare Physician Fee Schedule (MPFS)— the RBRVS-based allowed fees </li></ul>7-23
    24. 24. 7.8 Calculating RBRVS Payments (Continued) <ul><li>The following steps are used to calculate the RBRVS payments under the MPFS: </li></ul><ul><ul><li>Determine the procedure code for the service </li></ul></ul><ul><ul><li>Use the MPFS to find three RVUs—work, practice expense, and malpractice—for the procedure </li></ul></ul><ul><ul><li>Use the Medicare GPCI list to find the three geographic practice cost indices </li></ul></ul><ul><ul><li>Multiply each RVU by its GPCI to calculate the adjusted value </li></ul></ul><ul><ul><li>Add the three adjusted totals, and multiply the sum by the annual conversion factor to determine the payment </li></ul></ul>7-24
    25. 25. 7.9 Fee-Based Payment Methods <ul><li>In addition to setting various fee schedules, payers use one of three main methods to pay providers: </li></ul><ul><ul><li>1. Allowed charges </li></ul></ul><ul><ul><li>2. Contracted fee schedule </li></ul></ul><ul><ul><li>3. Capitation </li></ul></ul><ul><li>Allowed charge— maximum charge a plan pays for a service or procedure </li></ul>7-25
    26. 26. 7.9 Fee-Based Payment Methods (Continued) <ul><li>Balance billing— collecting the difference between a provider’s usual fee and a payer’s lower allowed charge </li></ul><ul><li>Write off— to deduct an amount from a patient’s account </li></ul>7-26
    27. 27. 7.10 Capitation <ul><li>The capitation rate (or cap rate ) is the periodic prepayment to a provider for specified services to each plan member </li></ul><ul><ul><li>Health plan sets a capitation rate that pays for all contracted services to enrolled members for a given period </li></ul></ul><ul><li>Provider withhold— amount withheld from a provider’s payment by an MCO </li></ul>7-27

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