introduction to healthcare and public health in the us financing healthcare (part 2) lecture a this...

Introduction to Healthcare and Public Health in the US

Financing Healthcare (Part 2)

Lecture a

This material (Comp1_Unit5a) was developed by Oregon Health and Science University, funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number

[IU24OC000015)].

Financing Healthcare (Part 2)Learning Objectives

• Describe the revenue cycle and the billing process undertaken by different healthcare enterprises. (Lecture a)

• Understand the billing and coding processes, and standard code sets used in the claims process. (Lecture a)

• Identify different fee-for-service and episode-of-care reimbursement methodologies used by insurers and healthcare organizations in the claims process. (Lecture a)

• Review factors responsible for escalating healthcare expenditures in the United States. (Lecture b)

• Discuss methods of controlling rising medical costs. (Lecture c)

Health IT Workforce Curriculum Version 3.0/Spring 2012

2

Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 2)

Lecture a

Financing Healthcare (Part 2) Lecture a - Goals

• Describe the revenue cycle and the billing process including charge capture and coding in the cycle that ensures appropriate reimbursement

• Review the use code sets and electronic data interchange transactions used in the claims process

• Examine different methodologies used by payers to reimburse providers

3Health IT Workforce Curriculum Version 3.0/Spring 2012


Lecture a


3

The Business of Healthcare

• Revenue to HCOs different than typical business– Payments made by 3rd party

• 1st party – insured or patient• 2nd party – the HCO or provider• 3rd party – the insurance company or plan that

pays the HCO or provider

– Payment depends on• Type of service and diagnosis• Payer formula to determine


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Lecture a

The Business of Healthcare

• Revenue (continued)– Payments for identical services may vary from

payer to payer– The government pays for approximately 47%

of all medical services rendered


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Lecture a

The Revenue Cycle and Medical Billing

• Revenue Cycle - standard set of activities and events that produce revenue or income for a healthcare provider.

• Medical billing - the process of submitting claims to insurance companies in order to receive payment or reimbursement for services rendered by a healthcare provider.


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Lecture a

Reimbursement & Claims

• Reimbursement: compensation or payment for healthcare services already provided• Methods of reimbursement include fee-for-

service and episode-of-care• Claim: itemized statement and request for

payment of the costs of healthcare services rendered by a healthcare provider or organization


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Lecture a

Billing Definitions

• Charge capture

– The process of documenting medical services in preparation of a claim

• Charge description master = price list

- Database of prices for services provided used by HCOs during the billing process



Lecture a


8

Billing Definitions

• Electronic Data Interchange (EDI)– The structured transmission of data between

organizations by electronic means using standard transaction sets

– A transaction set: an electronic model of a paper transaction or form


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Lecture a

Revenue Cycle Overview

• Appointment scheduled• Registration: Demographic and insurance info• Services provided• Charge capture• Coding• Claim submission: paper or electronic• Reimbursement received• Final settlement with patient



Lecture a


10

Registration

• Practice management software or hospital management software

• Demographic information– Accurate patient and responsible party

information• Insurance information

– Confirm terms of coverage– Determine deductibles, copayments, and

coinsurance– Accurate claim identification by third party payer



Lecture a


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Charge Capture

• Charge capture: the process of collecting a list of all services, procedures, and supplies provided during an encounter or in the course of care

• Charge description master = the price list – Database used by healthcare facilities– Paper based forms

• Superbill, encounter form, or charge ticket

– Electronic capture• Automatic – improved accuracy


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Lecture a

Importance of Charge Capture

• Ensures proper reimbursement for services provided

• Permits reevaluation of episode of care reimbursement arrangements


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Lecture a

Coding and Code Sets

• Coding: process of translating the written diagnosis and procedures relating to a patient encounter into a numeric classification or code

• Code set: group of numeric or alphanumeric codes used to encode descriptive data elements - Tables of terms, medical concepts, medical diagnostic

codes, or medical procedure codes - A code set includes the codes and the descriptors of

the codes


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Lecture a

HIPAA Code Sets

• Health Care Common Procedure Coding System (HCPCS) & Current Procedural Terminology (CPT) – AMA

• ICD-9-CM Volumes 1 & 2 (diagnosis codes) • ICD-9-CM Volume 3 (procedures)

– National Center for Health Statistics & CMS respectively

• National Drug Codes (NDC) – Food and Drug Administration and drug manufacturers

• Code on Dental Procedures and Nomenclature (CDT) – American dental Association (ADA)


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Lecture a

Code Sets by Provider

• Physician - Inpatient and outpatient– Diagnosis – ICD-9-CM– Procedure – CPT• Hospital Facility – inpatient– Diagnosis – ICD-9-CM– Procedure – ICD-9-CM volume 3• Hospital Facility – outpatient– Diagnosis – ICD-9-CM– Procedure – HCPCS (CPT Level I and HCPCS

Level II)


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Lecture a

Update to the ICD-9

• ICD-10-CM– Replaces ICD-9-CM Volume 1– Increases diagnosis codes from 13,000 to

68,000 codes.• ICD-10-PCS

– Replaces ICD-9-CM Volume 3– Number of codes from 11,000 to 87,000

• Compliance set for October 1, 2013



Lecture a


17

ICD-9-CM

Diseases of the circulatory system (390-459)

Ischemic heart disease (410-414) (410) Acute myocardial infarction (410.0) MI, acute, anterolateral (410.1) MRI, acute, inferior, NOS


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Lecture a

CPT Examples

Auditory System

External EarIncision69000 Drainage external ear, abscess or

hematoma, simple

69005 complicated

69020 Drainage external auditory canal, abscess

69090 Ear piercing



Lecture a


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Coding Examples

• Diagnosis– Upper respiratory infection = 461.9 (ICD-9-CM)

• Service, procedure or test– New patient, office visit, level II = 99202 (CPT)– Biopsy of skin, subcutaneous tissue and/or

mucous membrane(including simple closure), unless otherwise listed; single lesion = 11100 (CPT)

– Immune globulin 10 mg = J1564 (HCPCS Level II)


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Lecture a

Claim Submission

• Claim elements– Demographic and insurance identification information– Encounter elements

• Diagnosis• Dates• Procedure• Charges• Identifiers

• Submission method: paper or electronic – Paper

• physicians – CMS Form 1500 • facility – CMS Form 1450

– EDI: 837 Transaction


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Lecture a

Electronic claims-transactions

• Electronic data interchange (EDI)– HIPAA privacy rules/Transactions Rule

• 837 Healthcare claims or equivalent encounter information

• 835 Healthcare payment and remittance advice• 270/271 Eligibility for a health plan• 276/277 Health claims status• 278 Referral certification and authorization


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Lecture a

Remittance

• Reimbursement received– Reduced amount due to coinsurance,

copayments, or contract– Challenges

• Non-payment by payer • Incorrect reimbursement

• Final settlement with patient• coinsurance


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Lecture a

3rd Party reimbursement

• Reimbursement Methodology– Fee-for-service (FFS)– separate payments

made for each individual service provided– Episode-of-care – payment of one sum for

providing all services or care during a illness or time frame



Lecture a


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Reimbursement Methodology

• Fee-for-service (FFS)– separate payments made for each individual service provided– Traditional retrospective– Self-pay

• Episode-of-care – payment of one sum for providing all services or care during a illness or time frame – Capitation– Prospective payment– Global payment

• Managed care may involve fee-for-service and/or episode-of-care methods



Lecture a


25

Traditional Retrospective

• Traditional retrospective payment: payment made after services have been provided– Method of reimbursement used by commercial or indemnity

health insurance policies– Fee schedule – list of allowable services and procedures and

amounts payable for each– Fee schedule developed using historical claims data and

provider “usual and customary” submissions– Resource Based Relative Value Scale (RBRVS) payment based

on the cost of services in terms of effort, overhead, and malpractice insurance


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Lecture a

Self-pay

• Self-pay– Patient responsible for payment for healthcare

services• Uninsured subset of self-pay

– May seek reimbursement afterwards• Self-insured plan – large employers• Costs possibly higher


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Lecture a

Episode-of-Care Methodology

• Episode-of-care: one or more services provided by a HCO during the course of providing care related to a particular medical condition or situation

• Episode-of-care payment: one payment for the services provided during an episode of care

• Types of episode-of-care payments

– Capitation

– Prospective payment

– Global payment


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Lecture a

Capitation

• HCO receives a fixed sum per person enrolled in the plan and assigned to the HCO– Typical payment for a HMO - same amount paid

per length of time regardless of the number of plan patients requiring care, the frequency of visits, or the severity of an illness

– PMPM = per member per month– Payer knows costs in advance – Provider assumes some risk as the level of

services required is unknown



Lecture a


29

Prospective Payment Method

• Prospective payment method : payers establish reimbursement rates in advance for healthcare services to be provided over a specified time

• Based upon average resource use required to provide a level of care for a given set of conditions or a disease

• Same amount paid regardless of the costs incurred



Lecture a


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Prospective Payment Types

• Per-diem payment: a fixed payment is made for each day of hospitalization i.e. based on unit of time

• Case-based payment : payment of a fixed amount for providing health services for a condition or disease (case)



Lecture a


31

Diagnosis Related Groups (DRGs)

• CMS case based in-patient prospective payment system– Based on diagnosis, procedures, age, sex,

comorbidities, complications, and discharge status

• Comorbidity - the presence of 2 or more conditions or diseases in the same patient which complicates a patient’s hospital stay leading to more resource use or longer length of stay



Lecture a


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Global Payment

• Payer makes one payment for multiple providers treating a single episode of care

• Extends the concept of capitation to a larger group



Lecture a


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Managed Care Reimbursement

• Reimbursement– Contract with providers to limit fees

• Fee-for-service: discounted fee schedules• Episode-of-care: prospective payment

• Patient utilization control through– Financial incentives to use network resources

• Offer lower in-network costs• Increase out-of-pocket expenses for non-network

use



Lecture a

Financing Healthcare (Part 2)Summary

• Revenue cycle– Unique process – Charge capture

• Services & diagnosis

– Claims coded– Claim submitted and adjusted by payer

• Reimbursement methods– Fee-for service– Episode-of-care


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Lecture a

Financing Healthcare (Part 2)References – Lecture a

References• Abraham, M. (2011). In CPT Current Procedural Terminology (Standard ed.). Chicago, IL: American Medical

Association. Retrieved Jan 2012 from: http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-practice/coding-billing-insurance/cpt/about-cpt.page?

• Buck, C. J. (2012). ICD-9-CM, for Physicians. In CPT Current Procedural Terminology (Professional ed., Vol. 1, 2). Chicago, IL: The American Health Information Management Association.

• Castro, A. B. and Layman, E (2006). Principles of Healthcare Reimbursement. In CPT Current Procedural Terminology (Standard ed., Ch. 1 - 3, 8). Chicago, IL: The American Health Information Management Association.

• Current Procedural Terminology. (n.d.). Retrieved December 16, 2011, from Wikipedia website: http://en.wikipedia.org/wiki/Current_Procedural_Terminology.

• Definition of Health Insurance Terms. (2010, August 1). Retrieved March 22, 2011, from Bureau of Labor Statistics website: http://www.bls.gov/ncs/ebs/sp/healthterms.pdf.

• HIPAA Code Sets. (n.d.). Retrieved December 16, 2011, from Centers for Medicare and Medicaid Services website: https://www.cms.gov/ICD9ProviderDiagnosticCodes/


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Lecture a

http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-practice/coding-billing-insurance/cpt/about-cpt.page

http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-practice/coding-billing-insurance/cpt/about-cpt.page

http://en.wikipedia.org/wiki/Current_Procedural_Terminology

http://www.bls.gov/ncs/ebs/sp/healthterms.pdf

https://www.cms.gov/ICD9ProviderDiagnosticCodes/

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