Chapter 15
HOSPITAL
INSURANCE
HOSPITAL INSURANCE
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Learning Objectives
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Compare inpatient and outpatient hospital services.
List the major steps relating to hospital claims
processing.
Describe two differences in coding diagnoses for hospital
inpatient cases and physician office services.
Describe the procedure codes used in hospital coding.
Discuss the important items that are reported on the
HIPAA hospital claim, the 837I.
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Key Terms
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Admitting diagnosis
Ambulatory care
Attending physician
Charge master or
Charge ticket
CMS-1450
Emergency care
Health information
management (HIM)
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Inpatient
Master patient index
Principal diagnosis
Principal procedure
Prospective Payment
System (PPS)
Registration
837I
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Inpatient Care
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Patient stays overnight or longer
Includes:
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Inpatient hospital care
Skilled nursing facilities
Long-term care facilities
Hospital emergency departments
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Outpatient or Ambulatory
Care
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No overnight stay
Includes:
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Same-day surgery
Care provided in patients’ homes
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Home Health Agencies
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Assistance with Activities of Daily Living
(ADLs)
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Skilled nursing care, physical therapy, etc.
Home health aides
Hospice care
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HIM Department
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Health Information Management
Organizes and maintains patient medical records
Three Major Steps in a Patient’s Hospital
Stay:
 Admission
 Treatment and Charges
 Discharge and Billing
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Admission
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Registration Process
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Create/update patient’s medical record
Verify insurance coverage
Secure consent for release of information
Collect advance payments, as appropriate
Emergency departments usually have separate
registration/admission
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Admission
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(cont’d)
Registration Process
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Medicare patients receive one-page printout
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Entitled “An Important Message from Medicare”
Explains rights as hospital patient
All patients receive copy of hospital’s privacy
practices
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Based on the HIPAA Privacy Rule
Receipt is acknowledged with signature
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Treatment and Charges
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Medical record contains
Notes, ancillary documents, and correspondence
from attending physician and all other
physicians/providers
 Patient data, including insurance information
 Charges for all treatments and tests; supplies
and equipment used; medication; room and
board; and time spent in special facilities
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Confidentiality is important - Why
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Discharge and Billing
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Goal is to file a claim within 7 days of
discharge
Items recorded on charge master
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Similar to practice’s encounter form
Hospital’s computer system tracks patient’s
services
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Inpatient (Hospital) Coding
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HIM (Health information Management)
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Responsible for diagnostic & procedural
of patient’s medical records.
Coding is done as soon as the patient is
discharged.
Inpatient Coders:
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Generalists
Maybe skilled as surgical coders or
Medicare Coders.
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Inpatient (Hospital) Coding
Cont.
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ICD-9 Volumes 1 and 2 used for
inpatient diagnoses codes
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ICD-9 Volume 3 used for inpatient
procedure codes
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HCPCS may be used for some claims
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Hospital
Diagnosis Coding
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Admitting Diagnosis
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Condition identified at time of admission
Principal Diagnosis
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Condition responsible for this admission
established after study
Listed first in medical record and insurance billing
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Hospital
Diagnosis Coding
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(cont’d)
Suspected or unconfirmed diagnosis
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Usually used as an admitting diagnosis
Often referred to as “rule outs”
The admitting diagnosis may not match the
principal diagnosis once the patient has been
treated
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Hospital
Diagnosis Coding
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(cont’d)
Comorbidities and Complications
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Comorbidities (co-existing conditions) are other
conditions that affect a patient’s stay or course of
treatment
Complications are conditions that develop as a
result of surgery or treatment
Shown in patient medical record as “CC”
May list up to 8 on claim
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Hospital Procedural Coding
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ICD-9 Volume 3 used
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Includes an Alphabetic Index and a Tabular
List similar to those in Volumes 1 and 2
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Codes are 3 or 4 digits
Principal Procedure
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Most closely related to the treatment of the
principal diagnosis
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Medicare Inpatient
Payment System
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Diagnosis Related Groups (DRGs) – Cost
reimbursement method developed by Medicare for its
prospective payment system (PPS) for reimbursement
of medical fees for a patient.
 DRG system analyze conditions and treatment for
similar groups of patients used to establish Medical
fees for hospital inpatient services.
Under the DRG classification system:
 Groupings were created based on relative value of
the resources that physicians and hospitals
nationally used for patients with similar conditions.
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Medicare Inpatient
Payment System
Cont.
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The Calculations
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Each DRG category is based on patient
characteristics (e.g., age, sex), diagnosis,
and medical procedures all of which are
condensed into a single DRG that applies to a
specific patient.
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Medicare Inpatient
Payment System
Cont.
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Prospective Payment System (PPS)
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At the same time the DRG system was created,
Medicare changed the way hospitals were paid.
Payment changed from a fee-for-service approach
to Medicare Prospective Payment System (PPS).
Payment set ahead of time based on DRG.
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Medicare Inpatient
Payment System
Cont.
 Quality Improvement Organization
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Made up of practicing physicians and other health care
experts contracted by CMS in each state to review
Medicare & Medicaid claims for appropriateness of
hospitalization and clinical care.
QIO’s goal is to ensure that payment is made only for
medically necessary services.
Set up when DRG was established,
The program replaced the “Peer Review Organization”.
Monitor and improve the usage and quality of care for
Medicare beneficiaries.
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Medicare Outpatient
Payment System
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DRGs (Diagnosis Related Groups)
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Implemented for outpatient hospital services, previously
were paid on a fee-for-service basis
Hospital Outpatient Prospective Payment System (PPS) is
used to pay for hospital outpatient services.
In place of DRGs, patients are grouped under an
Ambulatory Patient Classification
Reimbursement made according to preset amounts based on
the value of each APC (ambulatory Patient Classification).
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Private Insurers
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Often use standardized number of days
allowed for condition
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Many private insurers have adapted the
DRG system for their billing
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Filing Claims
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Medicare Part A
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HIPAA 837I claim is mandated by CMS
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Electronic claim
I in 837I stands for Institutional
Paper claim, UB-92, is accepted under some
circumstances
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Uniform Billing 1992 (UB-92) form
Also known as CMS-1450
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The HIPAA 837I and the UB-92
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Contain:
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Patient data
Information on insured
Facility/patient type
Source of admission
Various conditions that
affect payment
Whether Medicare is
primary payer
Chapter 15
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Principal and other
diagnosis codes
Admitting diagnosis
Principal procedure
code
Attending and other
physician
Charges
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Remittance Advice
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Received when payment is transmitted
to account
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HIM (Health Information Management)
Department coordinates with Patient
Accounting Department
Remittance Advice reviewed to assure
payment received matches payment anticipated
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Quiz
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hospital coders
ICD-9 Volume 3 is used by ______________.
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In the hospital medical record, CC refers to
comorbidities and complications
_____________________________.
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Part A
Medicare ___________
pays for inpatient
and outpatient hospital costs.
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institutional
The I in 837I stands for ____________.
An encounter form is created for hospital
services. (T/F)
False, the charge master is used in hospitals.
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Critical Thinking
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What is the difference between the
admitting diagnosis and the principal
diagnosis?
The admitting diagnosis is usually the reason
identified at the time of admission.
The principal diagnosis is determined after study and
is listed first in the medical record and insurance
claim.
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