MHI 610 Module 3 Assignment InstructionsPrepare a professional presentation on HIPAA regulations as related to electronic billing. The
presentation should be 10-12 slides not including the introduction and references.
Chapter 10
Managing Insurance, Billing, and
Reimbursement
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Learning Objectives
10.1 Define health insurance and understand the concepts
related to health coverage.
10.2 Discuss the evolution of health insurance.
10.3 Define individual and group insurance plans.
10.4 Differentiate between fee-for-service, managed care, and
value-based insurance plans.
10.5 Define and discuss different types of governmentsponsored health plans.
10.6 Discuss the importance and methods of verifying
insurance.
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Learning Objectives, Continued
10.7 Define practice management and explain how it relates
to billing and electronic office billing systems.
10.8 Discuss how electronic health records (EHRs) affect
billing processes.
10.9 Demonstrate billing processes utilizing EHR software.
10.10
Demonstrate use of an electronic office billing
system.
10.11
Demonstrate insurance claims processing.
10.12
Demonstrate use of practice management
reports.
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Introduction
• To understand health insurance, billing, and
reimbursement, it is important to understand revenue
cycle management.
– Revenue cycle: “All administrative and clinical functions that
contribute to the capture, management, and collection of
patient service revenue.” (Healthcare Financial Management
Association)
– Admission/registration clerks enter insurance information
into the EHR system.
– The clerk or insurance verifier confirms the patient’s
insurance coverage with the insurance company.
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Introduction, Continued
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10.1 Health Insurance
• Premium: a specified number of consistent payments to an
insurance company in exchange for payment if something occurs
• Health insurance: a type of insurance that pays for healthcare
services that are incurred by the insured person(s)
• Health coverage: the legal entitlement to payment or
reimbursement for healthcare costs, generally under a contract
with:
– A health insurance company,
– A group health plan offered in connection with employment, or
– A government program like Medicare, Medicaid, or the Children’s
Health Insurance Program
• Third-party payer: someone other than the patient pays for
healthcare services
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10.1 Health Insurance, Continued
History of National Health Insurance and Medicare
• 1945: President Truman calls for creation of national
health insurance fund for all Americans
• 1965: Medicare established under President Johnson
• 1972: President Nixon expands Medicare
• 1973: Health Maintenance Organization (HMO) Act
provides grants to employers who set up HMOs
• 1980: Omnibus Reconciliation Act of 1980 expands
home health services and brings Medigap—or Medicare
supplemental insurance—under federal oversight
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10.1 Health Insurance, Continued
• 1982: Hospice services for the terminally ill added to
Medicare benefits; Medicare Part C implemented
• 1986: Consolidated Omnibus Budget Reconciliation Act of
1985 (COBRA)
• 1996: Health Insurance Portability and Accountability
Act (HIPAA)
• 2001: Expanded Medicare benefits for younger people
with amyotrophic lateral sclerosis
• 2003: President Bush signs Medicare Prescription Drug
Improvement and Modernization Act of 2003, adding an
optional prescription drug benefit
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10.1 Health Insurance, Continued
• 2010: Affordable Care Act (ACA) enacted in two parts:
– Patient Protection and Affordable Care Act
– Health Care and Education Reconciliation Act
• Required immediate improvements in healthcare coverage
for all Americans
• Preserved and expanded insurance coverage
• Made insurance coverage available for all Americans
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10.1 Health Insurance, Continued
Insurance Terminology
• Subscriber: the person whose insurance coverage is used
for acute or outpatient care
• Coinsurance: the insured person’s share of the costs of a
covered healthcare service, calculated as a percentage of
the allowed amount for the service
• Copayment: a fixed amount that an insured individual
pays for a covered healthcare service, usually at the time
the service is provided
• Out-of-pocket amount: expenses for medical care that
aren’t reimbursed by the insurance company
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10.1 Health Insurance, Continued
• Allowed amount: the maximum amount on which
payment is based for covered healthcare services
• Benefit year: the year of insurance benefits coverage
under an individual health insurance plan
• Annual limit: a cap on the benefits the insurance
company will pay in a year
• Lifetime limit: a cap on the total lifetime benefits an
individual may receive from the insurance company
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10.1 Health Insurance, Continued
• Guarantor: the individual responsible for payment
– Covered dependents: those covered by the guarantor’s
insurance plan (e.g., spouse or children)
© Valeri Potapova/Shutterstock.com
• Deductible: the amount an insured individual must pay
out of pocket before the insurance will pay
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10.1 Health Insurance, Continued
Classifying Insurance Plans
• Insurance plans are classified as either.
– An individual health insurance plan: an insurance plan
that an individual purchases for himself or herself and/or his
or her family
– Or a group health insurance plan: provides healthcare
coverage to a specific group of people, typically based on an
employer
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10.1 Health Insurance, Continued
• Traditionally, health insurance plans have been fee-forservice plans.
– Healthcare provider is reimbursed for every test, procedure,
and service
– Too expensive for insurance companies
• Managed health insurance plans, or managed care plans,
have replaced most fee-for-service plans.
– Reduce costs by giving subscribers choices in their health
care that impose certain rules or restrictions
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10.1 Health Insurance, Continued
Three types of managed care plans:
• Health maintenance organization (HMO): usually limits
coverage to include care only from doctors who work for or
contract with the HMO
– Integrated care: systematic coordination of health
• Preferred provider organization (PPO): contracts with
medical providers, such as hospitals and doctors, to create
a network of participating providers
• Point of service (POS) plans: considered to be a hybrid of
HMOs and PPOs and the most flexible managed care
insurance plans
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10.1 Health Insurance, Continued
• Value-based plan: healthcare providers are reimbursed for
the services they provide, but also receive incentive
payments or reductions in payments based on patient
outcomes
• Consolidated Omnibus Budget Reconciliation Act
(COBRA): a federal law that may allow individuals to
temporarily keep health coverage after their employment
ends, they lose coverage as a dependent of the covered
employee, or another qualifying event occurs
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10.1 Health Insurance, Continued
Insurance Classification of Healthcare Providers
• In-network: includes providers or healthcare facilities that
are part of a health plan’s group of providers with which it
has negotiated a discount
• Out-of-network: usually refers to physicians, hospitals, or
other healthcare providers who are considered
nonparticipants in an insurance plan (usually an HMO or
PPO)
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10.1 Health Insurance, Continued
Government-Sponsored Healthcare Programs
• Medicare: a federal health insurance program for people
who are aged 65 or older and certain younger people with
disabilities
– Medicare Part A: hospital insurance
– Medicare Part B: medical insurance
– Medicare Part C: Medicare Advantage Plans
– Medicare Part D: helps pay for prescription drugs for
Medicare beneficiaries
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10.1 Health Insurance, Continued
• Medicaid: a state-administered health insurance program
for low-income families and children, pregnant women, the
elderly, people with disabilities, and in some states, other
qualified adults
• CHAMPVA: a comprehensive healthcare benefits program
in which the Department of Veterans Affairs shares the cost
of covered healthcare services and supplies with eligible
beneficiaries
• TRICARE: a Department of Defense regionally managed
healthcare program for active duty and retired members of
the uniformed services, their families, and survivors
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10.1 Health Insurance, Continued
© ALPAPROD/Shutterstock.com
• Workers’ compensation: an insurance plan that
employers are required to have to cover employees who
get sick or injured on the job
• Employees are typically reimbursed with four types of
payment (see next slides)
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10.1 Health Insurance, Continued
– Income replacement benefits
• Temporary total disability (TTD) benefits: employee has
been injured at work and cannot perform their work duties
• Temporary partial disability (TPD) benefits: employee
works in a reduced capacity but cannot work to the same extent
as they could before their injury or illness
• Permanent total disability (PTD) benefits: the worker’s
injury permanently prevents the worker from returning to their
former occupation
• Permanent partial disability (PPD) benefits: medical
maximum improvement has been achieved and a worker may
be able to work in some capacity, but the injury has caused
damage for an indefinite period and they cannot return to their
old occupation
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10.1 Health Insurance, Continued
– Healthcare treatment: the medical provider who treats the
work-related injury or illness will be paid directly by the
patient’s employer’s insurer
– Mileage reimbursement: employees injured at work who
must travel to their medical appointments will receive
reimbursement from their employers for the mileage cost
and for some of the wages they lose while in transit to and
from, and during their appointments
– Burial and death benefits: entitled to dependents of an
employee who dies from a work-related illness or injury
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10.1 Health Insurance, Continued
Verification of Insurance Coverage and Benefits
• Major insurance plans have web pages for online eligibility
requests to determine coverage and benefits for their
subscribers.
• Medicare and Medicaid also have online eligibility
databases for providers to query.
• HIPAA Eligibility Transaction System (HETS): the
Medicare eligibility database application
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10.1 Health Insurance, Continued
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10.1 Health Insurance, Continued
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Source: CMS.gov
10.1 Health Insurance, Continued
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10.1 Health Insurance, Continued
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10.2 The Billing Process
• Practice management: the day-to-day operations of a
medical practice
• The billing aspect of a medical practice includes:
– Claims processing
– Claims management
– Revenue management
– Reporting
• Patient data must be updated to ensure accurate billing
and reimbursement.
• Payment method must be verified and entered into the
EHR.
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10.2 The Billing Process, Continued
• An EHR system may:
– Have a billing software component built in, or
– Interface with a separate billing software program
• Electronic superbill: an itemized form that allows charges
to be captured from a patient visit
• Charge entry: the process of entering medical codes into
the billing system
• After charge entry, electronic insurance claims and bills are
produced.
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10.2 The Billing Process, Continued
• CMS-1500: a universal claim form accepted by Medicare,
Medicaid, and most insurance payers
– Traditionally, insurance companies were billed for services
provided in a physician’s office using this paper form.
• HIPAA requires most claims now be processed
electronically using the the HIPAA X12 837 Healthcare
Claim.
• In an inpatient facility, the UB-04 (CMS-1450) is the paper
form used to bill Medicare.
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10.2 The Billing Process, Continued
• Most EHR systems have a billing software component that
may or may not be used by the healthcare organization.
• Interface: provides communication flow between two or
more computer systems
• Benefits of using an EHR for billing operations:
– Improved accuracy
– Improved efficiency
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10.2 The Billing Process, Continued
• A superbill is a staple of every physician office.
– Records the diagnosis and treatment for each patient at each
visit
– Content varies by healthcare organization
• Common diagnoses and procedures charged by the
organization
• Checkboxes next to the diagnoses, procedures, and associated
International Statistical Classification of Diseases and Related
Health Problems (ICD) and Current Procedural Terminology
(CPT) codes
– A useful tool in coding compliance activities
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10.2 The Billing Process, Continued
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10.2 The Billing Process, Continued
• Claims should be reviewed for accuracy and marked as
“Ready for Final Billing” before transmission.
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10.2 The Billing Process, Continued
• Claim scrubbing: the process of checking claims for errors
before transmitting them to insurance companies
• Once any errors are corrected, the claim goes to the payer
or to a medical claims clearinghouse:
– A company that accepts electronic claims from healthcare
providers, scrubs them, transmits the clean claims to the
appropriate payer, and returns the claims that have errors to
the provider
– Clean claims: those without errors
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10.2 The Billing Process, Continued
• When the final bill is transmitted, the EHR system
automatically updates to reflect the name of the payer, the
date, and amount billed.
• Claims are electronically transmitted to payers or the
clearinghouse.
• Patient bills are printed and mailed or emailed.
• Upon receipt of payments, providers:
– Update patient accounts with payment information
– Post adjustments
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10.3 Reimbursement Methodology
• Reimbursement: the act of compensating a person for
services rendered
• Fee-for-service: a reimbursement method that requests
payment for each service or procedure
– Each service or procedure has a set fee or charge.
– Providers are reimbursed per the third-party payer fee
schedule.
• Fee schedule: a price list of services and procedures
• Many healthcare providers base their fees on the CMS
Medicare Physician Fee Schedule (MPFS).
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10.3 Reimbursement Methodology,
Continued
• Medicare uses the resource-based relative value scale
(RBRVS) to create the MPFS.
• The RBRVS uses three factors to calculate the value of a
service or procedure:
1. Relative value units (RVU) calculated for three
components:
• Work RVUs
• Practice expense RVUs
• Malpractice RVUs
2. Geographic practice cost indices (GPCI): adjustments
applied to the RVUs to account for variations in the costs of
practicing medicine in specific geographic regions
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10.3 Reimbursement Methodology,
Continued
3. Conversion factor (CF): a fiscal year monetary amount
adjusted annually and derived from a formula set by
Congress to convert the GPCI into a dollar amount that
reflects:
• Category of services
• Percentage of changes to the Medicare Economic Index
• Physician expenditures
• Access to health care
• Quality of health care
• Health insurance companies base their fees on the MPFS.
• Hospital chargemaster: computer database that compiles
all procedures, services, supplies, and drugs that are billed
to insurance payers
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10.3 Reimbursement Methodology,
Continued
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Consider This
Let’s look at CPT code 20610, Arthrocentesis, aspiration and/or injection,
major joint or bursa (e.g., shoulder, hip, knee, subacromial bursa); without
ultrasound guidance. Code 20610 may be reported for the removal of fluid
from a major joint or bursa. It may also be reported for the injection of drugs
into a major joint or bursa. Physician’s offices typically accept patients with
Medicare, Medicaid, and commercial insurance. The physician, who is
contracted with the payers, has access to the fee schedules for each payer. The
following is a list of the payers’ fees for code 20610 as well as the office fee:
Payers’ Fee Schedule for Code 20610:
Medicare $61.14
Medicaid $58.12
Commercial payer $78.28
Physician’s Office Fee Schedule:
Code 20610 $85.00
(continued)
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Consider This, Continued
The fee schedule shows that each payer has a different
allowable fee for code 20610. The commercial payer fee
represents a single amount despite the range of fees set by
the many different commercial payers that all have their own
fee schedules. Rather than looking up the exact fee for each
payer, billing is expedited if the physician’s office has one set
fee for code 20610, typically set a few dollars above the
highest listed fee on the commercial payers’ fee schedules. If
the fee is set lower than what is listed on the fee schedule,
and the reimbursement is approved, the payer will pay only
the amount requested. In our example, the physician’s office
sets a fee of $85.00 for code 20610.
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10.4 Practice Management Reports
• Billing/payment
status report: lists
the status of every
patient account,
allowing the billing
staff to identify claims
that need to be billed
or rebilled and
insurance payers that
need to be contacted
regarding lack of
payment
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10.4 Practice Management Reports,
Continued
• Remittance advice (RA) report: lists the patient’s
information and amount paid by Medicare or another
payer to the physician practice
• The EHR system generates financial and statistical
production reports to assist the practice manager with
budgeting and revenue management.
– Assist in financial reconciliations of billed charges, receipts,
and adjustments
– Indicate opportunities to improve the management of
practice revenues and expenses, plus billing, accounts
receivable, and collections processes
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10.4 Practice Management Reports,
Continued
• Production by provider
report: shows how many
patients are treated within
a specified period by each
provider in a practice,
along with the revenue
generated
• Can be used for:
– Calculating provider
salaries
– Calculating the number of
appointment slots needed
for each provider
– Scheduling staff
– Ordering supplies
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10.4 Practice Management Reports,
Continued
• Production by
procedure report:
reflects the number of
procedures
performed during a
specific time period
along with the
associated revenue
• Data sort: arranging
data in a particular
sequence, from high
to low or low to high
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10.4 Practice Management Reports,
Continued
• Production by insurance report: reflects the amount of
revenue generated by each insurance carrier
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10.4 Practice Management Reports,
Continued
• Day sheet: a report of practice activity for a 24-hour
period
– Used to reconcile patient accounts and ensure that no fraud,
abuse, or theft is occurring
• Patient day sheet: contains the patient’s name, account
number, description of activity, provider, transaction code,
amount, and end-of-report totals
• Payment day sheet: lists payments made during a 24hour period
• Procedure day sheet lists the procedures charged during
a 24-hour period
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10.4 Practice Management Reports,
Continued
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10.4 Practice Management Reports,
Continued
• Deposit report:
reflects the totals for
payments from
insurance payers and
from patient payers
made in cash, checks,
credit cards, and
electronic direct
deposit
• Patient ledger: a
report that reflects the
patient’s financial
status in summary
and/or in detail
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10.4 Practice Management Reports,
Continued
• Patient aging report: an accounts receivable report that shows
how long patients have owed money to the practice
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