HealthCare

Chapter 1

Overview of American Health Care

Industry
At the end of this chapter, you will be able to:
1. Understand difference between the healthcare industry in India and America
2. Define key terms
3. Define what is Medical Billing
4. State difference between medical care and health care
5. Understand need of health insurance in U.S.
6. Understand need of medical billing services

Healthcare is one of the largest industries in the United States. Presently, it costs the U.S. an
estimated $900 billion each year, and this figure continues to grow. Most of this cost is paid
through insurance plans which cover most of the charges for care provided.
U.S. Census Bureau data from 2002 estimate that 85% of people in the United States would
be covered by some form of health insurance; and of that percentage:
n 63% are covered by employment-sponsored plans
n 25% are covered by government plans
n 8% are covered by privately purchased plans
(Approximately, 10% of the people in the United States are covered by more than one
insurance plan, e.g., employment-based plus Medicare.)

What is insurance?
Insurance is a contract that protects the insured from the loss of health, property, life, etc.
OR
An Insurance Company guarantees payment to the insured for unforeseen events (e.g., death,
accident and illness).
There are different types of insurance: Property, life, and health. The latter is discussed at
length in this manual.

What is health insurance?

To understand the meaning of the term ``health insurance’’ as it is used in the text the
differentiation between the medical care and healthcare must be made.
Medical care: Medical care includes the identification of disease and provides care and
treatment to people who are sick or injured. Medical care does not include preventive
services.
Health care: Health care expands the definition of medical care to include preventive
services (e.g., immunization, regular check-ups), which are designed to help individuals avoid
health and injury related problems.

Health insurance is a contract between a policyholder and an insurance carrier for the
purpose of providing reimbursement of all or a portion of medical and any other healthcare
expenses.

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Need of Health Insurance in U.S.

n Health insurance is very important to the people in U.S. Today, health care costs are
very high and it is getting higher. Without it, one serious illness or accident could wipe out
anyone financially. Who will pay hospital and doctor’s bills if you have a serious accident or a
major illness is a big question for people in U.S.?

n Great number of people in the U.S. protect themselves and their family with
health insurance.

Medical Plans are designed to help individuals and their families to cover the
financial cost of all the medical services provided by the physician, hospital, or
any other provider.

Difference between the healthcare industry in India and America

India United States

1. Few people have Medical Insurance A large number of people have medical insurance.
2. Patients immediately pay the fee even Doctors (Providers) bill the Insurance Companies
if they have an insurance policy. and most of the time get paid directly from them.
(Bill has to be paid at the time of treatment.) (Patient undergoes treatment and provides all the
insurance information to the Physician.)

Overview of American Health Care Industry

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What is medical billing?

Medical billing is the process of generating and submitting claims on behalf of provider
to insurance companies in order to receive payment for services rendered by a healthcare
provider to the patient.

In cases where claim is rejected by the Insurance Company a statement/bills will be

generated and sent to the patient. Also if patient has no insurance coverage statement/bills
will be sent to the sent directly to the patient.
The purpose of Medical Billing is to zero-out the balance on a patient’s record.

The Medical Billing Industry

The Medical Billing Industry is a part of the Health care industry. Medical Billing is the income
generation and financial data management of a physician or a group of physicians’ practices.
This means maintaining all of the physician’s non-medical records and keeping track of and
collecting money due to him.

The client of the Billing Office may be one physician, a group of physicians working in the same
location practicing different specialties (Ophthalmology, Anesthesia, etc.) or a group of
physicians practicing the same specialty, etc.

Medical Billing Process

Medical billing is a multi-step process:
The employees in the medical billing office are divided into three distinct and separate
departments.
I. Coding
II. Billing (Charge posting and Payment posting)
III. A/R (Account receivable) Follow-up
Let’s take a quick look at these three distinct and separate areas within the medical billing
office.
DOCTOR’S OFFICE: It begins at the doctor’s office where a new patient or an existing patient
contacts the office.
Front desk: The front desk then collects all the patient information and insurance
information (by phone, fax or in person, if the patient is a walk-in).
Scanning: All the documents are scanned and sent to the billing office where Coding, billing,
and A/R are done.

I. CODING DEPARTMENT
The documents (encounter forms) are coded for CPT-4 & ICD-9 codes.

CPT-4 (Current Procedural Terminology) codes are standardized codes used to identify
the treatment performed for a patient.

ICD-9 (International Classification of Diseases, Clinical Modifications 9th edition)

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The coders assign ICD-9-CM codes to diagnoses, signs, and symptoms (i.e., a patient’s medical
condition) documented by the health care provider.

II. BILLING DEPARTMENT

1) Registration and Charge entry : Registering a patient and doing charge

entry/charge posting is done. It is entering the patients’ personal
information from the demographic sheets after checking and entering the
information related to the service (e.g ICD and CPT codes) in the billing
software.

2) Claim Submission: Paper and electronic claims are submitted to the Insurance Company for
processing. The purpose of this function is to ensure that claims submitted are processed
correctly and accurately based on insurance-specific requirements.

3) Payment Posting: Once Insurance Company processes and pays the claim,
checks are sent to doctors along with the explanation of benefits (EOB).
Payment posting department posts these payments against the charges in the
medical billing system.
4) Denial Processing: In case, Insurance Company denies the claim sent by billing office, it is
communicated back to doctor’s office on explanation of benefits (EOB). Billing office works on
these denials in order to correct the previously submitted claim and to resubmit the corrected
claim in order to get the payment from Insurance Company.
Following steps are taken to work on denials:
 Charges and patient details are reviewed in order to find the cause of denial.
 Any missing information is entered, all the appropriate changes are made and the claim
is re-billed.
 In case a follow-up is required, relevant notes are written in the patient’s account for
the AR Department to follow-up with the Insurance Company.

5) Patient Billing: If Insurance Company’s explanation of benefits holds patient responsible for
payment of part or entire amount to doctor, billing office sends bill to the patient in order to get
payment from patient.

III. ACCOUNT RECEIVABLE DEPARTMENT

-
Account Receivable Collections: Accounts Receivable Department does the follow-up with
insurance companies and patients for the following:
1) Follow-up with insurance companies in order to know the status of unpaid
claims.
2) If any claim has been denied by insurance because of improper denial, AR
department calls the Insurance Company to resolve the denial and get the
claim paid.
3) To follow-up with patients to obtain any information which is missing such as SSN, date of
birth, etc.

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4) To follow-up with patients for the payment due to them.

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SUMMARY: MEDICAL BILLING WORKS LIKE THIS

1) The billing process begins with the office visit. After the provider sees the patient,
depending on the service provided and the examination, the doctor creates or updates
patient's medical record.
2) This record contains a summary of treatment and demographic information related to the
patient. Upon the first visit, the provider will usually give the patient a diagnosis (or possibly
several diagnoses), in order to better coordinate and streamline his/her care. The
treatment, diagnosis, and duration of service combine to determine the procedure code
that will be used to bill the insurance.
3) The doctor then either provides this information to a medical coder or other billing
specialist in the billing office.
4) From this, a billing record, either paper claim (usually on a standardized form called an
HCFA) or electronic claim is generated.
5) This billing record or claim is then submitted either to a clearinghouse that acts as an
intermediary for the information (this is typical for electronic billing) or directly to the
Insurance Company.
6) A claim is either mailed or electronically transmitted to Insurance Company.
7) Based on the amount negotiated by the doctor and the Insurance Company, the Insurance
Company pays the provider.
8) Apart from creating and sending the claims, the billing office also maintains an account of
all patients who visited the physician, collects any money that is due from the insurance
companies and patients, records all payments made by these insurance companies and
patients and reports the financial status of the physician’s practice for any given period.
9) The goal of a billing office is to ‘zero-out’ the balance on a patient’s record.

PROCESS FLOW
Medical Records and Encounter Forms
Doctor’s Office
Coding
Sent to Billing Office
Documentation & Scanning Charge Entry
Claim Transmission
Forwarded to Payer (With Correct Information)
Forwareded to Payer
(Insurance Company)

Denied
Accounts Receivable Denial Handling Claim Adjudication

Denied

Payment Posting

Patient Balance

Patient Billing

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Role and Responsibility of Medical Biller

Medical claims and patient billing are the heart of any medical practice. Steady financial
receivables are what keep a business running. There will always be a need for medical
services; therefore, medical billing services will always be in high demand.

Role of Medical Biller is to:

 review patient records and other source documents to code diagnoses, procedures, and
services.
 understand insurances and prepare and review claims for accuracy.
 review insurance payments and explanation of benefits forms, appeal claims when
necessary, update staff about new regulations.

Responsibility of Medical Biller is to:

 Enter financial and demographic data into a patient database(data entry)
 Have thorough knowledge of health care insurances
 Ability of critical reading and comprehension skill
 Attention to detail

DOCTORS NEED MEDICAL BILLERS HELP WITH INSURANCE CLAIM

 To save their valuable time (instead of generating medical claims they can see more
patients).

 To have constant cash flow by getting constant payment on insurance claims submitted
for services they have provided.

 To have specialized people to file the claims and handle the voluminous work of medical
billing process as per the rules and different guidelines of U.S. healthcare Industry.

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KEYWORDS

Term Definition

f A health
f care practitioner
f M Lwho
is called a provider. The physician -
Provider
provides medical treatment to a patient for any illness is the
provider. He is also called the rendering physician.
The process of assigning diagnoses, procedures, and services
Coding
using numeric and alphanumeric characters is called coding.

A claim is a request made to the Insurance Company by the billing

Claim
office on behalf of the physician for reimbursement of services
provided to their members.

A new patient is a person who has not received any professional

New patient
service from the healthcare provider or another provider of the
same specialty in the same group of practice within the last 36
months.

An established patient is a person who has been seen within the

Established
last 36 months by the healthcare provider or another provider of
patient
the same specialty in the same group practice.

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Chapter 2

List of Terms Basic to the Health

Insurance Industry

At the end of this chapter, you will be able to:

Define key terms of health insurance industry

The following table outlines the various terms associated with health care industry.

Term Definition
A person admitted to a hospital for medical care for more than
In-patient
24 hours.

A person who receives treatment in a physician’s office or a

Outpatient
hospital but does not require hospitalization.
Amount payable by the insurance company to the insured when
Benefits
the insured suffers a loss.
A person who is eligible for the benefits under an insurance
Beneficiary
coverage. He is either the person who pays the premium or a
dependent of that person.
A monthly fee is called premium.
Premium
OR
The amount you or your employer pays in exchange of the
insurance coverage.
The person who pays the premium to purchase an insurance
Subscriber
policy. This person may either pay the premium himself or as in
most cases, the person’s employer may pay the premium or a
part of it on his behalf. It is very common in the U.S. for an
employer to purchase medical policies for its employees.

The spouse and children of the subscriber who are eligible for
Dependent
medical care under the insurance contract.
Valid date: The date from which a person is eligible for medical
Effective Date
benefits under his insurance contract. The insurance company is
responsible for the person’s medical bill from this day.

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This is a unique identification number assigned to each

Insurance
subscriber. The claims and any correspondence for that
Identification subscriber and his dependents will be sent under his ID#. The
Insurance companies use this number to access the subscriber’s
Number account in their computer systems.

Term Definition
Many people in the US have more than one insurance coverage.
Primary
They may have up to three insurance coverages. This is possible
Insurance if; one person is the subscribers to two policies, a person
subscribes to one policy and is covered under his spouse’s
coverage or the person may be a dependent of two working
parents. In these cases, one insurance company takes first
responsibility for the patient’s medical bills. It would pay a major
portion of the bill. This would be the patient’s primary coverage.

Example: If a patient’s bill is $200, the primary insurance would

agree to pay 80% of this amount, i.e. $160. The patient’s other
insurance will be responsible for the balance.
When a patient has more than one insurance company, the
Secondary
insurance that is responsible for the balance on a bill after the
Insurance primary insurance has paid, is the secondary insurance. They will
pay their portion of the bill based on what the primary has
already paid. To determine their portion of the bill they will
require a copy of the primary insurance’s EOB. For this reason, a
secondary claim is always sent with a copy of the primary EOB.
Example: To continue with the example of the previous point, the
secondary would be responsible for the balance $40 or a portion
of it. If the secondary pays the whole $40 then the patient need
not pay anything at all. Some insurance companies pay only a
percentage of the balance. The primary has paid 80% of the total
bill i.e. $160, and if the secondary only takes responsibility
for16% of the total bill i.e. $32 then, if the patient has a third
insurance, they would be responsible for the $8. If not, the
patient would have to pay that amount.

The third insurance coverage for a patient is the tertiary

Tertiary
insurance but it is not common to find a person with 3 insurance
Insurance coverages. The tertiary insurance will be responsible for any
amount left unpaid after the secondary insurance has paid.

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The process of coordinating the payment of benefits when a

Coordination
person is covered under more than one health insurance plan.
of Coordination of Benefits (COB) eliminates over insurance or
duplication of benefits.
Benefits
Example: Mary is covered by her employer Indemnity Plan with
80/20 coinsurance. This is her primary insurance coverage. She
is also covered under her husband's employer plan with a 80/20
coinsurance, as her secondary coverage.
Mary incurs a $1,000 claim. Her plan reimburses 80% or $800.
Her spouse's plan then reviews the claim and pays the difference
of 20% or $200.

Term Definition

This is the amount charged by a physician as a compensation for his

Billed
services. The billed amount will reflect on the claim against the
Amount treatment that was performed.

Most Insurance Companies have a fixed payable amount for each of

Allowed
the different services performed by the physicians. They fix this
amount based on various in-house calculations like cost of the
treatment, geographical location of the practice, average charge of
all physicians for that procedure, etc. Insurance companies will pay
the allowed amount regardless of how much the physician bills.

A participating relationship is one in which the physician accepts a

Participating
payment of the insurance company’s allowed amount as full
payment. This is regardless of how much the physician billed for his
services. If the physician bills over the allowed amount, the
physician receives the allowed amount and the difference is written
off. The patient cannot be billed for the balance.
Advantages to the participating doctors:
• Participating doctors get more patients.
• Participating physician’s claims are given priority and
paid promptly by the insurance company.
• They get payment directly from the insurance company
as payment collection from patients is usually time-
consuming and involves lot of effort.

A non-participating provider is one who is not in a contract with the

Non-
insurance company and he expects to receive the total billed
participating amount. The Insurance Company pays the doctor according to the
allowed amount. The non-participating doctor can bill the patient
for the balance (i.e. the difference between the billed amount and
the allowed amount).

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When the physician’s billed amount is more than a participating

Write-off
insurance company’s allowed amount, the insurance company will
pay its allowed amount and the difference between the billed and
the allowed amount will be written off or adjusted.

Billed Allowed Amount Amount

Amount Amount Paid due from
patient
Dr. participating $75 $70 $56 $14
Dr.Non-participating $75 $70 $56 $19

Term Definition
When a non-participating primary insurance company pays a part of a
Balance Bill
claim, the balance on the claim can be billed to the patient or the
secondary insurance. This is called balance billing.
The balance bill would therefore be the difference between the
physician's billed amount and the non-par insurance company's
allowed amount for a service.
A fixed annual dollar amount which has to be paid to healthcare
Deductible
provider by the insured before his/her insurance starts paying for the
healthcare cost, is called deductible.
Example: Mary has an insurance plan that has a deductible of $100 in a
calendar year. In her first visit to doctor her medical expense is $300;
Out of the total amount $100 would be Mary and $200 would be the
insurance’s responsibility. After this, she will not pay any deductible in
the same year.
A provision in an insurance policy that requires the policyholder or
Co-pay
patient to pay a specified dollar amount to the healthcare provider for
(Copayment)
each visit or medical service received.
A flat dollar amount a patient pays directly to the physician or hospital
when he or she receives certain covered services from a provider.

It is a specified percentage of the allowed amount above the deductible

Co-insurance
which is paid by the secondary insurance or patient.
Example: Mary's Plan has 80/20 coinsurance. After Mary has met her
deductible, the plan will pay for 80% of eligible charges, and Mary is
responsible for the remaining 20%.
A medical bill or a part of a medical bill paid by a patient out of his own
Out-of-Pocket
pocket because of non payment of his insurance company or because of
Expense instructions from his insurance company is called an out of pocket
expense. Deductibles, co-insurance, co-payment and balance bill fall
under “out of pocket expenses”.

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A list of all the medical services and their respective allowed amount is
Fee Schedule
called a fee schedule. Most insurance companies would have a fee
schedule, i.e., predetermined prices on all medical services. A fee
schedule can be obtained form any insurance company and can be used
to verify the payments made by the insurance company.

Some insurance companies have a maximum payable amount on certain

Contract
illnesses or policies. The insurance policy may say that it will pay a
limited amount on a specific illness or a limited amount for a calendar
year. The total amount payable on a patient’s policy based on his/her
contract is called the contract maximum.
Example: A patient may be covered for $5000 per year for dental
surgery. If the patient’s dental surgery bills exceed that amount in a
calendar year, he/she will be responsible for the excess.

Term Definition
Insurance companies determine fees charged for health services by
Reasonable
geographic areas. Also referred to as Usual and Customary, or Usual and
and Prevailing.
Customary Example: An insurance company's Reasonable & Customary fee for a
tonsillectomy is $1,000 in the Louisville, KY, area. When a doctor in this
(R&C) area charges more than the R&C amount, the doctor will only receive
payment up to the R&C amount.

The PCP is usually a general practitioner. He is the equivalent of a

Primary Care
family doctor, who when specialized treatment is required, refers the
Physician(PCP)
patient to a specialist. For this reason, he is also called the Referring
(Referring Physician or a gatekeeper.
Physician)
Some insurance contracts require an authorization or a referral for the
Referral
patients who have met a specialist. This should come from the primary
care physician, stating his diagnoses and the reasons he sent the patient
to meet a specialist. The insurance companies use this document from
the PCP as a kind of a second opinion on the patient’s medical condition
and the necessity for his treatment.

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Some insurance contracts require a pre-authorization or a pre-

Pre-
certification for specific services. Pre-certification is the process by
authorization which a health plan or insurance company reviews the proposed
treatment and certifies or authorizes the patient and patient's physician
or as to how benefits may be paid.
Pre- Example: If a patient comes in for an eye surgery and if his insurance
certification card says that any treatment related to the eye needs to be pre-
certified, the clerk at the doctor’s office will call the insurance company
and let them know that an eye surgery is to be performed on the
patient. The insurance company will give a pre-certification number,
which is to be mentioned on the claim.

Evaluation & Management is the medical services provided by

Evaluation &
physician for the purpose of diagnosing and treating diseases,
Management counseling, and evaluating the problem.

A consultation is a referral by one physician to another physician,

Consultation
normally a specialist, who will provide advice or a treatment plan of a
specific problem with a known diagnosis and will not render definitive
medical care.
Unique number that identifies the physician to the carrier.
Provider
Unique number issued to the provider and reported in the Block 33 of
Identification the CMS-1500 claim to identify the provider who rendered services.
Number (PIN) The PIN for physicians submitting paper claim forms is a six-digit
number and if the physician bills electronically, the PIN is a ten-position
number.

Term Definition
UPIN is a unique number given to referring physician for their
UPIN
identification. It is in addition to PIN & is reported in the block 17A
(Unique
Provider of CMS 1500. It is a 5 digit number preceded by an alpha.
Identification The PIN and the UPIN are two different numbers.
Number ) PIN is used to identify the Rendering Provider
UPIN is used to identify the Referring Provider.

A number assigned by the state in which a business or entity is

TIN
(Tax operated that identifies it for filing and paying taxes related to business
dentification or entity.
Number)
It is a 10 digit number assigned to all healthcare provider and those
NPI
numbers are used by health plans to identify provider by Centers for
(National
Medicare and Medicaid Services (CMS).
Provider
Identifier)

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 The Social Security Number (SSN) was created in 1936. It is a

SSN
nine-digit account number assigned by the Secretary of Health
(Social Security and Human Services for the purpose of administering the Social
Number) Security laws.
 When anyone begin to work in the United States, he/she will
have to obtain a Social Security number and pay social security
taxes, just as all Americans do.
 The Social Security number (SSN) is the most frequently used
recordkeeping number in the United States. SSNs are used for
employee files, medical records, health insurance accounts,
credit and banking accounts, university ID cards, and many
other purposes.
 Computer records have replaced paper filing systems in most
organizations. And more than one person may share the same
Medicalname, accurate
necessity retrieval
involves of every
linking information works
procedure orbest if each
service file is
reported
Medical
to the insurance company to a condition that justifies the necessity for
Necessity performing that procedure or service.
Medical necessity denial: denial of otherwise covered services that
were found to be not reasonable or necessary.
Example: Insurance will not reimburse for care provided to a patient in
a hospital or skilled nursing facility when it could have been provided
at home or in an outpatient facility.

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Term Definition
i i
A health problem that existed before the date your insurance
Preexisting
became effective. OR
Condition A health condition (other than pregnancy) or medical problem
that was diagnosed or treated before enrollment in a new
health plan. Presence of a pre-existing condition upon
enrollment may result in exclusion of coverage for that
condition for a period of time.

Example: Mary has asthma and has received treatment for the
past 4 years. She starts a new job which has a pre-exiting
condition exclusion built in to the employer's medical plan. Any
medical treatment related to Mary's asthma will not be eligible
for coverage for the first 6 months of her employment;
however, her other medical care will be covered under the
plan.
The time between the effective date of a contract and the date
Waiting
the Plan will assume liability for certain services---frequently
Period with respect to preexisting condition. (In the above stated
example, there is a waiting period of 6 months.)

An EOB is a statement sent to providers/patients by their

Explanation
health plan that explains which procedures and services were
of benefits (EOB) provided, how much they cost, how much is covered by
insurance, how much the patient must pay, the amount applied
/Remittance towards the annual deductible & the amount insurance has
paid.

Place of Service
Place of Service refers to the physical location where health care is provided to the
patient.
The following national standard two-digit numeric Place of Service Codes may be used: For
example,

11 – Office
12 - Home
21 – Inpatient Hospital
22 – Outpatient Hospital
23 – Emergency
24 – Ambulatory
31 – Skilled Nursing Facility
32 – Nursing Facility
34 – Hospice

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Chapter 3

Life Cycle of an Insurance Claim

At the end of this chapter, you will be able to:
Discuss different steps involved from start till end of medical billing cycle.

This chapter provides an overview of the development of a health insurance claim in the
healthcare provider’s office and the major steps taken to process that claim by the insurance
company.
I. Development of the claim
a. New patient interview and check-in procedures
b. Established patient return visit
II. Generation of an Insurance Claim
III. Processing of a claim by the insurance company

I. Development of the Claim

The development of an insurance claim begins when the patient contacts a healthcare
provider’s office and schedules an appointment. At this time, it is important to determine
whether the patient is a new patient requesting an initial appointment or an established
patient returning to the practice for additional services.

■ A new patient is defined as a person who has been

person who has not received any seen within the last 36
professional service from the months by the health-
healthcare provider or another care provider or
provider of the same specialty in another provider of
the same specialty in
the same group practice within the
the same group practice.
last 36 months.

■ An established patient is a
a. New Patient Interview and Check-in Procedures
The purpose of the new patient interview and check-in procedure is to obtain
information, schedule the plan for an appointment, and generate a patient
record. Basic office policies and procedures are also explained to the new
patient.
Step 1: Pre-registration of a new patient, who calls to schedule an appointment,
is done. After determining that patient has contacted the appropriate office,
following information is obtained.

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1. Patient’s name (last, first, and middle initial). For a minor child, obtain the
name and address of the parent.

2. Home address and telephone number

3. Date of Birth (DOB)

4. Guarantor (person responsible for paying the charges)
5. Social Security number (SSN)
6. Spouse’s name, occupation, place of employment
7. Referring provider’s name
8. Emergency contact (e.g., relative) address and telephone number
9. Health Insurance Information (for processing the claim)
 Name, address and phone no of the Insurance company
 Name of policyholder (or subscriber or beneficiary) who is the person
and in whose name the insurance policy is issued
 Health Insurance identification number
 Health Insurance group number
Step 2: The patient is then informed of the participation of the provider with
their insurance plan.
 A participating provider is one who has a contract with the insurance
company to provide medical services to subscribers and to accept the
insurance company’s determined allowed fee for the procedure
performed.

 A non-participating provider has no contractual relationship with the

patient’s insurance company, and has a legal right to expect the patient to
pay the difference between the insurance allowed fee and the amount
charged.
Step 3: The patient’s eligibility for the insurance plan and the benefits of the
plan are verified and clarified. The patient eligibility for primary care physician
services can be determined by locating the patient’s name on the insurance
plan’s current enrollment roster or by placing a call to the insurance company
to check on the patient’s eligibility. The eligibility for health care specialist
services can be determined by placing a call to the insurance company for
eligibility status and policy benefits.

 A PCP (primary care physician) is a family practitioner, internist,

pediatrician, and in some insurance plans, a gynecologist, responsible for
providing all routine primary healthcare for the patient.
 A Health care specialist is a healthcare provider who is not a primary
care physician.
Step 4: The patient’s appointment is scheduled.

Patients making appointments with a specialist must obtain referral from their
PCP. It is the patient’s responsibility to obtain the initial authorization from
their PCP.
The PCP issues a Primary Care Referral Form, which is either hand-carried by the
patient or faxed to the specialist/ancillary services provider.

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Ancillary services: Professional services by a hospital or other inpatient

health program. These may include x-ray, drug, laboratory, or other services.

Activity: View a referral form

Step 5: The patient fills out the Registration Form

Each new patient fills out a Patient Registration Form at the time of the first
visit to the practice. The completed form is used to open the patient’s medical
account and insurance billing records. When the patient returns the completed
form to the front desk, the receptionist reviews the form very carefully to ensure
that all necessary demographic and billing data have been supplied.

Activity: View a registration form

Step 6: A new patient’s chart is established and the patient’s demographics are
entered into the practice’s patient database to create a new patient’s medical
record.
Step 7: The patient’s encounter form is created.
Encounter form (also known as the charge ticket, routing form or super bill) is
the financial record source document used by health care providers and other
personnel to record the patient’s treated diagnoses and the services rendered
to the patient during the current encounter. The minimum information entered
on the form at this time is the date, patient’s name. The encounter form may
vary from a simple blank piece of paper to a rather complex-customized
preprinted check-off sheet.
Step 8: The clinical assessment and/or treatment is performed. After the
patient’s examination and/or treatment, the provider or clinical assistant will
record on the encounter form all current and pertinent diagnoses, all services
rendered and special follow-up instructions to be presented at the exit interview.
The chart and encounter form are then returned to the staff member
responsible for checking out the patients.

Activity: View an encounter form

b. Established Patient Return Visit

1. A return appointment is fixed either at the time of the last appointment or later
when the patient telephones for a new appointment.
One or two days prior to an appointment with a specialist for non-emergency
services the status of the authorization/referral for care must be checked to

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ensure all authorizations are current. If the authorization/referral has expired,

the patient’s non-emergency appointment may have to be postponed until the
required treatment reports have been filed with the primary care physician or
case manager and new authorization for additional treatment has been
obtained.
2. The patient’s registration demographics are checked while they are present at
the front desk. The returning patients are asked if there have been any
changes in their patient registration data (name, address, phone number,
employer and insurance program). If

3. The encounter form is generated for the patient’s current visit.

4. The clinical assessment and/or treatment is performed. The chart and

encounter form are then returned to the staff member responsible for checking
out the patients.

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At this point, the procedures for new and established

patients merge.
The encounter forms are coded for CPT and ICD Code.
After this, all the encounter forms, demographics, medical report,
referral forms are batched and scanned and sent to the Billing Office
for generation of an Insurance Claim.

II. Generation of the Claim

1. The charges for procedures and/or services performed are entered and the
charges are totaled.

2. The charges are posted to the patient’s ledger/account record on the pertinent
computer screens.
 The patient ledger, also known as the patient account record in a
computer ized system, is the permanent record of all the financial
transactions between the patient and the practice. The charges and
copays are all posted on the patient’s account.
 Each procedure performed is individually described and priced on the
ledger/account record.

3. The insurance claim is developed.

 The insurance claim form used to report physician services is known as
the CMS1500 form (formerly known as HCFA-1500 form).
 The claim is developed from the encounter form, the patient’s
ledger/account record, and the chart.
 Patient identification and insurance policy identification information is
obtained from the patient’s chart or ledger account.
 The procedures and charges from the ledger or encounter form are
transferred directly to the description of service line on the claim form
(Block 24D of HCFA1500 form).
 The codes for the diagnoses treated during the encounter and listed on
the encounter form and/or the patient’s chart are reported in the
diagnoses section of the claim form (Block 21 of HCFA-1500 form).
 Added to the claim are answers to standard questions pertaining to
additional insurance coverage, current hospitalization, name and address
of the facility here the service was rendered, and the identification of
the provider.
 The completed claim form is then proofread and double checked for
accuracy, and any necessary attachments are developed and stapled to
the claim.

4. The required attachments are affixed to the claim, such as copies of operative
reports, pathology reports, and copies of written authorizations.

5. The claim forms then go out to the insurance companies either electronically
(through the clearing house), or are printed on paper and mailed.

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III. Processing of a Claim by the Insurance Company

Processing of paper claims starts in the mailroom where the envelopes
are opened, attachments unstapled, and clipped to the claim. Claims are
then scanned into the computer.
Processing of electronic claims begins when a file of transmitted claims
is received from the clearinghouse. (The clearing house edits the claims
before sending to insurance companies) and is opened in the claims
processing computer.

1. The computer scans each claim for patient and policy identification and compares
them with the master policy file.
 Claims will be automatically rejected if the patient and subscriber names
do not match exactly with the names on the master policy list. Use of
nicknames or typographical errors on claims will cause rejection and
return, or delay in reimbursement to the provider because the claim
cannot be matched with the names on the master list.

2. Procedure codes on the claim form are matched with the policy’s master benefits
list.

 Any service determined to be a non-covered benefit is marked as an

uncovered procedure or non-covered procedure and rejected for
payment.
 Services provided to a patient without proper pre-authorization are
marked as an unauthorized service.
3. Procedure codes are cross-matched with the diagnosis codes to ensure the medical
necessity of all services provided.
 Any services that is considered not “medically necessary” for the
submitted diagnosis code may be rejected.

4. A determination of “allowed charges” is made.

 If no irregularity or inconsistency is found on the claim, the allowed

charge for each covered procedure is determined.
 The allowed charge is the maximum amount the insurance company will
pay for each procedure or service, according to the patient’s policy. The
exact amount allowed varies according to the contract and is less than or
equal to the fee charged by the provider. Payment is never greater than
the fee submitted by the provider.
5. Determination of patient’s annual deductible obligation is made.
 The deductible is the total amount of covered out-of-pocket medical
expenses a policyholder must incur each year before the insurance
company is obligated to pay any benefits.

6. The co-payment or co-insurance requirement is determined.

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7. The Explanation of Benefits form is completed.

 The Explanation of Benefits (EOB) form or report is a statement telling

the patient or provider how the insurance company determined its share
of the reimbursement.

The report includes the following: (for sample of EOB see Appendix 1 – Forms):

 A list of all procedures and charges submitted on the claim form.

 A list of any procedures submitted but not considered a benefit of the
policy.
 A list of all the allowed charges for each covered procedure.
 The amount of the patient deductible, if any, subtracted from the total
allowed charges.
 The patient’s financial responsibility for cost sharing (co-payment) for
this claim.
 The total amount payable by the insurance company on this claim.
An EOB is also used if there is other insurance coverage to determine how to
pay the claim as a secondary payer.

Activity: View an EOB

8. EOB and benefit check are mailed.

 If the claim form stated that direct payment should be made to the
physician, the reimbursement check and a copy of the EOB will be mailed
to the physician. This can be accomplished in one of three ways:

a. The patient signs the Authorization of Benefits Statement,

Block 13 on the CMS –1500 form.
b. The physician marks “YES” in Block 27 on the claim form.
c. The physician has signed an agreement with the insurer for
direct payment of all claims.

 If reimbursement is to be sent to the patient, the policyholder will

receive a copy of the EOB and check; explanation (EOB) is sent to the
provider by most Insurance Company, without payment.

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Chapter 4

Commercial Health Insurance

At the end of this chapter, you will be able to:

1. Define key terms
2. Understand classification of the American Health Insurance Industry
3. Name all the Government-sponsored healthcare programs
4. Describe Indemnity plan
5. Describe different managed care model, and provide details about each
6. Explain role of a gatekeeper in managed care
7. Understand third-party reimbursement methods

Classification of the American Health Insurance Industry

Insurance Company

Public Insurance Private Insurance

Company Company

Commercial Plan Managed Care

Medicare Worker’s
Compensation

Medicaid TRICARE CHAMPVA No-Fault HMO PPO POS

GOVERNMENT SPONSORED HEALTHCARE PROGRAMS

1) Medicare: A Federal Government Program for people above 65 years and

disabled people below 65 years of age and people of any age suffering from
ESRD.
2) Medicaid: A State & Federal Government Program for people having annual
income level near National poverty guidelines.

3) TRICARE: Department of Defence’s health care program (formerly called

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CHAMPUS---the Civilian Health and Medical Program of the Uniformed

Services). Covers medical care for uniformed service personnel (Army, Navy,
Air force, Marines and Coast Guard) and their families that are not directly
related to the military.
4) CHAMPVA: is a program to provide health care benefits for dependents of
veterans rated as 100% permanently or totally disabled as a result of service-
connected conditions, veterans who died as a result of service-connected
conditions, and veterans who died on duty with less than 30 days of active
service.

5) Workers Compensation: Workers Compensation is a program mandated

by State governments, which requires employers to cover medical expenses
and loss of wages for workers who are injured on the job or who have
developed job-related disorders.

Where Do People in U.S. Get Health Insurance

Coverage?

U.S. Census Bureau data from 2002 estimates that 85% of people in
the United States are covered by some form of health insurance; and
of that percentage:

 63% are covered by employment-sponsored plans

 25% are covered by government plans
 8% are covered by privately purchased plans

Group Insurance
 Most Americans get health insurance through their jobs or are covered
because a family member has insurance at work.
 This is called group insurance. Group insurance is generally the least
expensive kind.
 In many cases, the employer pays part or all of the cost.
 A Federal law called COBRA (Consolidated Omnibus Budget Reconciliation
Act of 1985) makes it possible for most people to continue their group health
coverage for a period of time. The law requires that if a person works for a
business of 20 or more employees and leaves his job or is laid off, he can
continue to get health coverage for at least 18 months. He will be charged a
higher premium than when he was working.
 He will also be able to get insurance under COBRA if his spouse is covered but
now he is widowed or divorced. If someone is covered under his parents'
group plan while he was in school, he can also continue in the plan for up to
18 months under COBRA until he finds a job that offers him health insurance.
 Not all employers offer health insurance. A person m i g h t find
this to be the case with his job, especially if he works for a small
business or work part-time. If his employer does not offer health
insurance, he might be able to get group insurance through
membership in a labor union, professional association, club, or

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other organization. Many organizations offer health insurance

plans to members.

Individual Insurance
 If a person’s employer does not offer group insurance, or if the
insurance offered is very limited, he can buy an individual
policy.
 A person can get fee-for-service, HMO, or PPO protection. But he
should compare his options and shop carefully because coverage
and costs vary from company to company.

Commercial Health insurance

 Commercial Health insurance or Private health insurance is an
insurance which is paid for by somebody other than the
government.

 Government health insurance is standard for each program, but

c o m m e r c i a l health insurance includes many variations in price
and the kinds of benefits that clients get.

 Commercial health insurance is usually paid for by the client’s

employer, union, by the client and employer sharing the cost, or
by the client.

 The rules about health insurance--such as what benefits are

available and what rights the client has—depend on two things:

the type of insurance and

who is paying for the insurance.

Types of Commercial Health Insurance

Commercial health insurance can take several different forms. These can be
broadly divided into two large categories:
(1) “indemnity” or “fee-for-service”, the kind most people used to have;
indemnity and
(2) managed care plans, which are more common now.

Indemnity Plans

 Indemnity Plans are a type of health care

insurance set up as a fee-for service plan. The
coverage offered by most traditional insurers is in
the form of an indemnity plan. The patient pays
medical care provider directly for services and
then files claims to be reimbursed by the plan.
 An indemnity plan offers maximum flexibility because the patient can visit
any doctor, hospital, or other health care provider he/she chooses in any
part of the country. There is no need to choose a primary care physician

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(PCP) to coordinate health care and also a referral is not required to visit a
specialist.
 With the indemnity plan, the patient pays reasonable and customary,
deductible, coinsurance amount, and up to an out-of-pocket maximum.
 The plan reimburses patients for covered medical services as long as the
expenses are reasonable and customary for the area in which they live. In an
80/20 plan, after the deductible is paid, the plan will cover 80% of expenses
and the participant must pay the remaining 20%. In a 90/10 plan, after the
deductible is paid, the plan will cover 90% of expenses and the participant
must pay the remaining 10%.
 The provider uses balance billing.

 On the other hand, it’s the most expensive way to go, and not every
employer offers this plan.

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Managed Health Care Plans

The financing of the America’s health care system has changed the way
healthcare services are organized and delivered, as evident by the movement
from the traditional fee-for-service systems to managed care networks. All
managed care plans involve an arrangement between insurer and a selected
network of health care providers (doctors, hospitals). These types of plans offer
moderate health care coverage for a relatively low price.
There are three basic types of managed care plans:
(1) Health Maintenance Organizations (HMOs)
(2) Preferred Provider Organizations (PPOs)
(3) Point of Service (POS).

Although there are important d i f f e r e n c e s between the d i f f e r e n t

types of managed care p l a n s , t h e r e a r e s i m i l a r i t i e s a s w e l l .
Health Maintenance Organization (HMO)

 HMO is a network of participating

physicians of insurance company. If a
member opts for the HMO plan, he/she
is assigned a Primary Care Physician. If
an HMO member falls sick, he/she first
needs to visit the Primary Care
physician for his/her initial treatment.
If PCP finds that patient needs to be
treated by any specialist for the same
illness, patient is referred by PCP to an
in-network specialist.

 Patient can not visit a specialist

without the referral by PCP and in such
cases; insurance company is not obligated to pay for the claims.

Note: In emergency situations, patient can visit the specialist

without the referral of P C P h o w e v e r w i t h i n 2 4 h o u r s o f t h e
treatment; insurance company should be informed about this.

 Expenses incurred by the member of HMO plan are a fixed monthly

premium and a small co-payment per visit.
 This is generally the least expensive managed health care plan option
available.

E x a m p l e : Mary selected an HMO medical plan and selected her PCP. She
visited her PCP when she had an earache. PCP tried to cure her but the problem
persisted. So, her PCP referred her to a network Ear, Nose, and Throat (ENT)
Specialist. Mary continued her treatment using that provider and was charged a
small co-payment.
If Mary had sought care from a physician or facility other than her PCP, or
without being referred by her PCP, her HMO would not have provided any

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coverage for those expenses, even if the physician or facility was in the HMO
network.

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Tips for HMO’s Coverage

 If a patient has two insurances and one of the insurance is a
HMO of the other insurance then we will bill the HMO only.
 If a patient has two insurances and one of the insurance is a HMO,
but not a HMO of the other insurance then we will follow the
sequence given on the registration form.

Preferred Provider Organization (PPO)

 A PPO is a network of contracted
participating physicians and hospitals
agreeing to render services at discounted
rates.
 A PPO plan provides both in-network and
out-of-network b e n e f i t s .

 Unlike an HMO, there is no primary care

physician (PCP). The patient can directly
see a specialist, without a referral from the
PCP, within the network. Also he can see a
provider out-of-network.

 Expenses incurred by the member of PPO

plan, when he sees an in-network provider, are premium, a small co-
payment per visit and lower co-insurance.

 The patient incurs higher out-of-pocket expenses when he sees an

out-of-network provider. He pays deductibles, higher co-pays, higher
coinsurance and balance bill.
 This plan is more f l e x i b l e and expensive than an HMO plan as the
patient has the choice of seeing both an in-network provider and an
out-of-network provider.

Point of Service (POS)

 POS plans are almost a hybrid of HMO and
PPO plans.
 Like an HMO, the patient needs to f i r s t visit a
PCP. If PCP finds that patient needs to be
treated by any specialist, patient is referred
by PCP to an in-network specialist.
 However, like a PPO, a POS plan lets a
patient to see an out-of-network provider
without a referral from the PCP. But he
incurs higher out-of-expenses when he sees
an out-of-network provider. He has to pay
deductibles, higher co-pays, higher
coinsurance and balance bill.

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 This is the most flexible plan available among the managed care plans.

Reimbursement Methods
The mixture of reimbursement schemes seen in health care practices today greatly
adds to the complexity of the p r a c t i c e ’ s administrative billing operations. Many
practices must work concurrently with three reimbursement methods:

 Capitation
 Fee-for-Service
 Episode of care

Capitation
 Method of payment whereby a physician or hospital is paid a f i x e d amount for
each person in a particular plan regardless of the frequency or type of service
provided.
 Capitation is the method used by HMOs and some managed care plans.

 Capitation is usually described in the HMO/managed care literature as the PMPM

payment (per member per month payment).
 This reimbursement method was initially provided only to primary care
physicians. In some parts of the country capitation is paid to selected health care
specialties.

Fee-for-Service

 It is the longstanding traditional form of reimbursement.

 The payment is made according to the reasonable and customary fee for each
service provided.
 Payment for services may be made by the patient or from a third-party payer
(e.g., individual or corporation, government or private health insurance, etc.).

Episode of Care Reimbursement

It is a payment method in which the health care provider receives one lump sum
for all services rendered to the patient for a s p e c i f i c illness. One example of
reimbursement is in the global surgical fee paid to physicians who perform major
surgery. These global surgical fee payments cover the following services:

 A preoperative visit
 The surgery
 Normal postoperative care
Reimbursement for any surgical complications is usually paid on a strict fee-for-
service basis.
Neither of these two hospital reimbursement methods a f f e c t s the services and
claims for physician services.

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All the Commercial Insurances can have following three coverages:

1) BASIC INSURANCE COVERAGE

 Basic protection pays toward the physician’s fee, hospitalized expenses to
a maximum amount and surgical fees (as defined in each contract) with the
basic insurance coverage.
 The patient is typically responsible for the first $100 or more charged for
medical services (this amount is called deductible) in addition to a co-
payment amount for each service or treatment provided.

It covers the following:

 Hospitalizations (costs of a hospital room and care)
 Diagnostic laboratory
 X rays
 Surgery fees
 Assistant surgeon fees
 Obstetric care
 Newborn care

Basic coverage also pays toward the cost of surgery, whether it is performed in or
out of the hospital, and for some doctor visits.

2) MAJOR MEDICAL INSURANCE

 This insurance provides coverage for catastrophic or prolonged, high-cost
illnesses and injuries (sometimes also called catastrophe insurance).
 This coverage is for outpatient care and prescription not covered by basic
plan.
 With major medical insurance, the patient is typically responsible for a
deductible amount, as well as a co-payment amount for each service or
treatment provided.
 However, this amount is typically less than the deductible amount
required with basic insurance coverage.
Major Medical (MM) coverage pays benefits for the following services:

 Office visits
 Outpatient non-surgical treatment
 Physical and occupational therapy
 Purchases of durable medical equipment (DME)
 Mental health visits
 Allergy testing and injections
 Prescription drugs
 Private duty nursing (when medically necessary)
 Dental care required as a result of a covered accidental injury

3) COMPREHENSIVE INSURANCE COVERAGE

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This insurance combines the benefits of both basic insurance coverage and
major medical coverage. With any insurance coverage a small deductible usually
covers broad medical treatment under one policy.

Some Examples of Commercial Insurances are:

n AETNA
n US HEALTHCARE
n OXFORD
n GROUP HEALTH INSURANCE
n BLUE CROSS AND BLUE SHIELD
n UNITED HEALTHCARE
CIGNA, etc…

ID Cards
Health Plan identification (ID) cards is mailed to the participant from the health
plan for all covered family members. It identifies the plans the participant has
chosen for themselves and their family. A participant or family member must
present this ID card to their physician at the time of service for payment and
billing purposes.

The medical plan ID card typically includes the following information on the
front of the card:

· Participant name and identification number

· Co-payment for HMO plan
· Health plan group number:
 Provides employer's identification number with the insurance
company (health plan)
 Identifies participant when calling the health plan's member
services department
· Effective date
The back of the card typically includes the following information:

· Address of the insurance

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ID Cards of Some Commercial Insurance

Aetna US Healthcare

Oxford Health Plans

Group health Insurance

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Horizon Blue Cross and Blue Shield

United Healthcare

Cigna HealthCare

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Primary vs. Secondary Insurance

Households with dual income often have more than one insurer, in such cases
primary and secondary insurance coverage should be determined. For
commercial plans the subscriber or insured’s insurance company is always
primary for the subscriber. In other words, the husband’s insurance company is
primary for him and the wife’s insurance company is primary for her. However,
the primary insurance company for any dependents is determined by the
insured’s’ birthdays, the primary insured being the
individual whose birthday is first during the year. This is often referred to as the
“birthday rule.”
BIRTHDAY RULE: determines coverage by primary and secondary policies
when each parent subscribes to a different health insurance plan.

Child of divorced parents:

1) The custodial parent’s plan is the primary.
2) If the parents are remarried, then the parent’s plan is the primary, the
custodial step-parents plan is the secondary, and the noncustodial parent’s
plan is the tertiary.
3) If the court order specifies that a particular parent must cover the child’s
medical expense then that parent’s plan is the primary.
Child living with both parents:
If each parent subscribes to a different health insurance plan, the primary and the
secondary policies are determined by applying the birthday rule. Physicians office
staff must obtain birth date of both the policyholder of each policyholder because
the birthday rule states that the policyholder whose birth month and day occurs
earlier in the calendar year holds the primary policy for the children.

The year of birth is not considered when applying the birthday rule
determination.

Example: Which policy is primary for the child if both parents have insurance.
Birthday of mother is 03/06/59.
Birthday of father is 03/20/57.
Answer: Mothers policy is primary as her birthday is earlier in the calendar year.
Example: Birthday of both parents is on the same date.
Father’s policy took effect 03/06/86.
Mother’s policy took effect 09/06/92.
Answer: Father’s policy is primary because it has been in effect 6 years longer.
If the policyholders have identical birthdays, the policy in effect in the longest
is considered primary.

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KEYWORDS

Term Definition
Providers and facilities with which a managed care organization
In-Network contracts to provide services. Many benefit plans encourage
enrollees to use participating (in-network) providers to reduce
the member's out-of-pocket expenses.
Example: Mary enjoys the flexibility of her PPO plan. She usually
sees an in-network provider and pays a small copayment for
services.

Providers and facilities that do not participate in a managed

Out-of-Network care plan.
Example: Although Mary usually sought services from
physicians and the specialists within her PPO network, her
friend highly recommended a dermatologist who did not
participate in her plan. Mary chose to see the dermatologist,
anyway, and paid a deductible and coinsurance.
Mary was grateful that she had flexibility in her PPO plan and
could receive at least some benefit when seeking out-of-
network services. If she had been enrolled in an HMO she would
have had no out-of-network benefits at all.

Maximum Out-of- The most money a person will be required pay a year for
Pocket deductibles and coinsurance. It is a stated dollar amount set by
the insurance company, in addition to regular premiums.

Activity: Mary Medical Activity

Your instructor will lead a scenario-based activity applying what you have
learned to a specific participant situation.

Scenario:
Mary Medical enrolled in a POS with a new health plan. She would really like to
plan surgery to have her sinuses drained. Being in a new plan, Mary has not yet
seen a provider to arrange the surgery.
Answer the following questions:
Can Mary see any physician of her choice to plan her surgery?

In-network:
Would Mary pay a deductible? Copay?
Out-of-network:

What process would Mary have to follow if she needed to be

In-network:
hospitalized?
Out-of-network:
What if her condition became urgent or life threatening? For In-network:
instance, Mary found herself struggling to breathe very early Out-of-network:
in the morning prior to any provider’s office hours.

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Chapter 5

Medicare
At the end of this chapter, you will be able to:
1. Define key terms
2. List categories of people eligible for Medicare coverage
3. Explain when Medicare is primary and secondary payer
4. Explain the billing sequence for Medicare patients with employer-
sponsored plans, Medigap, Medicare-Medicaid crossover plans.
5. Understand and state advantages of Medicare–Managed care (HMO
Program)
6. Explain claim submission of Medicare
7. State deadline for filing Medicare claim
8. Explain CLIA, COBRA, HPSA, Hospice

Medicare
Medicare, the single largest health benefits programs in the United States, is a
federal program authorized by Federal Government. Center of Medicare and
Medicaid Services (CMS, formerly HCFA) is responsible for the operation of the
Medicare program and for selecting a f i s c a l intermediary (FI) to process Part A
claims and a carrier to process Part B claims.

Medicare is a four-part program:

1. Medicare Part A (Hospital Insurance): It covers hospital bills e.g., (room
charges, etc.).
It is billed on UB-92 form.
2. Medicare Part B (Supplemental Medical Insurance): It covers physician’s
services, outpatient hospital services, durable medical equipments and clinical
laboratory tests.
3. Medicare Part C (Medicare Advantage Plan): It covers health benefits through
Medicare private health plan.
4. Medicare Part D (Prescription Drugs): It covers Prescription drugs
Eligibility for Medicare
1. By age: People who are age 65 or over, who (or whose spouse) have
contributed a small part of salary to SSA (Social Security Association) for at
least 10 years and who are permanent citizens of US.
2. By disability: People under age 65, with certain disabilities
3. By kidney failure: People of any age with permanent kidney failure

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requiring dialysis or a transplant.

Medicare Part B Eligibility
1. Part B coverage is optional (as there is a monthly premium associated with it)
and is o f f e r e d to all b e n e f i c i a r i e s when they become entitled to Part A. (If you
are eligible for Medicare, Part A is free, but you must pay premium for Part B).

2. Beneficiaries are automatically enrolled in Part B when they become entitled

to Part 'A', unless they state that they do not want it. The federal government
pays about 75 percent of the program costs. A beneficiary’s Medicare card
shows the coverage he/she has (Hospital Insurance {Part A}, Medical Insurance
{Part B}, or both) and the date the protection started.

3. It also may be purchased by most persons age 65 or over who do not qualify
for premium-free Part A coverage.

4. The premium for Medicare Part B is dependent on the annual income level of
the beneficiary. For most enrollees it is $96.40 for the year 2010.

5. Use of Part B benefits requires a $155 deductible for calendar year 2010. The
deductible must represent charges for services and supplies covered by
Medicare. It also must be based on the Medicare-approved amounts, not the
actual charges billed by the physician or medical supplier.

6. Medicare Part B carriers are responsible for reimbursing physician services,

outpatient hospital services, durable medical equipment, and clinical laboratory
tests.

Medicare Card

Front Back

Health Insurance Claim Number (HICN)

Every Medicare beneficiary is issued a health insurance card from the Social
Security Administration.
 The card contains the individual’s name, sex, health insurance claim
number (HICN), the effective date, and the Medicare coverage.
 HICNs are usually social security numbers with letters known as suffixes,
attached at the end.
 HICNs must be included on all Medicare claim forms, related bills,

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documents, notices, and any other communications dealing with a Medicare

claim because Medicare records are organized by these numbers.
Some facts about HICN:
 Traditional Medicare ID numbers contain 9 digits followed by an alpha 1
character suffix.
 Some ID numbers will contain 2 additional characters that are either
numeric or alphabetic.
 Patients who are retired railway workers have special Railroad Retirement
cards with ID numbers containing an alpha prefix.

Guide to HICN S u f f i x e s
Each Medicare patient has an identification number called HICN(Health
Insurance Claim Number). It is typically their SSN with a suffix. An exception
would be people who never worked or Contributed to Social Security. If these
people are eligible for coverage through their spouse, their HICN will be their
spouse’s SSN with a different suffix. Below are the list of few suffixes and
their meaning:
■ A People who worked and contributed to SSA (Social Security
required time frame (typically 10 years).
■ B People who never contributed to SSA, but are eligible because
of their c o n t r i b u t i o n .
spouse’s
■ C Children or Dependent of someone who worked under SSA.
■ D Widow/widower or a dependent of someone who worked
■ W under SSA
Widow/widower under 65 who are eligible under their spouse’s
number if
they were disabled prior to death.
■ M Usually means “medical benefits only”. The card will verify
whether there

are Hospital Benefits (part A) too.

■ T Patient’s entitled to Part A and/or Part B benefits, but not to
monthly
S o c i a l S e c u r i t y benefits.

Carrier
Carriers are insurance companies under contract to the Center for Medicare and
Medicaid Services (Health Care Financing Administration) to administer Part B of
the Medicare program. They are responsible for processing claims, computing
payments for physicians’ services, making payments, determining whether
claims are covered or not, and informing physicians of any changes in Medicare
policy and procedures.
Railroad Retirement Medicare Beneficiaries enrolled in Railroad Retirement
Medicare have a Medicare card with the words “Railroad Retirement” displayed
prominently. The identification (ID) number has an alpha prefix in front of the

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nine-digit number. Palmetto GBA is the national Railroad Medicare Part B carrier.

Medigap Plan (Supplemental Plan)

Medigap insurance is private, commercial plan that meets the federal
government standards for Medigap coverage and collects premiums directly
from the patient.
It provides coverage to the patients for health care cost (coinsurance and
deductible) not paid by Medicare to ‘‘fill the gap.’’

Medicare Primary Payer

Medicare is generally primary if:

1) An individual does not have any other insurance.

2) An individuals’ employer-sponsored coverage is based on his/her retirement.
3) An individuals’ only other insurance is medigap insurance (This is sometimes
called supplemental coverage).
4) Patient has both Medicare and Medicaid.
5) The health insurance plan is only for self-employed individuals.

Medicare Secondary Payer (MSP)

Medicare Secondary Payer (MSP) refers to situations where the Medicare
program does not have primary responsibility for paying a beneficiary’s health
expenses because the beneficiary may be entitled to other coverage that should
pay primary health benefit.

Given below are cases when M e d i c a r e is the s e c o n d a r y

payer:
1) Individuals who are aged 65 or older and working, with coverage under an
employer sponsored or employee organization group health plan.
2) Individuals who are aged 65 or older and covered by a working spouse’s
employer group health plan. The working spouse can be of any age.
3) Individuals who are under age 65, have Medicare because of disability, and
covered under a group health plan (GHP) because of their current
employment or the current employment of a family member.
4) Individuals who have Medicare because they have permanent kidney failure
and are covered under a Group Health Plan (GHP) because of their current
employment or the current employment of a family member.
5) Individuals who have Medicare because they have permanent kidney failure
and are covered under a Group Health Plan (GHP) because of their former
employment.

Medicare is only secondary for an 18-month coordination period

in this situation.

M e d i c a r e Plans
Medicare plans include the:

1) Original Medicare Plan: Offered by the Federal government and available

throughout the United States.

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2) Medicare managed care plans (e.g., Medicare + choice): available in many

areas of the country and often require beneficiaries to seek care from
providers on the plan’s list.
Crossover

Crossover refers to the process of sending Medicare claim

information to secondary i n s u r a n c e c o m p a n i e s t o f a c i l i t a t e
coordination of benefits for their beneficiaries.

Example: M e d i c a r e - - M e d i c a i d Crossover

The Medicare carrier electronically transfers the Medicare claim and the
payment information to Medicaid for processing of the patient’s Medicare
deductibles and coinsurance responsibilities and for payment of any service
covered by Medicaid/Medical not Medicare.

M e d i c a r e – M a n a g e d C a r e (HMO Program)
1) A Medicare HMO is a Medicare-approved, contracted, organized,
community-based network of physicians, hospitals, other health
care providers.

2) They provide all Medicare-covered services and receive payments directly from
Medicare for the beneficiary care. All Medicare HMO offer
preventive medical care, immunizations, health education, and vision,
hearing aids, and dental care.

3) Medicare beneficiaries are eligible to enroll if they:

 Are enrolled in Medicare Part B
 Live or are willing to travel in the HMO service area
 Are not receiving ESRD or hospice care.
4) Enrollees must continue to pay the Medicare Part B monthly premium and a
monthly premium to HMO, and they may also be required to pay co payments
when seeking services.

5) A PCP (Primary Care Physician) is selected to coordinate care by either providing

health care or by arranging for beneficiaries to see other providers when
necessary.
The advantages of joining HMO-Medicare
The enrollment in Medicare HMO results in:
1) Additional benefits (e.g., preventive care, dental care, eyeglasses, hearing
aids at a very little or no additional cost.)
2) Lower costs (HMOs are expected to reduce out-of pocket payment and charge
predictable premium amount; beneficiaries do not need Medicare
Supplemental Insurance.)
3) No accepting assignment problem (Enrollees do not worry about finding a
doctor who accepts Medicare assignment.)

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4) Preventive care (through immunization)

5) Educational services (Health education classes and information are available
to encourage healthier life styles)
6) Quality (Medicare HMOs must meet standards to maintain eligibility)
7) Flexibility (Beneficiaries can return to original Medicare plan, which could be
effective the first day of the month following the month in which the request
is made.)

The disadvantages of joining HMO-Medicare

1) Lack of freedom (Beneficiaries cannot choose any provider until it is an
emergency)
2) Prior approval required (Prior approval from PCP is required)
3) Dis-enrollment can be lengthy (sometimes up to 30 days)

Some facts about Medicare

 Medicare Part A reimburses institutional providers for inpatient hospital and

skilled nursing facility stays, home health and hospice services, ESRD and
kidney donor coverage, and heart/heart-lung, liver, and bone marrow
transplants.
 Medicare Part B reimburses noninstitutional healthcare providers for all
outpatient services such as physicians services (e.g., office visits, inpatient
visits) diagnostic testing, ambulance services, and supplies used in the the
home and certified by a physician, and so on.

 Medicare Advantage (Part C) plans are available in many areas. People with
Medicare Parts A and B can choose to receive all of their health care services
through one of these provider organizations under Part C.

 Prescription drug coverage (Part D) that helps pay for medications doctors
prescribe for treatment.

Claim Submission of Medicare

Electronic Media Claims Submission (EMC)

A “paper claim” is simply one that is submitted on paper. An “electronic claim” is
one that is submitted via central processing unit (CPU) to CPU transmission, tape,
diskette, direct-data entry, direct wire, dial-in telephone, or personal computer
upload or download.

 A claim which has no discrepancy is called clean claim.

 Electronic Media Claims (EMC) is an electronic claim processing system that

enables a provider to submit his/her claims to the carrier more efficiently
than the paper claims.

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 The Medicare statute provides for claims payment floors and ceilings.

 A floor is the minimum amount of time a claim must be held before payment.

 A ceiling is the maximum time allowed for processing a clean claim before

 Medicare owes interest to the provider of services.

Physicians and suppliers who file paper claims will not be paid
before the 26th day after the date of receipt of their claims. Clean
claims filed electronically will be paid no sooner t h a n 1 3 d a y s a f t e r
receipt.

 For clean electronic claim:

I. In case of participating physicians: Floor (12 days),
Ceiling (17 days)
I I . In case of nonparticipating physicians: Floor (12 days),
Ceiling (24 d a y s )

 For paper claim: Floor (25 days), Ceiling (29 days)

Interest Payments
Interest payments will begin on the 18th day after the date of receipt of a clean
electronic claim for participating physicians and 25th day after the date of receipt
of a clean electronic claim for non-participating physicians and all suppliers.
For all providers, including participating and non-participating physicians and
suppliers, interest payments will begin on the 28th day after the date of receipt of
a clean paper claim.

Clinical Laboratory Improvement Amendment (CLIA):

CLIA established quality standards for all the laboratory testing to ensure the
accuracy, reliability, and timeliness of patient test results regardless of where
the test was performed.
All physicians who perform laboratory tests must register with the CLIA program
and be issued either a certificate of registration, a certificate for physician-
performed microscopy procedures (PPMP), or a certificate or waiver.
Performing tests without CLIA approval is a violation of the Clinical Amendment
Improvement Act of 1988 and claims submitted by independent laboratories
that have not enrolled in the CLIA program are being denied.

Example: Venipuncture, Urine Analysis, Hemocult

KEYWORDS

Term Definition

Primary Primary policy holder is the person to whom policy

Policy holder is issued.

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Prim a r y Primary insurance is the insurance plan responsible for paying

Insurance healthcare insurance claim first.

Ordering physician is a physician who orders diagnostic or

Ordering
clinical laboratory tests, pharmaceutical services or durable
Physician
medical equipment.

The maximum charge a non-PAR provider may charge a Medicare

Limiting patient.
Charge
The Consolidated Omnibus Budget Reconciliation Act of 1985
COBRA (COBRA) states an employer (with 20 or more employees) must
offer continuation of employer-sponsored group insurance
coverage for a specified time (up to 18 months) to an employee
for any of the following occurrences.
Death of the employed spouse Loss of employment or reduction
in work hours Divorced. If a beneficiary has COBRA coverage and
is entitled to Medicare, then Medicare would be primary, except
in ESRD cases. If a beneficiary is entitled due to ESRD, then the
COBRA coverage is primary for the coordination period.

The Advanced Beneficiary Notice (ABN) also known as a "waiver

of liability,” is a notice given to Medicare beneficiaries to let the
patient know Medicare is not likely to pay for certain services. The
notice must be given to the patient before services are performed.
The patient is responsible for the unpaid services.
Care provided to terminally ill patients and their families that
emphasize emotional needs and coping with pain and death rather
than cure. All terminally ill patients qualify for the hospice care.
Hospice is an autonomous, centrally administered program of
coordinated inpatient and outpatient palliative (relief of
symptoms) services for terminally ill patient and their families.
This program is for the patients for whom there is nothing further
the provider can do to stop the progression of disease, and the
patient is only treated to relieve the pain or the discomfort.
Besides this, physician-directed interdisciplinary team provides
psychological, sociological, and spiritual care.

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Chapter 6

Medicaid
At the end of this chapter, you will be able to:
1. D e f i n e key terms
2. Know eligibility criteria of Medicaid
3. List advantages of Medicaid over Medicare
4. Recognize Medicaid c a r d and ID
5. Understand Medicaid-HMO Plan
Good health is important to everyone. If anyone can't afford to pay for
medical care in U.S., Medicaid can make it possible for them to get the care that
they need so that they can get healthy and stay healthy.
Medicaid is available only to certain low-income individuals and
families who fit into an eligibility group that is recognized by federal and
state law. Medicaid does not pay money to them; instead, it sends payments
directly to your health care providers. Depending on the patient’s state's
rules, they may also be asked to pay a small part of the cost (co-payment) for
some medical services.

 Medicaid is health insurance f o r the poor.

 It was created in 1965 as a joint federal/state public assistance program for

people too poor to afford health care.

 This program is administered by the individual states under federal guidelines,

the benefits offered and eligibility requirements vary widely from one state to
another.

 Medicaid is the largest program providing medical and health related services to
America’s lower income group. About 36 million people around the U.S.,
including children, the elderly, the blind, and the disabled, are currently covered
by Medicaid.

 Eligibility is based on financial needs. The annual income level of the

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recipient should be near National poverty guidelines.

 Deductible, coinsurance and c o - p a y m e n t for patient’s

primary coverage: Medicaid generally pays the deductible amount charged, as
well as the patient responsibility not covered by Medicare or any other
commercial insurance. Usually, Medicaid recipients pay no part of costs for
covered medical expenses, although a co-payment is sometimes required.

 Most of the patient’s health care costs are covered if they have Medicare and
Medicaid.

 Advantages over Medicare: People with Medicaid may get

coverage for services such as hospital, preventive, and long-term care and other
items not covered under Medicare such as dental work, prescriptions,
transportation, eyeglasses, and hearing aids, nursing home and home health care,
that aren’t fully covered by Medicare.

 Assignment of benefits: In Medicaid coverage payment is made directly

to the provider. Provider participating in Medicaid must accept the
reimbursement level as payment in full. Each state has a broad discretion in
determining the reimbursement methodology & resulting rate of services.
Balance billing to the patient is illegal. A patient may be billed for any service that
is not in the covered benefits.

 When an individual is covered by both Medicare and Medicaid:

Medicare is the primary payer.

 Medicaid is always payer of the last resort when a recipient is covered by other
insurance (e.g., Medicare, TRICARE, or any other commercial insurance).

 The Medicare--Medicaid Crossover is a combination of Medicare and Medicaid

(or MediCal in California) programs. This program is available to Medicare
eligible persons with income below poverty level.

MEDICAID INSURANCE CARDS

Medicaid of New York

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Medicaid of New Jersey

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Medicaid of Utah

What is a Medicaid HMO plan?

The state has contracted with private companies called Health Maintenance
Organizations (HMO) to manage health care.

Features of Medicaid HMO plan

 A Medicaid HMO is a Medicaid-approved, contracted, organized, community-

based network of physicians, hospitals, other health care providers.
 If you are in an HMO you will have to get all your medical care, including mental
health, alcohol and drug treatment, from the doctors and hospitals who are in
your HMO.
 A PCP (Primary Care Physician) is selected to coordinate care by either
providing health care or by arranging for beneficiaries to see other providers
when n e c e s s a r y . If you need to see a specialist, you must ask your primary
doctor for a referral.

ID of patient having Medicaid of:

New York : 2 Alpha + 5 Numeric + 1 Alpha (e.g., XH12345Y)
New Jersey : 10 Digits
Utah : 10 Digits

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LIST OF SOME OF THE HMO’S FOR DIFFERENT CLIENTS

MEDICAID

1. AMERICAID AMERIGROUP
2. AMERICAN PREFERRED
3. AMERICHOICE
4. AMERIHEALTH
5. BRONX HEALTH PLAN
6. BETTER HEALTH PLAN
7. CARE CORE
8. CARE PLUS HEALTH PLAN
9. CENTER CARE
10. CHILD HEALTH PLAN
11. FIDELIS CARE
12. FIRST HEALTH
13. GENESIS HEALTH PLAN
14. HARMONY HEALTH MEDICAID
15. HORIZON MERCY
16. HERITAGE NJ MEDICAL GROUP
17. HEALTH PLUS (FAMILY HEALTH PLAN)
18. HEALTH START
19. HIP NY MEDICAID
20. GARDEN STATE HEALTH PLAN
21. LIBERTY MEDICAID
22. MHS/MEDICAID
23. NEIGHBOURHOOD
24. SUFFOLK HEALTH
25. UNIVERSITY HEALTH PLAN

MEDICARE

1. EVERCARE
2. CIGNA MEDICARE
3. US HEALTHCARE
4. HIP MEDICARE
5. HORIZON MEDICARE BLUE
6. HUMANA GOLD CHOICE
7. OXFORD MEDICARE
8. ROCKEY MOUNTAIN
9. STERLING OPTIONS
10. UNICARE
11. UNITED HEALTHCARE

BCBS

1. HORIZON BCBS
2. C.N.Y.
3. MED ADVANTAGE BCBS

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Chapter 7
Worker’s Compensation & No-fault
At the end of this chapter, you will be able to:
1. Define key terms
2. Understand the billing procedure for Worker’s Compensation & No-fault

WORKER’S COMPENSATION
Worker’s Compensation is a State insurance program that provides health care
and income to employees when the employee suffers a work related injury,
illness or death. Insurance laws in each state require employers to purchase
Worker’s Compensation insurance to cover their employees.
Eligibility
 To qualify for the Worker’s Compensation, employee must either be injured
while working within the scope of their job description, injured while
performing a service required of the employer, or succumb to an illness that can
be directly linked to employment.
 Anyone employed by a for-profit company/corporation or state employees
suffering a work-related injury is eligible for worker’s compensation benefits.
 Coal miners, longshoremen, harbor workers, and all federal employees, except
those in the “uniformed services,” with a work-related injury are eligible for
federal compensation plans.
How Worker’s Compensation Functions:
Step 1 : For Worker’s Compensation injured employee should inform the HR
Department of his company about his injury.
Step2 : The Company HR Department must send employee’s paper to the
Worker’s Compensation (Insurance Company).
Step 3 : Employee visits his doctor.
Step 4 : The Doctor reports to the Worker’s Compensation (Insurance
Company).
Step 5 : Then, the doctor sends CMS-1500 form and all the related papers to the
Billing Office.

NO-FAULT
Insurance that pays for health care services resulting from bodily injury
regardless of who is at fault for causing the accident.
Basically, no-fault insurance is what its name suggests: there's no fault placed in
the event of an accident. The drivers involved would submit a claim to their own
insurance companies and receive compensation from them rather than target one

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another, trying to figure out who's to blame.

Comparison between Worker’s Compensation and

No-fault

Worker’s Compensation No-fault

Providers are required to accept Providers are required to
Assignment of
Benefits
Worker’s Compensation reim- accept No-fault reimbur-
bursement as payment in full. sement as payment in
Balance billing to patient is full. Balance billing to
prohibited. patient is prohibited.

Deductible No deductible Deductible must be paid

Copayment No co-payment No co-payment

Premium The employer pays all Premium is paid by the

premiums. automobile owner

Filing Deadline
The filing deadline for the first injury report is determined by state law. The
deadline for filing of the claim form for services performed will vary from
carrier to carrier.

*Tips:
 Insured party will always be the patient.
 Policy No. and Claim No. is same for Worker’s Compensation.
 DOS and Date of Injury can be same or different for Worker’s Compensation.

Names of Some of the No-fault Insurances

1. All State
2. Progressive
3. Hartford
4. Kempere
5. State farm
6. State wide
7. Wasan

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8. Liberty Mutual
9. Prudential
10. Metlife
11. Risk management

Chapter 8

Blue Cross and Blue Shield

At the end of this chapter, you will be able to:
1. Define key terms
2. Describe Federal Employee Program
3. Describe BlueCard Program
4. Explain how a BlueCard patient is identified
5. State the deadline for filing BCBS claims

B l u e C r o s s ( B C ) a n d B l u e S h i e l d ( B S ) plans are perhaps the best-

known medical insurance programs in the United States. They were started as
prepaid medical plans selling contracts to individuals or groups for coverage of
specified medical expenses as long as the premiums were paid.

 BCBS plans include fee-for service, indemnity, managed care, Away from

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home Care (BlueCard), Federal Employee Program (FEP), Medicare

supplemental plans and coordinated home health and hospice care.
 Deadline for filing claims: The deadline for claim submission is 1 year
from the date of service, unless otherwise specified in the subscriber or
provider’s contracts.
Federal Employee Program
 The Federal Employee Health Benefits Program (FEHBP) or Federal
Employee Program (FEP) is an employer-sponsored health benefit
program established by the Act of 1959. The FEP provides benefits to over
approximately 9 million federal government employees and dependents.

 The BCBS Federal Employee Program (FEP) is just one of many commercial
plans available for election by federal government employees.

 FEP cards obtain the phrase words “Government-Wide Service Benefit plan”
under the BCBS trademarks. The ID number begins with a letter “R”
followed by eight numeric digits. All ID cards carry the name of the
government employee.

 Dependents names do not appear on the card.

 A three-digit enrollment code is located on the front of the card to specify

the option(s) elected when the government employee enrolled in the
program. This code should be entered as the group ID number on BCBS
claims .

 The four enrollment options are:

101 Individual, High Option Plan
102 Family, High Option Plan
104 Individual Standard (Low) option Plan
105 Family Standard (Low) Option Plan

BCBS
FEP ID

BlueCard Program
The BlueCard Program is a national program that enables members obtaining
healthcare services while traveling or living in another Blue Cross Blue Shield
(BCBS) Plan’s area to receive all the same benefits of their contracting BCBS Plan
and access to providers and savings. The program links participating health care
providers and the independent BCBS Plans across the country and around the
world through a single electronic network for claims processing and
reimbursement. BCBS manuals & newsletters use the term `host plan’ when
discussing the local plan and home plan to indicate the patient’s out of area plan.
BlueCard patients have identification numbers (ID) that begin with an alpha

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prefix.. The three-character alpha prefix at the beginning of the member’s

identification number is the key element used to identify and correctly route out-
of-area claims. The alpha prefix identifies the Blue Cross Blue Shield Plan or
national account to which the member belongs. It is critical for confirming a
patient’s membership and coverage. Claims without alpha prefix are handled
outside the BlueCard Program.

There are four types of products administered through BlueCard Program

1) BlueCard Traditional
2) BlueCard PPO
3) BlueCard Managed Care/POS
4) HMO

 A blank suitcase logo on the member’s ID

card indicates BCBS traditional, POS, or HMO
benefits delivered through the BlueCard
Program

 A suitcase with “PPO” on the member’s ID

card indicates BCBS PPO benefits delivered
through the BlueCard Program .

 This program does not cover the following

benefits: vision, dental, prescription, hearing or when the patient is covered
by one or more than one health insurance carrier Claims of these services
must be mailed or sent electronically to the patient’s home plan listed on the
back of the patient’s BCBS ID card. PAR’s may collect only the patient’s
deductible and copay/co-insurance. Patients are responsible for obtaining
necessary precertification and pre authorizations from their home plans.

 Payments are made to provider by the host plan after the home plan
determines how the claim should be made and transmits this information to
the host plan. The BlueCard program has a system for reimbursement of all
payments made by the host plan on behalf of the home plan.
 Subscriber do not pay for medical services other than usual out-of-pocket
expenses (noncovered services, deductible, co-payment, and coinsurance)

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Home Plan (where the card is): Enrolls members, issues ID Cards and
provides benefit information.

Host Plan (where the service is) Maintains physician, other professional
provider and health care facility contracts and issues payment.

 If the provider and subscriber are from same State, then bill is sent to the
home plan.
 If the provider and subscriber are from different State, then bill is sent to
the host plan of the patient i.e. local plan of the provider.
The local plan pays the provider, and the s u b s c r i b e r ’ s plan sends an
explanation of b e n e f i t s (EOB) to the subscriber.
Example 1: If the subscriber is in NY and he gets the service from a Provider
in NY then the claim should be billed to home plan of NY.
Example 2: If the subscriber is in NY and he gets the service from a provider in
NJ then the claim should be billed to host plan (local plan) of NJ.

When BCBS of New York has contract with insurance companies such as GHI and
United Health Care (UHC) following are the prefixes and the billing tips.

YLA – BCBS of NY + GHI – Bill to GHI (BCBS coverage is for the hospital bills and
the technical component whereas GHI is responsible for the professional
[physician] bills)
YLS – BCBS of NY + United Health Care– Bill to United Health Care (BCBS coverage
is for the hospital bills and the technical component whereas UHC is responsible
for the professional [physician] bills)
YLM – BCBS of NY + Medicare (BCBS is always secondary to Medicare)
YLR – Medicare replacement program– Bill to BCBS (BCBS replaces Medicare)

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C hapter 9

Registration, Charges and Payments

Registration
Each new patient fills out a Patient Registration Form at the time of the first visit
to the practice. The completed form is used to open the patient’s medical
account and insurance billing records. When the patient returns the completed
form to the front desk, the receptionist reviews the form very carefully to ensure
that all necessary demographic and billing data have been supplied. The
Registration form contains the following information of the patient (for sample
of demographic sheet see Appendix – Forms):
1) Patient’s Full Name (First Middle Last)
2) Address and Telephone number (If the patient does not have a home
telephone #, an alternative contact # is required).
3) Date of Birth
4) Sex
5) Social Security Number
6) Marital Status and Dependents, if any
7) Patient’s occupation – Name and Address of the employer, patient’s
designation.
8) Name of the spouse.
9) Name, relationship, and occupation of the person legally responsible for any
outstanding payment; the guarantor.
10) The patient’s health insurance information. If the patient has more than one
coverage, the billing office requires the following information:
a. Names of the subscribers
b. Their relationship to the patient
c. Employment status
d. Name of the subscriber’s employer
e. Address of the subscriber’s employer
f. Effective dates of each policy.
g. Group No.
(The office staff checks the information to be sure that the patient has
correctly determined which policy is primary, secondary, etc.).
11) Front and back copies of the insurance cards. The photocopy of the front and
back of all the patient’s insurance identification cards is made, which is
maintained in the patient’s chart.
12) Source of referral and referral number, where applicable.
13) A signed insurance responsibility statement accepting responsibility for any
charges not paid by the insurance company.
14) Assignment of benefits and Release of Information statements (see below)
signed by the patient allowing the doctor to receive the insurance benefits
and also permitting him to release medical information to the insurance
companies.
15) A signed promissory note indicating that the patient is willing to take
responsibility for all his/her payments.

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16) All patients with insurance must sign the “Authorization for Release of
Medical Information Form” which is a written permission to release
necessary medical information to an insurance company or other third
party to prevent breach of patient confidentiality.

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What is Breach of Confidentiality

Breach of Confidentiality: It, often unintentional, involves the unauthorized
release of patient information to a third party.
A contract is an agreement between two or more parties to perform specific
services or duties. A third party is one who is not involved in the
patient/provider relationship. (The first party is the person designated in the
contract to receive a contracted service. The second party is the person or
organization providing the service.)
When a patient asks a provider to perform medical services a verbal contract is
established between the patient and the health care provider.
The billing office and the insurance company, which will receive all medical
information regarding the patient, is the third party. All staff involved with the
processing of the insurance claim forms should check to be sure the patient has
signed an “Authorization for the Release of Medical Information Statement”
before completing the claim form.
This can be achieved in one of two ways:
1) The preferred method is to require the patient to sign a special Release of
Insurance Information form unique to the specific provider’s practice and
maintained in the patient’s chart. This special form authorizes the
processing of claim forms without the patient’s signature appearing on each
form. The phrase” signature on file,” however, must be typed or stamped in
Block 12 of each claim form (for sample of HCFA form see Appendix –
Forms) filed for that patient.

2) Practices that are manually preparing all claims can have the patient sign
the Release of Medical Information block on the claim form.

CHARGES
Procedure entry: Information regarding various procedures carried out on the
patient are obtained from the physician’s office in the form of a charge ticket and
entered as charges into the billing system for every date of service.
Step I. The charge ticket is the financial record source document used by the
health care providers and other personnel to record the patient’s treated
diagnoses and the services rendered to the patient during the current
encounter.
The details found in a charge ticket are the following:
1) Date of Service (DOS) (Treatment date)
2) Diagnosis code (ICD-9-CM)
3) Procedure code (CPT)
4) Number of units performed (when applicable) (No. of times treatment was
given)
5) Place of Service (POS)
6) Type of Service (e.g., Medical care, Surgery, etc. and is automatically
generated by the system once the CPT code is entered.)
7) Referring physician’s name
8) Referral/Authorization No.

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9) The Rendering physician’s name (Provider’s name)

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All the above information is entered into the medical billing software by the
agents in the billing office and is then submitted as claims to the respective
carriers on the prescribed forms.
When we start billing for a client, details regarding the client’s practice will be
entered onto the Medical Billing Software’s database.
I. The following details common to a physician group (the client as a whole) will
be entered.
1) Group/Hospital Name.
2) Address
3) Telephone#
4 ) T a x Identification #
II. The following details regarding individual physicians from the
group will also be e n t e r e d .
1 ) Physician’s N a m e
2) Address
3) Telephone #
4 ) Physician’s s p e c i a l t y
5) Social Security #
6) Federal tax Identification #
7) State License #
8) The physician’s various provider numbers with the different
insurance c o m p a n i e s
9) UPIN – Unique Physician’s Identification Number

Then, as the physician treats his patients, their demographic, medical, and
insurance information will be added, including the charge or fees for the
treatment rendered. The claim for these patients are then sent out to the various
insurance companies and if a patient does not have an insurance coverage a
patient billing statement is sent out to him/her.

PAYMENTS
The services that are provided to the patients are sent out to the insurance
companies in
the form of claims.

These claims get paid by the insurance companies.

1) The payments are received at the provider’s mailing addresses and/or at

the billing companies’ addresses.
2) In cases when they are received at providers’ addresses then they are in
turn forwarded to the billing company to post the payments in their
system. Such payments come in batches and may have Bank’s Deposit
Slip or Payment Listing with them. Payments that are received directly at
the billing companies’ address do not have the Banks’ Deposit Slip.

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The most commonly used words in payments are the

following:
1) Billed amount: The amount charged by a physician as a compensation for
his services.
2) Allowed amount: The fixed payable amount set by the insurance
companies for different services performed by the physicians.
3) Participating provider: A Participating Provider is one who accepts the
payment of the insurance company’s allowed amount as full payment, for
any of the insurance company’s beneficiaries regardless of how much he
billed for his services.
4) Nonparticipating: A Non Participating Provider is one who has not
agreed to accept the carrier determined, allowed rate as payment in full
for covered services performed and, therefore, expects to be paid the full
amount of the fees charged for the services performed.
5) Deductible: A specified amount of annual out-of-pocket expense for
covered medical services that the insured must incur and pay each year
to a health care provider before the insurance company will pay benefits.
6) Coinsurance: A specified percentage of the insurance determined
allowed fee for each service, the secondary insurance or the patient must
pay the healthcare provider.
7) Co-payment: A provision in a insurance policy requiring the patient to
pay a specified dollar amount to a health care provider for each visit
and/or medical services they receive.
8) Write off: The difference between a physician’s billed amount and the
participating insurance company’s allowed amount will be written off
after the insurance company pays the allowed amount. This is called
write-off or disallowance.
9) Primary insurance: The insurance company that takes first responsibility
for the patient’s medical bills is called the primary insurance. A major
portion of the patient’s bill is paid by this insurance.
10) Explanation of benefits (EOB): A statement accompanying all claims
payments that explains how the insurance company determined its
share of the reimbursement.
11)
Cases of Interest Payment and Offset
Interest Payment
Charges for which the insurance company delays its processing and payment,
accrues an interest on it. The insurance company pays the amount of interest
along with the payment.
Example 1:

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Example 2:

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Offset

Insurance offset is the amount that the insurance company believes they have
overpaid earlier for a particular charge, DOS, and patient.
First, they would attempt to recover the overpayment by requesting a refund
from the provider. If the physician does not reply or issue a refund, they would
automatically adjust it from the next check issued to the provider.
In some cases, they would give the information of the claim that they believe they
overpaid. In other cases, they would only provide the claim reference number.

In the above case, payment is being removed from particular patients’ accounts,
the charges of those patient’s should be adjusted.

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In the above case, the amount of check is lesser than the amount total of the EOB.
Here the amount should be offset from one or from many accounts of that EOB
depending on how much is been offset and how much has been paid for some of
those accounts listed on the EOB. The insurance has provided the claim reference
number only. Advise: always go for the one with the highest payment.

Also notify the U.S. office, so they can dispute the offset/Refund with the
insurance company.

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Chapter 1 0

Denials

Claims that do not get paid come back as Denials from the insurance carriers.
This can be due to posting errors, incorrect procedure/diagnosis codes, lack of
information (medical records) while filing a claim or missing/incomplete patient
details.

Possible Reasons for Delays and Denials in

processing claims
Reasons for Delays
The claims may not have reached the insurance company’s systems. This is
possible due to a bombed transmission or due to an error in the clearinghouse or
within the insurance company.
There could be a delay due to a backlog in the insurance company’s claims
processing department. They make take longer than usual to process the claims.

Reasons for Denials

1. The claim will be denied if the patient’s coverage is not effective at the
time of the service. The coverage may have terminate before the date of
the patient’s service.
2. The insurance company may deny the claim stating that their coverage is
secondary to the patient.
3. The insurance may not be able to identify the patient in their records.
This could be due to incorrect policy identification # or an incorrect
policyholder’s name.
4. All insurance companies have a filing limit counted from the date of
service. If a claim is sent past that limit it will be denied for late filing.
5. Some insurance companies have specific procedures that their policies do
not cover. These procedures will be denied as non-covered services.
6. If there is any information missing or incorrect on the claim like the PIN,
patient’s address group# etc, the claim will be denied.
7. A claim may be put on hold or denied if the insurance company requires
information from the patient.
8. An insurance company may deny a claim stating that the procedure

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performed does not match the diagnosis.

9. An insurance company which requires a pre-certification or a referral for
the treatment performed will deny the claim or make a lower payment if
these are not attached to the claim or if the claim does not contain the
pre-certification or referral#.
10. An insurance company may deny a claim stating that the service is
inclusive in another code or when multiple units of the same code are
billed.
11. In the case of a managed care network where a patient’s policy states that
he can only see specific physicians, if the rendering physician is not a part
of the network, the claim will be denied stating that the patient went out
of network. Some manged care organizations pay a lower fee for an out-
of-network physician.
12. When more than one unit of a service is performed in a day, the insurance
may pay only one unit and deny the rest as duplicates.
13. A claim may be wrongly processed and denied or wrongly paid.
14. Some insurance coverage has a limit on the payable benefits per year. For
example, if a policy covers all charges up to $10,000 for a calendar year,
the patient is responsible for all charges after the insurance has paid the
$10,000. When the insurance has met it is maximum, it will deny the
claim stating that the maximum benefits have been met.

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Chapter 1 1

Coding
C o d i n g : Coding is a process of reporting diagnoses, procedures and services
as numeric and alphanumeric characters on the insurance claim form.

C P T - 4 Codes:
· C P T - 4 stands for “ C u r r e n t P r o c e d u r a l T e r m i n o l o g y . ” The
‘ ‘ 4 ’ ’ stands for the fourth edition of the coding system, currently in use.
· CPT was developed by the American Medical Association (AMA), which also
revises it annually.
· CPT-4 codes are standardized codes used to identify the treatment
performed for a patient.
· This coding system is used by insurance carriers and medical offices
(clinics, private homes, hospitals, nursing facilities, hospice, etc.) to identify
the services, procedures, and treatments performed for patients by the
medical staff.
· CPT codes reported on the claims must be mapped with the appropriate
ICD-9
· codes to prove medical necessity of procedure performed or services
rendered.
· CPT codes are filled in the 24D section of the CMS-1500 form (its units are
filled
· in the Section 24G of the same form.
· In the current CPT book, codes are grouped into six major sections:

1) Evaluation and Management (E/M) 99201--99499

2) Anesthesia 00100--01999,
99100--99140
3) Surgery 10040--69990
4) Radiology 70010--79999
5) Pathology and Laboratory 80048--89399
6) Medicine 90281—99199

Evaluation & Management is the medical services provided by

physician for the purpose of diagnosing and treating diseases, counseling, and
evaluating the problem.

· E/M CPT codes provide a way to classify the extent of a physician’s work and
analyze and report those physician services.
· It describes the intensity of a medical encounter including the risks and
complexities associated with the diagnosis and medical decision-making.
· E/M services are divided into the following categories: office and other
outpatient visits, hospital inpatient services, consultations, emergency
department services etc.

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· These categories are further divided into two or more subcategories, such as
new or established patients and initial or subsequent visits.

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ICD-9-CM Codes:
· ICD-9-CM code stands for International Classification of Diseases,
Clinical Modifications 9th edition, which is a book, published by World
Health Organization (WHO).
· The National Center for Health Statistics (NCHS) and the Centers for
Medicare & Medicaid Services (CMS) oversee all the changes and
modifications to the ICD-9-CM.
· The coders assign ICD-9-CM codes to diagnoses, signs, and symptoms (i.e., a
patient’s medical condition) documented by the health care provider.
· The first three digits of an ICD-9-CM code identify the condition and any
additional digits define the specificity of the diagnosis.

Modifiers
A modifier is a 2-digit code attached to the main code that indicates the
procedure/service has been altered in some mern--er (either enhanced or
diminished). A modifier provides the means by which a service or procedure
that has been performed can be altered without changing the procedure code.

Why to use a modifier?

· Think of modifiers as procedure code enhancers
· They show that procedure has been altered by some specific circumstances
· May need to use a modifier to be paid appropriately for the services you
provide
When to use a modifier?
 A service or procedure that has both a professional and technical
component.
 A service or procedure that was performed by more than one physician
and/or in
 more than one location.
 A service or procedure that has been increased or reduced.
 Only part of a service that was performed.
 An adjunctive service that was performed.
 A bilateral procedure service that was performed.
 A service or procedure that was provided more than once.
 Unusual events that occurred.
 Procedure only partly completed.
I. Only part of a procedure was performed
(Professional/technical)
Professional component (26 modifier) includes:
 Physician’s work in providing the service, interpretation and report of
procedure.
 Always applies when service done inpatient or outpatient hospital.

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Technical component (TC modifier) includes:

 Equipment, supplies, personnel, costs associated with procedure.
 Physician may bill when test done in their office and no professional
component done.

II. Procedure increased or reduced

52 - Reduced Services
 Procedure partially reduced or eliminated at physician’s discretion
 May indicate only a portion of the elements of a procedure were complete
22- Unusual Procedural Services
 Service provided is greater than that usually required
 Reflects additional work that is typically not part of procedure
III. Bilateral procedures
50 Modifier
 Procedures performed on both sides of patient’s body (both arms, legs,
eyes,
 etc. especially in the case of surgeries.)
RT Modifier
 On the right side of the patient’s body (arm, leg etc. especially in the case
of radiology services)
LT Modifier
 On the left side of the patient’s body (arm, leg, etc. especially in the case
of radiology services)
IV. An adjunctive service that was performed
59 Modifier: Distinct and Separate Services
 Used to indicate a procedure or service was independent from other
service(s) performed on same day
V. A service or procedure that was provided more than once
(Repeat Procedure Modifiers)
76 -Repeat procedure by same physician
 Use -76 to document repeated procedure
 Documents services done twice and not a duplicate
77 -Repeat procedure by another physician
 Use -77 when another physician repeats the procedure
VI. Any additional service along with the E/M service
25 Modifier
 Significant, separately identifiable E/M service by same physician on the
same day of the procedure or other service
 Use only with E/M codes
VII. Service provided by a Resident Provider
GC Modifier
 Used when service has been provided by a resident provider under the
supervision of a teaching physician.

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Modifiers Can Help

 Allow claims to process correctly
 Prevent claims processing delays and denials
 Overuse of some modifiers may raise a red flag with Medicare and other
payers.
 Currently looking at overuse of 25 and 59

List of Common Modifiers

21---Prolonged Evaluation and Management Services
22---Unusual Procedural Services
23--- Unusual Anesthesia
24---Unrelated Evaluation and Management Service by the Same Physician
during a Postoperative
Period
25---Significant, Separately Identifiable Evaluation and Management Services
by the same physician on the Same Day of the Procedure or other services
26---Professional Component
29---Global Billing
32---Mandated Services
47---Anesthesia by Surgeon
50---Bilateral Procedure
51---Multiple Procedures
52---Reduced Services
53---Discontinued procedure/service
54---Surgical Care Only
55---Postoperative Management Only
56---Preoperative Management Only
57---Decision for Surgery
58---Staged or Related Procedure or Service by the Same Physician During
the Postoperative Period
59---Distinct Procedural Service
62---Two Surgeons
63---Procedure Performed on Infants
66---Surgical Team
76---Repeat Procedure by Same Physician
77---Repeat Procedure by Another Physician
78--- Return to the Operating Room for a Related Procedure During the
Postoperative Period
79---Unrelated Procedure or Service by the Same Physician During the
Postoperative Period
80--- Assistant Surgeon
81---Minimum Assistant Surgeon
82---Assistant Surgeon (When Qualified Surgeon not Available)
90---Reference (Outside) Laboratory
91---Repeat Clinical Diagnostic Laboratory Test
99---Multiple Modifiers

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KEYWORDS

Term Definition

Surgery It is the branch of medicine concerned with diseases and condi

tions which require or are amenable to operative procedures.
Surgery is the work done by a surgeon.
A physician who treats disease, injury, or deformity by operative
Surgeon
or manual methods. A medical doctor specialized in the removal
of organs, masses and tumors and in doing other procedures
using a knife (scalpel).
Pathologist A doctor who identifies diseases by studying cells and tissues
under a microscope.
Radiologist A doctor who specializes in creating and interpreting areas inside
the body. The pictures are produced with X-rays, sound
waves, or other type of energy.
Anesthesiology A branch of medical science dealing with anesthesia and
anesthetics.

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Forms
CMS- 1500 (Formerly ‘HCFA- 1500’) Form -- Front Side

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MEDICAL REPORT

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ENCOUNTER FORM-I

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ENCOUNTER FORM-II

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ENCOUNTER FORM-III

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REFERRAL FORMS

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INSURANCE CHECKS

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Glossary
The following are definitions of commonly used terms by the medical
provider, hospital and healthcare industries.
Aging: Accounts receivable report.
Benefit: Amount payable by the insurance company to a claimant, assignee, or
beneficiary when the insured suffers a loss.
Beneficiary: The person or financial instrument (for example, a trust fund),
named in the policy as the recipient of insurance money in the event of the
policyholder's death.
Bad Faith: Accusations by policyholders that insurers took steps to deliberately
delay, underpay, or deny a claim.
Co-Insurance: Arrangement by which the insurer and the insured share, in a
specific ratio, payment for losses covered by the policy, after the deductible is
met.
Consolidate Omnibus Budget Reconciliation Act (COBRA): Requires
employers with more than 20 employees to make group health care coverage
available for 18 months, at the employee's expense, to employees who leave the
employer for any reason other than gross misconduct.
Disability: Physical or mental condition that prevents a person from performing
one or more occupational duties temporarily (short-term), long-term, or totally
(total disability).
Effective Date: Date when insurance coverage begins.

Eligibility Date: Date when a m e m b e r of an insured group applies for

insurance.

Eligibility Period: Time following the eligibility date (usually 31 days) during
which a m e m b e r of a group may apply for insurance without evidence of
insurability.
Elimination Period: The period of time between the date the illness or disability
commences and the beginning of the benefit payment period. It is sometimes
referred to as the Qualifying Period.
ERISA: The Employee Retirement Income Security Act of 1974 (ERISA) is a
federal law that affects pension and profit-sharing plans. Among other
provisions, this law specifies a published summary plan must be distributed to
participants within 120 days after adoption of the plan and within 90 days after
an employee becomes a participant. The law requires that a summary plan
description be issued every 5 years.
Family Policy: A life insurance policy providing insurance on all or several family
members in one contract, generally whole life insurance on the principal
breadwinner and small amounts of term insurance on the other spouse and
children, including those born after the policy is issued.

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Health Insurance – coverage that provides for the payment of benefits as a

result of sickness or injury. Includes insurance for losses from accident, medical
expense, disability, or accidental death and dismemberment.
H I P A A : Health Insurance Portability and Accountability Act, also known as
the Kassebaum-Kennedy Act of 1996.
Insurance: Risk management plan that, for a price, offers the insured an
opportunity to share the costs of possible financial loss through an insurer.
I n s u r e d : The person on whose life the policy is issued.
M e d i - C a l : California's state-run medical insurance.
Maximum monthly benefit: The highest dollar amount a policyholder can
receive on a monthly basis from the insurance policy.
P o l i c y : The printed document issued to the policyholder by the company
stating the terms of the insurance contract.
P o l i c y t e r m : The period for which an insurance policy provides coverage.
Policyholde r: The person who owns a life insurance policy. This is usually
the insured person, but it may also be a relative of the insured, a partnership or
a corporation.
R e m i t t a n c e A d v i c e : It's received from Medicare, and it states how much
money is being paid for a batch of bills that were sent, and which of those bills
(if any) were rejected and why. Also referred to as EOB and EOMB.
Usual, Customary and Reasonable (UCR): A term used to refer to the
commonly charged or prevailing fees for health services within a geographic
area.
U t i l i z a t i o n R e v i e w ( U R ) : A formal assessment of the medical necessity,
efficiency and/or appropriateness of healthcare services and treatment plans
on a prospective, concurrent or retrospective basis.
Waiting Period: In order to become eligible for coverage under some group
health and disability insurance policies, an individual must satisfy a certain
number of continuous days of service as an active, full-time employee. This is
known as the waiting period. (In addition, a waiting period can also be the time
period between when a disability occurs and when payments from the
disability insurance policy begin.)

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Abbreviations
AMA American Medical Association
ARU Automated Response Unit
ASG Ambulatory Surgery Center

BCBS Blue Cross Blue Shield

CCI Correct Coding Initiative

COB Coordination of Benefits
COBRA Consolidate Omnibus Budget Reconciliation Act
CT Computerized Tomography
CPT-4 Current Procedural Terminology, 4th edition

DME Durable Medical Equipment

DOS Date of Service

EMC Electronic Media Claims Submission

E/M Evaluation and Management
EOB Explanation of Benefits
ESRD End Stage Renal Disease

FEP Federal Employee Program

FECA Federal Employment Compensation Act

GHI Group Health Insurance

GHP Group Health Plan

HCFA Health Care Financing Administration

HCPCS HCFA Common Procedure Coding System
HMO Health Maintenance Organizations
HICN Health Insurance Claim Number
HIPAA Health Insurance Portability and Accountability Act
HPSA Health Professional Shortage Area

ICD-9-CM International Classification of Diseases, 9th edition

ID Identification Number

LGHP Large Group Health Plan

MDCR Medicare
MDCD Medicaid
MM Major Medical Benefits
MRI Magnetic Resonance Imaging
MRN Medical Record Number
MSP Medicare Secondary Payer
PCP Primary Care Physician
PIN Provider Identification Number
PMPM Per Member per Month
POS Point of Service
PPO Preferred Provider Organization

UPIN Unique Provider Identification Number

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BIBLIOGRAPHY
BOOKS
Understanding Health Insurance, A Guide to Professional Billing, Seventh Edition,
Jo
Ann
C.
Row
el
2002 Insurance Direcctory, Ingenix, Inc.

The Medical Manager Student Edition, Version 9.20, Richard Gartee

Medicare Part B, A Guide for Physicians

MISCELLANEOUS

Websites

http://wwwempiremedicare.com

http://www.medicare.gov/publications/pubs/pdf/10050.pdf

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