Insurance Handbook for the Medical
Office
13th edition
Chapter 17
Hospital Billing
Copyright ©2014 by Saunders, an imprint of Elsevier Inc. All rights reserved
1
Lesson 17.1
Hospital Billing Basics
1.
2.
3.
4.
Define common terms related to hospital billing.
Name qualifications necessary to work as a hospital
patient service representative.
List instances of breach of confidentiality in a
hospital setting.
Explain the purpose of the appropriateness
evaluation protocols.
Copyright ©2014 by Saunders, an imprint of Elsevier Inc. All rights reserved
2
Lesson 17.1
Hospital Billing Basics (cont’d)
5.
6.
7.
8.
Describe criteria used for admission screening.
Define the 72-hour rule.
Describe the quality improvement organization and
its role in the hospital reimbursement system.
Describe the International Classification of Diseases,
Tenth Revision, Procedure Coding System (ICD-10PCS).
Copyright ©2014 by Saunders, an imprint of Elsevier Inc. All rights reserved
3
Lesson 17.1
Hospital Billing Basics (cont’d)
9.
10.
11.
State the role of International Classification of
Diseases, Tenth Revision, Procedure Coding
System (ICD-10-PCS) in hospital billing.
Explain the basic flow of the inpatient hospital stay
from billing through receipt of payment.
Describe the charge description master.
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4
Patient Accounts Representative
Qualifications
Knowledge and competence in:
•
•
•
•
•
•
•
•
•
•
ICD-9-CM, ICD-10-CM, and ICD-10-PCS diagnostic codes
CPT and HCPCS procedure codes
CMS-1500 insurance claim form
Uniform Bill (UB-04) insurance claim form
Explanation of benefits and remittance advice document
Medical terminology
Major health insurance programs
Managed care plans
Insurance claim submission
Denied and delinquent claims
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5
Appropriateness Evaluation
Protocols
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6
Admitting Procedures for Major
Insurance Programs
Preauthorization
Private insurance (group or individual)
Commercial insurance and managed care
Emergency inpatient admission
Nonemergency inpatient admission/elective
admission
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7
Admitting Procedures for Major
Insurance Programs
Medicaid
Medicare
TRICARE
Workers’ Compensation
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8
Preadmission Testing
Diagnostic studies
Laboratory tests
Chest x-ray
Electrocardiography
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9
Medicare 3-Day Payment Window
Rule or 72-Hour Rule
Also called 3-day payment window rule
If patient receives diagnostic tests and
hospital outpatient services within 72 hours of
admission to hospital, all such tests and
services are combined with inpatient services
Preadmission services become part of the
DRG payment to hospital and may not be
billed separately
Copyright ©2014 by Saunders, an imprint of Elsevier Inc. All rights reserved
10
Medicare 3-Day Payment Window
Rule or 72-Hour Rule
Exceptions to the 72-hour rule
Services provided by home health agencies,
hospice, nursing facilities, and ambulance
services
Physician’s professional portion of a diagnostic
service
Preadmission testing at an independent laboratory
when the laboratory has no formal agreement with
the healthcare facility
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11
Utilization Review
Department conducts an admission and
concurrent review and prepares a discharge
plan on all cases
Utilization review (UR) companies exist for
self-insured employers, third-party
administrators, and insurance companies
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12
Quality Improvement Organization
Program
Admission review
Readmission review
Procedure review
Day outlier review
Cost outlier review
DRG validation
Transfer review
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13
Coding Hospital Diagnoses and
Procedures
Diagnosis codes come from ICD-9-CM or
ICD-10-CM
Procedure codes come from CPT, HCPCS,
ICD-9-CM (Volume 3) or ICD-10-PCS
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14
Coding Hospital Diagnoses and
Procedures
Principal diagnosis
First listed diagnosis
Reason patient is seeking medical care
On outpatient claims, known as:
•
Reason for the encounter
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15
Coding Hospital Diagnoses and
Procedures
Principal diagnoses subject to 100% review
Arteriosclerosis heart disease (ASHD)
Diabetes mellitus without complications
Right or left bundle branch block
Coronary atherosclerosis
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16
Coding Inpatient Procedures
Procedural coding systems
ICD-9-CM, Volume 3
ICD-10-PCS
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17
Character Definitions
Character 1: Medical Section
Character 2: Body Systems
Character 3: Root Operation
Character 4: Body Part
Character 5: Approach
Character 6: Device
Character 7: Qualifier
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18
Coding Hospital Outpatient
Procedures
Healthcare Common Procedure Coding
System Level I Current Procedural
Terminology Coding System
Use up-to-date Current Procedural Terminology
(CPT)
Use HCPCS to obtain medical procedural codes
for Medicare and some non-Medicare patients on
outpatient hospital insurance claims that are not in
CPT code book
Use modifiers as noted in CPT/HCPCS guidelines
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19
Inpatient Billing Process
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20
Charge Description Master
Services and procedures are checked off and
coded internally
Data includes:
Procedure code
Charge
Revenue code
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21
Lesson 17.2
Practice Hospital Billing
12.
13.
14.
15.
16.
State when the CMS-1450 (UB-04) paper or
electronic claim form may and may not be used.
State reimbursement methods used when paying for
hospital services under managed care contracts.
Describe the purpose of diagnosis-related groups.
Discuss the electronic claim filing guidelines as
stated in the Administration Simplification Act of
1996.
Identify how payment is made on the basis of
diagnosis-related groups.
Copyright ©2014 by Saunders, an imprint of Elsevier Inc. All rights reserved
22
Lesson 17.2
Practice Hospital Billing (Cont’d)
17.
18.
19.
20.
State how payment is made on the basis of the
ambulatory payment classification system.
Name the four types of ambulatory payment
classifications.
Complete insurance claims in both hospital inpatient
and outpatient settings to minimize their rejection by
insurance carriers.
State the general guidelines for completion of the
paper CMS-1450 (UB-04) and transmission of the
electronic claim form.
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23
Reimbursement Methods
Ambulatory payment classifications
Bed leasing
Capitation or percentage of revenue
Case rate
Contract rate
Diagnosis-related groups (DRGs)
Differential by day in hospital
Differential by service type
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24
Reimbursement Methods
Fee-for-service
Fee schedule
Flat rate
Per diem
Percentage of accrued charges
Periodic interim payments (PIPs) and cash
advances
Relative value studies or scale (RVS)
Resource-based relative value scale (RBRVS)
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25
Reimbursement Methods
Usual, customary, and reasonable (UCR)
Withhold
Managed care stop loss outliers
Charges
Discounts in the form of sliding scale
Sliding scales for discounts and per diems
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26
Reimbursement Methods
Hard copy billing
Used for insurance companies that are not
capable of receiving electronic claims
Receiving payment
After receipt of payment, patient sent net bill listing
any owed deductible, coinsurance amount, and
charges not covered
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27
Outpatient Insurance Claims
Emergency department visits
Elective surgeries
Only outpatient services provided by the
hospital should be submitted by the hospital
unless the hospital is billing for physicians
Using the hospital for surgical or medical
consultations that could be done in a
physician’s office should be avoided
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28
Billing Problems
Incorrect name on form
Wrong subscriber, patient name listed in error
Covered days vs. noncovered days
Duplicate statements
Double billing
Phantom charges
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29
Uniform Bill Inpatient and or
Electronic Claim Form
Used since 1982 for inpatient and outpatient
hospital claims
Updated in 2007
Considered as a summary document supported
by an itemized bill
Printed in red ink on white paper
Dates of service and monetary amounts entered
without spaces or decimal points
Dates of birth are entered using two sets of twodigit numbers for the month and day, four-digit
numbers for the year
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30
The Medicare Severity DiagnosisRelated Group System
Designed to increase reimbursement for
sicker patients
Diagnoses are assigned values that
commensurate with severity of illness
Split into a maximum of three payment tiers
Reimbursement crosswalk will identify ICD-9
and corresponding ICD-10 codes and MSDRGs
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31
The Medicare Severity DiagnosisRelated Group System
Clinical outliers
Unique combinations of diagnoses and surgeries
causing high costs
Very rare conditions
Long length of stay, or day outliers, no longer
apply
Low-volume DRGs
Inliers (hospital case falls below the mean
average or expected length of stay)
Death
Leaving against medical advice
Admitted and discharged on the same day
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32
Diagnosis-Related Groups and the
Physician’s Office
When calling the hospital to admit a patient,
give all of the diagnoses authorized by the
physician
Ask the physician to review the treatment or
procedure in question when a hospital
representative calls with questions
Get to know hospital personnel on a firstname basis
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33
Ambulatory Payment Classification
System
Developed as outpatient classification
systems by Health System International
Based on patient classification rather than
disease classifications
More than 500 APCs are continually being
modified; updated and released twice a year
in the Federal Register
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34
Ambulatory Payment Classification
System
APCs are applied to the following:
Ambulatory surgical procedures
Chemotherapy
Clinic visits
Diagnostic services and diagnostic tests
Emergency department visits
Implants
Outpatient services furnished to nursing facility
patients not packaged into nursing facility
consolidated billing
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35
Ambulatory Payment Classification
System
APCs are applied to the following:
Partial hospitalization services for community
mental health centers (CMHCs)
Preventive services (colorectal cancer screening)
Radiology including radiation therapy
Services for patients who have exhausted Part A
benefits
Services to hospice patient for treatment of a nonterminal illness
Surgical pathology
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36
Hospital Outpatient Prospective
Payment System
Procedure code is primary axis of
classification, not the diagnostic code
Reimbursement methodology based on
median costs of services and facility cost to
determine charge ratios and copayment
amounts
Adjustment for area wage differences based
on the hospital wage index currently used for
inpatient services
OPPS may be updated annually
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37
Types of Ambulatory Payment
Classifications
Surgical procedure APCs
Significant procedure APCs
Medical APCs
Ancillary APCs
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38
Questions?
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39
