CHAPTER © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 7 Visit Charges and Compliant Billing

CHAPTER

© 2012 The McGraw-Hill Companies, Inc. All rights reserved.

7Visit Charges and Compliant Billing


Learning Outcomes

When you finish this chapter, you will be able to:7.1 Explain the importance of properly linking

diagnoses and procedures on health care claims.

7.2 Describe the use and format of Medicare’s Correct Coding Initiative (CCI) edits and medically unlikely edits (MUEs).

7.3 Discuss types of coding and billing errors.

7.4 Explain major strategies that help ensure compliant billing.

7-2


Learning Outcomes (Continued)

When you finish this chapter, you will be able to:7.5 Discuss the use of audit tools to verify code

selection.

7.6 Describe the fee schedules that physicians create for their services.

7.7 Compare the usual, customary, and reasonable (UCR) and the resource-based relative value

scale (RBRVS) methods of determining the fees that insurance carriers pay for providers’ services.

7.8 Describe the steps used to calculate RBRVS payments under the Medicare Fee Schedule.

7-3


Learning Outcomes (Continued)

When you finish this chapter, you will be able to:7.9 Discuss the calculation of payments for

participating and nonparticipating providers, and describe how balance billing regulations affect the charges that are due from patients.

7.10 Differentiate between billing for covered versus noncovered services under a capitation schedule.

7-4


Key Terms

• advisory opinion• allowed charge• assumption coding• audit• balance billing• capitation rate (cap rate)• CCI column 1/column 2

code pair edit• CCI modifier indicator• CCI mutually exclusive

code (MEC) edit

7-5

• charge-based fee structure

• code linkage

• computer-assisted coding (CAC)

• conversion factor

• Correct Coding Initiative (CCI)

• documentation template

• downcoding

• edits


Key Terms (Continued)

• excluded parties• external audit• geographic practice cost

index (GPCI)• internal audit• job reference aid• medically unlikely edits

(MUEs)• Medicare Physician Fee

Schedule (MPFS)• OIG Work Plan• professional courtesy

7-6

• prospective audit

• provider withhold

• Recovery Audit Contractor (RAC)

• relative value scale (RVS)

• relative value unit (RVU)

• resource-based fee structure

• resource-based relative value scale (RBRVS)

• retrospective audit


Key Terms (Continued)

• truncated coding• upcoding• usual, customary, and

reasonable (UCR)• usual fee• write off

7-7


7.1 Compliant Billing 7-8

• Diagnoses and procedures must be correctly linked on health care claims so payers can analyze the connection and determine the medical necessity of charges

• Code linkage—connection between a service and a patient’s condition or illness


7.2 Knowledge of Billing Rules 7-9

• To prepare correct claims, it is important to know payers’ billing rules as stated in patients’ medical insurance policies and participation contracts

• Correct Coding Initiative (CCI)—computerized Medicare system that prevents overpayment– CCI edits—code combinations used by computers in

the Medicare system to check claims

• CCI column 1/column 2 code pair edit– Medicare code edit where CPT codes in column 2 will not be paid if reported in the same way as the column 1 code


7.2 Knowledge of Billing Rules(Continued)

7-10

• CCI mutually exclusive code (MEC) edit—both services represented by MEC codes that could not have been done during one encounter

• CCI modifier indicator—number showing if the use of a modifier can bypass a CCI edit

• Medically unlikely edits (MUEs)—units of service edits used to lower the Medicare fee-for-service paid claims error rate


7.2 Knowledge of Billing Rules(Continued)

7-11

• OIG Work Plan—OIG’s annual list of planned projects

• Advisory opinion—opinion issued by CMS or the OIG that becomes legal advice

• Excluded parties—individuals or companies not permitted to participate in federal health care programs


7.3 Compliance Errors 7-12

• Claims are rejected or downcoded because of:– Medical necessity errors– Coding errors– Errors related to billing

• Truncated coding—diagnoses not coded at the highest level of specificity

• Assumption coding—reporting undocumented services the coder assumes have been provided due to the nature of the case or condition


7.3 Compliance Errors (Continued) 7-13

• Upcoding—use of a procedure code that provides a higher payment

• Downcoding—payer’s review and reduction of a procedure code


7.4 Strategies for Compliance 7-14

• Major strategies to ensure compliant billing:– Carefully define bundled codes and know global

periods– Benchmark the practice’s E/M codes with national

averages– Keep up to date through ongoing coding and billing

education– Be clear on professional courtesy and discounts to

uninsured/low-income patients– Maintain compliant job reference aids and

documentation templates– Audit the billing process


7.4 Strategies for Compliance (Continued) 7-15

• Professional courtesy—providing free services to other physicians

• Job reference aid—list of a practice’s frequently reported procedures and diagnoses

• Computer-assisted coding (CAC)—allows a software program to assist in assigning codes

• Documentation template—form used to prompt a physician to document a complete review of systems (ROS) and a treatment’s medical necessity


7.5 Audits 7-16

• Monitoring the coding and billing process is done to ensure adherence to established policies and procedures

• An important compliance activity involves audits– An audit is a formal examination or review– Recovery Audit Contractor (RAC)—program

designed to audit Medicare claims


7.5 Audits (Continued) 7-17

• External audit—audit conducted by an outside organization

• Internal audit—self-audit conducted by a staff member or consultant

• Prospective audit—internal audit of claims conducted before transmission

• Retrospective audit—internal audit conducted after claims are processed and RAs have been received


7.6 Physician Fees 7-18

• Physicians set their fee schedules in relation to the fees that other providers charge for similar services

• Usual fee—normal fee charged by a provider


7.7 Payer Fee Schedules 7-19

• Payers use two main methods to establish the rates they pay providers– Charge-based fee structure—fees based on

typically charged amounts– Resource-based fee structure—fee structures built

by comparing three factors:(1) how difficult it is for the provider to do the procedure,

(2) how much office overhead the procedure involves, and

(3) the relative risk that the procedure presents to the patient and to the provider


7.7 Payer Fee Schedules (Continued) 7-20

• Payers that use a charge-based fee structure also analyze charges using one of the national databases– Usual, customary, and reasonable (UCR)—setting

fees by comparing usual fees, customary fees, and reasonable fees

– Relative value scale (RVS)—system of assigning unit values to medical services based on their required skill and time



• The relative value system can be used to assign a relative value, known as the relative value unit– Relative value unit (RVU)—factor assigned to a

medical service based on the relative skill and required time

• Conversion factor—amount used to multiply a relative value unit to arrive at a charge



• Resource-based relative value scale (RBRVS)—relative value scale for establishing Medicare charges– Geographic practice cost index (GPCI)—Medicare

factor used to adjust providers’ fees in a particular geographic area


7.8 Calculating RBRVS Payments 7-23

• Each part of the RBRVS—the relative values, the GPCI, and the conversion factor—is updated each year by CMS

• Medicare Physician Fee Schedule (MPFS)—the RBRVS-based allowed fees


7.8 Calculating RBRVS Payments(Continued)

7-24

• The following steps are used to calculate the RBRVS payments under the MPFS:– Determine the procedure code for the service– Use the MPFS to find three RVUs—work, practice

expense, and malpractice—for the procedure– Use the Medicare GPCI list to find the three

geographic practice cost indices– Multiply each RVU by its GPCI to calculate the

adjusted value– Add the three adjusted totals, and multiply the sum by

the annual conversion factor to determine the payment


7.9 Fee-Based Payment Methods 7-25

• In addition to setting various fee schedules, payers use one of three main methods to pay providers:

1. Allowed charges

2. Contracted fee schedule

3. Capitation

• Allowed charge—maximum charge a plan pays for a service or procedure


7.9 Fee-Based Payment Methods(Continued)

7-26

• Balance billing—collecting the difference between a provider’s usual fee and a payer’s lower allowed charge

• Write off—to deduct an amount from a patient’s account


7.10 Capitation 7-27

• The capitation rate (or cap rate) is the periodic prepayment to a provider for specified services to each plan member– Health plan sets a capitation rate that pays for all

contracted services to enrolled members for a given period

• Provider withhold—amount withheld from a provider’s payment by an MCO

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CHAPTER © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 7 Visit Charges and Compliant Billing