Medical Billing USinsurance Plan
Medical Billing USinsurance Plan

Medical Billing Guide (Training Manual)

Medical Billing Guide

Medical billing is a crucial process in the healthcare system, serving as the financial backbone for healthcare providers. It involves the submission of healthcare claims to insurance companies and government agencies to ensure that providers receive payment for services rendered. This system is essential for maintaining the financial health of medical practices, hospitals, and other healthcare facilities, as it enables a smooth flow of payments for services provided to patients. In this article, we’ll explore the key aspects of medical billing, the challenges it faces, and why it matters.

What is Medical Billing?

Medical billing is the process by which healthcare providers translate medical services into billable claims and submit them to insurance companies or government programs like Medicare and Medicaid. The objective is to ensure that the healthcare provider gets reimbursed for their services. The process involves various steps, from verifying patient insurance to processing payments, and requires specialized knowledge of medical coding and insurance protocols.

Medical billing refers to the process of submitting and following up on claims with health insurance companies to receive payment for services provided by healthcare providers. It involves:

  • Patient Registration: Collecting and verifying patient information.
  • Insurance Verification: Confirming the patient’s insurance coverage and benefits.
  • Coding: Translating medical services, diagnoses, and procedures into standardized codes using systems like CPT (Current Procedural Terminology), ICD (International Classification of Diseases), and HCPCS (Healthcare Common Procedure Coding System).
  • Claim Submission: Sending the coded information to insurance companies or government programs for payment.
  • Payment Posting: Recording payments received from insurance or patients.
  • Follow-Up: Tracking unpaid or underpaid claims and appealing denied claims.
  • Patient Billing: Invoicing patients for amounts not covered by insurance.

It requires a good understanding of healthcare regulations, insurance policies, and medical coding to ensure accurate and timely reimbursements.

Key Steps in the Medical Billing Process

  1. Patient Registration and Insurance Verification
    The first step in medical billing is gathering and verifying patient information, including insurance details. This step is crucial as it helps determine the patient’s coverage and ensures that claims are submitted correctly to the right insurer. Errors in this stage can lead to claim rejections or delays in payment.
  2. Medical Coding
    Medical coding is a critical part of the billing process. Every service, diagnosis, and procedure provided by a healthcare professional is assigned a standardized code. Common coding systems include:

    • CPT (Current Procedural Terminology): Codes for medical services and procedures.
    • ICD (International Classification of Diseases): Codes for diagnoses.
    • HCPCS (Healthcare Common Procedure Coding System): Codes for procedures, equipment, and supplies.

    Accurate coding is vital as it ensures that claims reflect the services provided, allowing insurers to process payments properly.

  3. Claim Creation and Submission
    After coding, the claim is generated and submitted to the insurance company or government program. This step often requires electronic submission through medical billing software that connects to insurance portals. Proper documentation and coding ensure that claims are not denied or delayed.
  4. Payment Processing and Posting
    Once the claim is processed, the insurance company pays the healthcare provider based on the patient’s policy. The payment is recorded, and any remaining balance is billed to the patient. This balance may include copays, deductibles, or coinsurance amounts that the insurance doesn’t cover.
  5. Denial Management and Appeals
    Not all claims are accepted on the first submission. Insurance companies may deny claims due to various reasons, such as incorrect coding, lack of documentation, or eligibility issues. The medical billing team is responsible for reviewing denied claims, correcting errors, and resubmitting them for payment. If necessary, they may also file appeals to challenge the insurance company’s decision.
  6. Patient Billing and Collections
    After the insurance company has paid its portion, any remaining balance is billed to the patient. This includes sending statements and, if necessary, managing payment plans or collections.

Challenges in Medical Billing

Despite its importance, medical billing comes with several challenges:

  • Complexity of Coding: With thousands of codes in the CPT, ICD, and HCPCS systems, coding errors can easily occur, leading to denied or delayed payments.
  • Insurance Regulations: Insurance companies have different rules, policies, and timelines, making it difficult for billers to keep track of them all.
  • Claim Denials: A significant portion of claims is initially denied, often due to incorrect coding or insufficient documentation. This requires follow-up and re-submission, which can be time-consuming.
  • Constant Updates: Medical codes, regulations, and insurance policies change frequently. Medical billers must stay updated on the latest changes to avoid errors and ensure compliance.

The Importance of Medical Billing

Medical billing plays a crucial role in maintaining the financial stability of healthcare providers. Without timely and accurate billing, providers may face cash flow issues that could affect their ability to offer quality care. Additionally, proper billing ensures that patients receive accurate statements and only pay for the services rendered, fostering transparency and trust in the healthcare system.

Medical billing is a complex yet essential process in the healthcare industry, ensuring that healthcare providers are reimbursed for the services they provide. By translating medical services into codes and managing claims with insurers, the billing process keeps the financial aspects of healthcare running smoothly. As the healthcare landscape evolves, so too must the medical billing processes, with billers needing to stay informed about the latest coding updates and regulations to avoid errors and ensure efficient payment collection.

What is a billing center/ house?

Billing center is a centralized office that handles the provider/ hospital’s billing activities. It
could be a part of the hospital network or can be an outsourced organization. Billing houses
relieve the burden of maintaining hospital bills and accounts and assist in claims submission
process. Billing houses can handle more than one hospital/ provider at a time as they are
independent organization.

How Billing Companies Charge For Services?

Two common methods used to charge for billing services are:

  • Flat fee per claim basis
  • Percentage of accounts receivables per month

The flat fee method was popular when this service business first came into being.
Companies would charge from $2.50-$4.50 per claim and 50% of that amount for
resubmissions. All other charges would be billed separately. Ex: patient bills, EMC fees, and
postage costs. This method is not widely used today.

The number one method used today is the percentage of accounts receivables in a given
month. This percentage can range from 5% to as high as 16%. It is our opinion that 10% and
up is on the high end. If you are contemplating going with a company charging this rate be
sure that there are no additional charges and try to lock that rate in for a few years.

Many companies will include patient bills, clearing house fees, and postage costs as part of your
percentage. This is an area where you may be able to negotiate. The one time set up fees
range from $500.00-$2500.00 depending on the level of work that is required up front. Prior
to the first claim being generated your practice needs to be set up on computer.

This involves setting up your providers, places of service, provider ID’s, insurance carriers,
ICD9/CPT codes, fee schedules, patient base and productivity reporting. The billing service
needs to contact carriers advising them of the billing intermediary status on your behalf as
well as testing and getting you set up with the EMC carriers. Those companies charging the
higher rates may be setting up software for you and or training your staff along with some
consulting services.

What is the overall billing process?

After the provider renders services to the patient, the billing company will submit bills to the
insurance company/ payer, using the insurance information that was last provided, as well
as information about the reason for the examination, and the exact type of procedure
performed.

Medical Billing and Collection Lifecycle

What does a billing center do with respect to claims process?

A billing center’s full service approach includes:

 claim entry,
 primary and secondary electronic and computer generated hard copy claims,
 patient primary, co-insurance and deductible billing,
 the handling of all telephone and written inquires regarding claims and billing issues,
 payment application and deposits,
 and insurance and patient follow-up on unpaid claims.
 It should be able to provide electronic billing for all insurance carriers, including
Medicare, Medicaid, Blue Cross/Blue Shield and NEIC companies and also a vast array
of medical practice analysis reports, to facilitate better management of your medical
practice operation.

The needs of all medical practices are not the same. The billing center should customize its
services to meet the unique needs of each client. Whenever possible, however, procedures
and forms already in place should be utilized. The billing center should be able to adapt its
protocols

Various Departments in the Billing House:

Charge Entry Team
Quality Assurance
Transmission
Scan
Cash Posting Team
Account Receivables (AR)

Charge Entry

They are responsible for registering patient details & the charges in the billing system.

Registration Process:

This is a process wherein patient information is collected from the patient at the time of
entry at the hospital. The hospital front office staff has to do the following functions in this
regard:

When a patient first requests an appointment, before the formal registration process begins,
the practice requests the patient for the name of his or her insurance company. For e.g. if a
patient has an insurance plan that requires him or her to seek services only from a
contracted physician and the practice does not include a contracted physician from that
plan, but still the patient insists on an appointment, the hospital informs the patient of his or
her obligation to pay the physician in full on the day of the appointment. If a patient belongs
to a plan, which requires a referral (an authorization from a patient’s PCP), the correct
referral information – the proper paper form or an authorization number is collected.
After fixing up the appointment of when the patient comes into the hospital, the staff gives
a registration packet to the patient.

This contains the hospital brochure, the financial policy and the registration form. With the hospital brochure, the hospital welcomes the patient, describes in brief about the hospital history and structure, about its doctors, staff, facilities etc. It also gives the scheduled appointment timings of various doctors. The financial policy details about the payments by patients for treatments not covered by insurance, noncontracted payers etc. The registration form contains the patient information and the
insurance information. The patient or an authorized person should sign the registration form
at two places – one for authorizing the physician to release medical information in order to
submit a claim and one for assigning benefits to the physician. Ideally this packet would be
mailed to the patient immediately after his appointment is fixed so that when the patient
arrives on the appointment day, he or she would have completed filling in the registration
form.

The hospital must also request the patient to give a copy of his insurance cards. This is very
much necessary since the card copy contains the insurance plan details and the correct
identification number of the plan and the claims mailing address. A copy in the patient’s file
is also necessary for the fact that at the time the patient leaves the hospital, the card copy
can be verified to see if any co-pay needs to be collected from the patient.

A copy of the patient’s driver’s license is also necessary. This is required because, patient
can be traced of his whereabouts when he has moved or left no forwarding address.

Pre-authorization:

This is a requirement to be adhered to before the patient gets registered for treatment. Also
known as pre-certification, this requires notification to the plan of certain planned services
and all elective inpatient hospitalizations before they are rendered. Depending on the plan,
either the patient or the provider must seek pre-authorization for these services. Certain
managed care plans require the patients to go through a contracted physician participating
in their network. If the patient gets treated through a physician not part of the network then
the managed care plan require the physician to call the plan and notify them of the
treatment before hand. Only after their approval can the treatment proceed. If the
treatment is done without the approval, then the managed care plan will not reimburse the
physician for their services nor can the physician bill the patient. This approval is called preauthorization
and a copy of this should be made available in the patient’s file before the
treatment is rendered. Another requirement is to obtain a second opinion from an impartial
physician regarding medical necessity of the procedure to be performed.

A service is deemed medically necessary when:

  • It is appropriate for the diagnosis being reported.
  • It is provided in the appropriate location.
  • It is not provided for the patient’s or his/ her family’s convenience.
  • It is not custodial care. (Custodial care is care that can be provided by people who
    are not trained medical professionals.)

Once the authorization has been granted, an authorization number would be given. This
number should be reported on the claim for the service.

Demographic Entry requires the following information:

1. Patient Details – Last name, First name, Middle Initial.
2. Patient’s Sex & DOB – DOB should be in the format MM/DD/YYYY.
3. Patient’s SSN# – Social Security Number is always 9 digit numeric. The Social
Security Administration of the United States of America allots this number to all
American Citizens.
4. Patient’s Address
5. Guarantor’s Details
6. Employer Details
7. Insurance Details – Name, ID#, Group#, Address, Subscriber Details.

Charge Entry Process:

When the initial procedure of registration of patients is completed, the treatment is carried
out. During this activity, the physician has to fill in the charge sheet or the super-bill
showing details of the treatment rendered. This form shows the patient name, date of
service, time of service, doctor performing the service, procedure description and diagnosis
description. The attending doctor should sign this form. A sample charge sheet/ super-bill is
attached. Based on the procedure & diagnosis descriptions, the CPT/ HCPCS codes and the
ICD-9 codes would be filled in. This is an internal form and would be used in filling up the
claim to be sent to the carrier. This should not be used as a medical record to be attached
along with the claim.

Frequently there may be situations where there is more than one diagnosis to be fixed for a
particular procedure. In such cases it should be made clear on the charge sheet or superbill.
Coding of procedures & diagnosis:

This is a process whereby the procedures and diagnosis given in the charge sheet are
coded. As discussed earlier the most common coding systems used for procedures and
diagnosis is CPT-4 and ICD-9 respectively. Based on the doctor’s medical impressions and
the indications in the super-bill we need to fix a proper code for the procedure and
diagnosis. This is a complicated, lengthy and time-consuming process and involves research
and analysis. Since incorrect coding leads to breach of compliance, we need to be very
careful in this aspect.

Some carriers, particularly Medicare, require only certain diagnosis to be reported for
certain procedures since according to them other diagnosis is not medically necessary to be
treated with this procedure. Hence HCFA has set up a CPT-ICD9 linkage wherein they state
the list of ICD9 codes that correspond to a CPT code. In other words, it specifies what may
be the kinds of diseases/ symptoms for which this treatment is being given.
ICD or International Classification of Diseases is a cluster of codes defined to describe the
symptoms and ailments of patients. Originally based on a list of codes published by WHO
(World Health Organization), this is recognized by the US Department of Health and Human
Services. ICD-9-CM refers to International Classification of Diseases, Ninth Revision, and
Clinical Modification.

ICD-9-CM codes are 3, 4 or 5 digit numerical codes from 001 to 999.9. The three-digit code
is the parent code giving the name of the disease. The supplemental four or five digit codes
under that three-digit code are more specific. When there are more specific codes for a
particular disease, we need to use that code only. We should use the three-digit code only
where the fourth or fifth digit is not available. In addition there are V-codes and E-codes. V
Codes are Supplementary of Factors Influencing Health Status and Contact with Health
Services (V01-V82). E Codes are Supplementary Classification of External Causes of Injury
and Poisoning (E800-E999).

The following terms are important to understand.

Unbundling: This refers to a situation where two procedures are reported where one is
included in the other or there is a third procedure which covers both for a lesser value
(lesser than the value of both the procedures put together).

Up coding: This refers to a situation where a more complex procedure is used than is
warranted by the diagnosis reported. A simpler procedure could be used instead.

Pre-coding: Before the actual data entry is commenced for demographics and charge-entry, it is
desirable to pre-code all those fields wherein a code is available. For e.g. in demographics,
patient account number and insurance company number are ideal for coding. Similarly in
charge-entry, doctor number, referring doctor number, facility id, place of service and
modifier are ideal for coding. If this coding is done before hand, it will be simple & fast for
the data entry person and will save him/her a lot of time in searching for the code or adding
masters.

Procedures: CPT-4, HCPCS & Other Coding System

CPT-4 or Current Procedural Terminology is a set of codes defined to describe the
procedures/ treatment rendered to the patients. Developed by the American Medical
Association, this coding system has been acknowledged by the Health Care Financing
Administration and all Insurance Carriers. This is a five digit numeric code starting from
10000-99999. The entire set of codes from 10000-99999 is subdivided into various ranges
of codes covering various body sites/ specialty of treatment such as Integumentary,
Musculoskeletal, Respiratory, Female Genital, Male Genital, Digestive, Urinary,
Cardiovascular & Nervous Systems, Radiology, Nuclear Medicine, Evaluation & Management
etc.

HCPCS

In 1985, the health care financing administration [HCFA], an administrative agency of the US
congress responsible for the operations of Medicare & Medicaid programs, began using the
HCPCS [HCFA common procedural coding system] a national uniform coding system for
reporting health care services to the Medicare program. HCPCS is a tri level system
developed to augment the existing CPT-4 system and to provide a clearing house for the
assignment of temporary code numbers for newly developed medical and surgical
procedures prior to their appearance in the CPT system :

Level I codes are the existing CPT 4 codes

Level II codes are national codes augmenting CPT-4. These codes are established to allow
more definitive reporting of physician services, such as injections of specific medications.
These codes are also used for reporting non physician services such as a patient transportation services, durable medical equipment, orthotics, prosthetics, specific medical supplies, dental procedures, rehabilitative services, speech, language and auditory screening, etc..

Level III codes generally are codes used by each regional Medicare fiscal intermediary. A
fiscal intermediary is a large private insurance company that has been awarded the federal
contract for processing claims for federally administered programmes.

HCPCS Codes meaning HCFA Common Procedure Coding System are codes designed by the
Health Care Financing Administration (HCFA). They are alphanumeric codes, which are
accepted by certain limited carriers and are used in cases where no appropriate code
figures in CPT-4.

ASA Codes developed by American Society of Anesthesiologists are codes that need to be
used for anesthesia billing. The codes range from 00100 through 01999. All Medicare
carriers and certain Medicaid carriers accept these codes.

Relative Value Units

RVU or Relative Value Units are units assigned to CPT codes for reimbursement. This is
brought out by the Omnibus Budget Reconciliation Act of 1989 (OBRA, later amended in
1990). The relative value for each service is the sum of relative value units (RVUs) that
reflect the resources involved in furnishing the three components of a physician’s service:

  1. Work;
  2. Practice Expenses; and
  3. Cost of Malpractice insurance.

Facility

Facility is the place where the doctor sees the patient. It can be a hospital, a nursing home,
a skilled nursing facility, Ambulatory Surgical Center, Radiation Oncology Center, a clinic or
even the patient’s home.

Place of Service (POS)

Give the correct place of service code for inpatient, outpatient, office consultation,
emergency room, ambulatory surgical center etc.

Admit Date, Discharge Date, Injury Date, Though these are not compulsory fields it is desirable to provide this information. Injury date is a must for Workmen’s compensation claims.

Referral Number, Prior authorization Number

As explained above, for cases that require prior authorization the authorization or the
referral number should be stated. If there is an authorization or referral on file but no
number has been allotted, we should just state “referral on file” in the above field.
From Date of Service, To Date of Service,

Date of service (DOS) is the date on which the treatment is rendered to the patient. This may be
just one date or a range of dates. We need to fill in this information as given in the charge
sheet/ super-bill.

Modifier

Modifiers are codes that are used to “enhance or alter the description of a service or supply
under certain circumstances. A modifier provides the means by which the reporting
physician can indicate that a service or procedure that has been performed has been
altered by some specific circumstance but has not changed in its definition or code. The
judicious application of modifiers obviates the necessity for separate procedure listings that
may describe the modifying circumstance.

Modifiers may be used to indicate to the recipient of a report that:

  • A service or procedure has both a professional and technical component.
  • A service or procedure was performed by more than one physician and/or in more
    than one location.
  • A service or procedure has been increased or reduced.
  • Only part of a service was performed.
  • An adjunctive service was performed.
  • A bilateral procedure was performed.
  • A service or procedure was provided more than once.
  • Unusual events occurred.
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