chapter 17 hospital billing elsevier items and derived items © 2010, 2008 by saunders, an imprint...

Chapter 17Chapter 17

Hospital BillingHospital Billing

Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc.Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc.

Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc.Elsevier items and derived items © 2010, 2008 by Saunders, an imprint of Elsevier Inc. 22

Learning ObjectivesLearning Objectives

Define common terms related to hospital billing.Define common terms related to hospital billing. Name qualifications necessary to work in the Name qualifications necessary to work in the

financial section of a hospital. financial section of a hospital. List instances of breach of confidentiality in a List instances of breach of confidentiality in a

hospital setting.hospital setting. Explain the purpose of the appropriateness Explain the purpose of the appropriateness

evaluation protocols.evaluation protocols. Describe criteria used for admission screening.Describe criteria used for admission screening. Define the 72-hour rule.Define the 72-hour rule.


Learning Objectives (cont’d.)Learning Objectives (cont’d.)

Describe the quality improvement Describe the quality improvement organization and its role in the hospital organization and its role in the hospital reimbursement system.reimbursement system.

State the role of ICD-9-CM Volume 3 in State the role of ICD-9-CM Volume 3 in hospital billing.hospital billing.

Identify categories in ICD-9-CM Volume 3.Identify categories in ICD-9-CM Volume 3. Explain the basic flow of an inpatient hospital Explain the basic flow of an inpatient hospital

stay from billing through receipt of payment.stay from billing through receipt of payment. Describe the charge description master.Describe the charge description master.



State reimbursement methods used when State reimbursement methods used when paying for hospital services under managed paying for hospital services under managed care contracts.care contracts.

State when the CMS-1450 (UB-04) paper or State when the CMS-1450 (UB-04) paper or electronic claim form may and may not be electronic claim form may and may not be used.used.

Describe the history and purpose of Describe the history and purpose of diagnosis-related groups.diagnosis-related groups.

Identify how payment is made based on Identify how payment is made based on diagnosis-related groups.diagnosis-related groups.



State how payment is made based on the State how payment is made based on the ambulatory payment classification system.ambulatory payment classification system.

Name the four types of ambulatory payment Name the four types of ambulatory payment classifications.classifications.

Edit and complete insurance claims in both Edit and complete insurance claims in both hospital inpatient and outpatient settings to hospital inpatient and outpatient settings to minimize their rejection by insurance carriers.minimize their rejection by insurance carriers.

State the general guidelines for completion of State the general guidelines for completion of the CMS-1450 (Uniform Bill [UB-04]) and the CMS-1450 (Uniform Bill [UB-04]) and transmission of the electronic claim form.transmission of the electronic claim form.



Lesson 17.1Lesson 17.1


Patient Service Representative Patient Service Representative QualificationsQualifications

Knowledge and competence in:Knowledge and competence in: ICD-9-CM diagnostic codesICD-9-CM diagnostic codes CPT and HCPCS procedure codesCPT and HCPCS procedure codes CMS-1500 insurance claim formCMS-1500 insurance claim form Uniform Bill (UB-04) insurance claim formUniform Bill (UB-04) insurance claim form Explanation of benefits and remittance advice documentExplanation of benefits and remittance advice document Medical terminologyMedical terminology Major health insurance programsMajor health insurance programs Managed care plansManaged care plans Insurance claim submissionInsurance claim submission Denied and delinquent claimsDenied and delinquent claims


Patient Service RepresentativePatient Service Representative


ICD-9-CM Inpatient Coding ICD-9-CM Inpatient Coding


Medicolegal Confidentiality Medicolegal Confidentiality IssuesIssues

DocumentsDocuments May not be released unless a patient has signed May not be released unless a patient has signed

an authorization form.an authorization form. Verbal communicationVerbal communication

New employees may have to sign a confidentiality New employees may have to sign a confidentiality statement.statement.


Medicolegal Confidentiality Medicolegal Confidentiality Issues (cont’d.)Issues (cont’d.)

Computer securityComputer security Use of passwordsUse of passwords Policies for email and faxesPolicies for email and faxes Downloading of data from one department to Downloading of data from one department to

anotheranother Length of time documents may be retained on Length of time documents may be retained on

hard drivehard drive Procedures for deletion of confidential informationProcedures for deletion of confidential information Closing out when leaving a workstation or deskClosing out when leaving a workstation or desk


Appropriateness Evaluation Appropriateness Evaluation ProtocolProtocol


Admitting Procedures for Major Admitting Procedures for Major Insurance ProgramsInsurance Programs

Private insurancePrivate insurance Managed careManaged care

Emergency inpatient admissionEmergency inpatient admission Nonemergency inpatient admissionNonemergency inpatient admission Admission to a participating hospitalAdmission to a participating hospital Admission to a nonparticipating hospitalAdmission to a nonparticipating hospital


Admitting Procedures for Major Admitting Procedures for Major Insurance Programs (cont’d.)Insurance Programs (cont’d.)

MedicaidMedicaid MedicareMedicare TRICARE and CHAMPVATRICARE and CHAMPVA Workers’ compensationWorkers’ compensation


Preadmission TestingPreadmission Testing

Preadmission testing (PAT) includes:Preadmission testing (PAT) includes: Diagnostic studiesDiagnostic studies Laboratory testsLaboratory tests Chest x-rayChest x-ray ElectrocardiographyElectrocardiography


Medicare 72-Hour RuleMedicare 72-Hour Rule

Also called 3-day payment window ruleAlso called 3-day payment window rule If patient receives diagnostic tests and If patient receives diagnostic tests and

hospital outpatient services within 72 hours of hospital outpatient services within 72 hours of admission to hospital, all such tests and admission to hospital, all such tests and services are combined with inpatient servicesservices are combined with inpatient services

Preadmission services become part of the Preadmission services become part of the DRG payment to hospital and may not be DRG payment to hospital and may not be billed separatelybilled separately


Exceptions to the 72-Hour RuleExceptions to the 72-Hour Rule

Services provided by home health agencies, Services provided by home health agencies, hospice, nursing facilities, and ambulance hospice, nursing facilities, and ambulance servicesservices

Physician’s professional portion of a Physician’s professional portion of a diagnostic servicediagnostic service

Preadmission testing at an independent Preadmission testing at an independent laboratory when the laboratory has no formal laboratory when the laboratory has no formal agreement with the healthcare facilityagreement with the healthcare facility


Utilization ReviewUtilization Review

Department conducts an admission and Department conducts an admission and concurrent review and prepares a discharge concurrent review and prepares a discharge plan on all cases.plan on all cases.

Utilization review (UR) companies exist for Utilization review (UR) companies exist for self-insured employers, third-party self-insured employers, third-party administrators, and insurance companies.administrators, and insurance companies.


Quality Improvement Quality Improvement Organization (QIO)Organization (QIO)

Admission reviewAdmission review Readmission reviewReadmission review Procedure reviewProcedure review Day outlier reviewDay outlier review Cost outlier reviewCost outlier review DRG validationDRG validation Transfer reviewTransfer review


Coding Hospital ProceduresCoding Hospital Procedures

Outpatient hospital insurance claims use Outpatient hospital insurance claims use Current Procedural Terminology (CPT) Current Procedural Terminology (CPT) and and International Classification of Diseases, Ninth International Classification of Diseases, Ninth Revision, Clinical Modification Revision, Clinical Modification (ICD-9-CM), (ICD-9-CM), Volumes 1 and 2Volumes 1 and 2

Inpatient hospital insurance claims use ICD-Inpatient hospital insurance claims use ICD-9-CM, Volumes 1 and 2, for diagnoses and 9-CM, Volumes 1 and 2, for diagnoses and Volume 3 for proceduresVolume 3 for procedures


Inpatient - Principal DiagnosisInpatient - Principal Diagnosis

Principal diagnosisPrincipal diagnosis: condition assigned a : condition assigned a code representing the diagnosis established code representing the diagnosis established after study that is chiefly responsible for after study that is chiefly responsible for patient admissionpatient admission

Diagnostic code sequence in correct order is Diagnostic code sequence in correct order is very important in billing of hospital inpatient very important in billing of hospital inpatient casescases


Rules for Coding Inpatient Rules for Coding Inpatient DiagnosesDiagnoses

Some differences exist between coding Some differences exist between coding diagnoses for inpatient and outpatient cases.diagnoses for inpatient and outpatient cases.

Codes for signs and symptoms of ICD-9-CM Codes for signs and symptoms of ICD-9-CM are not reported as principal diagnoses.are not reported as principal diagnoses.

When two or more conditions are principal When two or more conditions are principal diagnosis, either condition may be sequenced diagnosis, either condition may be sequenced first.first.

When a symptom is followed by a contrasting When a symptom is followed by a contrasting comparative diagnosis, sequence symptom comparative diagnosis, sequence symptom code first.code first.


Principal Diagnoses Subject to Principal Diagnoses Subject to 100% Review100% Review

Arteriosclerosis heart disease (ASHD)Arteriosclerosis heart disease (ASHD) Diabetes mellitus without complicationsDiabetes mellitus without complications Right or left bundle branch blockRight or left bundle branch block Coronary atherosclerosisCoronary atherosclerosis


ICD-9-CM Volume 3 ProceduresICD-9-CM Volume 3 Procedures

Used for inpatient hospital billingUsed for inpatient hospital billing Tabular list divided into chapters that relate to Tabular list divided into chapters that relate to

operations or procedures for various body operations or procedures for various body systemsystem

Alphabetic index is arranged by procedure Alphabetic index is arranged by procedure and not anatomic siteand not anatomic site

Alphabetic index used to locate procedure Alphabetic index used to locate procedure referred to as main termreferred to as main term


Coding Outpatient ProceduresCoding Outpatient Procedures

Use up-to-date Current Procedural Use up-to-date Current Procedural Terminology (CPT)Terminology (CPT)

Use HCPCS to obtain medical procedural Use HCPCS to obtain medical procedural codes for Medicare and some non-Medicare codes for Medicare and some non-Medicare patients on outpatient hospital insurance patients on outpatient hospital insurance claims that are not in CPT code bookclaims that are not in CPT code book

Use modifiers as noted in CPT/HCPCS Use modifiers as noted in CPT/HCPCS guidelinesguidelines


Inpatient Billing ProcessInpatient Billing Process


Charge Description MasterCharge Description Master

Services and procedures are checked off and Services and procedures are checked off and coded internallycoded internally

Data includesData includes Procedure codeProcedure code ChargeCharge Revenue codeRevenue code


Reimbursement MethodsReimbursement Methods

Ambulatory payment classificationsAmbulatory payment classifications Bed leasingBed leasing Capitation or percentage of revenueCapitation or percentage of revenue Case rateCase rate Diagnosis-related groupsDiagnosis-related groups Differential by day in hospitalDifferential by day in hospital Differential by service typeDifferential by service type


Reimbursement Methods Reimbursement Methods (cont’d.)(cont’d.)

Fee scheduleFee schedule Flat rateFlat rate Per diemPer diem Periodic interim payments (PIPs) and cash Periodic interim payments (PIPs) and cash

advancesadvances WithholdWithhold Managed care stop loss outliersManaged care stop loss outliers


Reimbursement Methods Reimbursement Methods (cont’d.)(cont’d.)

ChargesCharges Discounts in the form of sliding scaleDiscounts in the form of sliding scale Sliding scales for discounts and per diemsSliding scales for discounts and per diems


Elements of the Reimbursement Elements of the Reimbursement ProcessProcess

Electronic data interchangeElectronic data interchange Allows computer to help in scrubbing billAllows computer to help in scrubbing bill

Hard copy billingHard copy billing Used for insurance companies that are not Used for insurance companies that are not

capable of receiving electronic claimscapable of receiving electronic claims Receiving paymentReceiving payment

After receipt of payment, patient sent net bill listing After receipt of payment, patient sent net bill listing any owed deductible, coinsurance amount, and any owed deductible, coinsurance amount, and charges not coveredcharges not covered


Outpatient Insurance ClaimsOutpatient Insurance Claims Emergency department visitsEmergency department visits Elective surgeriesElective surgeries Only outpatient services provided by the Only outpatient services provided by the

hospital should be submitted by the hospital hospital should be submitted by the hospital unless the hospital is billing for physiciansunless the hospital is billing for physicians

Using the hospital for surgical or medical Using the hospital for surgical or medical consultations that could be done in a consultations that could be done in a physician’s office should be avoidedphysician’s office should be avoided


Billing Errors and ProblemsBilling Errors and Problems

Incorrect name on formIncorrect name on form Wrong subscriber, patient name listed in errorWrong subscriber, patient name listed in error Covered days vs. noncovered daysCovered days vs. noncovered days Duplicate statementsDuplicate statements Double billingDouble billing Phantom chargesPhantom charges


Uniform Bill (UB-04)Uniform Bill (UB-04) Used since 1982 for inpatient and outpatient hospital Used since 1982 for inpatient and outpatient hospital

claimsclaims Updated in 2007Updated in 2007 Considered as a summary document supported by an Considered as a summary document supported by an

itemized billitemized bill Printed in red ink on white paperPrinted in red ink on white paper Dates of service and monetary amounts entered Dates of service and monetary amounts entered

without spaces or decimal pointswithout spaces or decimal points Dates of birth are entered using two sets of two-digit Dates of birth are entered using two sets of two-digit

numbers for the month and day, four-digit numbers for numbers for the month and day, four-digit numbers for the yearthe year


Uniform Bill (UB-04) FormUniform Bill (UB-04) Form


Diagnosis-Related Groups Diagnosis-Related Groups SystemSystem

Patient classification method that categorizes Patient classification method that categorizes patients who are medically related with patients who are medically related with respect to diagnosis and treatment and respect to diagnosis and treatment and statistically similar in length of staystatistically similar in length of stay

Used to classify and measure past cases and Used to classify and measure past cases and to classify current cases to determine to classify current cases to determine paymentpayment

25 basic major diagnostic categories25 basic major diagnostic categories


Seven Variables Responsible for Seven Variables Responsible for DRG ClassificationsDRG Classifications

Principal diagnosisPrincipal diagnosis Secondary diagnosis (up to eight)Secondary diagnosis (up to eight) Surgical procedures (up to six)Surgical procedures (up to six) Comorbidity and complicationsComorbidity and complications Age and sexAge and sex Discharge statusDischarge status Trim pointsTrim points


Sample Case HistorySample Case History


Cost OutliersCost Outliers

Clinical outliers include:Clinical outliers include: Unique combinations of diagnoses and surgeries Unique combinations of diagnoses and surgeries

causing high costscausing high costs Long length of stay (day outliers)Long length of stay (day outliers) Low-volume DRGsLow-volume DRGs

Inliers include:Inliers include: DeathDeath Leaving against medical advice (AMA)Leaving against medical advice (AMA) Admitted and discharged on same dayAdmitted and discharged on same day


DRG Common TermsDRG Common Terms

DRG creepDRG creep DowncodingDowncoding ComorbidityComorbidity Most-resource-intensiveMost-resource-intensive


DRGs and the DRGs and the Physician’s OfficePhysician’s Office

When calling the hospital to admit a patient, When calling the hospital to admit a patient, give all of the diagnoses authorized by the give all of the diagnoses authorized by the physician.physician.

Ask the physician to review the treatment or Ask the physician to review the treatment or procedure in question when a hospital procedure in question when a hospital representative calls with questions.representative calls with questions.

Get to know hospital personnel on a first-Get to know hospital personnel on a first-name basis.name basis.


Ambulatory Payment Ambulatory Payment Classification SystemClassification System

Developed as outpatient classification Developed as outpatient classification systems by Health System Internationalsystems by Health System International

Based on patient classification rather than Based on patient classification rather than disease classificationsdisease classifications

More than 500 APCs are continually being More than 500 APCs are continually being modified; updated and released twice a year modified; updated and released twice a year in the Federal Registerin the Federal Register


APC ApplicationsAPC Applications

Ambulatory surgical proceduresAmbulatory surgical procedures ChemotherapyChemotherapy Clinic visitsClinic visits Diagnostic services and diagnostic testsDiagnostic services and diagnostic tests Emergency department visitsEmergency department visits ImplantsImplants Outpatient services furnished to nursing Outpatient services furnished to nursing

facility patients not packaged into nursing facility patients not packaged into nursing facility consolidated billingfacility consolidated billing


APC Applications (cont’d.)APC Applications (cont’d.) Partial hospitalization services for community Partial hospitalization services for community

mental health centers (CMHCs)mental health centers (CMHCs) Preventive services (colorectal cancer Preventive services (colorectal cancer

screening)screening) Radiology including radiation therapyRadiology including radiation therapy Services for patients who have exhausted Part Services for patients who have exhausted Part

A benefitsA benefits Services to hospice patient for treatment of a Services to hospice patient for treatment of a

non-terminal illnessnon-terminal illness Surgical pathologySurgical pathology


Hospital Outpatient Prospective Hospital Outpatient Prospective Payment SystemPayment System

Procedure code is primary axis of Procedure code is primary axis of classification, not the diagnostic code.classification, not the diagnostic code.

Reimbursement methodology based on Reimbursement methodology based on median costs of services and facility cost to median costs of services and facility cost to determine charge ratios and copayment determine charge ratios and copayment amounts.amounts.

Adjustment for area wage differences based Adjustment for area wage differences based on the hospital wage index currently used for on the hospital wage index currently used for inpatient services.inpatient services.

OPPS may be updated annually.OPPS may be updated annually.


Types of APCsTypes of APCs

Surgical procedure APCsSurgical procedure APCs Significant procedure APCsSignificant procedure APCs Medical APCsMedical APCs Ancillary APCsAncillary APCs