The Medical Billing Cycle

CHAPTER

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1The Medical Billing

Cycle


Learning Outcomes

When you finish this chapter, you will be able to:1.1 Identify four types of information collected during

preregistration.

1.2 Compare fee-for-service and managed care health plans, and describe three types of managed care approaches.

1.3 Discuss the activities completed during patient check-in.

1.4 Discuss the information contained on an encounter form at check-out.

1.5 Explain the importance of medical necessity.

1-2


Learning Outcomes (Continued)

When you finish this chapter, you will be able to:1.6 Explain why billing compliance is important.

1.7 Describe the information required on an insuranceclaim.

1.8 List the information contained on a remittance advice.

1.9 Explain the role of patient statements in reimbursement.

1.10 List the reports created to monitor a practice’s accounts receivable.

1-3


Key Terms

• accounting cycle• accounts receivable

(A/R)• adjudication• capitation• coding• coinsurance• consumer-driven health

plan (CDHP)• copayment• deductible• diagnosis

1-4

• diagnosis code• documentation• electronic health records

(EHRs)• encounter form• explanation of benefits

(EOB)• fee-for-service• health maintenance

organization (HMO)• health plan• managed care


Key Terms (Continued)

• medical coder• medical necessity • medical record • modifier • patient information form • payer • policyholder • practice management

program (PMP)• preferred provider

organization (PPO)• premium

1-5

• procedure• procedure code• remittance advice (RA)• statement


1.1 Step 1: Preregister Patients 1-6

• Patient information gathered via phone or Internet before visit:– Name– Contact information– Reason for the visit– Whether patient is new to practice


1.2 Step 2: Establish Financial Responsibility for Visit

1-7

• Many patients have medical insurance, which is an agreement between a policyholder and a health plan

• To secure medical insurance, policyholders pay premiums to payers, which are health plans such as government plans and private insurance


1.2 Step 2: Establish Financial Responsibility for Visit (Continued)

1-8

• Fee-for-Service Health Plans– Policyholders are repaid for medical costs– Requires payment of coinsurance– Usually a deductible must be paid before benefits

begin

• Managed Care Health Plans– Managed care organizations control both financing

and delivery of health care– Have contracts with both patients and providers


1.2 Step 2: Establish Financial Responsibility for Visit (Continued)

1-9

• Types of managed care health plans– Preferred provider organization (PPO): provider

network for plan members; discounted fees– Health maintenance organization (HMO): pays

fixed amounts called capitation payments to contracted providers; patients must pay a small fixed fee called a copayment per visit

– Consumer-driven health plan (CDHP): combines a health plan with a high deductible with a policyholder's savings account


1.3 Step 3: Check In Patients 1-10

• Patients complete the patient information form that contains personal, employment, and medical insurance information

• Patient identity is verified• Time-of-service payments due before treatment

are collected


1.4 Step 4: Check Out Patients 1-11

• Every time a patient is treated by a health care provider, a record, known as documentation, is made of the encounter

• This chronological medical record, or chart, includes information that the patient provides


1.4 Step 4: Check Out Patients(Continued)

1-12

• Diagnoses and Procedures– A diagnosis is the physician’s opinion of the nature of

the patient’s illness or injury– Procedures are the services performed– Coding is the process of translating a description of a

diagnosis or procedure into a standardized code• A patient’s diagnosis is communicated to a health plan as a

diagnosis code• A procedure code stands for a particular service, treatment,

or test• A modifier is a two-digit character that is appended to a CPT

code to report special circumstances


1.4 Step 4: Check Out Patients(Continued)

1-13

• The diagnosis and procedure codes are recorded on an encounter form, also known as a superbill

• A practice management program (PMP) is a software program that automates the administrative and financial tasks required to run a medical practice


1.5 Step 5: Review Coding Compliance 1-14

• A physician, medical coder, or medical insurance specialist assigns codes

• The documented diagnosis and medical services should be logically connected, so that the medical necessity of the charges is clear to the insurance company– Medical necessity is treatment by a physician for the

purpose of preventing, diagnosing, or treating an illness, injury, or its symptoms in an appropriate manner


1.6 Step 6: Check Billing Compliance 1-15

• Each charge, or fee, for a visit is represented by a specific procedure code

• The provider’s fees for services are listed on the medical practice’s fee schedule

• Medical billers use their knowledge to analyze what can be billed on health care claims


1.7 Step 7: Prepare and Transmit Claims 1-16

• Medical practices produce insurance claims to receive payment

• PMPs generate health care claims for electronic transmittal


1.8 Step 8: Monitor Payer Adjudication 1-17

• When a claim is received by a payer, it is reviewed following a process known as adjudication—a series of steps designed to judge whether it should be paid

• The document explaining the results of the adjudication process is called a remittance advice (RA) or explanation of benefits (EOB)


1.9 Step 9: Generate Patient Statements 1-18

• A statement lists all services performed, along with the charges for each service

• Statements list the amount paid by the health plan and the remaining balance that is the responsibility of the patient


1.10 Step 10: Follow Up PatientPayments and Handle Collections

1-19

• The accounting cycle is the flow of financial transactions in a business

• PMPs are used to track accounts receivable (AR)—monies that are coming into the practice

• PMPs are also used to create day sheets, monthly reports, and outstanding balances reports

Documents

The Medical Billing Cycle