CHAPTER

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1Introduction to the

Medical Billing Cycle

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Learning Outcomes

When you finish this chapter, you will be able to:1.1 Explain the reason that employment opportunities

for medical insurance specialists in physician practices are increasing rapidly.

1.2 Describe covered services and noncovered services under medical insurance policies.

1.3 Compare indemnity and managed care approaches to health plan organization.

1.4 Cite three examples of cost containment under health maintenance organizations.

1.5 Define a preferred provider organization.

1-2

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Learning Outcomes (Continued)

When you finish this chapter, you will be able to:1.6 State the two elements that are combined in a

consumer-driven health plan.

1.7 Recognize the three major types of medical insurance payers.

1.8 List the ten steps in the medical billing cycle.

1.9 Define professionalism.

1.10 Explain the purpose of certification.

1-3

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Key Terms

• accounts receivable (A/R)

• adjudication

• benefits

• capitation

• coinsurance

• compliance

• consumer-driven health plan (CDHP)

• copayment • covered services

1-4

• deductible• diagnosis code• ethics• etiquette• excluded services• fee-for-service• health care claim• health maintenance

organization (HMO)• health plan• indemnity plan• managed care

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Key Terms (Continued)

• managed care organization (MCO)

• medical coder• medical insurance• medical insurance

specialist • medical necessity• network• noncovered services• open-access plan• out-of-network• out-of-pocket

1-5

• participation• patient ledger• Patient Protection and

Affordable Care Act (PPACA)

• payer• per member per month

(PMPM)• point-of-service (POS)

plan• policyholder• practice management

program (PMP)

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Key Terms (Continued)

• preauthorization• preexisting condition• preferred provider

organization (PPO)• premium• preventive medical

services• primary care physician

(PCP)• procedure code• professionalism• provider

1-6

• referral• schedule of benefits• self-funded (self-insured)

health plan• third-party payer

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1.1 The Medical Insurance Field 1-7

• Spending on health care in the United States is rising due to the cost of advances in medical technology and an aging population

• There are many job opportunities in the health care field as a result

• A TRILLION DOLLAR industry!– 12 zeros!

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1.2 Medical Insurance Terms 1-8• Medical insurance is a written policy that states the

terms of an agreement between a policyholder (an individual) and a health plan (an insurance company, plan or program that provides some form of medical insurance)– Dependents

• Person other than the insured who is covered under a health plan– Wife, children…?

• Health plans provide benefits (payments for medical services)

• Health plans are often referred to as payers• A third-party payer is a private or government

organization that insures or pays for health care on behalf of beneficiaries

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1.2 Medical Insurance Terms (Continued) 1-9

• Insurance policies contain a schedule of benefits that summarizes payments that may be made for medical services

• Payer’s definition of medical necessity determines coverage and payment

• A provider must meet the payer’s professional standards– Providers include physicians, nurse-practitioners,

physician assistants, therapists, hospitals, laboratories, long-term care facilities, and suppliers such as pharmacies and medical supply companies

• May be individuals, groups, or organizations

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1.2 Medical Insurance Terms (Continued) 1-10

• Covered services may include primary care, emergency care, medical specialists’ services, and surgery. These are listed in the policy.

• Preventive medical services include physical examinations, pediatric and adolescent immunizations, prenatal care, and routine screening procedures

• Not all covered services have the same benefits

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1.2 Medical Insurance Terms (Continued) 1-11

• Noncovered services are– those not paid for by a health plan

• Excluded services may include:– Dental services, eye care, employment-related

injuries, cosmetic procedures, or experimental procedures

– Some other specific items– A preexisting condition

• a medical condition diagnosed before the policy took effect

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1.3 Health Care Plans 1-12

• An indemnity plan provides protection against loss

• Physicians send the health care claim—a formal insurance claim that reports data about the patient and the services provided—to the payer on behalf of the patient

• Patients pay a premium– the periodic payment they are required to make to

keep a policy in effect

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1.3 Health Care Plans (Continued) 1-13

• Most policies have a deductible– the amount that the insured pays on covered services

before benefits begin

• Coinsurance is the percentage of each claim that the insured pays

• Some patients must pay out-of-pocket expenses prior to benefits– Example on page 9

• Fee-for-service is a charging method based on each service performed– Figure 1.2, page TEN