The Medical Billing Cycle 1
Learning Outcomes
1-2
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.
Learning Outcomes (Continued)
1-3
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.
Key Terms
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accounting cycle
accounts receivable (A/R)
adjudication
capitation
coding
coinsurance
consumer-driven health
plan (CDHP)
• copayment
• deductible
• diagnosis
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diagnosis code
documentation
electronic health records (EHRs)
encounter form
explanation of benefits (EOB)
fee-for-service
health maintenance organization
(HMO)
health plan
managed care
1-4
Key Terms (Continued)
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medical coder
medical necessity
medical record
modifier
patient information form
payer
policyholder
practice management
program (PMP)
• preferred provider
organization (PPO)
• premium
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procedure
procedure code
remittance advice (RA)
statement
1-5
Step 1 in the Medical Billing Cycle:
Preregister Patients
• Patient information gathered via phone or
Internet before visit:
– Name
– Contact information
– Reason for the visit
– Whether patient is new to practice
1-6
Step 2 in the Medical Billing Cycle: 1-7
Establish Financial Responsibility for Visit
• 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
Step 2 in the Medical Billing Cycle: Establish Financial
Responsibility for Visit (Continued)
• 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
1-8
Step 2 in the Medical Billing Cycle: 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
Step 3 in the Medical Billing Cycle: Check
1-10
In Patients
• 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
Step 4 in the Medical Billing Cycle: Check
1-11
Out Patients
• 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
Step 4 in the Medical Billing Cycle: Check
1-12
Out Patients (Continued)
• 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
Step 4 in the Medical Billing Cycle: Check
1-13
Out Patients (Continued)
• 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
Step 5 in the Medical Billing Cycle:
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
Step 6 in the Medical Billing Cycle: Check
1-15
Billing Compliance
• 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
Step 7 in the Medical Billing Cycle: 1-16
Prepare and Transmit Claims
• Medical practices produce insurance claims to
receive payment
• PMPs generate health care claims for electronic
transmittal
Step 8 in the Medical Billing Cycle: 1-17
Monitor Payer Adjudication
• 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)
Step 9 in the Medical Billing Cycle: 1-18
Generate Patient Statements
• 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
Step 10 in the Medical Billing Cycle: Follow Up Patient 1-19
Payments and Handle Collections
• 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