Copyright © 2015 McGraw-Hill Education. Permission required for reproduction or display. CHAPTER Insurance and Coding 7.

Copyright © 2015 McGraw-Hill Education. Permission required for reproduction or display.

CHAPTER

Insurance and Coding

7


Learning Outcomes7-2

After studying this chapter, you will be able to:7.1 Define medical insurance and coding

terminology.7.2 Explain the differences among the types

of insurance plans.7.3 Compare and contrast PAR and nonPAR

and the methods insurance companies use to determine how much a provider is paid.

.


Learning Outcomes (cont.)7-3

After studying this chapter, you will be able to:7.4 Apply ICD-10-CM conventions,

abbreviations, and guidelines to properly code diagnoses in an outpatient setting.

7.5 Apply CPT conventions and guidelines to properly code procedures and supplies in an outpatient setting.

7.6 Explain the effects of coding compliance errors on the revenue cycle in the medical office setting.


Key Terms

• accepting assignment

• allowed charge

• assignment of benefits

• balance billing

• birthday rule

• Blue Cross and Blue Shield Association (BCBS)

• capitation

• carrier

• Centers for Medicare and Medicaid Services (CMS)

• CHAMPVA• code linkage• coinsurance• coordination of benefits

(COB)• copayment (copay)

7-4


Key Terms (cont.)

• CPT

• customary fee

• deductible

• Defense Enrollment Eligibility Reporting System (DEERS)

• diagnosis-related groups (DRGs)

• fee-for-service

• HCPCS

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• HMO (health maintenance organization)

• ICD-10-CM• ICD-10-PCS• indemnity plan• insured• managed care• Medicaid• Medicare


Key Terms (cont.)

• participating (PAR) provider

• patient encounter form

• PPO (preferred provider organization)

• preauthorization

• premium

• primary care provider (PCP)

• provider

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• reasonable fee• referral• relative value scale

(RVS)• resource-based relative

value scale (RBRVS)• sponsor• third-party payer• TRICARE• usual fee• workers’ compensation


7.1 Insurance Terminology

• The medical insurance contract− Insured− Premium− Third-party payer− Coordination of benefits− The birthday rule

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7.1 Insurance Terminology (cont.)

• Types of medical insurance coverage:− Basic− Medical− Hospital− Surgical− Major medical− Disability− Dental insurance− Vision care

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7.2 Insurance Plans: Identifying Plans and Payers

• Payment methods that insurance companies use:– Fee-for-service

– Made by the insurance carrier after the patient has received medical services

– The insured pays for the medical services at the time of receiving them, and the insurance carrier reimburses the insured after receiving an insurance claim; alternatively, the insured may instruct the carrier to pay the physician directly

– Capitation: payment is made in advance

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• Types of medical insurance plans:1. Indemnity plans: under most indemnity plans, the

insurance company reimburses medical costs on a fee-for-service basis

Three conditions that must be met before reimbursement is made:– The policy’s premium payment must be up-to-

date– A deductible has been paid– Any coinsurance has been taken into account

7-107.2 Insurance Plans: Identifying Plans and Payers (cont.)


2. Managed care plans

Two main types of managed care plans:– HMOs– PPOs

HMOs attempt to control costs by using a number

of methods:– Restricting patients’ choice of providers– Requiring cost sharing– Requiring preauthorization/precertification for

services– Controlling access to services




• Preferred provider organization– The PPO (preferred provider organization)

contracts to perform services for PPO members at specified rates; these rates, or fees, are generally lower than the fees charged to regular patients

– The PPO gives the insured a list of PPO providers from which to receive healthcare at PPO rates


• Medical insurance payers– Private-sector payers: Made up chiefly of a few

very large national firms that offer all the leading types of insurance plans

– Medicare: A federal health plan that provides insurance to citizens and permanent residents aged 65 and older; people with disabilities, including kidney failure; and spouses of entitled individuals– Medicare is divided into four parts: Part A, hospital

insurance; Part B, medical insurance; Part C, Medicare Advantage; Part D, prescription drug coverage



– Medicaid: A health benefit program, jointly funded by federal and state governments, that is designed for people with low incomes who cannot afford medical care

– TRICARE (formerly CHAMPUS ): The Department of Defense’s health insurance plan for military personnel (referred to as sponsors) and their families

– CHAMPVA: Stands for Civilian Health and Medical Program of the Veterans Administration; is a government health insurance program that covers the expenses of the families of veterans with total, permanent, service-connected disabilities



– Workers’ compensation: Each state has its own workers’ compensation laws to guarantee that an employee who is injured or who becomes ill in the course of employment will have adequate medical care and an adequate means of support while unable to work

– Five categories of work-related injuries: Injury without disability Injury with temporary disability Injury with permanent disability Injury requiring vocational rehabilitation Injury resulting in death



• Plan participation– PAR: A physician who joins an insurance plan is a

participating (PAR) provider in that plan; as a participating provider, the physician agrees to provide medical services to the insurance plan members according to the plan’s rules and payment schedules

– nonPAR: A nonparticipating provider, or nonPAR, chooses not to join a particular insurance plan; a nonPAR physician who treats members of a plan does not have to obey the rules or follow the payment schedule of that plan; at the same time, a nonPAR physician will not receive any of the benefits of participation

7-167.3 Participation and Payment Methods


• Fee schedules

– In a private managed care plan, contracts that set fees are often negotiated between the insurance company and the physician

– In Medicare, the Centers for Medicare and Medicaid Services (CMS) is responsible for setting up the terms of the plan, referred to as the Medicare Fee Schedule (MFS)

7-177.3 Participation and Payment Methods

(cont.)


• Payment concepts

– Allowed charge– Balance billing– Accepting assignment– Assignment of benefits– UCR fees– Relative value scale (RVS)– Resource-based relative value scale (RBRVS)– Diagnosis-related groups (DRGs)

7-187.3 Participation and Payment Methods(cont.)


• Two medical coding systems:

– Diagnostic coding: Codes for reporting what is wrong with the patient or what brought the patient to see the physician

– Procedural coding: Codes for reporting each procedure and service the physician performed in treating the patient

7-197.4 Diagnostic Coding


• Basic steps in diagnostic coding:

– Locate the diagnostic statement in the patient’s medical record

– Find the diagnosis in the ICD-10-CM’s Alphabetic Index; look for the condition first, then find descriptive words that make the condition more specific, such as the location or acute vs. chronic

– Locate the code in the Tabular Index

– Read all category, subcategory, and subclassification information to obtain the code that corresponds to the patient’s specific disease or condition

7-207.4 Diagnostic Coding (cont.)


7-217.5 Procedural Coding

• The procedural coding system classifies services rendered by physicians; each procedure code represents a medical, surgical, or diagnostic service performed by a provider– CPT-4: The most commonly used system of

procedure codes is found in Current Procedural Terminology, Fourth Edition, a book published by the American Medical Association and known as the CPT

– CPT organization


• Coding evaluation and management services:

Three key factors documented in the patient’s medical record help determine the level of service:

– The extent of the patient history taken

– The extent of the examination conducted

– The complexity of the medical decision making

7-227.5 Procedural Coding (cont.)


• Basic steps in procedural coding:1. Become familiar with the CPT

2. Find the services that were provided

3. Look up the procedure code

4. Determine appropriate modifiers

5. Record the procedure code

7-237.5 Procedural Coding (cont.)


• Correctly linked codes that support medical necessity meet the following conditions:– The CPT-4 procedure codes match the ICD-10-CM

diagnosis codes– The procedures are not elective, experimental, or

nonessential– The procedures are furnished at an appropriate

level

7-247.6 Coding Compliance


• Common coding errors:– Reporting diagnosis codes that are not at the

highest level of specificity available– Using out-of-date codes– Altering documentation after the services are

reported– Coding without proper documentation to back up

the codes selected– Reporting services provided by unlicensed or

unqualified clinical personnel

7-257.6 Coding Compliance (cont.)


• Common coding errors (cont.):– Reporting services that are not covered or that

have limited coverage– Using modifiers incorrectly, or not at all– Upcoding—using a procedure code that

provides a higher reimbursement rate than the code that actually reflects the service provided

– Unbundling—billing the parts of a bundled procedure as separate procedures

7-267.6 Coding Compliance (cont.)


Chapter 7 Summary

Learning Outcomes Key Concepts

7.1Define medical insurance and coding terminology.

• Administrative medical assistants should be familiar with basic terms and concepts of medical insurance, including coding and compliance. Insurance carriers may use different terminology, and medical office personnel need to know current terminology.

7-27


Chapter 7 Summary (cont.)


7.2 Explain differences among the types of insurance plans.

• Indemnity plans are usually fee-for-service plans that pay after services are provided. They offer benefits in exchange for regular payments of a fixed premium by the insured.• Managed care plans, in contrast, often use capitation payments, which are fixed, prospective payments made for services to be provided during a specified period of time. It is common to base capitation rates on gender and age.

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• In an HMO, patients agree to receive services from providers who have contracts with the HMO; usually, a PCP coordinates the patient’s care and makes referrals.

• In a PPO, patients are offered lower fees in exchange for receiving services from plan providers but are usually not required to choose a PCP.

7-29




7.3 Compare and contrast PAR and nonPAR and the methods used by insurance companies to determine how much a provider is paid.

• PAR providers agree to render medical services to plan members according to the plan’s rules and payment schedules; a nonPAR provider is not contractually obligated to abide by the rules or the payment schedule when treating members.• PAR providers receive a direct benefit payment from the insurance carrier through an agreed upon assignment of benefits; a nonPAR provider collects payment from the patient at the time of service and the patient receives payment from the insurance carrier.

7-30




Common types of payment systems used by third-party payers for reimbursing physicians are based on: –usual, customary, and reasonable (UCR) fees; –a relative value scale (RVS); –a resource-based relative value scale (RBRVS); or–diagnosis-related groups (DRGs).

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Learning Outcomes

Key Concepts

7.4 Apply ICD-10-CM conventions, abbreviations, and guidelines to properly code diagnoses in an outpatient setting.

• The ICD-10-CM is used to report patients’ conditions (diagnoses) on their medical records and on insurance claims. Codes consist of three to seven alphanumeric characters and a description. The Alphabetic Index is used first to locate the approximate correct code for a diagnosis. Next, the Tabular Index is used to verify and refine the final code selection. All conventions, abbreviations, instructional notes, and guidelines should be followed. The ICD-10-CM contains 21 chapters, each containing codes requiring high levels of specificity.

7-32




7.5 Apply CPT conventions and guidelines to properly code procedures and supplies in an outpatient setting.

• CPT-4, a publication of the AMA, contains the most widely used system for physicians’ medical services and procedures. There are two levels of procedural codes: CPT-4 and HCPCS, which include temporary codes. CPT-4 codes are required for reporting physician services on insurance claim forms. Codes consist of five digits and a description. Modifiers may be used to indicate a change to the code description.

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• CPT-4 contains six sections of codes:– Evaluation and Management– Anesthesia– Surgery– Radiology– Pathology and Laboratory– Medicine

• HCPCS codes are used to code supplies, equipment, and procedures not listed in the CPT-4 . HCPCS codes are selected the same way as CPT-4 codes.

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7.6 Explain the effects of coding compliance errors on the revenue cycle in the medical office setting.

• Coding compliance is the process of coding using actions that satisfy federal official requirements and guidelines. Individual carrier guidelines must also be followed in order to be considered compliant.

7-35


State whether the statement is true (T) or false (F). If the statement is false, tell why it is false.

1. (LO 7.1) Using the birthday rule, the primary policy for a child is the policy which covers the oldest adult.

2. (LO 7.1) To receive disability insurance benefits, the insured must have been injured on the job.

3. (LO 7.2) A deductible requires the insured to pay a stated monetary amount of covered services prior to insurance benefits being paid by the insurance carrier.

4. (LO 7.2) The phrase “80/20” within an insurance agreement represents the insured copayment.

5. (LO 7.3) The allowed charge and amount billed for the service are frequently the same amount.

7-36Chapter 7 Review: True/False Questions


State whether the statement is true (T) or false (F). If the statement is false, tell why it is false.

6. (LO 7.3) PAR providers are commonly permitted by the insurance carrier to balance bill.

7. (LO 7.4) Use of a seventh digit in ICD-10-CM code is optional.

8. (LO 7.5) 99215 is an example of a CPT-4 code.

9. (LO 7.4) October 1, 2014, is the mandatory implementation for ICD-10-CM.

10. (LO 7.4) One of the advantages of ICD-10 is expandability within categories.

7-37Chapter 7 Review: True/False Questions

Copyright © 2015 McGraw-Hill Education. Permission required for reproduction or display. CHAPTER Insurance and Coding 7.

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