Chapter 2 Billing and Coding for Health Services

Chapter 2 Billing and Coding for Health Services

LEARNING OBJECTIVES

After studying this chapter, you should be able to do the following:

· 1. Describe the revenue cycle for healthcare firms.

· 2. Understand the role of coding information in healthcare organizations in claim generation.

· 3. Define the basic characteristics of charge masters.

· 4. Define the two major bill types used in healthcare firms.

· 5. Appreciate the role of claims editing in the bill submission process.

REAL-WORLD SCENARIO

Riley Ilene, the Chief Financial Officer of Campbell Hospital, was concerned by the reduction in revenue during the last 3 months. The revenue reduction was most pronounced in the outpatient arena and represented a 15% reduction from prior-year levels. Loss of this revenue had eroded Campbell’s already thin operating margins, and the hospital was now operating with losses.

Riley’s first thought was that volume may be down from prior-year levels. She asked her controller, Michael Dean, to report on comparative volumes for last year and this year. Michael’s report showed that total numbers of outpatient visits were actually above last year. Furthermore, the increases in volumes appeared relatively uniform across all product line groupings. Riley then directed Michael to review “Revenue and Usage” summaries for the current year and last year. A revenue and usage summary would show the quantity of items billed by charge code and payer. The summaries would also break out the volumes by inpatient and outpatient areas.

After reviewing these data Michael reported back to Riley with some startling news. Volumes for several procedures in the hospital’s “charge master” were well below prior-year levels. Specifically, the numbers of drug administration codes that are reported when an injectable or infusible drug is administered were well below prior-year levels. This was surprising because the number of injectable and infusible drugs had actually increased.

Riley Ilene thought she had discovered the problem and reported back to her CEO, Meredith Lynn. Meredith, however, asked Riley whether this could have caused the revenue reduction. Meredith believed that a heavy percentage of the hospital’s payment was related to either case payment for inpatients or APC (ambulatory patient classification) groups for outpatients. Meredith believed that these bundled payments would not be impacted by a failure to document the drug administration procedures.

Riley said that this was a good point and she would do some additional research and report back to Meredith. Riley found that Medicare provides separate payment for the drug administration procedure when performed in outpatient visits. The average loss for the undocumented procedure codes appeared to average about $130 per occurrence. Riley also found that many of their commercial payers paid on a discount from billed charge basis. Failure to report these procedures for these payers would result in lost revenue. The only remaining task was to discover why charges for drug administration procedures for outpatient procedures were not being recorded.

LEARNING OBJECTIVE 1

Describe the revenue cycle for healthcare firms.

Healthcare firms are for the most part business-oriented organizations. Their ultimate financial survival depends on a consistent and recurring flow of funds from the services they provide to patients. Without an adequate stream of revenue these firms would be forced to cease operations. In this regard, healthcare firms are similar to most business entities that sell products or services in our economy. Figure 2–1 depicts the stages involved in the revenue cycle for a healthcare firm. The critical stages in the revenue cycle for healthcare firms are the provision and documentation of services to the patient, the generation of charges for those services, the preparation of a bill or claim , the submission of the bill or claim to the respective payer, and the collection of payment.

Figure 2-1 Revenue Cycle

A simple review of the six stages of the revenue cycle in Figure 2–1 hides the significant degree of complexity involved in revenue generation for healthcare providers. No other industry in our nation’s economy experiences the same level of billing complexity that most healthcare firms face. Part of this complexity is related to the nature and importance of the services provided. Regulation is also a factor that further complicates documentation and billing for healthcare services. Finally, the existence of different payment methods and rates for multiple payers further complicates the revenue cycle for most healthcare firms. Payment complexity is addressed in Chapter 3 .

LEARNING OBJECTIVE 2

Understand the role of coding information in healthcare organizations in claim generation.

GENERATING HEALTHCARE CLAIMS

Figure 2–2 provides more detail to the steps and processes involved in the actual generation of a health-care bill or claim. The process and steps mirror those in Figure 2–1 except additional detail unique to health-care firms is included. The process often begins with the collection of information about the patient before the delivery of services in the patient registration function. Information about the patient, including address, date of birth, and insurance data, is collected to facilitate bill preparation after services are provided. Once services have been provided, data from that encounter(s) flow into two areas: medical documentation and charge capture.

Figure 2-2 Detailed Revenue Cycle

Although the primary purpose of the data accumulated in the medical record may be related to clinical decision making, a substantial proportion of the information may also be linked to billing. For example, the assignment of diagnosis and procedure codes within the medical record by physicians plays a key role in diagnosis-related group (DRG) assignment. Many healthcare payers provide payment for inpatient care based on DRG assignment. Data in the medical record are also the primary source for documenting the provision of services. For example, if a patient’s bill listed a series of drugs used by the patient but the medical record did not show those drugs as being used, the claim would not be supported. The primary linkage between the claim and the medical record is related to the documentation of specific services provided and their reporting in a series of clinical codes. We explore the categories of coding and their importance to billing shortly.

Data from the provision of services also flow directly to billing through the capture of charges. The posting of charges to a patient’s account is usually accomplished through the issuance and collection of “charge slips” in a manual mode or through direct order entry or bar code readers in an automated system. The critical link here is the firm’s price list, often referred to as its “charge master” or charge description master (CdM) . The CDM is simply a list of all items for which the firm has established specific prices. In a hospital setting it is not unusual to find more than 20,000 items on its charge master.

Information from the medical record and the charge master then flow into the actual claim. For most healthcare firms there are two basic categories of claims: the Uniform Bill 2004 (UB-04) and the Centers for Medicare & Medicaid Services (CMS) 1500. The UB-04 is the claim form used for most hospitals to report claims for both inpatient and outpatient services. The CMS-1500 is used primarily for physician and professional claims. Appendix 2–A provides samples of these two claim forms.

The final step before actual claim submission is claims editing. Although this step may not be performed by all healthcare firms, it is a critical step for many. In this editing process several key areas are reviewed. First, does the claim have enough information to trigger payment by the patient’s payer? For example, perhaps the claim is missing the patient’s social security number or healthcare plan identification number. Second, does the claim meet logical standards and is it complete? For example, a claim may have a charge for laboratory panel but no charge for a blood draw to collect the sample. Editing is critical to accurate and timely payment by third-party payers.

REGISTRATION

In most cases a patient or their representative provides a basic set of information regarding the patient before the actual delivery of services. In a physician’s office this may be done just before medical service performance. For an elective hospital inpatient admission, it may be done a week or more before admission. A number of clinical and financial sets of information are collected at this point. From the financial perspective, three activities are especially important in the billing and collection process.

Perhaps the most important activity is insurance verification. If the patient has indicated they have third-party insurance coverage, it is important to have this coverage verified from the payer. The patient may also have secondary coverage from another health plan. Verification of that coverage is also critical to accurate and timely billing. The critical piece of information to collect from the patient in this regard is their health plan identification number, which may sometimes be their social security number. Queries to the health plan before service can validate the type of coverage provided by the health plan and the eligibility of the patient for the scheduled service. In today’s current environment insurance verification is often done online. Sometimes prior approval for elective services is required by the health plan before a claim can be submitted. This prior verification is often referred to as precertification. Information regarding coverage for large governmental programs such as Medicare and Medicaid is not often needed because the benefit structure is standardized. It is important, however, to verify the existence of current coverage.

The second activity in registration is often related to the computation of copayment or deductible provisions that may be applicable for the patient. Once insurance coverage has been determined, it is usually possible to calculate the required amount that may still be due from the patient. For example, a Medicare patient without supplemental coverage may report to a hospital for a scheduled computed tomography. It is possible for the registration staff to calculate the amount of copayment due by the patient. The registration staff can then advise the patient regarding the amount of payment due and try to make arrangements for payment at the point of service.

The third activity in this registration process relates to financial counseling . Patients who have no coverage may be eligible for some discount through the healthcare firm’s charity care policy. Any residual that may still be due can be discussed with the patient, and financing may be arranged before the point of service. It is also possible that an uninsured patient may be eligible for some governmental programs, especially Medicaid. Staff at the healthcare firm can advise the patient regarding eligibility and help them to complete the necessary documents required for coverage.

MEDICAL RECORD AND CODING

Information regarding the services provided to the patient is recorded in the patient’s medical record. Critical pieces of information contained in that record are used in the billing process and are communicated to the payers to trigger payment. The Health Insurance Portability and Accountability Act (HIPAA) of 1996 designated two specific coding systems to be used in reporting to both public and private payers:

· 1. International Classification of Diseases, 9th revision, Clinical Modification (ICD-9-CM)

· 2. Healthcare Common Procedure Coding System (HCPCS)

HIPAA requires that two categories of information be reported to payers: diagnosis codes and procedure codes. The iCd-9-CM has sets of codes that provide information for both diagnoses and procedures. A 10th revision to ICD is scheduled to be adopted in the United States in 2013.

The HCPCS provides information in the procedure area but does not provide information regarding diagnoses. HIPAA therefore requires that ICD-9 codes be used for diagnosis reporting for all healthcare providers, including hospitals and physicians. ICD-9 procedure codes are required for procedure reporting for hospital inpatients, whereas HCPCS codes are used for procedure reporting by hospitals for outpatient services and also by physicians ( Table 2–1 ).

Table 2-1 HIPAA-Designated Coding

Inpatient

Outpatient

Provider

Diagnosis

Procedure

Diagnosis

Procedure

Physician

ICD–9–CM

CPT

ICD–9–CM

CPT

Facility

ICD–9–CM

ICD–9–CM

ICD–9–CM

HCPCS (CPT and HCPCS Level II)

ICD-9 diagnosis codes are composed of three digits that may be followed by a decimal point with two additional digits. For example, all ICD-9 codes that start with 428 refer to the primary diagnosis of heart failure. Additional digits after 428 further specify the patient’s exact condition. For example, 428.1 refers to left heart failure. Table 2–2 provides a listing of the top 10 inpatient diagnoses reported by Medicare in Fiscal Year 2008.

Table 2-2 2008 Public Data: Primary Diagnosis Frequency

Dx1

Definition

Frequency

% of Total

486

Pneumonia, Organism Unspecified

430,535

3.7%

414.01

Coronary Atherosclerosis of Native Coronary Artery

365,228

3.2%

428.0

Congestive Heart Failure

338,746

2.9%

491.21

Obstructive Chronic Bronchitis, With Acute Exacerbation

285,152

2.5%

038.9

Unspecified Septicemia

264,325

2.3%

599.0

Urinary Tract Infection, Site Not Specified

240,731

2.1%

584.9

Acute Renal Failure, Unspecified

226,539

2.0%

427.31

Atrial Fibrillation

220,171

1.9%

410.71

Subendocardial Infarction, Initial Episode of Care

213,917

1.9%

715.36

Osteoarthrosis, Localized, Not Specified Whether Primary or Secondary, Involving Lower Leg.

191,866

1.7%

Sourc:e Cleverley & Associates, 2010

ICD-9 procedure codes are used to report hospital inpatient procedures. These codes may be up to four digits in length, with a decimal point following the first two digits. For example, a code with 37 as the first two digits would refer to procedures on the heart and pericardium. A code of 37.23 would refer to a combined right and left heart cardiac catheterization. Table 2–3 shows a listing of the top 10 inpatient ICD-9 procedure codes reported by Medicare in Fiscal Year 2008.

Table 2-3 2008 Public Data: Primary Procedure Frequency

Px1

Definition

Frequency

% of Total

9904

Packed Cell Transfusion

333,161

4.8%

00.66

PTCA or Coronary Athererectomy

298,464

4.3%

81.54

Total Knee Replacement

278,443

4.0%

38.93

Venous Cath NEC

265,661

3.8%

39.95

Hemodialysis

230,754

3.3%

45.16

EGD With Closed Biopsy

201,288

2.9%

37.22

Left Heart Cardiac Cath

200,616

2.9%

88.72

Dx Ultrasound-Heart

129,105

1.9%

96.71

Cont Mech Vent

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