CHAPTER
1
The Medical Billing
Cycle
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.
1-2
Learning Outcomes
When you finish this chapter, you will be able to:
1.1
1.2
1.3
1.4
1.5
Identify four types of information collected during
preregistration.
Compare fee-for-service and managed care health
plans, and describe three types of managed care
approaches.
Discuss the activities completed during patient
check-in.
Discuss the information contained on an encounter
form at check-out.
Explain the importance of medical necessity.
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.
1-3
Learning Outcomes (Continued)
When you finish this chapter, you will be able to:
1.6
1.7
1.8
1.9
1.10
Explain why billing compliance is important.
Describe the information required on an insurance
claim.
List the information contained on a remittance
advice.
Explain the role of patient statements in
reimbursement.
List the reports created to monitor a practice’s
accounts receivable.
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.
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
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.
1-5
Key Terms (Continued)
•
•
•
•
•
•
•
•
medical coder
medical necessity
medical record
modifier
patient information form
payer
policyholder
practice management
program (PMP)
• preferred provider
organization (PPO)
• premium
•
•
•
•
procedure
procedure code
remittance advice (RA)
statement
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.
1-6
1.1 Step 1: Preregister Patients
• Patient information gathered via phone or
Internet before visit:
–
–
–
–
Name
Contact information
Reason for the visit
Whether patient is new to practice
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.
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
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.
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
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.
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
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.
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
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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
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.
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
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.
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
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.
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
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.
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
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.
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
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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)
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.
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
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.
1.10 Step 10: Follow Up Patient
Payments 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
© 2011 The McGraw-Hill Companies, Inc. All rights reserved.