Session 5
Session 5
Lecture a
This material (Comp 1 Unit 5) was developed by Oregon Health & Science University, funded by the Department
of Health and Human Services, Office of the National Coordinator for Health Information Technology under
Award Number 90WT0001.
This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International
License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/4.0/.
Financing Health Care, Part 2
Learning Objectives - 1
• Describe the revenue cycle and the billing
process undertaken by different health
care enterprises. (Lecture a)
• Explain the billing and coding processes,
and standard code sets used in the claims
process. (Lecture a)
2
Financing Health Care, Part 2
Learning Objectives - 2
• Identify different fee-for-service and episode-
of-care reimbursement methodologies used
by insurers and health care organizations
(HCOs) in the claims process. (Lecture b)
• Review factors responsible for escalating
health care expenditures in the United States.
(Lecture c)
• Discuss methods of controlling rising medical
costs. (Lecture d)
3
Health Care Revenue Collection
4
The Business of Health Care - 1
5
The Business of Health Care - 2
6
The Revenue Cycle
and Medical Billing
• Revenue Cycle: Standard set of activities
and events that produce revenue or
income for a health care provider.
• Medical Billing: Part of revenue cycle. The
process of submitting claims to insurance
companies in order to receive payment or
reimbursement for services rendered by a
health care provider.
7
Reimbursement & Claims
• Reimbursement: Compensation or
payment for health care services already
provided
– Fee-For-Service
– Episode-of-Care
• Claim: Itemized statement and request for
payment of the costs of health care
services rendered by a health care
provider or organization sent to third-party
payor 8
Billing Definitions - 1
• Charge Capture
– The process of documenting medical services
in preparation of a claim
• Charge Description Master
– Database of prices for services provided,
used by HCOs during the billing process
9
Billing Definitions - 2
10
Revenue Cycle Overview
• Insurance information
– Confirm terms of coverage
– Determine deductibles, copayments, and
coinsurance
– Accurate claim identification by third party payor
12
Charge Capture
– Electronic capture
o Automatic – improved accuracy
13
Importance of Charge Capture
14
Coding and Code Sets
• ICD-10-CM
– Replaces ICD-9-CM Volumes 1 & 2
– Diagnosis codes increased from 14,025 to
69,823.
• ICD-10-PCS
– Replaces ICD-9-CM Volume 3
– Procedure codes increased from 11,000 to
87,000
• Compliance was set for October 1, 2015
16
Code Set Differences
ICD-9 and ICD-10
17
HIPAA Code Sets
• ICD-10-CM (Diagnosis codes)
• ICD-10-PCS (Procedure codes)
– NCHS & CMS respectively
• Current Procedural Terminology (CPT)
– AMA
• National Drug Codes (NDC)
– FDA and drug manufacturers
• Code on Dental Procedures and
Nomenclature (CDT)
– ADA 18
Code Sets by Provider
• Auditory System
– External Ear
o Incision
o 69000 Drainage external ear, abscess or
hematoma, simple
o 69005 Complicated
o 69020 Drainage external auditory canal, abscess
o 69090 Ear piercing
21
Coding Examples
• Diagnosis
– Upper respiratory infection = J06.9 (ICD-10-CM)
22
Financing Health Care, Part 2
Summary
• Revenue cycle
– Unique process
– Charge capture
o Services & diagnosis
– Claims coded
23
Financing Health Care Part 2
References – 1 – Lecture a
References
Buck, C. J. (2012). ICD-9-CM, for Physicians. In CPT Current Procedural Terminology
(Professional ed., Vol. 1, 2). Chicago, IL: The American Health Information
Management Association.
Code Sets Overview. (n.d.). Retrieved January 24, 2017, from
https://www.cms.gov/Regulations-and-Guidance/Administrative-Simplification/Code-
Sets/index.html
Coding & Billing. (n.d.). Retrieved January 24, 2017, from https://www.ama-
assn.org/practice-management/coding-billing
Current Procedural Terminology. (n.d.). Retrieved January 24, 2017, from Wikipedia
website: http://en.wikipedia.org/wiki/Current_Procedural_Terminology.
Definition of Health Insurance Terms. (2010, August 1). Retrieved January 24, 2017, from
Bureau of Labor Statistics website: http://www.bls.gov/ncs/ebs/sp/healthterms.pdf.
24
Financing Health Care Part 2
References – 2 – Lecture a
References
National Center for Health Statistics. International Classification of Diseases (ICD-10-
CM/PCS) Transition - Background.
http://www.cdc.gov/nchs/icd/icd10cm_pcs_background.htm. Updated October 1,
2015. Accessed January 24, 2017.
25
Introduction to Health Care and
Public Health in the U.S.
Financing Health Care, Part 2
Lecture a
Lecture b
This material (Comp 1 Unit 5) was developed by Oregon Health & Science University, funded by the Department
of Health and Human Services, Office of the National Coordinator for Health Information Technology under
Award Number 90WT0001.
This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International
License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/4.0/.
Reimbursement Methodologies
• Revenue Cycle
– Claims submitted and adjusted by payor
• Examine different methodologies used by
payors to reimburse providers.
28
Claim Submission - 1
• Claim:
– Demographic and insurance information
– Diagnosis and procedure codes
– Time intervals
– Charges
– Provider identifiers
29
Claim Submission - 2
• Submission:
– Paper
o Physicians – CMS Form 1500
o Facility – CMS Form 1450
30
Electronic Claims Transactions
31
Remittance
• Reimbursement received
– Reduced amount due to coinsurance,
copayments, or contract
– Challenges
o Non-payment by payor
o Incorrect reimbursement
32
3rd Party reimbursement
• Reimbursement Methodology
– Fee-for-service (FFS): Separate payments
made for each individual service provided
– Episode-of-care: Payment of one sum for
providing all services or care during a illness
or time frame
• Example:
– Patient with cough and fever is treated at
urgent care
33
Reimbursement Methodology
• Fee-for-service (FFS)
– Traditional retrospective
– Self-pay
• Episode-of-care (EOC)
– Capitation
– Prospective payment
– Global payment
35
FFS: Traditional Retrospective - 2
36
FFS: Self-pay
• Self-pay
– Patient responsible for payment for health
care services
o Uninsured subset of self-pay
– May seek reimbursement afterwards
o Self-insured plan: Large employers (ERISA)
o Costs possibly higher
37
EOC: Capitation - 1
39
EOC: Prospective Payment Method
40
Prospective Payment Types
41
Diagnosis Related Groups (DRGs)
43
Managed Care Reimbursement
• Reimbursement
– Contract with providers to limit fees
o Fee-for-service: Discounted fee schedules
o Episode-of-care: Prospective payment
44
Financing Health Care, Part 2
Summary
• Revenue cycle
– Unique process
– Charge capture
o Services & diagnosis
– Claims coded
– Claim submitted and adjusted by payor
• Reimbursement methods
– Fee-for service
– Episode-of-care
45
Financing Health Care Part 2
References – Lecture b
References
Castro, A. B. and Layman, E (2006). Principles of Healthcare Reimbursement. In CPT
Current Procedural Terminology (Standard ed., Ch. 1 - 3, 8). Chicago, IL: The
American Health Information Management Association.
Code Sets Overview. (n.d.). Retrieved January 24, 2017, from
https://www.cms.gov/Regulations-and-Guidance/Administrative-Simplification/Code-
Sets/index.html
Current Procedural Terminology. (n.d.). Retrieved March 30, 2016, from Wikipedia
website: http://en.wikipedia.org/wiki/Current_Procedural_Terminology.
46
Introduction to Health Care and
Public Health in the U.S.
Financing Health Care, Part 2
Lecture c
This material (Comp 1 Unit 5) was developed by Oregon Health & Science University, funded by the Department
of Health and Human Services, Office of the National Coordinator for Health Information Technology under
Award Number 90WT0001.
This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International
License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/4.0/.
What’s Driving the High Cost of
Health Care in the U.S.
• Review U.S. health care expenditures and
medical inflation
• Examine the factors contributing to the
increase in health care expenditures in the
United States
• Describe the Emergency Medical
Treatment and Active Labor Act (EMTALA)
• Discuss the cost of care to the uninsured
48
Factors Contributing to High
Health Care Expenditures
• Technology
• Increased demand and utilization
– Chronic disease
– Aging population
• Administrative costs
– 7% of health care expenditures in the U.S.
– Twice the average of other industrialized
countries
49
Technology and National
Health Care Expenditures
• Congressional Budget Office Estimates
– 40-50% of total expenditures
• Technology in health care
– Procedures
– Equipment
– Processes by which medical care is delivered
50
Technology - 1
51
Technology - 2
• Medical devices
– Computerized Tomography (CT) scanners
– MRI imaging
– Implantable defibrillators
• Health Information Technology (HIT)
– Electronic medical records
– Telemedicine
52
Pharmaceutical Costs
53
Administrative Costs
54
Physician/Hospital Costs
• Increased demand
– Utilization
o Positron emission tomography (PET)
o Magnetic resonance imaging (MRI)
– Techniques
o Minimally invasive surgery
§ da Vinci robotic surgery
o Imaging techniques
55
Chronic Disease - 1
• Preventable/Manageable through:
– Early detection – Exercise
– Diet – Medical treatment
56
Chronic Disease - 2
57
Chronic Disease and
Health Risk Behaviors
• CDC: Four health risk behaviors
– Lack of physical activity
– Poor nutrition and obesity
– Tobacco use
– Excessive alcohol consumption
58
Prevalent Chronic Diseases
• Asthma
• Chronic obstructive pulmonary disease
• Chronic renal failure
• Congestive heart failure
• Coronary artery disease
• Diabetes
• Mood disorders/senility
• Cancer
• Hypertension
59
Chronic Disease and Increased
Demand for Services
• Increased Utilization of Services
– Management/treatment to decrease risk of
complications
o For example, aggressive treatment of diabetes to
avoid such complications as heart disease, kidney
failure, or blindness
– Early intervention at risk groups
o For example, weight loss, smoking cessation
60
Early Detection and Prevention
– Prevention
o Immunizations
61
Increased Demand: Aging
62
The Uninsured
• Receive
– Less preventive care
– Diagnosed at more advanced disease states
– Once diagnosed, received less therapeutic
care
– Have higher mortality rates
• Cost of care is twice as much for
uninsured vs. insured
63
The Uninsured 2014
64
Financing Health Care, Part 2
Summary – Lecture c
• U.S. health care expenditures highest
worldwide
– Both per capita and % GDP
• Factors
– Increase demand and utilization
o Aging and chronic disease
– Technology
– Pharmaceutical costs
– Administration costs
65
Financing Health Care, Part 2
References – 1 – Lecture c
References
Adapted from: DeLia, D., Cantor, J., Emergency department utilization and capacity; The
Synthesis Project, Robert Wood Johnson Foundation. Research Synthesis Report 17,
July 2009.
California Healthcare Foundation. Health care costs 101: reaching a spending plateau?
http://www.chcf.org/~/media/MEDIA%20LIBRARY%20Files/PDF/PDF%20H/PDF%20
HealthCareCosts15.pdf November 2015. Accessed January 24, 2017.
Callahan, D. (n.d.). The Hastings Center Bioethics Briefing Book. Retrieved January 24,
2017, from
http://www.thehastingscenter.org/uploadedFiles/Publications/Briefing_Book/health%2
0care%20costs%20chapter.pdf
Centers for Medicare and Medicaid Services. National health expenditure accounts.
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-
Reports/NationalHealthExpendData/NHE-Fact-Sheet.html. Updated December 2,
2015. Accessed January 24, 2017.
66
Financing Health Care, Part 2
References – 2 – Lecture c
References
Fisher E, Bynum J, Skinner J. The Policy Implications of Variations in Medicare Spending
Growth. The Dartmouth Atlas: The Dartmouth Institute for Health Policy and Clinical
Practice Center for Health Policy Research, February 27, 2009. Available at:
http://www.dartmouthatlas.org/downloads/reports/Policy_Implications_Brief_022709.p
df. Accessed January 24, 2017.
Robert Wood Johnson Foundation. Available at: http://www.rwjf.org/. Source for health
issue research and health policy. Accessed January 24, 2017.
The Congress of the United States Congressional Budget Office. Washington DC: 2008
[cited July 31, 2010]. Technological Change And The Growth Of Health Care
Spending. Available at: http://www.cbo.gov/ftpdocs/89xx/doc8947/01-31-
TechHealth.pdf. Accessed January 24, 2017.
67
Financing Health Care, Part 2
References – 3 – Lecture c
References
The Peterson Center on Healthcare and the Kaiser Family Foundation. Menlo Park, CA
(2016) Health costs. Available from: http://www.healthsystemtracker.org/. Provides
background information, links to key data and policy information on US healthcare
costs. Last accessed January 24, 2017.
Weber EJ, Showstack JA, Hunt KA, et al. “Are the Uninsured Responsible for the
Increase in Emergency Department Visits in the United States?” Annals of
Emergency Medicine 52(2): 108–115, 2008.
68
Introduction to Health Care and
Public Health in the U.S.
Financing Health Care, Part 2
Lecture d
This material (Comp 1 Unit 5) was developed by Oregon Health & Science University, funded by the Department
of Health and Human Services, Office of the National Coordinator for Health Information Technology under
Award Number 90WT0001.
This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International
License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/4.0/.
Controlling Health Care Costs - 1
70
Controlling Health Care Costs - 2
– Concierge medicine
71
Cost Drivers: Technology
72
Cost Drivers: Increased Utilization
– Chronic disease
o Diagnostic tests
o Management of disease
o Prevention of progression and complications
73
Cost Drivers: Administrative Costs
and Reimbursement Methods
• Administrative Costs
– Billing Procedures
o Rules
o Process
• Reimbursement Methods
– Fee-for-service encourage utilization
– Disparities within and among insurance plans
74
Cost Drivers: Defensive
Medicine & Patient Preference
• Defensive medicine
– Overutilization of services
– Tort reform
• Patient preference
– Request for specific test or medication
– Direct to consumer advertising
75
Fixing a Broken System?
77
Evidence-Based Medicine
78
The Medical Home
– Enhanced access
o Same day appointments
79
Concierge Medicine - 1
80
Concierge Medicine - 2
• Typical features
– Same day urgent care appointments
– Next day non-urgent care appointments
– 24-hour telephone access
– Extended office visits
– Preventive care physicals/screenings
81
Concierge Medicine - 3
• Other features
– Patient’s home or workplace consultations
– Wellness and nutrition planning
– Mental health counseling
– Stress reduction counseling
– Smoking cessation support
– Coordination of medical needs during travel
82
Concierge Medicine - 4
83
Concierge Medicine - 5
• Challenges
– Health insurance for specialty services, high-
cost procedures, emergency treatments, and
hospitalization.
– No data on how model affects overall health
care costs
– Employers evaluating model for savings
– Could exacerbate the shortage of primary
care providers
84
Financing Health Care, Part 2
Summary – 1 – Lecture d
• Improved efficiency
– Health information technology
– Evidence-based medicine
• Medical home model
– Lower costs 5.6%
– Comprehensive care
• Concierge medicine or Retainer
– Enhanced services
– No research to support cost containment
85
Financing Health Care, Part 2
References – 1 – Lecture d
References
Callahan, D. (n.d.). The Hastings Center Bioethics Briefing Book. Retrieved January 24,
2017, from
http://www.thehastingscenter.org/uploadedFiles/Publications/Briefing_Book/health%2
0care%20costs%20chapter.pdf
Centers for Disease Control and Prevention. Meaningful Use.
http://www.cdc.gov/ehrmeaningfuluse/introduction.html. Updated October 11, 2012.
Accessed January 24, 2017.
The Congress of the United States Congressional Budget Office. Washington DC: 2008
[cited July 31, 2010]. Technological Change And The Growth Of Health Care
Spending. Available at: http://www.cbo.gov/ftpdocs/89xx/doc8947/01-31-
TechHealth.pdf. Accessed January 24, 2017.
Fisher E, Bynum J, Skinner J. The Policy Implications of Variations in Medicare Spending
Growth. The Dartmouth Atlas: The Dartmouth Institute for Health Policy and Clinical
Practice Center for Health Policy Research, February 27, 2009. [cited 2010 July 31].
Available at:
http://www.dartmouthatlas.org/downloads/reports/Policy_Implications_Brief_022709.p
df. Accessed January 24, 2017.
86
Financing Health Care, Part 2
References – 2 – Lecture d
References
Jackson, G. L., Powers, B. J., Chatterjee, R., & Prvu Bettger, J. (n.d.). The Patient-
Centered Medical Home: A Systematic Review. Annals of Internal Medicine. doi:
10.7326/0003-4819-158-3-201302050-00579
Robert Wood Johnson Foundation. Source for health issue research and health policy.
Available at: http://www.rwjf.org/. Last accessed: Mach 30, 2016.
The Peterson Center on Healthcare and the Kaiser Family Foundation. Menlo Park, CA
(2016) Health costs. Available from: http://www.healthsystemtracker.org/. Provides
background information, links to key data and policy information on US healthcare
costs. Last accessed January 24, 2017.
87