Required Discussion

Write a 150- to 350-word response to the following:

Discuss at least two components described in the Billing Workflow section in Ch. 10 of Health Information and Technology Management.

  • How do these components affect health care reimbursement?


Health Information Technology and Management, Ch. 10

10 Healthcare Transactions and Billing

LEARNING OUTCOMES

After completing this chapter, you should be able to:
  • Describe the billing workflow
  • Identify the eight types of HIPAA electronic transactions
  • Compare the differences between hospital and professional claim forms
  • Explain the functions of a clearinghouse
  • Discuss the concepts of claim scrubbers, accounts receivable, and the payment floor
  • Explain how electronic data interchange (EDI) transactions work

ACRONYMS USED IN CHAPTER 10

Acronyms are used extensively in both medicine and computers. The following acronyms are used in this chapter.
ANSI
American National Standards Institute
ANSI 837-D
HIPAA-Compliant Dental Claim Format
ANSI 837-I
HIPAA-Compliant Institutional Claim Format
ANSI 837-P
HIPAA-Compliant Professional Claim Format
APC
Ambulatory Payment Classification
ASC
Accredited Standards Committee
CDA
Clinical Document Architecture
CMN
Certificates of Medical Necessity
CMS
Centers for Medicare and Medicaid Services
CMS-1500
Paper Claim Form for Professional Services
COB
Coordination of Benefits
CPT-4
Current Procedural Terminology, Fourth Edition
DISA
Data Interchange Standards Association
DRG
Diagnosis-Related Group
EDI
Electronic Data Interchange
EFT
Electronic Funds Transfer
EHR
Electronic Health Record
EMC
Electronic Media Claims
EOB
Explanation of Benefits
ER
Emergency Room (Emergency Department)
ERA
Electronic Remittance Advice
FTE
Full-Time Equivalent Employees
HCPCS
Healthcare Common Procedure Coding System
HHS
(U.S.) Department of Health and Human Services
HIPAA
Health Insurance Portability and Accountability Act
HIPPS
Health Insurance Prospective Payment System Code Set
HIS
Health Information Service
HMO
Health Maintenance Organization
ICD-9-CM
International Classification of Diseases, Ninth Revision with Clinical Modifications
IPPS
Inpatient Prospective Payment System
MS-DRG
Medicare Severity—Diagnosis-Related Group
NCCI
National Correct Coding Initiative
NCPDP
National Council for Prescription Drug Programs (Pharmacy EDI Format)
NPI
National Provider ID
OCR
Optical Character Recognition
OPPS
Outpatient Prospective Payment System
PCP
Primary Care Physician
PHI
Protected Health Information (HIPAA)
PPO
Preferred Provider Organization
PPS
Prospective Payment System
RUG
Resource Utilization Group
SDO
ANSI-Accredited Standards Development Organization
SNF
Skilled Nursing Facility
UB-04
Universal Billing Claim Form for Institutional Billing (also known as CMS-1450)
WC
Workers’ Compensation
X12N
ANSI Insurance Standards Committee Responsible for Developing and Maintaining HIPAA Transactions

Secondary Health Records and Business Processes

Chapter 5 described secondary health records as those that are created by abstracting relevant details from the primary records. The business or billing office is one of the main departments creating and using secondary health records. A principal example of secondary records is the health insurance claim.
This chapter will examine health insurance claims, billing, and other healthcare transactions. To put some of the terms from Chapter 9 into the context of business office processes, we begin with an overview of a general billing workflow. We then examine separately the business processes of medical professionals and of hospitals. Follow the workflow in Figure 10-1 as you read the following section.

Billing Workflow

  • 1. Providers of all types verify patient insurance eligibility with the health plan, either prior to or during the admission or visit. Medical offices collect and post copays at the visit.
  • 2. The patient is treated and discharged or checked out.
  • 3. As you learned in Chapter 9, the provider usually needs to bill a third party, the insurance plan, in order to receive payment. The insurance bill is called a claim. The first step in preparing the claim is to assign procedure codes for the services rendered and the supplies used and diagnosis codes representing the disease or medical condition.
  • 4. Using these codes and the patient registration information, a computer program generates a paper or electronic claim to be sent to the insurance plan.
    Before the claim is sent to the insurance plan, an insurance or claim specialist reviews the claim to make sure there are no errors. Because of the volume of claims, a computer program is used to examine the claim data and identify problems. Once the claim is correct, it is sent to the insurance plan (usually electronically).
  • 5. When the claim is received by the insurance plan, it is adjudicated. If the claim is correct, a payment is sent to the provider; this is called the remittance. A paper or electronic document is generated that explains the amounts that were paid. This is called the remittance advice or explanation of benefits (EOB).
  • 6. When the remittance is received by the provider, the payment amount is recorded in the patient accounts system. Frequently, the amount billed does not equal the amount paid. This may be the result of a contractual agreement that stipulates that the provider will accept a discounted payment and/or that a portion of the charges is the patient’s obligation. An accounting entry called a write-down adjustment is posted to adjust the charge.
  • 7. If the patient has a secondary insurance plan, a claim is next sent to the second plan. In certain cases the first plan will automatically forward the claim to the second plan. This is called a “piggyback” claim or coordination of benefit (COB) claim. For example, when a Medicare patient has a supplemental insurance policy with the fiscal intermediary who processes the Medicare claims, the company will sometimes process the secondary claim automatically. This eliminates the need for the provider to file a second claim. These are also known as crossover claims.
  • 8. Most health plans require the patient to pay a portion of the medical bill. These payments are referred to as the copay, coinsurance, and deductible amounts. The copay amount is usually stated on the patient’s insurance card and collected during the patient visit. The coinsurance amount is usually a percentage of the allowed amount and is not known until the claim has been adjudicated. The EOB tells the provider what amount is the patient’s responsibility.
    When all the patient’s insurance plans have responded with remittance advice, a bill or statement is sent to the patient for any amounts due that are the patient’s responsibility. The patient statement should clearly show the amounts paid or denied by the insurance plans, any adjustments to the charges required by the plan contract, and the amount due from the patient.
  • 9. When patient payments are received by the medical office or hospital, they are posted to the patient’s account. When the account balance is zero, no further statements will be sent.

FIGURE 10-1 Billing workflow.

Patient Billing and Statements

Amounts that are determined to be “patient due” (i.e., the patient’s responsibility to pay) are billed to the patient. A bill and a statement are not the same thing. A bill is akin to an invoice you might receive for a purchase. A statement is a list of charges, payments, and adjustments posted to the account during the period covered by the statement. Most healthcare facilities send patient statements, though some may call them patient bills. Several types of patient statements are discussed next.

FIGURE 10-2 Example of an open item patient statement.

BALANCE FORWARD PATIENT STATEMENT

A balance forward statement lists charges and payments for one period. Subsequent statements simply start with a line giving the balance from the previous statement, and then list any new payments, charges, or adjustments posted in the current period. A bank statement or credit card statement is an example of a balance forward statement. Balance forward statements work fine for banks. However, because healthcare reimbursement involves third-party payers and because it can take weeks or months for claims to be filed, adjudicated, and processed, balance forward statements confuse the patients. Payments listed on a balance forward statement may be for services provides several months ago, not services listed on the current statement; it is therefore not apparent to the patient to which charges the payments were applied.

OPEN ITEM PATIENT STATEMENT

An open item statement lists each charge, how much has been paid by the insurance plan, how much was written down by the provider, and how much is due from the patient. The charges for each visit are reprinted on subsequent statements until they are paid in full. The bottom of the open item statement clearly shows the amount pending with the insurance plan and the amount due from the patient. Figure 10-2 shows a sample of an open item statement.

HOSPITALS BILLS OR STATEMENTS

Patient bills from hospitals list charges for tests, services, and the inpatient stay, but do not usually detail every item that was used or charged. For example, a summary line may appear on the bill for use of the surgical suite and surgical supplies, but will not list in detail each of the supplies used, even though those items were recorded in the hospital’s cost accounting system. (Note that the surgeon’s and anesthesiologist’s fees are not on the hospital bill; they are billed separately by the doctors.)
One reason hospitals summarize the details of charges is because hospitals are reimbursed under a prospective payment system (PPS), as discussed in Chapter 9, which is different from the way doctors and other healthcare providers are reimbursed. As mentioned earlier, hospitals start a new patient account for every stay. This method of accounting ensures that insurance payments are applied to the correct inpatient stay when a patient is hospitalized more than once. However, separate patient accounts mean that a patient who has been in the hospital several times will receive multiple bills and statements. This sometimes confuses patients.

Electronic Data Interchange (EDI)

As discussed in Chapter 3, HIPAA mandated eight electronic transactions and required all but the smallest health plans to make them available to providers. The process of exchanging these transactions is called electronic data interchange or EDI.
Some forms of EDI, particularly the electronic media claim (EMC), had been in use for several years, but health plans used many different EMC formats and providers could not keep up. HIPAA standardized EDI formats by requiring specific transaction standards for eight types of electronic data interchange.
Seven of the eight transactions use standard formats developed by the American National Standards Institute (ANSI) Data Interchange Standards Association (DISA) Accredited Standards Committee (ASC) X12n. The ANSI X12 EDI standards have long alphanumeric designations, but they are often referred to in a shortened version (i.e., ASC X12 835 or ANSI 835). We will use the shorter ANSI designation throughout this text.
The eighth HIPAA-mandated transaction format, retail pharmacy claims, was not created by ANSI. It is instead a format maintained by the National Council for Prescription Drug Programs, Inc. (NCPDP), an ANSI-accredited SDO, but not part of the X12n committee.
To review, here are the eight transactions required by HIPAA and their ANSI and NCPDP format numbers:
  • 1. Claims or equivalent encounters and coordination of benefits (ANSI 837). Due to differences in reimbursement methodologies, variations were made in this format to accommodate different providers. The formats are ANSI 837-P (professional claims), ANSI 837-I (institutional claims), and ANSI 837-D (dental claims)
  • 2. Remittance and payment advice (ANSI 835, Health Care Claim Payment/Advice)
  • 3. Claim status inquiry and response (ANSI 276, Health Care Claim Status Request; ANSI 277, Health Care Claim Status Response)
  • 4. Eligibility benefit inquiry and response (ANSI 270, Health Care Eligibility Benefit Inquiry; ANSI 271, Health Care Eligibility Benefit Response).
  • 5. Referral certification and authorization (ANSI 278, Health Care Services Request for Review and Response)
  • 6. Health plan premium payments (ANSI 820, Payroll Deducted and Other Group Premium Payment for Insurance Products)
  • 7. Enrollment and de-enrollment in a health plan (ANSI 834, Benefit Enrollment and Maintenance)
  • 8. Retail drug claims, coordination of drug benefits and eligibility inquiry (NCPDP 5.1, Version D.0).
    Transaction standards for two additional HIPAA transactions have not yet been finalized:
  • 9. Health claims attachments (ANSI 275, Patient Information in Support of a Health Claim or Encounter; not final)
  • 10. First report of injury for reporting workers’ compensation incidents (not final).
Though transactions such as electronic insurance eligibility verification are important, the principal goal was to eliminate the work involved in producing and processing paper claims and paper remittance advice. Because those are the major components in healthcare business, we will examine them next. However, because the reimbursement models for healthcare professionals differ dramatically from those used for hospitals, their claims are different as well. Therefore, we will discuss these providers’ claims separately.

Professional Services

Medicare and other insurance plans use two different types of claims, one for professional billing and another for institutional billing. Physicians, chiropractors, osteopaths, therapists, and nearly all other medical professionals bill for their services using the professional claim ANSI 837-P or CMS-1500.

Real-Time and Batch Posting

Posting is a term used for the act of putting charges and payments into the patient accounting system. In many medical offices, this is done in real time; that is, while the patient is still in the office. One advantage of real-time posting is that it allows for the collection of copay and sometimes coinsurance amounts due from the patient. Another is that it can shorten the revenue cycle, because at the end of the day the charge posting is complete and ready to be billed to insurance. Charge posting is also called charge capture.
Figure 10-3 shows an encounter form or superbill recommended by the American Academy of Family Practice for use in physician offices to communicate billing information about the visit. These are also known as charge tickets. The forms are numbered and identify the patient, provider, and date and time of the visit. They typically list the most common procedures and diagnosis codes used by the office. The doctor circles or checks the services and diagnosis. The person posting the charges enters the codes the doctor has marked on the form; the computer locates the item from the charge master and calculates the fee.
The process is essentially the same in batch posting, except that the superbills are not entered into the computer on the day of the visit. Instead they are gathered into a batch for the date and posted later. Some offices use a billing service to post charges, generate insurance claims, and send patient statements. The batch method is common when using a billing service.
With either method, superbills are numbered and missing numbers must be accounted for. A report of the payments and charges that have been posted is compared to the information on the superbills to ensure charges were posted correctly.
Some doctors do not see patients in the office. For example, anesthesiologists bill for their services, but do not have office visits. Many anesthesiologists use billing services. Other specialists such as radiologists and surgeons may see patients in their office, but also bill for services performed at the hospital. For these services, they do not use a superbill; instead, the charges are posted from a list or report provided by the doctor or hospital. These charges are batch posted.

FIGURE 10-3 Encounter form (also known as a superbill or charge ticket).

Payments

Payments are posted both in batches and real time. Patient payments, especially copay payments, are usually posted while the patient is present so that a receipt can be provided. Some offices collect the copay upon arrival; other offices collect the copay after the visit when the patient checks out.
Payments from insurance plans are often posted in batches. These payments may be accompanied by paper explanation of benefit (EOB) reports or electronic remittance advice (ERA) files. Both paper and electronic remittances can span multiple patients’ claims and are sometimes dozens of pages long.

Professional Claims Billing

The professional claim is a standard form. The paper version is the CMS-1500. The electronic version is the ANSI 837-P transaction. Medicare now requires all but the smallest provider to submit claims electronically. The most recent Medicare performance data available reported 94.8 percent of all Medicare Part B physician claims were electronic.1 Whether claims are electronic or paper, most medical offices use a computer to generate the claim.
Though the majority of claims are electronic, the CMS-1500 form can be useful to understand what information is reported, since essentially the same content is required in paper or electronic format. A sample CMS-1500 form is shown later in Figure 10-5.
The fields on the CMS-1500 form are numbered boxes called form locators. Figure 10-5 describes some of the fields on the CMS-1500 form. Medicare requires the blank form to be printed in a special color of red ink. The fields are filled in by the provider in black ink. The red form allows some Medicare intermediaries to extract data from the paper form electronically using optical character recognition (OCR) software. This eliminates data entry for the intermediary.
As you will recall from Chapter 9, professional claim reimbursement is based on the charges for the procedures, services, and supplies provided. Therefore, each item is listed on the claim with its HCPCS/CPT-4 code and associated with one or more diagnoses that justify its medical necessity. The charges for each item are typically the providers’ usual and customary rate for the item, not the contractual allowed amount they expect to be paid.
The same information is reported in an electronic claim. The difference is that electronic claims are sent in a file called a batch. Within that file are many claims for the same provider and possibly multiple claims for one or more patients. Because each paper claim is a form, it is necessary to repeat all the provider and patient information; with electronic claims, duplicate information is eliminated.
Figure 10-4 shows the structure of the ANSI 837-P electronic claim format required by HIPAA. The file structure of the ANSI 837-P starts with information about a transaction and the entity submitting the batch and then uses several loops to eliminate redundant repetition. Each loop in Figure 10-4 that is indented can be repeated so long as the information above it remains the same. For example, the billing provider is sent once; subsequent patients for that provider do not need to repeat the billing provider. Similarly, if the subscriber/patient has more than one claim, subsequent claims do not repeat the subscriber/patient information until the patient changes.
1Electronic Media Claims (EMC) Rates for Medicare Carriers for Calendar Year 2007 (the most recent year available), www.cms.hhs.gov.

FIGURE 10-4 Loop structure of ANSI 837-P electronic media claims.

Other space-saving efficiencies are realized as well. For example, if the subscriber and patient are the same, the patient information is not repeated. Additionally, the data are separated by special characters and therefore require little more file space than the actual fielded data. Figure 10-6, shown later, allows you to see the efficiency of EMC data.

Institutional Claims Billing

Hospitals and other institutions use a different claim form, both for paper and electronic billing, than do professional providers. This is necessary because as you learned in Chapter 9, hospital reimbursement is based on the principal diagnosis and diagnosis related group. The paper UB-04 form and the ANSI 837-I electronic format differ substantially from their counterparts used for professional claims. There are also differences in how hospital charges are posted.

Hospital Batch Posting

Inpatient facilities do not bill until the patient is discharged and all of the records have been completed. For this reason, many hospitals do not begin coding and charge capture until the HIM department has analyzed the record and sent it for coding. Review the workflow illustrated in Chapter 2, Figure 2-1.
Hospitals often hold billing for a number of days after discharge to ensure that all the charges have been collected and coded. This is called the bill-hold period. At that point, there are hundreds of charges to be coded and posted. However, as hospital departments become computerized, the lab, pharmacy, supplies, radiology, and other departments are beginning to automatically post charges as the supplies or services are used; thus, reducing the number of items that must be manually posted.
One of the reasons hospitals have a bill-hold period is because both the DRG Grouper software used to determine the DRG and the OPPS Pricer software used for APCs analyze the diagnosis and procedure codes for the entire episode. If important services or diagnoses are missing, the wrong DRG may be used or APC codes may be missing from the claim. Although it is possible to submit a corrected or supplemental claim, it may not be paid. Also, claims must be submitted within a certain time frame or they will not be paid.

FIGURE 10-5 CMS-1500 paper form for professional claims.

The fields on the CMS-1500 form are numbered boxes called form locators. The following describes some of the fields on the CMS-1500 form:
  • 1, 1a Type of insurance plan, member ID or policy number.
  • 2–3, 5–6, 8 Patient demographic information.
  • 4, 7, 11a–c Information about insured party; the primary person who is named on the health insurance card (also known as the subscriber, enrollee, member, or beneficiary).
  • 9a–d, 11d Information about secondary insurance, if any.
  • 10 Is the condition the result of an accident? If so, auto or WC insurance may be responsible.
  • 12 Patient signature to release PHI for claims processing; also for government programs, patient assigns benefits to provider.
  • 13 Insured’s signature to assign benefits to provider.
  • 14 Date of onset of current illness or injury.
  • 15 Date of previous occurrence of same or similar condition.
  • 16 Dates patient is unable to work due to current condition.
  • 17, 17b Referring provider name and national provider ID number.
  • 18 Hospitalization dates related to services on this claim.
  • 20 If purchased lab services are included on claim, the name of lab and cost to provider are entered in this box.
  • 22 If claim resubmitted to Medicaid, a reference number is entered in box.
  • 23 If prior authorization required for services, an authorization number is entered in this box. For managed care plans, this is also called the referral number.
  • 21 Diagnosis—up to four ICD-9-CM codes are entered in the numbered fields (called pointers). Later, in box 24e the pointer numbers will indicate the diagnoses for each procedure.
    Start Service Loop. Up to six procedures (related to four diagnoses) can be billed on the claim. Fields 24a–j are repeated for each procedure.
  • 24a–c Dates of service, place of service (office, hospital, home, etc.), and whether visit was an emergency.
  • 24d–e HCPCS/CPT-4 code, procedure modifier, and diagnoses codes pointers (from box 21).
  • 24f–g Charge (dollar amount) and days or units; represent the fee for service. For example, $450 for 3 days of hospital visits.
  • 24h Is service for Medicaid early periodic screening or family planning program.
  • 24j National provider ID (NPI) of the provider who rendered the service.
    End service loop. When all the procedures have been printed, the charges are totaled.
  • 28, 29, 30 Service loop totals; total of charges on claim, amount paid by primary plan (if this claim is secondary), and the balance due (charge minus payment),
  • 27, 31 Provider accepts or declines assignment of benefits and certifies that the claim is accurate. (Most doctors do not sign every form; instead, they have signed a form permitting the facility to print “signature on file” on the claim. However, the doctor remains responsible for the accuracy of the claim.)
  • 25, 26 Tax ID of the group practice, physician, or facility; the practice’s internal account number for the patient, which is subsequently used to post payments to the correct patient account.
  • 32, 32a Facility where service was rendered and national provider ID (NPI) of facility.
  • 33, 33a Billing provider, address, and phone; national provider ID (NPI) of billing provider.
Once the codes for the services have been posted and checked by a coding or billing specialist, the claim is produced by a computer program (as described in Chapter 9). As with professional claims, institutional claims must be submitted electronically (with rare exceptions). The most recent Medicare performance data available reported 99.9 percent of all Medicare Part A hospital claims were electronic.2 However, the UB-04 paper form can be useful to understand the information that is being sent in the ANSI 837-I electronic claim.

UB-04 Claims

Figure 10-7 shows the UB-04 paper form used for institutional claims. The UB-04 is also known as Form CMS-1450. It is only accepted from institutional providers (hospitals, skilled nursing facilities, home health agencies, etc.) that are excluded from the mandatory electronic claims submission requirements.
The UB-04 form looks considerably different from the CMS-1500. Whereas the CMS-1500 has “yes/no” boxes for questions like “Accident,” “Work-related,” or “Student,” the UB-04 does not. Because there are many more factors that could affect an inpatient claim “yes/no” check boxes and individual questions are replaced with coded fields. Special information affecting the claim is communicated through the use of condition codes, occurrence codes, and value codes. Also, because all of the charges for an inpatient stay might not fit on one piece of paper, the UB-04 claim is permitted to be nine pages long, which can accommodate 450 line items.

Electronic Media Claims (EMCs)

HIPAA requires all but the smallest health plans to receive claims electronically in the ANSI 837 format and permits all types of providers to send them. Further, Medicare requires nearly all providers to submit claims electronically. As described earlier, there are variations in the content of the ANSI 837 to accommodate professional, institutional, and dental providers. However, the loop structure shown in Figure 10-4 remains consistent. EMC files are not usually a single claim, but batches of claims sent in one large file. The shaded portion of Figure 10-6 shows you what an ANSI 837-I transaction would look like if you could see inside the file. The numbered labels on the right side of Figure 10-6 help you identify the loops, but are not part of the transaction file.

Clearinghouses

HIPAA defined a covered entity as a provider, health plan, or clearinghouse (see Chapter 3). A clearinghouse is generally thought of as an entity that acts as a transaction intermediary between the provider and the health plan. A clearinghouse receives claims from the provider, sends them to the plans, receives responses from the plans, and sends those responses to the provider. Technically, that function is called a switch, because HIPAA legally defines a clearinghouse as the specific function of converting data arriving in a noncompliant format into a HIPAA-compliant format.
Though clearinghouses do provide the conversion service defined by HIPAA, they serve a more practical purpose as well. A modern medical office may have 1,200 or more health plans defined in its computer system. In part, this is because different patients have different health plans. Another reason is that insurance companies offer many different plans. These plans may have different billing addresses and different fee structures; some of their plans may be fee-for-service, whereas others may be PPO or HMO; and so forth.
The result of this plethora of plans is that the billing department may be forced to deal with hundreds of EMC batches, one for each plan or unique carrier address. Imagine spending all week just transmitting files to all the different insurance carriers. So one service that clearing-houses provide is a single point of transmission.
2Electronic Media Claims (EMC) Rates for Medicare Carriers for Calendar Year 2007 (the most recent year available), www.cms.hhs.gov.

FIGURE 10-6 Sample electronic media claim file (ANSI 837-I).

FIGURE 10-7 UB-04 paper form for institutional claims.

The fields on the UB-04 form are numbered boxes called form locators. The following describes some of the fields on the UB-04 form:
  • 1, 2, 3, 5 Name and address of (institution) provider, name and address to send payments, the facility’s internal patient account and medical record numbers, and the facility’s tax number.
  • 4 Bill type 3 digit code indicating type of facility, type of care, and type of claim (admit-discharge, interim, replacement claim, etc.).
  • 6 Dates covered on claim.
  • 8–11 Patient demographic information.
  • 12–17 Date, hour, type, and source of admission; discharge hour and status (sent home, transferred to SNF, etc.).
  • 18–28 Condition codes are used to provide information relevant to the claim such as “condition related to work,” “admission unrelated to discharge,” or “neither patient nor spouse employed.”
  • 31–36 Occurrence codes and dates are used to provide information on a wide range of issues that affect the claim (examples: the date of an accident, date of last menstrual period for pregnancy claims, date of retirement).
  • 39a–41d Value codes followed by an amount are used to report numeric data that might affect adjudication of the claim. In most cases, these are monetary, such as the patient’s Medicare coinsurance; but in some instances, the value codes are used to report a quantity, such as number of units of blood or number of passengers in an ambulance.
    Start Service Loop (repeated up to 450 times)
  • 42–43, 45–48 Revenue code and description, date of service for outpatient claims or date of assessment for inpatient claims, units, total charge, total noncovered charge. The lines are normally sorted and printed in revenue code order. A special revenue code 0001 is used to report the sum of all the charges and all the noncovered charges on paper claims; electronic claims have fields for these totals in a segment of the structure.
  • 44 HCPCS or accommodation rate or HIPPS code, depending on the type of claim. Outpatient claims report the HCPCS code for the service or supply. Inpatient claims report the accommodation rate. Home health care, SNF, and long-term care facilities report the RUG code followed by an assessment code.
    End Service Loop
  • 50a–54d Name and ID of health plans the patient has as well as indicators that the patient has signed a release of information and assignment of benefits. If the patient has paid a deductible or coinsurance amount, that is reported in 54a–54d.
  • 56 Billing provider’s national provider ID (NPI) number.
  • 58a–62c Insured party’s name, patient’s relationship to insured, insured’s ID (member number), group name and number for each health plan listed in 50a–50c.
  • 63a–c Treatment authorization or referral number (if one was issued for these services).
  • 64a–c Document control (claim) number previously issued for this claim by a payer.
  • 65a–c Employer name for workers’ compensation claims.
  • 66 Version number of ICD codes; currently always a 9 for ICD-9-CM codes.
  • 67A–H The principal diagnosis code goes in field locator 67. Up to eight additional diagnoses codes are printed in fields 67A–H. Note fields 67I–Q are not used by Medicare.
  • 69 Admitting diagnosis code.
  • 70 Reason for visit code (for outpatient services).
  • 74 Principal procedure code and date (used for inpatient claims where a procedure was performed).
  • 74a–e Other procedures—codes and dates for other inpatient procedures.
  • 76 Attending provider name and NPI.
  • 77 Operating provider name and NPI (if surgical procedure).
  • 78–79 Other providers (i.e., referring doctor) name and NPI.
When using a clearinghouse, the provider’s computer produces the electronic claims file, but it can contain the claims for many different plans. The clearinghouse computer receives the larger file, separates the claims into individual files by payer, and retransmits the claims to the individual payers. (If the data is not in HIPAA format, the clearinghouse provides the conversion as well.)
When a plan receives a batch of claims, it returns a response file confirming it has received them. If the provider uses a clearinghouse, the clearinghouse gathers the responses from the various payers and produces a report for the provider. Clearinghouses may act as the conduit for the other HIPAA transactions as well.
Providers pay the clearinghouse for its services. The fee may be per transaction or a flat monthly rate. Health plans do not charge providers for EDI services.

Claim Scrubbers

Claims that are incorrectly coded or have missing information will be rejected by the payer. In some cases, more than one claim will be rejected. For example, a missing patient’s date of birth will result in all claims for that patient being rejected. Another example, a missing or incorrect provider ID could cause an entire batch of claims to be rejected.
With paper claims, a billing specialist could review the claim form before it was sent. With electronic claims, a prebilling report can be created that will allow the billing specialist to review information that is about to be assembled into the claim. This will allow corrections to be made before the claim is sent. However, there are hundreds of claims to be examined and many possible conditions that could cause a claim to be rejected. Modern offices and hospitals rely on computers to examine the data and prepare the claims.
To eliminate preventable billing errors and reduce rejected claims, providers use special software to analyze claims data prior to submission. This software is sometimes called a claim scrubber, because it produces “clean” or correct claims. The software may be a component of the billing system, in which case it may have the ability to prevent claims from being created until errors are corrected. In other cases the claim scrubbing software may examine a batch of claims and report if there are any errors before they are sent.
Payers use a list of rules called claim edits to examine received claims prior to adjudicating them. Claim scrubbers try to follow the same logic as the payer’s claim edits to identify problems in advance.

Provider Payments

Both professional and institutional providers endure long delays in receiving payment for their services. In addition to the bill-hold period described earlier, once a clean claim is filed, Medicare intermediaries impose a delay, called the payment floor, on paying the claim. The delay is 14 days for electronic claims and 29 days for paper claims. Many other health plans also impose a payment floor. Once the primary insurance has paid, the provider must still bill any secondary insurance plan, and then finally the patient. The uncollected money owed during this period is called accounts receivable. It is not unusual for providers to have a 90- to 120-day accounts receivable. This means that more than 90 days will pass from the date the patient was seen until the account is paid off.
When payment is received, it must be posted to the patient’s account in the accounting system. Secondary insurance claims require information about what the primary plan has paid; therefore, a claim cannot be sent to the secondary payer until the payment from the primary payer is posted.
The process of posting payments also involves posting the contractual write-down adjustments and writing off or rebilling any services that have been denied. Payment is denied for many reasons, including coding errors, services not covered by the patient’s plan, or services that require additional documentation to justify the claim. Denied claims require special handling, such as recoding and rebilling the claim, appealing the claim denial, or submitting requested supporting documents.

Electronic Remittance Advice (ERA)

For every claim that is filed, a provider can expect to receive a remittance advice (or EOB) and hopefully a payment. Large payers often group payments for hundreds of patient claims into one check and create remittance advice reports that are dozens of pages long. Each of these payments must be posted to the correct patient account along with any necessary contractual adjustments. Responsibility for any amount remaining due on the claim is then transferred to secondary insurance or the patient. If responsibility is transferred to secondary insurance, the billing system will automatically produce a claim the next time the insurance billing software is run.
A large medical practice or busy hospital can literally receive mail sacks filled with insurance checks and EOBs that must be posted. Electronic remittance advice (ERA) systems can receive the remittance information from the payer in an ANSI 835 transaction.
A patient account number sent by the provider with the claim is returned in the ERA so the correct patient is identified. The computer then uses the information in the file to automatically post the payments, post the adjustments, and transfer responsibility for each item that was adjudicated. This saves the practice or hospital time and effort.
Special segments within the ANSI 835 transaction carry codified information about how the claim was adjudicated and codes for any adjustments that were made to the payment. This information is saved in the database and reported in an electronic claim to the secondary payer.
The ERA system produces a report of what has been sent in the file and how it has been applied to the patient accounts. If payment has been paid by check, the checks are reconciled to totals on the report. If payment has been made by direct deposit, the amount of the deposit is verified with the reported payments. Direct deposit is called electronic funds transfer (EFT) by which money is sent electronically directly to the provider’s bank account. The ERA file is not sent to the bank because it contains PHI.
Figure 10-8 shows a sample paper remittance advice generated from an ERA file. Providers can use software provided by Medicare that will print data from an ANSI 835 file in a report similar to that shown in Figure 10-8. Though health plans format their paper EOBs differently, they generally contain the information shown in Figure 10-8. Studying this figure will help you understand the data that is sent in the ANSI 835 transaction.

Insurance Eligibility and Other Transactions

Though EMC and ERA eliminate a majority of the paper transactions, several other HIPAA transactions are useful to providers.

Insurance Eligibility

Determining if a patient still has the insurance plan listed in the registration computer or if the patient is eligible for certain services is a time-consuming but necessary task for many providers. Consider these examples:
  • Medicaid patients can be eligible for services one month and then not eligible the next. Medicaid also requires precertification (getting permission in advance) for certain services.
  • Managed care patients may change PCPs. Providers may want to verify they are still the PCP before seeing a patient.
  • Providers may want to make sure the insurance information on file is correct.
  • Medical offices are too busy while seeing patients to call insurance plans to verify eligibility; however, the patient insurance coverage on file may be out of date.
  • Hospitals and ambulatory surgery centers often verify covered services before scheduling or performing a surgery.
Determining electronic eligibility involves a pair of transactions. The provider sends an eligibility inquiry in the ANSI 270 format to inquire about the eligibility, coverage, or benefits associated with a health plan, employer, plan sponsor, subscriber, or a dependent under the subscriber’s policy. The payer responds with the requested information using the ANSI 271 transaction. The payer can also send ANSI 271 transactions to communicate information about, or changes to, eligibility, coverage, or benefits from payers to physicians, hospitals, and third-party administrators.

FIGURE 10-8 Sample paper EOB remittance advice.

Though not as important as EMC and ERA in reducing paperwork for the health system at large, for hospitals that have full-time staff manually doing eligibility verification by phone, electronic eligibility verification offers a significant improvement. Additionally, providers of all sizes will reduce payment delays and rejected claims due to outdated records by verifying patients’ insurance coverage before or during the patient encounter.

Referrals and Authorizations

Some situations and health plans require providers to get prior authorization before performing certain services for patients of those plans. Historically, this has been a time-consuming process requiring that a high-level medical professional talk to the plan about the case. The ANSI 278 transaction, called the Health Care Services Request for Review and Response, can be used to replace the phone call and conduct the referral certification and authorization process. Some examples where the ANSI 278 might be used include the following:
Explanation of Numbered Points Shown in Figure 10-8
  • The EOB header contains the addresses of the health plan and the provider. The NPI (national provider identifier) is that of the billing entity (group practice). The CHECK/EFT number is used to match the EOB with checks or electronic funds transfer deposits.
  • This line contains a mix of information about the claim: NAME is the name of the beneficiary. HIC is the beneficiary’s insurance number. ACNT is the medical practice’s ID for the patient number; this might be the account, medical record, or a special number generated for this claim. ICN is an internal control number, a unique 13-digit number assigned to the claim by the plan during claims processing. ASG indicates whether the claim was assigned. MOA contains codes that correspond to remittance advice remarks. For example, MA01 is a standard remark advising providers that if they disagree with the approved amount they have the right to appeal the claim. The code MA07 indicates the claim has been forwarded to Medicaid.
  • The claim details listed here correspond to the column labels at the top of this section: PERF PROV is the 10-digit national provider ID of the provider who provided the medical service. SERV DATE is the dates the service was performed. The dates can accommodate a range (from–to) and are listed in numeric format representing month, day, and year (in this example, January 17, 2009). POS is a 2-digit code for the place of service. NOS is the number of units of service or days. PROC is the HCPCS/CPT-4 code. MODS are up to four procedure code modifiers. BILLED is the amount the provider billed for the service. ALLOWED is the amount the provider is contractually allowed for the service. DEDUCT is the amount of deductible owed by the patient. COINS is the coinsurance amount owed by the patient. GRP/RC lists any group codes and claim adjustment reason codes associated with this service line. AMT is any adjustment amount related to the reason codes. PROV PD is the amount the provider is paid by the plan for this service. There will be a claim detail line for every procedure on the original claim.
  • The claim totals line shows the totals of the details lines. PT RESP is the portion of the claim for which the patient is responsible (deductible plus coinsurance amounts). CLAIM TOTALS are the totals of all service-line-level amounts under each of the columns labeled BILLED, ALLOWED, DEDUCT, COINS, AMT, and PROV PD.
  • NET is the amount actually being included in the check for this claim. Under certain circumstances this can be less than the PROV PD amount. An example of this is shown in the fourth claim on this EOB (see 7 below.)
  • When a claim is automatically forwarded to the secondary payer, it is sometimes called a “piggyback” claim. A message on the EOB informs the provider that the claim has been forwarded to the beneficiary’s second plan.
  • An additional line can print on the EOB where there are additional adjustments to the amount paid for the claim. Often this occurs when a claim has been resubmitted. The line will begin with the label ADJ TO TOTALS. The data may include PREV PD, the amount previously paid for the services when the claim is an adjusted claim. INT is the interest amount (if any). LATE FILING CHARGE is the late filing charge (if any). Amounts in this line are added or subtracted from the PROV PD amount, which is the reason the NET amount can be different from the sum of the PROV PD for the items.
  • After all the claims have been listed, a summary section totals the amounts for each of the columns and the amount of the check or EFT payment.
  • Below the claim totals summary section, sometimes there is another section that lists provider-level adjustment details. These are adjustments that are not specific to a particular claim on this EOB. In most cases the plan is deducting money from the check for a previous claim it believes was paid in excess or in error. When this occurs a PLB REASON CODE is listed. The reason codes provide an explanation for the adjustment. In this example, code 50 is Late Filing Penalty, which is being deducted from this check for a claim on a previous EOB. The number listed under FCN is usually the ICN number from a previous EOB and the HIC number listed is the beneficiary number of the patient on that claim.
  • Notifying the plan of an inpatient admission
  • Precertification of planned inpatient admissions
  • Precertification for transfer or admission to an SNF, rehabilitation services, or long-term care facility
  • Prior approval for certain procedures
  • Referrals for managed care patients.
In this transaction, the ANSI 278 is used to send the request for authorization and for the plan to return information about the authorization, certification, or referral to the provider. Even in cases where the response from the plan is an instruction to call a plan case manager, time is saved because the provider does not have to go through customer service or wait on hold.

A REAL-LIFE STORY The Realities of Hospital Billing

By Mary E. Bazan
  • Mary Bazan is the director of billing and finance for a large multiple-facility regional healthcare system.
We have 45½ FTEs (full-time equivalent employees) in my department. There are 5 personnel who post payments, 28 billers, 7 collectors, and 5 management and administrative personnel. We also perform document scanning of financial documents, such as consent to pay, authorizations, correspondence, nonelectronic remittance advice, financial disclosures, uncompensated payers, and write-offs. The scanned document files are stored in the same system as our HIM department uses, but the document imaging management software keeps the financial documents separate from the clinical records.
In our organization, each revenue-generating department is responsible for entry of its particular charges. A great number of departments automate that process. For example, the surgery system sends us the surgery charges, as does the lab system, radiology, and pharmacy. There are still some departments that do manual posting, such as point-of-care testing, outpatient clinics, and our ER.
Our staff uses an online coding support system and has online access to CMS memos, the Federal Register, and payers’ standards. We also have a compliance checker as part of our system that uses the National Correct Coding Initiative (NCCI) edits where they are required. NCCI is a Medicare standard for bundling and unbundling rules. For example, when you have certain procedures with fluoroscopy, you have to include the fluoroscopy in the procedure as opposed to billing separately for it.
Our hospital EHR enables our billers to access medical records right from the billing department, which can be very helpful in preparing claims. There are a number of claim elements that are situational in nature. So having ready access to the medical record is of great assistance to us.
We have two monitors on every desk, so a person can have a medical record displayed on one monitor and a coding reference on another, or a payment on one monitor and a claim record on the other.
About 97 percent of our claims go out electronically. For both inpatient and outpatient billing, we have a claim scrubber application that examines the claim data and applies the kinds of audits and standards that are required by different payers. One reason to have a claim scrubber is because no one can get a claim off their patient accounting system that will meet all the various payer standards. Despite the fact that HIPAA standardized transactions and code sets, it is still amazing to see the variety of ways plans process claims. For example, when you do multiple procedures on the same date, you are supposed to use the modifier on every line, yet I deal with one HMO whose system can’t handle that. There are also substantial differences between Medicaid requirements and everyone else. With the commercial payers, Blue Cross is pretty particular about what revenue code they want and whether you use an HCPCS code or not. They don’t do UB or transactions the way that Medicare would.
We send claims through a clearinghouse, rather than directly, because you basically have to do all the support of the setup and transmissions. So we have the clearinghouse expense for claims; but with the patient statements, I wish we could find a cheaper alternative. We pay the clearinghouse less than 10 cents a claim, but our patient billing has a pretty steep overhead. We aren’t able to do guarantor level billing, so statements are sent at the account level, which generates a plethora of paper and is pretty confusing to the patients and costly to us. After the initial billing, we try to combine things into a single patient statement; however, for us this is a manual process.
There hasn’t really been much progress improving patient billing in healthcare. Over the next few years, the industry should look at allowing patients to use the Internet to check on the status of their accounts, payments, and online statements. The banking, brokerage, telephone, and utility companies have succeeded in that area. We have had a fair number of people ask for online statements and payments.
The preponderance of our payers offer online access for claim status and eligibility. Medicaid, Medicare, and some others are transactional, but many other plans offer Internet-based lookup. Medicaid was the first program where we could do automatic generation of a 276 and get a 277 back. Probably the biggest issue is if we send those through our clearinghouse, they cost us a quarter each. We are trying to develop some kind of protocol that would only solicit those verifications when needed, because that is expensive, especially for programs like Medicaid where we are already not getting much money.
We receive electronic remittance transactions from Medicare, Medicaid, Blue Cross, and our biggest HMO. Those payers represent 75 to 80 percent of our volume. The electronic remittance transactions are coded with the data for secondary billing, allowing us to automate that as well.
None of the payers are doing electronic authorizations, and we have a fair number of Medicaid HMOs with fairly stiff authorization requirements that consume a lot of our time to do it with FTEs; so that transaction would be helpful.
None of our payers are working on electronic attachments. Right now they often want records that must be sent on paper. Another problem is that HIPAA requirements do not apply to workers’ compensation (WC) and auto insurance plans. They are very work intensive for us because they require everything; they audit the entire record and are our slowest payers.
My advice is to automate as much as you can. Get as much out the door and back in electronically as possible. Also check that each step of the process happens as it should. It is possible for a large file of claims to get misrouted, lost, corrupted, or not get from the clearinghouse to the payer. Rather than wait for the payment floor, we are proactive about verification. We check the payer’s website and the payer’s system to validate that claim batches arrived and are showing on their system. We randomly select a number of claims each day and check the claim status. We can’t afford to wait 14, 30, or 45 days to discover the claim didn’t get there.
Another thing is to look at data relative to rejections and look at patterns for process improvements. Though it takes a fair amount of effort, I believe if you have statistically sound sampling you can find the cause of the problem. For example, suppose someone transposed two numbers in the charge master. Every time that code is posted it will be wrong and someone in billing has to correct that manually. By fixing the charge master, you eliminate the need to make corrections. I don’t think there is any substitute for internal auditing. It takes time, but I have never found it to be anything but valuable.
The authorization, certification, or referral number is subsequently reported on the claim so the plan will know the service was authorized and the claim will not be denied or suspended.

Claim Status

Though a claim may pass the payer’s edits, it may not be adjudicated. In certain cases the plan may ask for further information, supporting documentation, or test results relating to the case. These are called suspended claims. Sometimes providers lose track of these requests for additional information and so the claim goes unpaid. Even when the requested information has been supplied, the provider may not know what has happened to the payment.
Though providers have come to expect a built-in payment delay (called the payment floor), claims that have not been paid in a reasonable period of time must be investigated. The first step is to query the plan about the claim status. There are a number of ways to do this:
  • Call the plan help lines and ask to speak to a customer service representative.
  • Use an automated voice response phone system provided by the plan.
  • Enter data on a web page provided by the plan.
  • Send a Health Care Claim Status Request (ANSI 276 transaction) electronically and receive a Health Care Claim Status Response (ANSI 277 transaction) back from the plan.
Obviously, the EDI transaction is more efficient. The HIS computers can be programmed to automatically generate ANSI 276 requests for any claim that is not paid within a certain number of days. The ANSI 277 responses can be gathered and reported to a claims specialist at the hospital or medical office to determine what is holding up payment.

Claim Attachments

Claim attachments are supplemental documents providing additional medical information to the claims processor that cannot be accommodated within the claim format. Common attachments are certificate of medical necessity (CMN), discharge summaries, and operative reports. They are sent to the health plan with the original claim or in response to a request from the plan. They are one of the main reasons claims are suspended (waiting the arrival of paper copies of the claim attachments).
HIPAA proposed to solve this problem by creating a transaction for the electronic transmission of claim attachments. The specification has been created by a joint effort of the ANSI ASC X12n work group and a HL7 workgroup assigned to create the format called the clinical document architecture (CDA). The CDA documents are both machine readable (they are easily parsed into data elements that can be processed electronically) and human readable (they can be easily viewed and read by a person.)
The HHS final rule to make the claim attachment standard official had not yet passed as of 2009, but a Notice of Proposed Rule Making defines six types of electronic claims attachments:
  • 1. Clinical reports
  • 2. Laboratory reports
  • 3. Emergency department reports
  • 4. Rehabilitative services (care plans)
  • 5. Ambulance services
  • 6. Medications (during treatment and upon discharge).
The ANSI X12n workgroup has defined the ANSI 275 transaction as “Additional Patient Information in Support of a Health Claim or Encounter.” The ANSI 275 transaction can act like an envelope and carry the CDA data.
The X12n workgroup also proposed that the ANSI 277 claim status response act as a request to the provider to send the required attachment. Providers will also be allowed to submit the ANSI 275 with the ANSI 837 claim for cases they know will require an attachment, eliminating the need for the plan to request the attachment or suspend the claim.

Chapter 10 Summary

Electronic Data Interchange (EDI)

HIPAA standardized healthcare EDI by requiring the use of standard formats developed and maintained by ANSI. HIPAA mandated eight EDI transactions:
  • 1. Claims or equivalent encounters and coordination of benefits (ANSI 837): Due to differences in the way doctors and hospitals bill, different implementations of this format were created:
    Healthcare professionals use ANSI 837-P, which is equivalent to the paper CMS-1500 form. Institutional providers use ANSI 837-I, which is equivalent to the paper UB-04 (also called the CMS-1450) form. Dentists use ANSI 837-D.
  • 2. Remittance and payment advice (ANSI 835): Replaces the paper remittance advice or the provider’s EOB. The transaction contains all the information necessary for a computer to automatically post payments to patient accounts and bill secondary insurance.
  • 3. Claim status inquiry (ANSI 276) and response (ANSI 277): These two transactions permit providers to query a plan about the status of a claim and get a response. Claims are sometimes suspended in the payer’s system awaiting further documentation. In the future, it may be possible for the ANSI 277 transaction to be used by plans to request claim attachments.
  • 4. Eligibility benefit inquiry (ANSI 270) and response (ANSI 271): Eligibility benefit information may be requested by the provider to verify eligibility, coverage, benefits, employer, plan sponsor, subscriber, or dependents under the subscriber’s policy. Plans may send ANSI 271 without an inquiry to inform providers and third-party administrators about changes in eligibility, coverage, or benefits.
  • 5. Referral certification and authorization (ANSI 278): Some plans require prior authorization or precertification for certain procedures or treatments; for example, surgery, expensive diagnostic tests, inpatient admission, or transfer to a SNF. The ANSI 278 transaction, Health Care Services Request for Review and Response, is used. Managed care plans that require PCP referrals can also use this transaction.
  • 6. Health plan premium payments (ANSI 820): The ANSI 820 transaction can be used to transmit health plan premium payments between employers and plans for employer group plans.
  • 7. Enrollment and de-enrollment in a health plan (ANSI 834): The ANSI 834 Benefit Enrollment and Maintenance transaction is used by employers to enroll (and remove) employees from group health coverage.
  • 8. Retail drug claims, coordination of drug benefits and eligibility inquiry (NCPDP 5.1; Version D.0): Retail pharmacies communicate with health plans using the NCPDP format.
Two additional healthcare transactions are being developed, but have not become official HIPAA transactions: Patient Information in Support of a Health Claim or Encounter (ANSI 275), which is used to send additional information necessary for processing certain claims, and the first report of injury transaction, which is used for reporting workers’ compensation incidents.

Posting, Billing and Payments

There are many steps involved in the accounting and billing departments for providers to be paid. Review the billing workflow shown in Figure 10-1 and the following information:
Entering procedure and diagnosis data for billing and the subsequent payments and adjustments into the patient accounts system is called posting. Posting is done in real time (while the patient is present) or in batches. Real-time posting is commonly used in medical offices; batch posting is commonly used by billing services and for hospital billing.
Hospitals delay billing for a designated period of time after discharge called the bill-hold period. This is done to ensure that all charges from the various hospital departments have been posted before producing the claim. Because inpatient prospective payment systems determine payment by analyzing all the codes on the claim, missed procedures or diagnoses could cause the hospital to be paid less.
Medicare and many other payers withhold payments for a period of time after the claim is adjudicated; for example, 14 days for electronic claims and 29 days for paper claims. This is called the payment floor.
In many cases if the patient has secondary insurance, the provider must wait until payment is received from the primary insurance before billing the secondary plan. In certain instances, payers will automatically forward the claim to the secondary plan. These are called piggyback, crossover, or COB claims.
Though providers can send EDI transactions directly to payers, many find that they have too many plans to send each batch separately. Clearinghouses can act like a switch, receiving a large batch of claims for many payers, repackaging the claims into individual batches, and forwarding them to each plan. Clearinghouses are one of the three covered entities defined by HIPAA; thus, they are permitted to process claim batches that contain PHI.
Because providers deal with so many plans with different rules, many providers use claim scrubbers (special software that examines claim data before it is sent to eliminate preventable billing errors).
When all of the plans have paid, any remaining balance that is patient responsibility must be collected from the guarantor or patient. From the date of the visit or admission to the date the account is finally paid off, the amount owed is called the accounts receivable.
Patient bills or statements are usually sent on a monthly or periodic basis to inform the patient about what insurance has paid and what is due. There are two types of patient statements:
  • Balance Forward—begins with the previous month’s balance and shows only charges or payments posted in the current period.
  • Open Item—shows all unpaid items with payment, adjustments, and balance for each item.           
                     
                     
                     
                     
                     

Field of study: 
Date Due: 
Monday, October 22, 2018

Answer

Health Information and Technology Management

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