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Claims Training Boot Camp

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This presentation covers the fundamentals of medical billing, coding, and reimbursement by explaining how all of these components work together. Emphasis is placed on the practical application of the latest industry knowledge and standards, with the goal of helping those who work with medical claims and claims data stay ahead of the game.

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Claims Training Boot Camp

  1. 1. CLAIMS TRAINING BOOT CAMP  PRESENTED BY: RICH HENRIKSEN, CEO of Nokomis Health, Inc.  JUNE 2, 2016
  2. 2. PART 1: CLAIM LIFE CYCLE
  3. 3. TOPICS COVERED IN THIS SECTION • Life cycle of a medical claim – routine physician visit • Life cycle of a medical claim – hospital emergency admission • Physician and hospital charges • Claim forms: CMS-1500 and UB04 • HIPAA EDI data sets: 837, 834, 270, 272, etc.
  4. 4. LIFE CYCLE OF A MEDICAL CLAIM: PHYSICIAN OFFICE, PRE-VISIT Patient schedules appointment Office verifies insurance coverage, pre- registers patient Office or patient obtains prior authorization or referral (if required by plan)
  5. 5. LIFE CYCLE OF A MEDICAL CLAIM: PHYSICIAN OFFICE, TIME OF VISIT Office checks in patient and collects copay or coinsurance estimate Patient receives services Physician dictates visit notes and assigns codes using “superbill” or electronically via clinic management system
  6. 6. LIFE CYCLE OF A MEDICAL CLAIM: PHYSICIAN OFFICE, POST VISIT Office staff enter charges into practice management system Office sends claim to clearinghouse via 837P EDI file Clearinghouse forwards claim to payor Payor adjudicates claim, sends remittance advice (RA) to provider and explanation of benefits (EOB) to member Office posts payment and bills member for any remaining financial responsibility
  7. 7. STEP 1: PATIENT REGISTRATION • Provider records patient’s demographic and insurance information • Provider obtains prior authorization or precertification (if required by plan), also ensures that referral is present if required • Provider may check patient eligibility from payor either by phone or electronically • Outbound request is the HIPAA 270 EDI data set • Response from payor is the HIPAA 271 EDI data set • Provider may collect copayment or a portion of deductible or coinsurance
  8. 8. NOTES ABOUT PATIENT ELIGIBILITY • Payors receive eligibility files from plan sponsors via HIPAA 834 data set • Patient data is very difficult to keep “clean” and up to date • Data is often keyed by hand, resulting in errors • Premium payments may be delayed or credited to incorrect accounts • There are often retroactive adds, changes, and deletes to group enrollments
  9. 9. STEP 2: PROVIDE SERVICES • Physician examines patient and orders ancillary services (lab, X-ray, etc.) if needed • Patient receives ancillary services and the encounter ends • Physician dictates the encounter and marks the services performed either electronically or on a paper charge ticket (referred to as a “superbill”); often will also select the diagnosis based on a list of common diagnoses
  10. 10. SUPERBILL EXAMPLE
  11. 11. SAMPLE PHYSICIAN DICTATION: PHYSICIAN OFFICE SUBJECTIVE: Mom brings patient in today because of sore throat starting last night. Eyes have been very puffy. He has taken some Benadryl when all of this congestion started but with a sudden onset just yesterday. He has had low-grade fever and just felt very run down, appearing very tired. He is still eating and drinking well, and his voice has been hoarse but no coughing. No shortness of breath, vomiting, diarrhea or abdominal pain. PAST MEDICAL HISTORY: Unremarkable. There is no history of allergies. He does have some history of some episodes of high blood pressure, and his weight is up about 14 pounds from the last year. FAMILY HISTORY: Noncontributory. No one else at home is sick. OBJECTIVE: General: A 13-year-old male appearing tired but in no acute distress. Neck: Supple without adenopathy. HEENT: Ear canals clear. TMs, bilaterally, gray in color. Good light reflex. Oropharynx pink and moist. No erythema or exudate. Some drainage is seen in the posterior pharynx. Nares: Swollen, red. No drainage seen. No sinus tenderness. Eyes are clear. Chest: Respirations are regular and non-labored. Lungs: Clear to auscultation throughout. Heart: Regular rhythm without murmur. Skin: Warm, dry and pink, moist mucous membranes. No rash.
  12. 12. SAMPLE PHYSICIAN DICTATION: PHYSICIAN OFFICE (CONTINUED) LABORATORY: Strep test is negative. Strep culture is negative. RADIOLOGY: Water's View of the sinuses is negative for any sinusitis or acute infection. ASSESSMENT: Upper respiratory infection. PLAN: At this point just treat symptomatically. I gave him some samples of Levall for the congestion and as an expectorant. Push fluids and rest. May use ibuprofen or Tylenol for discomfort.
  13. 13. STEP 3: CHARGE CAPTURE • Billing staff enter procedure codes and diagnoses codes (if not already recorded) into billing system • Records may be audited for level of service assignment and other reviews may be conducted prior to billing
  14. 14. STEP 4: CLAIM SUBMISSION • Billing staff create batch file for submission to payor, either directly or through clearinghouse • Outbound claims file is the HIPAA 837 EDI data set • Most claims go through several claim edits before payor accepts claim, ensuring completeness and accuracy • Billing software claim edits • Clearinghouse edits • Payor edit
  15. 15. CLAIM FORM TYPES • Providers other than pharmacies use one of the following two claim forms: • CMS-1500 – professional claim form – used by physicians, therapists, and other professionals • UB-04 – institutional claim form – used by facilities including hospitals, surgery centers, skilled nursing facilities, home health agencies, some transportation providers, etc.
  16. 16. PROFESSIONAL CLAIM FORM: CMS-1500 • CMS-1500 (HCFA-1500) insurance claim form is used for reporting physician (professional services) and supplier information • Information spaces on the claim are referred to as an “item” • Most payors require CMS-1500 information to be submitted electronically; this is the HIPAA 837P (professional) data set
  17. 17. SAMPLE PROFESSIONAL CLAIM FORM (CMS-1500)
  18. 18. STEP 5-1: PAYOR RECEIVES CLAIM • Payor receives electronic claims directly from providers, more typically through claim clearinghouses such as WebMD (now Emdeon) • Payor must enter paper claims manually into its claim system (or via scanning software)
  19. 19. STEP 5-2: PAYOR ADJUDICATES CLAIM • Payor passes claim through multiple edits prior to payment • Is member active and eligible for the date of service? • Are all required data elements present and accurate? • Is the physician in-network for this member? • Are the services a covered benefit for this member? • Are the procedure codes subject to bundling, downcoding, code edit denials, etc.? Payors often use proprietary software and external vendors to search for claim savings, often under the umbrella of “fraud, waste and abuse” • Is there a different primary payor? • Is the claim related to a motor vehicle accident or a workers compensation injury? • Is this a duplicate or corrected claim? • Has the patient met his/her annual or lifetime maximums for this service?
  20. 20. STEP 5-3: PAYOR DETERMINES PAYMENT • Payor calculates allowed amount based on contract rate or applicable fee schedule, then applies member responsibility to calculate plan payable/ member payable amounts • Most payors reimburse physicians the lesser of the billed charge for each code or the fee maximum that the payor has set for that code • Other than large physician groups, most payor contracts do not specify the fee maximums; physicians can obtain a sampling of fee maximums upon request • The difference between the allowed amount and billed charges is “provider discount,” which the provider must by contract write off • Providers who do not participate with a health plan (“out of network”) are typically reimbursed according to the payor’s “usual and customary” charge allowance for that region; the physician may balance bill the member for the unpaid portion of the bill, up to billed charges
  21. 21. STEP 5-4: PAYOR MAKES PAYMENT • Payor remits payment (check or electronic funds transfer) to physician along with Remittance Advice (RA) which shows how each claim line was adjudicated • The electronic version of the RA is the HIPAA 835 EDI data set • Allowed amounts are shown, which are separated into payor and patient liability • Discounts, denials, other disallowed charges are shown with reason codes • Payor sends Explanation of Benefits (EOB) to member
  22. 22. SAMPLE REMITTANCE ADVICE (RA)
  23. 23. SAMPLE EXPLANATION OF BENEFITS (EOB)
  24. 24. STEP 6: PHYSICIAN POSTS PAYMENT AND BILLS MEMBER FOR AMOUNTS DUE • Payments are posted either electronically or manually • The patient is billed for their financial responsibility (unless already collected) • Physician office may compare actual payment with expected payment to ensure that payor is paying according to contract • Physician office researches and responds to claim denials by submitting corrected claims, appeals, additional documentation, etc.
  25. 25. HOSPITAL ENCOUNTERS Patients commonly receive services from multiple providers during a hospital encounter, resulting in multiple claims HospitalAnesthesiologist ER physician Attending MD CRNA Pathologist Surgeon Radiologist Specialty consult
  26. 26. FACILITY CLAIM FORM: UB-04 • The Uniform Bill 2004 (UB-04) is also known as the HCFA-1450 and replaced the UB-92 in 2005 • The UB-04 is used for both inpatient and outpatient facility services • The National Uniform Billing Committee (NUBC) establishes and maintains a complete list of the allowable data elements and codes used on the UB-04 claim • The UB-04 contains 81 form locators (FLs) • A FL is a data field • Some FLs must be completed, some are used only when applicable to specific claims, and others are reserved for future use • The UB-04 has 22 service lines on a single form • The UB-04, when submitted electronically, can accept 450 service lines
  27. 27. SAMPLE UB-04
  28. 28. PHYSICIAN CHARGES • Each clinic has its own fee schedule (the amount that they charge for each CPT or HCPCS (procedure) code) o Each code typically has only one charge o Physicians charge the same amount to all payors, although each payor may reimburse at a different amount o The exception to this rule is for non-participating Medicare providers, who are limited to charging the Medicare Limiting Charge o Physicians often use RBRVS to set their fees o Physicians can update their fees at any time, but most do so annually (or less often)
  29. 29. SAMPLE PHYSICIAN CHARGEMASTER (SELECTED CODES) CPT Code Description Charge 99201 New patient visit, level 1 $60.00 99202 New patient visit, level 2 $100.00 99203 New patient visit, level 3 $145.00 99204 New patient visit, level 4 $220.00 99205 New patient visit, level 5 $275.00 99211 Established patient visit, level 1 $30.00 99212 Established patient visit, level 2 $60.00 99213 Established patient visit, level 3 $100.00 99214 Established patient visit, level 4 $145.00 99215 Established patient visit, level 5 $195.00 81005 Urinalysis $8.00 82310 Calcium test; total $13.00 90707 Measles, mumps, rubella vaccine $104.00
  30. 30. HOSPITAL CHARGEMASTER • The hospital chargemaster is the hospital’s “catalog” of all services that are provided by that hospital • Organized by department – the following are included for each item o Hospital’s item number (for internal use) o Department number (determines which cost center is credited with the revenue for that item) o Item description – used for claim detail o Price (charge) per unit o Cost (sometimes – depends on hospital’s cost accounting system) o Revenue code (always) o HCPCS codes, if required because of that item’s revenue code
  31. 31. HOSPITAL CHARGEMASTER (CONTINUED) • A typical chargemaster has thousands of items • Some states, such as Calif., require hospitals to make their chargemasters public • There are many types of charge lines o Recurring charges (room) o Charges tied to order entry (lab, pharmacy, x-ray) o Time-based charges (OR, anesthesia) o Items for which the charge varies from patient to patient (implants) o Charges which do not require HCPCS or CPT codes o Charges for which the HCPCS or CPT code is assigned at the chargemaster level o Charges for which the HCPCS or CPT code is assigned by HIM
  32. 32. SAMPLE HOSPITAL CHARGEMASTER (SELECTED CODES) Item # Description Cost center Rev code HCPCS code Charge Notes 101670 ICU DAILY 1220 0206 $3,479.00 Room charge, no HCPCS needed 105657 CBC 3430 0300 85025 $104.00 CPT code in the chargemaster 667765 SEQUENTIAL COMPRESSION SLEEVE 1330 0270 $196.00 Supply charge, no HCPCS or CPT code needed 273309 INJ ENOXAPARIN SODIUM 4480 0636 J1650 $13.35 Drug charge with HCPCS code 246639 GUAIFENESIN 4480 0250 $1.50 Drug charge with no HCPCS code 334789 OR LEVEL 3, FIRST 15 MIN 6310 0360 Assigned by HIM for OP claims $3,540.00 CPT code not in chargemaster, assigned by HIM on case by case basis
  33. 33. HOSPITAL CLAIM: CHARGE CAPTURE • Charges are accumulated through interfaces with main hospital information system • Lab tests, radiology services, pharmacy, other ancillary services: each department’s information system passes information to main billing system which pulls associated procedure codes and charge information for each test or procedure • Room charges – automatic if patient is in bed at midnight (or less) • Operating room charges – may be manually entered or may be automatic based on OR scheduling system • Supplies – manually entered by applicable department
  34. 34. HOSPITAL CODING • Health information management (HIM, formerly known as the medical records department) staff review records after patient is discharged and assign these codes to the entire encounter: o ICD-10 diagnosis codes o ICD-10 procedure codes (if applicable) o CPT codes for surgeries, interventional procedures • Other procedure codes reside in the chargemaster and are automatically brought forward to the claim
  35. 35. HIPAA EDI – ELECTRONIC DATA INTERCHANGES • Most payors now require providers to submit claims electronically • Many payors also require providers to accept remittance advices (RAs) electronically • Providers and payors use the HIPAA electronic data interchange (EDI, or X12) sets to accomplish this • Some providers use clearinghouses to send and receive EDI data sets; whether they send claims directly to payors or through a clearinghouse depends on the provider’s billing system and how it is configured • Historically version 4010 was being used; on Jan. 1, 2012 the newest version 5010 became effective; 5010 allows for the larger field size of ICD-10 as well as other improvements
  36. 36. KEY HIPAA EDI DATA SETS USED BY PROVIDERS Key HIPAA EDI sets used by providers and payors include: • 270 EDI Health Care Eligibility/Benefit Inquiry – used to inquire about the health care benefits and eligibility associated with a subscriber or dependent; sent from provider to payor • 271 EDI Health Care Eligibility/Benefit Response – used to respond to an inquiry about health care benefits and eligibility associated with a subscriber or dependent; sent from payor to provider • 276 EDI Health Care Claim Status Request – used by provider to request the status of a claim • 277 EDI Health Care Claim Status Notification – used by payor to notify provider regarding the status of a claim, or to request additional information from provider regarding a claim • 278 EDI Health Care Service Review Information – used to transmit health care service information for the purpose of request for review, certification, notification or reporting the outcome of a health care services review
  37. 37. KEY HIPAA EDI DATA SETS USED BY PROVIDERS (CONTINUED) • 835 EDI Health Care Claim Payment/Advice Transaction Set – used to send a remittance advice or explanation of payment from payor to provider • 837 EDI Health Care Claim Transaction Set - used by providers to submit claim billing information to payors; not used for retail pharmacy • EDI Retail Pharmacy Claim Transaction (NCPDP Telecommunications Standard version 5.1) – used to submit retail pharmacy claims from pharmacy to payor
  38. 38. KEY HIPAA EDI DATA SETS USED BY EMPLOYERS AND PLAN SPONSORS • 834 EDI Benefit Enrollment and Maintenance Set – used to manage enrollment information; sent from employer, union, group sponsor, etc. to payor • 820 EDI Payroll Deducted and other Group Premium Payment for Insurance Products – used to make premium payment for insurance products; can be used to order a financial institution to make a payment to payee
  39. 39. NATIONAL PRACTITIONER IDENTIFIERS (NPIS) • The National Practitioner Identifier (NPI) is a HIPAA Administrative Simplification Standard • NPI is a 10-digit numeric identifier assigned to both individuals and groups/facilities; most payors require NPIs on all claims • Payors used to assign their own provider numbers, so that a provider used to have many different numbers • Problems arose when payors required legacy provider numbers in addition to or in lieu of NPIs; most payors now require providers to use NPIs only on their claims
  40. 40. CLAIM ANALYSIS TIPS • Include modifiers when analyzing claims that can be split into technical and professional components (TC and 26 modifiers) • When studying an encounter, be sure to pull all related claims • Watch for duplicate, denied, and corrected claims • UB04 claims are sometimes “rolled up”’ by the payor, especially if payment is a fixed rate amount that applies to the entire claim • Watch for interim UB04 claims (typically for ongoing outpatient services or lengthy inpatient admissions) • Consider “allowed” versus “paid” when conducting financial analyses • Consider whether claims are secondary or apply to supplemental products
  41. 41. PART 2: CODING
  42. 42. HEALTHCARE CODING OVERVIEW – MAJOR TYPES OF CODES USED IN THE HEALTHCARE INDUSTRY TODAY• International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM) (retired Sep. 30, 2015) • ICD-9 diagnosis • ICD-9 procedure • ICD-10-CM (implemented Oct. 1, 2015) • ICD-10 diagnosis • ICD-10-PCS (Procedure Coding System) • HCFA Common Procedure Coding System (HCPCS) • Level 1 – Current Procedural Terminology, 4th Edition (CPT-4 or CPT) • Level II – HCPCS Level II or HCPCS • Revenue codes • Medicare Severity Diagnosis Related Groups (MS-DRGs) • Ambulatory Patient Classifications (APCs)
  43. 43. WHY IS MEDICARE RELEVANT FOR COMMERCIAL CODING AND REIMBURSEMENT? • Most health plans follow at least a portion of Medicare coding and billing guidelines • Many health plans base their reimbursement methods on Medicare’s methods • Some key Medicare terms • CMS – the Centers for Medicare and Medicaid Services, formerly known as the Health Care Financing Administration (HCFA); this federal agency is under the Secretary of Health and Human Services and administers the Medicare program • Medicare carriers and intermediaries – private organizations and companies which contract with CMS to administer the Medicare program
  44. 44. ICD CODES: OVERVIEW • The International Classification of Diseases (ICD) is updated and maintained by the World Health Organization (WHO) • ICD-9-CM developed in 1970s • WHO’s 9th revision of ICD (ICD-9) had attained wide international recognition by 1970s • The U.S. National Center for Health Statistics, part of Centers for Disease Control, modified ICD-9 with clinical information • These clinical modifications provided a way to classify morbidity data for indexing of medical records, medical case reviews, and ambulatory and other medical care programs, as well as for basic health statistics • Result was the International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM), commonly referred to as ICD-9, which precisely delineates the clinical picture of each patient
  45. 45. ICD CODES: OVERVIEW (CONTINUED) • WHO has developed 10th revision of ICD • Has been in use in most other countries since 1990s • Notable improvements in content and format over ICD-9-CM • addition of information relevant to ambulatory and managed care encounters • expanded injury codes • creation of combination diagnosis/symptom codes to reduce the number of codes needed to fully describe a condition • greater specificity in code assignment • will allow further expansion than was possible with ICD-9-CM • allows providers to better identify certain patients with specific conditions that will benefit from tailored disease management programs, such as asthma, diabetes, and hypertension • allows for better understanding of relationship of cost to specific medical conditions
  46. 46. TRANSITION FROM ICD-9 TO ICD-10 • ICD-10 includes two sets of codes • ICD-10-CM – diagnosis codes • Volume 1 – tabular listing • Volume 2 – index • ICD-10-PCS (Procedure Coding System) – procedure codes, only for inpatient (for Medicare – other payors may require ICD-10-PCS for outpatient claims billed on a UB04) • After many delays, ICD-10 transition occurred on Oct. 1, 2015 for all covered entities, including health plans, clearinghouses, and providers • To accommodate ICD-10, CMS mandated transition from version 4010 to version 5010 of the electronic health standards for HIPAA transactions; deadline was Jan. 1, 2012
  47. 47. ICD-10-CM FORMAT • Index • Alphabetical list of terms and their corresponding code • Index to Diseases and Injuries (main index) • Index to External Causes of Injury • Neoplasm Table • Tabular list • Table of Drugs and Chemicals • Sequential, alphanumeric list of codes divided into chapters based on body system or condition • Contains categories, subcategories, and valid codes
  48. 48. ICD-10-CM FORMAT • First character of a 3-character category is a letter • Second and third characters may be numbers or alpha characters • A three-character category without further subclassification is equivalent to a valid three-character code • Subcategories are either four or five characters and include either letters or numbers • Codes may be four, five, or six characters in length, in which each level of subdivision after a category is a subcategory • The final level of subdivision is a valid code and may be either a letter or number
  49. 49. ICD-10 DIAGNOSIS CODING GUIDELINES • Identify each service, procedure, or supply with an ICD-10 diagnosis code to describe the diagnosis, symptom, complaint, condition, or problem • Code the principal diagnosis first, followed by the secondary, tertiary, and so on • Code any coexisting conditions that affect the treatment of the patient for that visit or procedure as supplementary information • Do not code a diagnosis that is no longer applicable • Providers should code only the current condition that prompted the patient’s visit • Many times a patient has a long list of chronic complaints that are not the reason for the specific visit; providing nonessential information of this nature can cloud the determination of medical necessity and delay payment
  50. 50. ICD-10 DIAGNOSIS CODING GUIDELINES CON’T • Chronic complaints should be coded only when the patient has received treatment for the condition • When the diagnostic statement identifies an acute condition, providers should use the code that specifies “acute” whenever it is available • Providers should be as specific as possible in specifying diagnosis (i.e., code to the highest level of specificity) • When the diagnostic statement is general or generic, coders need to investigate further • If the information is not available in the record, coders should ask questions of the physician or care provider • Coders should code only what is documented in the medical record or chart
  51. 51. ICD-10-CM DIAGNOSIS CODES – MAJOR CATEGORIES Chapter 1. Certain Infectious and Parasitic Diseases (A00-B99) Chapter 2. Neoplasms (C00-D49) Chapter 3. Diseases of the Blood and Blood-forming Organs and Certain Disorders Involving the Immune Mechanism (D50-D89) Chapter 4. Endocrine, Nutritional and Metabolic Diseases (E00-E89) Chapter 5. Mental, Behavioral, and Neurodevelopmental Disorders F01-F99) Chapter 6. Diseases of the Nervous System (G00-G99) Chapter 7. Diseases of the Eye and Adnexa (H00-H59) Chapter 8. Diseases of the Ear and Mastoid Process (H60-H95) Chapter 9. Diseases of the Circulatory System (I00-I99) Chapter 10. Diseases of the Respiratory System (J00-J99) Chapter 11. Diseases of the Digestive System (K00-K95) Chapter 12. Diseases of the Skin and Subcutaneous Tissue (L00-L99) Chapter 13. Diseases of the Musculoskeletal System and Connective Tissue (M00-M99) Chapter 14. Diseases of the Genitourinary System (N00-N99) Chapter 15. Pregnancy, Childbirth and the Puerperium (O00-O9A) Chapter 16. Certain Conditions Originating in the Perinatal Period (P00-P96) Chapter 17. Congenital Malformations, Deformations and Chromosomal Abnormalities (Q00-Q99) Chapter 18. Symptoms, Signs and Abnormal Clinical and Laboratory Findings, Not Elsewhere Classified (R00-R99) Chapter 19. Injury, Poisoning and Certain Other Consequences of External Causes (S00-T88) Chapter 20. External Causes of Morbidity (V00-Y99) Chapter 21. Factors Influencing Health Status and Contact With Health Services (Z00-Z99)
  52. 52. ICD-10-CM DIAGNOSIS CODES – EXAMPLE Chapter 7. Diseases of the Eye and Adnexa (H00-H59) H00-H05 Diseases of eyelid, lacrimal system and orbit H10-H11 Disorders of conjunctiva H15-H22 Disorders of sclera, cornea, iris and ciliary body H25-H28 Disorders of lens H30-H36 Disorders of choroid and retina H40-H42 Glaucoma H43-H44 Disorders of vitreous body and globe H46-H47 Disorders of optic nerve and visual pathways H49-H52 Disorders of ocular muscles, binocular movement, accommodation and refraction H53-H54 Visual disturbances and blindness H55-H57 Other disorders of eye and adnexa H59 Intraoperative and postprocedural complications and disorders of eye and adnexa, not elsewhere classified
  53. 53. ICD-10-CM DIAGNOSIS CODES – EXAMPLE (CONTINUED) H52 Disorders of refraction and accommodation H52.0 Hypermetropia H52.229 Regular astigmatism, unspecified eye H52.00 Hypermetropia, unspecified eye H52.3 Anisometropia and aniseikonia H52.01 Hypermetropia, right eye H52.31 Anisometropia H52.02 Hypermetropia, left eye H52.32 Anisekonia H52.03 Hypermetropia, bilateral H52.4 Presbyopia H52.1 Myopia H52.5 Disorders of accommodation H52.10 Myopia, unspecified eye H52.51 Internal ophthalmoplegia (complete) (total) H52.11 Myopia, right eye H52.511 Internal ophthalmoplegia (complete) (total), right eye H52.12 Myopia, left eye H52.512 Internal ophthalmoplegia (complete) (total), left eye H52.13 Myopia, bilateral H52.513 Internal ophthalmoplegia (complete) (total), bilateral H52.2 Astigmatism H52.519 Internal opthalmoplegia (complete) (total), unspecified eye H52.20 Unspecified astigmatism H52.52 Paresis of accommodation H52.201 Unspecified astigmatism, right eye H52.521 Paresis of accommodation, right eye H52.202 Unspecified astigmatism, left eye H52.522 Paresis of accommodation, left eye H52.203 Unspecified astigmatism, bilateral H52.523, Paresis of accommodateion, bilateral H52.209 Unspecified astigmatism, unspecified eye H52.529 Paresis of accommodation, unspecified eye H52.21 Irregular astigmatism H52.53 Spasm of accommodation H52.211 Irregular astigmatism, right eye H52.531 Spasm of accommodation, right eye H52.212 Irregular astigmatism, left eye H52.532 Spasm of accommodation, left eye H52.213 Irregular astigmatism, bilateral H52.533 Spasm of accommodation, bilateral H52.219 Irregular astigmatism, unspecified eye H52.534 Spasm of accommodation, unspecified eye H52.22 Regular astigmatism H52.6 Other disorders of refraction H52.221 Regular astigmatism, right eye H52.7 Unspecified disorders of refraction H52.222 Regular astigmatism, left eye H52.223 Regular astigmatism, bilateral
  54. 54. ICD-9 DIAGNOSIS CODES: CATEGORIES Code Category 001-139 Infectious and parasitic diseases 140-239 Neoplasms 240-279 Endocrine, nutritional and metabolic diseases, and immunity disorders 280-289 Diseases of the blood and blood-forming organs 290-319 Mental, behavioral and neurodevelopmental 320-389 Diseases of the nervous system and sense organs 390-459 Diseases of the circulatory system 460-519 Diseases of the respiratory system 520-579 Diseases of the digestive system 580-629 Diseases of the genitourinary system 630-679 Complications of pregnancy, childbirth, and the puerperium 680-709 Diseases of the skin and subcutaneous tissue 710-739 Diseases of the musculoskeletal system and connective tissue 740-759 Congenital anomalies 760-779 Certain diseases originating in the perinatal period 780-799 Symptoms, signs, and ill-defined conditions 800-999 Injury and poisoning E000-E999 Supplementary classification of external causes of injury and poisoning V01-V91 Supplementary classification of factors influencing health status and contact with health services
  55. 55. ICD-9 DIAGNOSIS CODES: EXAMPLE 360-379 Disorders of the eye and adnexa 360 Disorders of the globe 361 Retinal detachments and defects 362 Other retinal disorders 363 Chorioretinal inflammations, scars, and other disorders of choroid 364 Disorders of iris and ciliary body 365 Glaucoma 366 Cataract 367 Disorders of refraction and accommodation 368 Visual disturbances 369 Blindness and low vision 370 Keratitis 371 Corneal opacity & other disorders of cornea 372 Disorders of conjunctiva 373 Inflammation of eyelids 374 Other disorders of eyelids 375 Disorders of lacrimal system 376 Disorders of the orbit 377 Disorders of the optic nerve and visual pathways 378 Strabisimus and other disorders of binocular eye movements 379 Other disorders of eye 380-389 Diseases of the ear and mastoid process 320-389 Diseases of the nervous system and sense organs 320-326 Inflammatory diseases of the central nervous system 327 Organic sleep disorders 330-337 Hereditary and degenerative diseases of the central nervous system 338 Pain 339 Other headache syndromes 340-349 Other diseases of the central nervous system 350-359 Disorders of the peripheral nervous system
  56. 56. ICD-9 DIAGNOSIS CODES: EXAMPLE (CONTINUED) 367 Disorders of refraction and accommodation 367.0 Hypermetropia Far-sightedness Hyperopia 367.1 Myopia Near-sightedness 367.2 Astigmatism 367.20 Astigmatism, unspecified 367.21 Regular astigmatism 367.22 Irregular astigmatism 367.3 Anisometropia and aniseikonia 367.31 Anisometropia 367.32 Aniseikonia 367.4 Presbyopia 367.5 Disorders of accommodation 367.51 Paresis of accommodation Cycloplegia 367.52 Total or complete internal opthalmoplegia 367.53 Spasm of accommodation 367.8 Other disorders of refraction and accommodation 367.81 Transient refractive change 367.89 Other Drug-induced disorders of refraction and accommodation Toxic disorders of refraction and accommodation 367.9 Unspecified disorder of refraction and accommodation Coders should code to the 5th digit wherever possible (highest level of specificity)
  57. 57. V CODES • V-codes are used for supplementary classification of factors influencing health status and contact with health services • V-codes range from V01-V91 • Can be one or two digits following the decimal • Used for circumstances other than a disease or injury classifiable with ICD-9 diagnosis codes • V-codes are reported in the ICD-9 diagnosis fields on CMS-1500 and UB-04 • V-codes are not used in place of procedure codes
  58. 58. THREE MAIN WAYS THAT GIVE RISE TO USE OF V- CODES • When a person who is not currently sick encounters the health services for some specific purpose • to act as a donor of an organ or tissue • to receive prophylactic vaccination • to discuss a problem which is in itself not a disease or injury • When a person with a known disease or injury, whether it is current or resolving, encounters the healthcare system for a specific treatment of that disease or injury • dialysis for renal disease • chemotherapy for malignancy • cast changes • When some circumstance or problem is present which influences the person’s health status but is not in itself a current illness or injury • a personal history of certain diseases • a person with an artificial heart valve in situ
  59. 59. V-CODES: CATEGORIES Code Category V01-V06 Persons with potential health hazards related to communicable disease V07-V09 Persons with need for isolation, other potential health hazards and prophylactic measures V10-V19 Persons with potential health hazards related to personal and family history V20-V29 Persons encountering health services in circumstances related to reproduction & development V30-V39 Liveborn infants according to type of birth V40-V49 Persons with a condition influencing their health status V50-V59 Persons encountering health services for specific procedures and aftercare V60-V69 Persons encountering health services in other circumstances V70-V82 Persons without reported diagnosis encountered during examination and investigation of individuals and populations V83-V84 Genetics V85 Body mas index V86 Estrogen receptor status V87 Other specified personal exposures and history presenting hazards to health V88 Acquired absence of other organs and tissue V89 Other suspected conditions not found V90 Retained foreign body V91 Multiple gestation placenta status
  60. 60. V-CODES: EXAMPLE V30-39 Liveborn infants according to the type of birth The following fourth-digit subdivisions are for use with categories V30-V39: 0 Born in hospital 1 Born before admission to hospital 2 Born outside hospital and not hospitalized The following two fifth-digit subdivisions are for use with the forth digit .0, born in hospital: 0 Delivered without mention of cesarean delivery 1 Delivered by cesarean delivery V30 Single liveborn V31 Twin, mate liveborn V32 Twin, mate stillborn V33 Twin, unspecified V34 Other multiple, mates all liveborn V35 Other multiple, mates all stillborn V36 Other multiple, mates live- and stillborn V37 Other multiple, unspecified V39 Unspecified Normal newborn girl, born in hospital, vaginal delivery = V30.00 Normal twins, born in hospital by cesarean delivery = V31.01 for each infant
  61. 61. E CODES • Used for supplementary classification of external causes of injury and poisoning • Provided to permit the classification of environmental events, circumstances, and conditions as to the cause of injury, poisoning, and other adverse effects • When use of an E-code is applicable, it is intended that the E-code is used in addition to a code from one of the main chapters of ICD-9, indicating the nature of the condition • Reported in the ICD-9 diagnosis fields on CMS-1500 and UB-04 • E-codes not used consistently, although • required on death records for deaths arising from injury • primarily used by trauma centers • not required by Medicare
  62. 62. E-CODES: CATEGORIES Code Category E000 External cause status E001-E030 Activity E800-E848 Transport accidents E849 Place of occurrence E850-E858 Accidental poisoning by drugs, medicinal substances, and biologicals E860-E869 Accidental poisoning by other solid and liquid substances, gases, and vapors E870-E876 Misadventures to patients during surgical and medical care E878-E879 Surgical and medical procedures as the cause of abnormal reaction of patient or later complication, without mention of misadventure at the time of procedure E880-E888 Accidental falls E890-E899 Accidents caused by fire and flames E900-E909 Accidents due to natural and environmental factors E910-E915 Accidents caused by submersion, suffocation, and foreign bodies E916-E928 Other accidents E939 Late effects of accidental injury E930-E949 Drugs, medicinal and biological substances causing adverse effects in therapeutic use E950-E959 Suicide and self-inflicted injury E960-E969 Homicide and injury purposely inflicted by other persons E970-E978 Legal intervention E979 Terrorism E980-E989 Injury undetermined whether accidentally or purposely inflicted E990-E999 Injury resulting from operations of war
  63. 63. E-CODES: EXAMPLE E906 Other injury caused by animals E906.0 Dog bite E906.1 Rat bite E906.2 Bite of nonvenomous snakes and lizards E906.3 Bite of other animal except arthropod Cats Moray eel Rodents, except rats Shark E906.4 Bite of nonvenomous arthropod Insect bite NOS E906.5 Bite by unspecified animal Animal bite NOS E906.8 Other specified injury caused by animal Butted by animal Fallen on by horse or other animal, not being ridden Gored by animal Implantation of quills of porcupine Pecked by bird Run over by animal, not being ridden Stepped on by animal, not being ridden E906.9 Unspecified injury caused by animal
  64. 64. ICD-10-PCS FORMAT • Each character of ICD-10-PCS (procedure coding system) has a specific meaning. Placement of characters is based on the following schema: 1 Section 2 Body System 3 Root Operation 4 Body Part 5 Approach 6 Device 7 Qualifier • Used to document procedures performed during the encounter • Ranked in priority of significance • Used only on UB-04 claims • A claim may or may not have an ICD-10 procedure code
  65. 65. ICD-10-PCS PROCEDURE CODES – MAJOR CATEGORIES Medical and Surgical-Related Sections 0 Medical and Surgical 1 Obstetrics 2 Placement 2 Administration 3 Measurement and Monitoring 4 Extracorporeal Assistance and Performance 5 Extracorporeal Therapies 6 Osteopathic 7 Other Procedures 8 Chiropractic 9 Imaging Ancillary Sections C Nuclear Medicine D Radiation Therapy E Physical Rehabilitation and Diagnostic Audiology G Mental Health H Substance Abuse Treatment
  66. 66. ICD-10-PCS PROCEDURE CODES – EXAMPLE 080 – Medical and Surgical – Eye – Alteration Section: 0 – Medical and Surgical Body system: 8 – Eye Operation: 0 – Alteration: Modifying the anatomic structure of a body part without affecting the function of the body part Body Part Approach Device Qualifier N – Upper Eyelid, Right 0 – Open 7 – Autologous Tissue Substitute Z – No Qualifier P – Upper Eyelid, Left 3 – Percutaneous J – Synthetic Substitute Q – Lower Eyelid, Right X – External K – Nonautologous Tissue Substitute R – Lower Eyelid, Left Z – No Device -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ----- 080N07Z: Medical and Surgical Eye Alteration Upper Eyelid, Right Open Autologous Tissue Substitute No Qualifier 080N0JZ: Medical and Surgical Eye Alteration Upper Eyelid, Right Open Synthetic Substitute No Qualifier 080N0KZ: Medical and Surgical Eye Alteration Upper Eyelid, Right Open Nonautologous Tissue Substitute No Qualifier 080N0ZZ: Medical and Surgical Eye Alteration Upper Eyelid, Right Open No Device No Qualifier 080N37Z: Medical and Surgical Eye Alteration Upper Eyelid, Right Percutaneous Autologous Tissue Substitute No Qualifier 080N3JZ: Medical and Surgical Eye Alteration Upper Eyelid, Right Percutaneous Synthetic Substitute No Qualifier
  67. 67. ICD-9 PROCEDURE CODES • 2 digits followed by a decimal, then no, 1, or 2 digits • Used to document procedures performed during the encounter • Ranked in priority of significance • Used only on UB-04 claims • A claim may or may not have an ICD-9 procedure code
  68. 68. ICD-9 PROCEDURE CODES – CATEGORIES Code Category 00 Procedures and interventions, not elsewhere classified 01-05 Operations on the nervous system 06-07 Operations on the endocrine system 08-16 Operations on the eye 17 Other miscellaneous diagnostic and therapeutic procedures1 18-20 Operations on the ear 21-29 Operations on the nose, mouth, and pharynx 30-34 Operations on the respiratory system 35-39 Operations on the cardiovascular system 40-41 Operations on the hemic and lymphatic system 42-54 Operations on the digestive system 55-59 Operations on the urinary system 60-64 Operations on the male genital organs 65-71 Operations on the female genital organs 72-75 Obstetrical procedures 76-84 Operations on the musculoskeletal system 85-86 Operations on the integumentary system 87-99 Miscellaneous diagnostic and therapeutic procedures
  69. 69. ICD-9 PROCEDURE CODES – EXAMPLE 08-16 Operations on the eye 08 Operations on eyelids 09 Operations on lacrimal system 10 Operations on conjunctiva 11 Operations on cornea 12 Operations on iris, ciliary body, sclera, and anterior chamber 13 Operations on lens 14 Operations on retina, choroid, vitreous, and posterior chamber 15 Operations on extraocular muscles 16 Operations on orbit and eyeball
  70. 70. ICD-9 PROCEDURE CODES – EXAMPLE (CONTINUED) 14 Operations on retina, choroid, vitreous, and posterior chamber 14.0 Removal of foreign body from posterior segment of eye Excludes: removal of surgically implanted material (14.6) 14.00 Removal of foreign body from posterior segment of eye, not otherwise specified 14.01 Removal of foreign body from posterior segment of eye with use of magnet 14.02 Removal of foreign body from posterior segment of eye without use of magnet 14.1 Diagnostic procedures on retina, choroid, vitreous, and posterior chamber 14.11 Diagnostic aspiration of vitreous 14.19 Other diagnostic procedures on retina, choroid, vitreous, and posterior chamber 14.2 Destruction of lesion of retina and choroid Includes: destruction of chorioretinopathy or isolated chorioretinal lesion Excludes: that for repair of retina (14.31-14.59) 14.21 Destruction of chorioretinal lesion by diathermy 14.22 Destruction of chorioretinal lesion by cryotherapy 14.23 Destruction of chorioretinal lesion by xenon arc photocoagulation 14.24 Destruction of chorioretinal lesion by laser photocoagulation 14.25 Destruction of chorioretinal lesion by photocoagulation of unspecified type 14.26 Destruction of chorioretinal lesion by radiation therapy 14.27 Destruction of chorioretinal lesion by implantation of radiation source 14.29 Other destruction of chorioretinal lesion Destruction of lesion of retina and choroids NOS Coders should code to the 4th digit wherever possible (highest level of specificity)
  71. 71. ICD-9 PROCEDURE CODES – EXAMPLE (CONTINUED) 14.3 Repair of retinal tear Includes: repair of retinal defect Excludes: repair of retinal detachment (14.41-14.59) 14.31 Repair of retinal tear by diathermy 14.32 Repair of retinal tear by cryotherapy 14.33 Repair of retinal tear by xenon arc photocoagulation 14.34 Repair of retinal tear by laser photocoagulation 14.35 Repair of retinal tear by photocoagulation of unspecified type 14.39 Other repair of retinal tear 14.4 Repair of retinal detachment with scleral buckling and implant 14.41 Scleral buckling with implant 14.49 Other scleral buckling Scleral buckling with: air tamponade resection of sclera vitrectomy 14.5 Other repair of retinal detachment Includes: that with drainage 14.51 Repair of retinal detachment with diathermy 14.52 Repair of retinal detachment with cryotherapy 14.53 Repair of retinal detachment with xenon arc photocoagulation 14.54 Repair of retinal detachment with laser photocoagulation 14.55 Repair of retinal detachment with photocoagulation of unspecified type 14.59 Other
  72. 72. ICD-9 PROCEDURE CODES – EXAMPLE (CONTINUED) 14.6 Removal of surgically implanted material from posterior segment of eye 14.7 Operations on vitreous 14.71 Removal of vitreous, anterior approach Open sky technique Removal of vitreous, anterior approach (with replacement) 14.72 Other removal of vitreous Aspiration of vitreous by posterior sclerotomy 14.73 Mechanical vitrectomy by anterior approach 14.74 Other mechanical vitrectomy 14.75 Injection of vitreous substitute Excludes: that associated with removal (14.71-14.72) 14.79 Other operations on vitreous 14.8 Implantation of epiretinal visual prosthesis 14.81 Implantation of epiretinal visual prosthesis 14.82 Removal of epiretinal visual prosthesis 14.83 Revision or replacement of epiretinal visual prosthesis 14.9 Other operations on retina, choroid, and posterior chamber
  73. 73. BILLING FORMS THAT USE ICD-10 • Professional (CMS-1500) • ICD-10-CM (diagnosis codes) • Institutional (UB-04) • ICD-10-CM (diagnosis codes) • ICD-10-PCS (procedure codes) • All claims, whether CMS-1500 or UB-04, must have at least one ICD-10 diagnosis code • On UB-04, the first diagnosis code must describe the principal reason for the care provided • If additional facts are required to substantiate the care provided, providers should list the ICD-10 codes in the order of their importance
  74. 74. IMPLICATIONS FOR CHARGEMASTER AND REIMBURSEMENT • Not used by providers to set charges • ICD-10 codes alone are not typically tied to payor fee schedules, although (rarely) some payors used ICD-9 procedure codes to negotiate outpatient facility reimbursement • ICD-10 codes drive MS-DRGs, which drive inpatient reimbursement for Medicare and many other payors
  75. 75. COMPARISON OF ICD-9 AND ICD-10 DIAGNOSIS CODING ICD-9-CM diagnosis codes ICD-10-CM diagnosis codes 3-5 characters in length 3-7 characters in length Approximately 13,000 codes Approximately 68,000 available codes First digit may be alpha (E or V) or numeric; digits 2-5 are numeric First digit is alpha; digits 2 and 3 are numeric; digits 4-7 are alpha or numeric Limited space for adding new codes Flexible for adding new codes Lacks detail Very specific Lacks laterality Allows laterality and bi-laterality Difficult to analyze data due to non-specific codes Specifically improves coding accuracy and richness of data for analysis Codes are non-specific and do not adequately define diagnoses needed for medical research Detail improves the accuracy of data used for medical research Does not support interoperability Supports interoperability and the exchange of health data between the U.S. and other countries
  76. 76. COMPARISON OF ICD-9 AND ICD-10 PROCEDURE CODING ICD-9-CM procedure codes ICD-10-CM procedure codes 3-4 numbers in length 7 alpha-numeric characters in length Approximately 3,000 codes Approximately 72,600 available codes Based on outdated technology Reflects current usage of medical terminology and devices Limited space for adding new codes Flexible for adding new codes Lacks detail Very specific Lacks laterality Allows laterality Generic terms for body parts Detailed descriptions for body parts Lacks description of method and approach for procedures Provides detailed descriptions of method and approach for procedures Limits DRG assignment Allows expansion of DRG definitions to recognize new technologies and devices Lacks precision to adequately define procedures Precisely defines procedures with detail regarding body part, approach, any device used, and qualifying information
  77. 77. HOW ARE ICD-9 AND ICD-10 DIFFERENT? Diagnosis ICD-9 ICD-10 Precordial chest pain 786.51 R07.2 Asthma, acute exacerbation 493.92 J45.21 Mild, intermittent, w/ acute exacerbation J45.41 Moderate, persistent, w/ acute exacerbation V45.51 Severe, persistent, w/ acute exacerbation Thumb laceration, w/o nail damage, initial encounter 883.0 S61.011A Laceration w/o FB, Rt. S61.012A Laceration w/o FB, Lt.
  78. 78. WHAT ARE HCPCS CODES? • Level I – CPT-4 (Current Procedural Terminology, 4th Edition) • Level II – HCPCS/National codes • (Level III – local codes – retired in 2003)
  79. 79. LEVEL 1 – CPT-4 • Developed and maintained by the American Medical Association (AMA) • Five-digit codes with descriptions • Developed in 1966 • Updated annually by the AMA • Six major sections: • Evaluation and management (E&M) (99201-99499) • Anesthesiology (00100-01999) • Surgery (10040-69990) • Radiology (70010-79999) • Pathology and laboratory (80048-89399) • Medicine (90281-99199 and 99500-99999) • Procedures are divided into subsections according to body part, service, or diagnosis
  80. 80. LEVEL 1I – HCPCS CODES • HCFA developed the second level of HCPCS codes because CPT does not contain all the codes needed to report medical services and supplies • These codes always begin with a single letter (A through V) followed by 4 numeric digits • Updated annually by CMS
  81. 81. LEVEL 1I – HCPCS CODES (CONTINUED) Grouped by type of service or supply they represent A codes – ambulance, transportation and supplies K codes – temporary DME codes B codes – enteral and parenteral nutrition L codes – orthotics and prosthetics C codes – temporary hospital codes M codes – medical services D codes – dental P codes – pathology, laboratory and blood products E codes – durable medical equipment (DME) Q codes – temporary procedures, services, drugs and supplies G codes – temporary procedures, services, drugs R codes – radiology transport and supplies H codes – mental health S codes – private payor and Medicaid codes J codes – drugs T codes – Medicaid codes Q codes – temporary procedures, services, drugs V codes – vision, audiology, and speech-language pathology services and supplies
  82. 82. CPT CODES – E&M EXAMPLE Evaluation and management (E/M) Office or other outpatient services New patient 99201 Office or other outpatient visit including for the evaluation and management of a new patient, which requires these three key components: • a problem focused history; • a problem focused examination; and • straightforward medical decision making. 99202 Office or other outpatient visit including for the evaluation and management of a new patient, which requires these three key components: • an expanded problem focused history; • an expanded problem focused examination; and • straightforward medical decision making. 99203 Office or other outpatient visit including for the evaluation and management of a new patient, which requires these three key components: • a detailed history; • a detailed examination; and • medical decision making of low complexity. 99204 Office or other outpatient visit including for the evaluation and management of a new patient, which requires these three key components: • a comprehensive history; • a comprehensive examination; and • medical decision making of moderate complexity. 99205 Office or other outpatient visit including for the evaluation and management of a new patient, which requires these three key components: • a comprehensive history; • a comprehensive examination; and • medical decision making of high complexity.
  83. 83. CPT CODES – SURGICAL EXAMPLE Eye and ocular adnexa Eyeball Removal of eye Secondary implant(s) procedures Removal of foreign body 65205 Removal of foreign body, external eye; conjunctival superficial 65210 conjunctival embedded (includes concretions), subconjunctival, or scleral nonperforating 65220 corneal, without slit lamp 65222 corneal, with slit lamp 65235 Removal of foreign body, intraocular; from anterior chamber or lens 65260 from posterior segment, magnetic extraction, anterior or posterior route 65265 from posterior segment, nonmagnetic extraction
  84. 84. LEVEL II HCPCS CODES - EXAMPLE Dental procedures Diagnostic Clinical oral evaluation Radiographs D0210 Intraoral – complete series (including bitewings) D0220 Intraoral – periapical – first film D0230 Intraoral – periapical – each additional film D0240 Intraoral – occlusal film D0250 Extraoral – first film D0260 Extraoral – each additional film D0270 Bitewing – single film D0272 Bitewings – two films D0274 Bitewings – four films D0290 Posterior-anterior or lateral skull and facial bone survey film D0310 Sialography D0320 Tempromandibular joint arthrogram, including injection D0321 Other temporomandibular joint films, by report D0322 Tomographic survey D0330 Panoramic film D0340 Cephalometric film Test and laboratory examinations…
  85. 85. IMPLICATIONS FOR CHARGEMASTER AND REIMBURSEMENT • Most payors set physician fee schedules based on CPT and HCPCS codes • CPT and HCPCS codes also used to reimburse most non-physician health professionals (e.g., optometrists, therapists, audiologists) • CMS established Relative Value Units (RVUs) for most CPT codes; this is the basis for Medicare payment • Most payors have adopted RVUs as their basis for reimbursing physicians • Many clinics have adopted RVUs as the basis for setting fees • Many clinics use RVUs to compensate physicians within their practice • This topic will be covered in depth in reimbursement section
  86. 86. MODIFIERS • Modifiers are used to identify circumstances that alter or enhance the description of a service or supply • There are two levels of modifiers – one for each level of codes • Level I (CPT) modifiers • Level II (HCPCS/National) modifiers • Some modifiers have an impact on reimbursement by either reducing or increasing the allowed amount for the code that it is modifying • Procedure codes may have multiple modifiers
  87. 87. LEVEL I (CPT) MODIFIERS • Two numeric digits which are added to the five-digit CPT code • Maintained and updated annually by the AMA • Commonly used modifiers • -26 professional component • -TC technical component • -25 separate, distinct E&M service • -50 bilateral procedure • -51 multiple procedures • -80 assistant surgeon
  88. 88. LEVEL II HCPCS MODIFIERS • Two alphabetic digits (AA-VP) which are added to the alpha/numeric HCPCS code • These are recognized by carriers nationally • Maintained and updated annually by CMS • Example • E1 upper left, eyelid • E2 lower left, eyelid • E3 upper right, eyelid • E4 lower right, eyelid • Both HCPCS and CPT modifiers are used interchangeably
  89. 89. REVENUE CODES • Used on UB-04 • Groups similar types of charges into one line • Every item in a hospital chargemaster must have one revenue code attached • Certain revenue codes require CPT/HCPCS codes • If a CPT/HCPCS code is available, it should be used • Hospitals should use the highest level of specificity of revenue code • Always four digits
  90. 90. REVENUE CODES - EXAMPLES 0120 Room & board/semi-private 0121 Med/Surg/Gyn/2 beds 0122 OB/2 beds 0123 Peds/2 beds 0124 Psych/2 beds 0125 Hospice/2 beds 0126 Detox/2 beds 0127 Oncology/2 beds 0128 Rehab/2 beds 0129 Other/2 beds 0400 Other imaging svc/general 0401 Diagnostic mammography 0402 Ultrasound 0403 Screening mammography 0404 PET scan 0409 Other image scan 0610 MRI – general 0611 MRI – brain 0612 MRI – spine 0614 MRI – other 0615 MRA – head and neck 0616 MRA – lower extremities 0618 MRA – other 0619 MRT – other
  91. 91. HOSPITAL CHARGEMASTER • The hospital chargemaster is the hospital’s “catalog” of all services that are provided by that hospital • Organized by department – the following are included for each item • Hospital’s item number (for internal use) • Department number (determines which cost center is credited with the revenue for that item) • Item description – used for claim detail • Price (charge) per unit • Cost (sometimes – depends on hospital’s cost accounting system) • Revenue code (always) • HCPCS codes, if required because of that item’s revenue code
  92. 92. HOSPITAL CHARGEMASTER (CONTINUED) • A typical chargemaster has thousands of items • Some states, such as Calif., require hospitals to make their chargemasters public • There are many types of charge lines • Recurring charges (room) • Charges tied to order entry (lab, pharmacy, x-ray) • Time-based charges (OR, anesthesia) • Items for which the charge varies from patient to patient (implants) • Charges which do not require HCPCS or CPT codes • Charges for which the HCPCS or CPT code is assigned at the chargemaster level • Charges for which the HCPCS or CPT code is assigned by HIM
  93. 93. SAMPLE HOSPITAL CHARGEMASTER (SELECTED ITEMS) Item # Description Cost center Rev code HCPCS code Charge Note 3112451 OR Level 1 charge for first 30 minutes 100120 0360 Assigned by HIM $2,500 Example of a timed charge for OR time 5172457 Pacemaker, dual chamber, rate responsive 100120 0275 C1785 $10,000 Example of a HCPCS code that could be in the chargemaster 3172471 Implant spine miscellaneous 100120 0278 N/A Manual Sample of an open code, in which supply implants are charged and priced using the hospital’s assigned markup schedule 3174526 Pack, cardiovascular custom 100120 0272 $1,500 Sample line in the chargemaster with no HCPCS code; field is left blank 9115487 EEG during nonintracranial surgery 100240 0740 95955 $750 Example of an outsourced service (not part of OR) that needs charge capture
  94. 94. SAMPLE HOSPITAL ITEMIZATION & UB ROLLUP
  95. 95. DRGS • The Diagnosis Related Group, or DRG, system uses ICD-10-CM diagnosis and procedure codes as well as patient demographic information to classify each inpatient hospital admission into one of 753 clinically cohesive groups that demonstrate similar consumption of hospital resources and length-of-stay patterns • Has been used by Medicare since 1983 to reimburse hospitals for inpatient admissions • Certain types of hospitals are excluded from Medicare’s DRG reimbursement system; these include psychiatric hospitals or units, rehabilitation hospitals or units, children’s hospitals, long-term care hospitals and cancer hospitals • CMS administers the DRG system and issues all rules and changes • DRGs are updated each October 1 • Base rates, wage indices, weights, and other DRG components are adjusted • Codes are re-mapped • New DRGs are created • DRGs are retired
  96. 96. DRGS • One problem with DRGs has been the historical inability to account for severity differences within a DRG • As a result, several severity-adjusted DRG systems have been developed • APR-DRGs (All-Patient Refined DRGs) – four severity subclasses for each DRG • APS-DRGs (All-Payer Severity-adjusted DRGs) – measures resource intensity • MS-DRGs (Medicare Severity DRGs) – used by CMS; three severity tiers for most DRGs
  97. 97. CCS AND MCCS • In MS-DRGs, many DRGs are split into one, two, or three related MS- DRGs based on whether any one of the secondary diagnoses has been categorized as an MCC, a CC, or no CC • CMS identified those diagnoses whose presence as a secondary diagnosis leads to substantially increased hospital use; they then categorized this CC list into three different levels of severity • MCCs (Major complications or comorbidities) – reflect the highest level of severity • CCs (Complications and comorbidities) – represent the next level of severity • Non-CCs – lowest level of severity; diagnosis codes that do not significantly affect severity of illness and resource use and do not affect DRG assignment
  98. 98. MS-DRGS • Current MS-DRG system is version 32, used for fiscal year 2015 • Many payors have adopted MS-DRGs for reimbursement • Successful MS-DRG coding requires physicians and medical staff to provide complete and detailed documentation, and health information management (medical records) staff to fully understand the medical conditions for which they are responsible • Key to accurate coding (and therefore to maximizing reimbursement) is assignment of secondary diagnosis codes
  99. 99. USES FOR MS-DRGS • Reimbursement • Evaluation of quality of care: since all cases in an MS-DRG are clinically similar, analysis of treatment protocols, related conditions or demographic distribution can be done • clinical best-practice models can be designed around MS-DRGs • benchmarking and outcome analysis can be conducted using the MS-DRG clinical framework • quality reviews can be performed to assess coding practices and physician documentation • ongoing education of physicians, coders, nurses and utilization review personnel can be guided by the results of MS-DRG analyses • Evaluation of utilization of services: each MS-DRG represents the average resources needed to treat patients grouped to that MS-DRG relative to the national average of resources used to treat all Medicare patients
  100. 100. MS-DRG ASSIGNMENT • MS-DRGs are assigned using the following considerations • The principal ICD-10 diagnosis code • Secondary ICD-10 diagnosis codes • The principal ICD-10 procedure code (when applicable) • Secondary ICD-10 procedure codes (when applicable) • Gender • Discharge status • Presence or absence of MCCs/CCs • Birth weight for neonates • One MS-DRG is assigned to each inpatient stay
  101. 101. MS-DRG ASSIGNMENT (CONTINUED) • Health information management coders review the patient’s chart upon discharge and assign the ICD-10 codes which determine MS-DRG • Grouper software calculates the MS-DRG based on the above considerations; grouper software is usually updated annually • Sometimes there are discrepancies between a hospital’s resultant MS- DRG and the MS-DRG calculated by a payor due to the use of different grouper versions
  102. 102. MS-DRG ORGANIZATION • There are 25 major diagnostic categories (MDCs), which are each organized into two sections: • Surgical – this section classifies all surgical conditions based upon operating room procedures • Medical – this section classifies all diagnostic conditions based upon diagnosis codes • MDCs are mutually exclusive and in general are organized by major body system and/or associated with a particular medical specialty
  103. 103. MDCS 01 Diseases and disorders of the nervous system 02 Diseases and disorders of the eye 03 Diseases and disorders of the ear, nose, mouth and throat 04 Diseases and disorders of the respiratory system 05 Diseases and disorders of the circulatory system 06 Diseases and disorders of the digestive system 07 Diseases and disorders of the hepatobiliary system and pancreas 08 Diseases and disorders of the musculoskeletal system and connective tissue 09 Diseases and disorders of the skin, subcutaneous tissue and breast 10 Endocrine, nutritional and metabolic diseases and disorders 11 Diseases and disorders of the kidney and urinary tract 12 Diseases and disorders of the male reproductive system 13 Diseases and disorders of the female reproductive system 14 Pregnancy, childbirth and the puerperium 15 Newborns and other neonates with conditions originating in the perinatal period 16 Diseases and disorders of the blood, blood forming organs and immunological disorders 17 Myeloproliferative diseases and disorders, poorly differentiated neoplasm 18 Infectious and parasitic diseases, systemic or unspecified sites 19 Mental diseases and disorders 20 Alcohol/drug use and alcohol/drug induced organic mental disorders 21 Injuries, poisonings and toxic effects of drugs 22 Burns 23 Factors influencing health status and other contacts with health services 24 Multiple significant trauma 25 Human immunodeficiency virus infections
  104. 104. MS-DRG EXAMPLE MDC 02 Diseases and disorders of the eye Surgical MS-DRGs MS- DRG 113 Orbital procedures w CC/MCC Relative weight: 1.8611 Geometric Mean LOS: 3.7 Arithmetic Mean LOS: 5.1 Operating room procedures: 14.21 14.22 14.26 14.27 14.29 14.31 14.32 14.39 14.41 14.49 14.51 14.52 14.53 14.54 14.55 14.59 14.9 National unadjusted payment $10,916.24 MS-DRG 114 Orbital procedures w/o CC/MCC MS-DRG 115 Extraocular procedures except orbit MS-DRG 116 Intraocular procedures w CC/MCC MS-DRG 117 Intraocular procedures w/o CC/MCC
  105. 105. MS-DRG EXAMPLE (CONTINUED) MDC 02 Diseases and disorders of the eye Medical MS-DRGs MS-DRG 121 Acute major eye infections w CC/MCC Relative weight: 1.0635 Geometric Mean LOS: 3.9 Arithmetic Mean LOS: 5.0 Principal diagnosis 360.00 360.01 360.02 360.04 360.13 360.19 370.00 370.03 370.04 370.05 370.06 370.55 375.01 375.31 375.32 376.01 376.02 376.03 376.04 National unadjusted payment $6,237.94 MS-DRG 122 Acute major eye infections w/o CC/MCC MS-DRG 123 Neurological eye disorders MS-DRG 124 Other disorders of the eye w MCC MS-DRG 125 Other disorders of the eye w/o MCC
  106. 106. SAMPLE MS-DRG WEIGHTS MS- DRG Description Relative weight National unadjusted payment 232 Coronary bypass w PTCA w/o MCC 5.5976 $32,833 662 Minor bladder procedures w MCC 3.0042 $17,621 663 Minor bladder procedures w CC 1.5285 $8,965 664 Minor bladder procedures w/o CC/MCC 1.2406 $7,277 766 Cesarean section w/o CC/MCC 0.7562 $4,435 775 Vaginal delivery w/o complicating diagnosis 0.5643 $3,310 795 Normal newborn 0.1724 $1,011 007 Lung transplant 9.2986 $54,541 468 Revision of hip or knee replacement w/o CC/MCC 2.7652 $16,219
  107. 107. MS-DRGS AS BENCHMARKING • Hospital casemix index is calculated as total weights / number of admissions • MS-DRGs can be used for • Comparing average charges across hospitals – regardless of size • Reimbursement across payors – regardless of payment method • Resource utilization and cost across hospitals • Identifying types of services provided by a hospital
  108. 108. APCS • The Ambulatory Payment Classification, or APC, system uses CPT and HCPCS codes to classify outpatient hospital admissions clinically cohesive groups that demonstrate similar consumption of hospital resources • Has been used by Medicare since 2000 to reimburse hospitals for certain outpatient services • Certain types of hospitals are excluded from Medicare’s APC reimbursement system; these include Maryland hospitals (for certain services), critical access hospitals, hospitals located outside of the 50 US states, and Indian Health Service hospitals • CMS administers the APC system and issues all rules and changes • APCs are updated each year • Base rates, wage indices, weights, and other APC components are adjusted • Codes are re-mapped • New APCs are created • APCs are retired
  109. 109. FEATURES OF APCS • Approximately 700 procedural APCs and 350 drug APCs • Like DRGs, each APC reflects procedures that are comparable both clinically and in resource use • Reimbursement by Medicare is at lesser of billed charges or the APC fee schedule amount, adjusted for geographic differences • Procedure-based APC groups are assigned a relative weight • Relative weight is based on median cost (operating and capital) for the grouped services • Weights are converted to payment rates using conversion factors • Assignment of APC code is driven by CPT and HCPCS codes • Patient can have multiple APCs on one claim, although multiple surgeries are paid the full APC amount for the highest APC, and all others are paid at 50% of the APC rate • Status indicators tell why there is no payment for a HCPCS code; for example, the code may be paid under a lab fee schedule, or the code may be considered to be bundled as part of a procedure and therefore not separately payable
  110. 110. APCS - EXAMPLE 0130 – Level I Laparoscopy RW 40.6743 Payment rate (national) $3,016.93 Includes these CPTs: 38129 Laparoscopic procedures, spleen 38589 Laparoscopic procedures, lymphatic system 43289 Laparoscopic procedures, esophagus 43648 Lap revise/remove eltrd antrum 43659 Laparoscopic procedures, stomach 44238 Laparoscopic procedures, intestine 44979 Laparoscopic procedures, appendectomy 45499 Laparoscopic procedures, rectum 47379 Laparoscopic procedures, liver 47560 Laparoscopy with cholangiogram 47561 Laparoscopy with cholangiogram and biopsy 47579 Laparoscopic procedures, biliary 49320 Laparoscopy, diagnostic biopsy separate procedure 49321 Laparoscopy, biopsy 49322 Laparoscopy, aspiration 49323 Laparoscopic drainage of lymphocele
  111. 111. APCS – EXAMPLE (CONTINUED) 0130 – Level I Laparoscopy Includes these CPTs (list continued from previous slide): 49324 Laparoscopic insertion of permanent IP catheter 49325 Laparoscopic revision of permanent IP catheter 49329 Laparoscopic procedure, abdomen/per/oment 49659 Laparoscopic hernia repair 50541 Laparoscopic procedures, ablate renal cyst 50549 Laparoscopic procedures, renal 50949 Laparoscopic procedures, ureter 51999 Laparoscopic procedures, bladder 54699 Laparoscopy procedures, testis 55559 Laparoscopy procedures, spermatic cord 58545 Laparoscopic myomectomy 58578 Laparoscopic procedures, uterus 58679 Laparoscopic procedures, oviduct-ovary 59898 Laparoscopic procedures, OB care/ delivery 60659 Laparoscopy procedures, endocrine
  112. 112. APCS – EXAMPLE (CONTINUED) 0131 – Level II Laparoscopy RW 50.9538 Payment rate (national) $3,779.40 0132 – Level III Laparoscopy RW 73.8696 Payment rate (national) $5,479.13
  113. 113. CLAIM FORM TYPES • Providers other than pharmacies use one of the following two claim forms: • CMS-1500 – professional claim form – used by physicians, therapists, and other professionals • UB-04 – institutional claim form – used by facilities including hospitals, surgery centers, skilled nursing facilities, home health agencies, some transportation providers, etc.
  114. 114. SAMPLE PROFESSIONAL CLAIM FORM (CMS-1500)
  115. 115. SAMPLE PHYSICIAN CHARGEMASTER (SELECTED CODES) CPT code Description Charge 99201 New patient visit, level 1 $60.00 99202 New patient visit, level 2 $100.00 99203 New patient visit, level 3 $145.00 99204 New patient visit, level 4 $220.00 99205 New patient visit, level 5 $275.00 99211 Established patient visit, level 1 $30.00 99212 Established patient visit, level 2 $60.00 99213 Established patient visit, level 3 $100.00 99214 Established patient visit, level 4 $145.00 99215 Established patient visit, level 5 $195.00 81005 Urinalysis $8.00 82310 Calcium test; total $13.00 90707 Measles, mumps, rubella vaccine $104.00
  116. 116. SUPERBILL EXAMPLE
  117. 117. FACILITY CLAIM FORM: UB-04 • The Uniform Bill 2004 (UB-04) is also known as the HCFA-1450 and replaced the UB-92 in 2005 • The UB-04 is used for both inpatient and outpatient facility services • The National Uniform Billing Committee (NUBC) establishes and maintains a complete list of the allowable data elements and codes used on the UB-04 claim • The UB-04 contains 81 form locators (FLs) • A FL is a data field • Some FLs must be completed, some are used only when applicable to specific claims, and others are reserved for future use • The UB-04 has 22 service lines on a single form • The UB-04, when submitted electronically, can accept 450 service lines
  118. 118. SAMPLE UB-04
  119. 119. HOSPITAL CODING • Health information management (HIM, formerly known as the medical records department) staff review records after patient is discharged and assign these codes to the entire encounter: • ICD-10 diagnosis codes • ICD-10 procedure codes • CPT codes for surgeries, interventional procedures • Other procedure codes reside in the chargemaster and are automatically brought forward to the claim
  120. 120. PART 3: PHYSICIAN AND HOSPITAL REIMBURSEMENT
  121. 121. TOPICS COVERED IN THIS SECTION • Hospital reimbursement models • Physician reimbursement models • Provider/plan contracting issues
  122. 122. HOSPITAL REIMBURSEMENT – OVERVIEW • Hospitals charge the same amount per service to all patients regardless of payor source • Each payor utilizes its own method for reimbursing the hospital • Hospitals write off the difference between charges and reimbursement as “discount” • Some hospitals’ aggregate discounts are 70+% of charges, meaning they collect only 30% of gross revenue; the remainder is discount • Payment can be greater than billed charges, depending on the contract terms • Self-pay patients and patients with no coverage are expected to pay full billed charges, less any charity discount
  123. 123. INPATIENT VERSUS OUTPATIENT STATUS • Inpatient versus outpatient: the admitting physician must admit patients specifically to “inpatient” status • Patients must meet admission criteria (intensity of service and severity of illness) • If patient does not meet inpatient criteria and if physician has not ordered inpatient services, then the patient’s status is outpatient • Services may be similar between inpatient and outpatient but reimbursement can be dramatically different
  124. 124. COMMON INPATIENT REIMBURSEMENT METHODS • DRG (Diagnosis Related Groups) • MS-DRGs (Medicare Severity DRGs) • Per case • Per diem • Percent discount • Carve outs • Outlier provisions
  125. 125. INPATIENT: DRG • DRG = Diagnosis Related Groups • Medicare transitioned to MS-DRGs (Medicare Severity DRGs) in 2008 • Health information management (medical records) staff assign ICD-10 diagnosis and procedure codes to the entire encounter after patient is discharged • DRGs are a derivation of ICD-10 diagnosis and procedure codes, as well as other demographic information • Each admission has only one DRG • Each DRG has a relative weight, which is updated annually by CMS • Hospital and payor agree on a base rate (“weight of 1.00” amount or “conversion factor”), which is multiplied by each admission’s DRG weight to determine reimbursement • Charges don’t matter, other than for outlier threshold determination • Length of stay doesn’t matter, other than for outlier threshold determination
  126. 126. INPATIENT: DRG Commercial payors negotiate the following with the hospital • DRG weight of 1.00 payment rate (eg, conversion factor) • DRG grouper version • Outlier provision • typically, payment is percent discount on the entire admission once a charge or length of stay threshold is met • DRG weight of one payment method no longer applies • Carve outs; separate, additional payment for high-cost drugs and devices (typically percent discount on the carve out items) • Implants and devices • High-cost drugs • Separate reimbursement methods (typically per diem or percent discount) for non-typical, high-cost, variable length-of-stay admission types: • Inpatient rehab • Neonatal intensive care, levels II, III, IV • Mental health • Chemical dependency
  127. 127. INPATIENT: MS-DRG • In MS-DRGs, many DRGs are split into one, two, or three related MS-DRGs based on whether any one of the secondary diagnoses has been categorized as an MCC, a CC, or no CC • CMS identified those diagnoses whose presence as a secondary diagnosis leads to substantially increased hospital use; they then categorized this CC list into three different levels of severity • MCCs (Major complications or comorbidities) – reflect the highest level of severity • CCs (Complications and comorbidities) – represent the next level of severity • Non-CCs – lowest level of severity; diagnosis codes that do not significantly affect severity of illness and resource use and do not affect DRG assignment
  128. 128. INPATIENT: SAMPLE MS-DRG REIMBURSEMENT MS- DRG Description Relative weight National unadjusted payment 662 Minor bladder procedures w MCC 3.0042 $17,621 663 Minor bladder procedures w CC 1.5285 $8,965 664 Minor bladder procedures w/o CC/MCC 1.2406 $7,277 466 Revision of hip or knee replacement w MCC 5.1513 $30,215 467 Revision of hip or knee replacement w CC 3.4231 $20,078 468 Revision of hip or knee replacement w/o CC/MCC 2.7652 $16,219
  129. 129. INPATIENT: PER STAY • Per stay (also known as per admission rate) • Fixed rate for entire admission • Can be organized into categories such as OB, medical, surgical with different rates for each category • Charges and length of stay don’t matter, other than for outlier threshold determination • Often there is no “lesser of” language, so the hospital is paid the per stay rate regardless of charges
  130. 130. INPATIENT: PER STAY • What is negotiated • Categories and definitions; varies from hospital to hospital and plan to plan, but typical categories and definitions include: • Medical (defined as DRG type or bed type revenue code) • Surgical (defined as DRG type or presence of surgical revenue code or bed type revenue code) • OB (DRG – can be split into vaginal and C-section) • Normal newborn (DRG or revenue code; often paid at $0 if OB rate is intended to cover both mom and baby) • Cardiac (DRG or ICD-10 – can be split into bypass, PTCA, other categories) • Rates for each category • Outlier provision • typically, payment is percent discount on the entire admission once a charge or length of stay threshold is met • Alternatively, can have additional per diem included with per stay amount, beginning on threshold day through day of discharge • Per stay payment method no longer applies
  131. 131. INPATIENT: PER STAY • What is negotiated (continued) • Carve outs; separate, additional payment for high-cost drugs and devices (typically percent discount on the carve out items) • Implants and devices • High-cost drugs • Separate reimbursement methods (typically per diem or percent discount) for non-typical, high-cost, variable length-of-stay admission types: • Inpatient rehab • Neonatal intensive care, levels II, III, IV • Mental health • Chemical dependency
  132. 132. INPATIENT: PER DIEM • Fixed payment per day of hospital service • Can be organized into categories such as OB, medical, surgical with different rates for each category • Charges and length of stay don’t matter, other than for outlier threshold determination • Often there is no “lesser of” language, so the hospital is paid the per stay rate regardless of charges
  133. 133. INPATIENT: PER DIEM WHAT IS NEGOTIATED • Categories and definitions; varies from hospital to hospital and plan to plan, but typical categories and definitions include • Medical (defined as DRG type or bed type revenue code) • Surgical (defined as DRG type or presence of surgical revenue code or bed type revenue code) • OB (DRG – can be split into vaginal and C-section) • Normal newborn (DRG or revenue code; often paid at $0 if OB rate is intended to cover both mom and baby) • ICU / CCU (defined as bed type revenue code) • Pediatrics (defined as bed type revenue code) • Rehab per diem (DRG or revenue code) • NICU per diems – levels II, III, IV (revenue code) • Mental health per diems (DRG or revenue code – can be split into psych, chemical dependency) • Rates for each category • Outlier provision • typically, payment is percent discount on the entire admission once a charge or length of stay threshold is met • Per diem payment method no longer applies • Carve outs; separate, additional payment for high-cost drugs and devices (typically percent discount on the carve out items) • Implants and devices • High-cost drugs
  134. 134. INPATIENT: PERCENT OF CHARGES • Payment based on flat discount from billed charges • What is negotiated • Discount rate • Categories of service, if different rates apply to various service lines • Typically used for PPOs • Often used by rural hospitals and by national health plans that don’t have a lot of business with a hospital
  135. 135. INPATIENT: OTHER METHODS • Min/max contracts with per diems, per stay, or DRG weight of one • typically for PPOs • rates are negotiated, then a corridor is set up to guarantee the PPO a discount (so a payor never pays more than billed charges) but also so the hospital never gets hit with a deep discount on any given admission • typical min/ • Surgical case add-on • Fixed amount per surgical admission paid in addition to med/surg per diem • Can mix and match reimbursement methods within a contract • Example A: • Per diems for medical, surgical, pediatrics, ICU/CCU • Per stay for vaginal delivery, C-section • Example B: • DRG weight of one for medical, surgical • Per case rate for vaginal delivery, C-section, normal newborn • Per diem for NICU, rehab, mental health
  136. 136. HOSPITAL FINANCIAL INCENTIVES BASED ON REIMBURSEMENT METHOD Reimbursement type Economic incentive Other issues Charges, % of charges Do as much as you can, keep patient as long as you can Raise charges as high as you can Per diem Keep patient as long as you can but do as little for them as you can Charges don’t matter DRG Admit and then discharge patient as quickly as possible, do as little for them as possible Charges don’t matter, but must have accurate coding to get to the highest DRG Per stay Admit and then discharge patient as quickly as possible, do as little for them as possible Charges don’t matter, coding doesn’t matter
  137. 137. SAMPLE HOSPITAL RATE SHEET
  138. 138. VARIATION IN PAY TYPE AND AMOUNT BY PAYOR - EXAMPLE Inpatient, 3 day stay, 3-vessel cardiac bypass, total charges = $40,000 Payor Pay Method Allowed Discount Medicare MS-DRG $18,000 $22,000 Medicaid DRG $15,000 $25,000 HMO 1 Per diem $8,000 $32,000 HMO 2 Cardiac case rate $25,000 $15,000 PPO 1 Percent discount $32,000 $8,000 Self pay Charges $40,000 $0
  139. 139. COMMON HOSPITAL PAYMENT METHODS – OUTPATIENT • Historically, most outpatient services were paid at a percent of charges • Many rural hospitals are still paid at >90% of charges by HMOs and PPOs for outpatient services • Outpatient is much more difficult to set up on per visit rates due to the large variability in types of services, although some plans use APCs to establish fixed outpatient rates
  140. 140. COMMON HOSPITAL PAYMENT METHODS – OUTPATIENT • Typical categories include • ER (defined by rev code, CPT, or APC) • CT (rev code, CPT, ICD-10 procedure code or APC) • MRI (rev code, CPT, ICD-10 procedure code or APC) • Outpatient surgery (CPT, old Medicare ASC grouper, APC) • Therapies (rev code, CPT, APC) • Default % of charges for all else
  141. 141. MEDICARE HOSPITAL PAYMENT METHODS – OUTPATIENT • Medicare reimburses hospitals based on several methods • Fee schedules • Outpatient lab • Ambulance • Physical, speech, occupational therapy • Screening and diagnostic mammography • Dialysis composite rate • End stage renal disease dialysis, drugs, supplies • APCs (Ambulatory Payment Classification) • Surgery • Radiology • Clinic services (provided within the hospital) • Emergency services • Cancer chemotherapy administration and drugs • Most all other outpatient services
  142. 142. APC REIMBURSEMENT • Reimbursement by Medicare is at lesser of billed charges or the APC fee schedule amount, adjusted for geographic differences • Procedure-based APC groups are assigned a relative weight • Relative weight is based on median cost (operating and capital) for the grouped services • Weights are converted to payment rates using conversion factors • Assignment of APC code is driven by CPT and HCPCS codes • Patient can have multiple APCs on one claim, although multiple surgeries are paid the full APC amount for the highest APC, and all others are paid at 50% of the APC rate • Status indicators tell why there is no payment for a HCPCS code; for example, the code may be paid under a lab fee schedule, or the code may be considered to be bundled as part of a procedure and therefore not payable separately
  143. 143. SAMPLE HOSPITAL RATE SHEET
  144. 144. HOSPITAL CONTRACTING ISSUES • Most hospitals want payments that are at least equal to their Medicare payment; often they want HMO payment to be at least 10-30% higher, and PPO payment to be 20-50% higher • 2015 national Medicare DRG weight of one is $5,865 (which is then adjusted for geography, also add-ons for teaching hospitals and hospitals that serve a large number of insured patients); 2007 rate was $4,869 • Hospitals talk with payors about “cost-shifting” – the idea that commercial payors must pay for the losses that hospitals incur in Medicare and Medicaid business; most hospitals’ revenue mix is 30-40% Medicare and Medicaid • A good benchmark for health plans to use in calculating hospital reimbursement is the hospital’s cost to charge ratio – this comes from the Medicare cost report which “steps down” all allowable hospital costs to revenue centers • Hospitals may be more willing to give deeper discounts (lower rates) to a health plan if they are granted exclusivity in a market
  145. 145. HOSPITAL CONTRACTING ISSUES (CONTINUED) • Term of hospital contracts varies by payor and hospital • National PPO contracts may be evergreen (in effect until terminated) or have auto-renew provisions • HMO and PPO agreements typically have 1, 2 or 3 year terms with provisions for rate increases in years 2 and 3 • Rural hospital contracts are typically evergreen or have auto-renew provisions • Most hospital contracts are silent regarding excessive charges • This is an issue for payors using % of charge payment methods • Smart contractors should limit charges to an external benchmark; this is rarely done
  146. 146. INCOME STATEMENT: ABBOTT-NORTHWESTERN HOSPITAL, MINNEAPOLIS 2013 2012 2011 2010 Inpatient Revenue $1,806,314,759 $1,896,682,509 $1,925,319,946 $1,826,334,967 Outpat Revenue $922,863,614 $881,638,457 $847,356,491 $819,803,660 Total Pt Revenue $2,729,178,373 $2,778,320,966 $2,772,676,437 $2,476,963,490 Discounts $1,739,980,629 $1,831,279,355 $1,853,341,397 $1,755,218,915 Net Pt Revenue $989,197,744 $947,041,611 $919,335,040 $890,919,712 Tot Operating Exp $1,075,946,706 $1,024,537,458 $976,757,925 $928,294,135 Operating Income/ (Loss) ($86,748,962) ($77,495,847) ($57,422,885) ($37,374,423) Tot Non-Pt Rev $141,894,209 $118,284,383 $90,772,217 $86,738,854 Tot Other Expense ($8,112) $0 $0 $0 Net Income / (Loss) $55,153,359 $40,788,536 $33,349,332 $49,364,431 Discount % 63.8% 65.9% 66.8% 70.9%
  147. 147. INCOME STATEMENT: SCRIPPS MERCY HOSPITAL, SAN DIEGO 2013 2012 2011 2010 Inpatient Revenue $2,197,520,424 $2,019,839,539 $1,871,409,399 $1,630,788,157 Outpat Revenue $597,048,601 $567,175,150 $486,790,449 $437,062,591 Total Pt Revenue $2,794,569,025 $2,587,014,689 $2,358,199,848 $2,067,850,748 Discounts $2,094,357,157 $1,856,796,227 $1,730,570,902 $1,507,492,983 Net Pt Revenue $700,211,868 $730,218,462 $627,628,946 $560,357,765 Tot Operating Exp $686,640,363 $677,408,011 $602,657,046 $567,615,147 Operating Income/ (Loss) $13,571,505 $52,810,451 $24,971,900 ($7,257,382) Tot Non-Pt Rev $27,551,821 $16,549,107 $17,768,199 $17,572,853 Tot Other Expense $0 $0 $0 $0 Net Income / (Loss) $41,123,326 $69,359,558 $42,740,099 $10,165,236 Discount % 74.9% 71.8% 73.4% 72.9%
  148. 148. INCOME STATEMENT: MEMORIAL SLOAN- KETTERING CANCER CENTER, NEW YORK 2013 2012 2011 2010 Inpatient Revenue $1,476,898,626 $1,484,529,514 $1,368,709,434 $1,263,740,718 Outpat Revenue $2,569,790,903 $2,271,652,490 $2,105,758,843 $1,804,360,306 Total Pt Revenue $4,046,689,529 $3,756,182,004 $3,474,468,277 $3,068,101,024 Discounts $2,167,809,498 $2,011,343,383 $1,770,663,877 $1,614,617,787 Net Pt Revenue $1,878,880,031 $1,744,838,621 $1,703,804,400 $1,453,483,237 Tot Operating Exp $2,263,848,401 $2,156,503,534 $1,996,280,796 $1,836,696,782 Operating Income/ (Loss) ($384,968,370) ($411,664,913) ($292,476,396) ($383,215,545) Tot Non-Pt Rev $568,898,788 $528,198,245 $498,618,281 $467,034,573 Tot Other Expense ($166,258,582) $17,578,332 $44,600,933 $28,638,564 Net Income / (Loss) $350,189,000 $98,955,000 $161,540,952 $55,182,464 Discount % 53.6% 53.5% 51.0% 52.6%
  149. 149. HOSPITAL COST TO CHARGE RATIOS Hospital 2013 2012 2011 2010 Abbott- Northwestern 39.4% 36.9% 35.2% 35.1% Scripps Mercy 24.6% 26.1% 25.6% 27.5% Memorial Sloan- Kettering 55.9% 57.4% 57.5% 59.9%
  150. 150. HOSPITAL WEIGHT OF ONE Hospital Charges per 1.00 Cost per 1.00 Medicare allowed per 1.00 Medicare gain / (loss) per 1.00 Abbott- Northwestern $28,257 $8,356 $7,410 ($946) Scripps Mercy $50,256 $9,479 $9,145 ($334) Memorial Sloan- Kettering $37,142 $14,542 $12,101 ($2,441)
  151. 151. PHYSICIAN REIMBURSEMENT • Like hospitals, physicians typically charge the same amount to all patients for the same CPT code regardless of payor • Physicians write off the difference between billed charges and allowed amount as discount • Most payors pay according to “lesser of” logic, meaning they pay the lesser of billed charges or the fee maximum in effect for that CPT code • Reimbursement is made per CPT and HCPCS code
  152. 152. PHYSICIAN REIMBURSEMENT METHODS • Fee schedule • Most payor fee schedules are based on CPT and HCPCS Level II codes • Most payors use Resource-Based Relative Value System (RBRVS) to help them develop their fee schedules • Fee schedules are typically “fee maximums;” for each code subject to the fee schedule, the payor reimburses the provider the lesser of provider’s billed charges or the fee maximum listed in the fee schedule • Number of fee schedules in use varies by plan; some plans have a single fee schedule, others have hundreds of fee schedules • Percent of charges • Typically used for CPTs and HCPCS codes that have no relative value • Sometimes payors will agree to reimburse “must-have” clinics on a percent of charge basis; not common
  153. 153. PHYSICIAN REIMBURSEMENT METHODS • Capitation • Not widely used • Capitation = monthly payment to a group of providers for each member assigned to that group of providers • Covers a defined set of services; no additional reimbursement to clinic if they provide services that are covered under capitation • Typically used only for HMOs (not PPOS), since the insurer is bearing risk • Not typically used by self-funded plan sponsors • Need to have members designate a primary care clinic or care system for capitation to work • Referrals are typically tightly managed in a capitated model
  154. 154. PHYSICIAN CONTRACTING • Unless the physician group is large enough to negotiate terms with the payor, most payors do not negotiate with providers • Fee schedule is generally “take it or leave it” • Rates are not specified in the contract • Payor may update the fee schedule at any time without notifying provider • Necessary because most payors contract with thousands of providers; it would be impossible to manage so many unique fee schedules • Most physician agreements are either evergreen or auto renew for consecutive terms • Some payors maintain a small number of fee schedules, others have hundreds of fee schedules • Depends on market strength of payor and their ability to get physicians to sign with them
  155. 155. SAMPLE PHYSICIAN CONTRACT Typical payment language in payor/ physician contracts: Pursuant to the terms of the applicable Plan, Payor or its agent and the Eligible Person shall pay to Participating Provider the lesser of Participating Provider's charges customarily billed to other patients or the amounts set forth in the applicable Fee Schedule as full payment of any claim submitted by Participating Provider for Covered Services furnished to Eligible Persons pursuant to such Plan. The schedule of maximum reimbursement amounts pursuant to which Payors shall pay Participating Providers to provide Medically Appropriate Covered Services shall be the lesser of the following: • the then current Fee Schedule of CHN, samples of which may be provided from time to time or supplied upon request from Provider; • any applicable state, federal or other mandated fee schedule; or • the actual fees or charges of Provider.
  156. 156. VARIATION IN PAY TYPE AND AMOUNT BY PAYOR - EXAMPLE Office visit, established patient, level 3 (99213) Charges = $125 Payor Pay Method Allowed Discount Medicare RBRVS $75.00 $50.00 Medicaid Fee schedule $40.00 $85.00 HMO 1 Fee schedule, fee max $80 $80.00 $45.00 HMO 2 Fee schedule, fee max $110 $110.00 $15.00 PPO 1 Fee schedule, fee max $140 $125.00 $0.00
  157. 157. NEW REIMBURSEMENT METHODS • Payors are developing many new reimbursement methods that are not solely fee-for-service based • New reimbursement models are focused on rewarding physicians and hospitals for “good” outcomes and the achievement of quality and cost goals • Historically payors sometimes offered quality bonuses if providers met certain goals, such as A1C testing, immunization rates, limited use of high-tech imaging services, etc. • New methods include shared risk through the use of Accountable Care Organizations, “pay for performance,” and penalties for adverse outcomes
  158. 158. NEW CMS REIMBURSEMENT METHODS • CMS has begun to transform itself from a passive payer of services into an active purchaser of higher quality, affordable care • The overarching goal is to foster joint clinical and financial accountability in the healthcare system • CMS has launched and is exploring many new reimbursement models such as: • Voluntary “pay for performance program,” named the Physician Quality Reporting System (PQRS) which provides for bonus payments to physicians for achieving quality goals • “Meaningful Use”, which means providers can receive bonus payments if they can demonstrate that they are using certified electronic health record (EHR) technology in ways that can be measured significantly in quality and in quantity • New reimbursement models for patients with dual (Medicare and Medicaid) membership such as capitation and managed fee-for-service
  159. 159. CMS VALUE-BASED PURCHASING GOALS Value-Based Purchasing – appropriate incentives encouraging all healthcare providers to deliver higher quality care at lower total costs; goals include: • Financial Viability—where the financial viability of the traditional Medicare fee-for-service program is protected for beneficiaries and taxpayers. • Payment Incentives—where Medicare payments are linked to the value (quality and efficiency) of care provided. • Joint Accountability—where physicians and providers have joint clinical and financial accountability for healthcare in their communities. • Effectiveness—where care is evidence-based and outcomes-driven to better manage diseases and prevent complications from them. • Ensuring Access—where a restructured Medicare fee-for-service payment system provides equal access to high quality, affordable care. • Safety and Transparency—where a value based payment system gives beneficiaries information on the quality, cost, and safety of their healthcare. • Smooth Transitions—where payment systems support well coordinated care across different providers and settings. • Electronic Health Records—where value driven healthcare supports the use of information technology to give providers the ability to deliver high quality, efficient, well coordinated care.
  160. 160. MEDICARE PAYMENT REFORM Congress passed the Medicare Access & CHIP Reauthorization Act (MACRA) in 2015 • Stabilized Medicare physician pay through the repeal of the sustainable growth rate formula • Under the proposed rule, physicians can choose between two different pathways of payment models • Alternative payment models – voluntary; physicians enrolling in these alternative payment and delivery models are exempt from MIPS • Merit-based incentive payment system (MIPS) – modified fee-for-service model which consolidates former reporting programs to provide greater flexibility • CMS issued proposed rules on April 27, 2016; comments are due by June 27, 2016
  161. 161. RESOURCE-BASED RELATIVE VALUE SYSTEM • Medicare RBRVS was developed through the 1980s and implementation began in 1992 as a 5-year phase-in from UCR (lower of usual, customary, or reasonable charges) • Result of the phase-in is that reimbursement for cognitive and E/M services was increased, but procedural reimbursement was decreased • This meant an increase in reimbursement to primary care physicians and a decrease in reimbursement to specialists • Now there is one fee schedule for all physician services based on CPT code – the same reimbursement applies regardless of the physician’s specialty – only difference is geographic adjustments
  162. 162. COMPONENTS OF RBRVS • Physician work • Time, mental effort, skill of physician • 55% of the total physician cost • Practice expense • Staff costs, rent, utilities, supplies, etc. • 42% of the total physician cost • Professional liability insurance (PLI) expense • Malpractice insurance • 3% of the total physician cost
  163. 163. PHYSICIAN WORK – COMPRISED OF: • Time required to perform the service • Technical skill and physical effort • Mental effort and judgment • Psychological stress associated with the physician’s concern about iatrogenic risk to the patient • Total physician work = “intraservice work” and “preservice and postservice work” • Intraservice work • For office visits = the patient encounter time • For hospital visits = time spent on the patient’s floor • For surgical procedures = the period from the initial incision to the closure of the incision
  164. 164. PHYSICIAN WORK – COMPRISED OF: (CONTINUED) • Total physician work = “intraservice work” and “preservice and postservice work” (continued from previous slide) • Preservice and postservice work • Work prior to and following provision of a service • Surgical preparation time • Writing or reviewing records • Discussion with other physicians • For surgical procedures, the total work period is the same as the global surgical period, including recovery room time, normal postoperative hospital care, and office visits after discharge, as well as preoperative and intraoperative work • Each year the AMA/Specialty RVS Update Committee (RUC) submits recommendations to CMS for physician work relative values based on CPT coding changes to be included in the Medicare payment schedule • Each year CMS has relied heavily on these recommendations when establishing interim values for new and revised CPT codes

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