Class # 3 "Processing a Medical Claim"
The medical billing insurance claims process starts when a healthcare provider treats a patient and sends a bill of services provided to a designated payer, which is usually a health insurance company. The payer then evaluates the claim based on a number of factors, determining which, if any, services it will reimburse.
Confirming Financial Responsibility
Once patient information has been recorded or updated, the physician’s office establishes who will be paying for the medical services that will be provided during the appointment.
Insurance coverage differs, often dramatically, between insurance providers and individual plans, so the first step is to familiarize yourself with the patient’s insurance coverage. Using the insurance information provided by the patient, including their insurance policy number, the office must confirm which services are covered under the patient’s current insurance policy and what medical conditions (diagnoses) the insurance provider requires in order to justify payment for those services.
For instance, a policy may cover certain types of blood work, but only if a specific diagnosis (such as hypercholesterolemia) is given by the physician. It is also important to confirm which services are explicitly not covered under the patient’s insurance policy. Knowing this information is crucial to ensuring reimbursement. For instance, if a patient is scheduled for an appointment that may require services not covered by their insurance policy, the patient should be informed that they will have to pay out of pocket before these services are rendered.
Insurance providers may also require various billing procedures, so the physician’s office must also check with the insurance provider to establish their specific billing requirements, and be prepared to meet those requirements. For instance, certain insurance providers may ask for preauthorization of all services before these services are billed. If a service is pre-authorized before the visit, the appointment can proceed smoothly, both for the patient, insurance provider, and physician’s office.
After the insurance provider has been contacted and all requirements have been met, the billing process should be explained to the patient. The patient should be informed of services not covered by their insurance plan and the out-of-pocket costs of those services. Having all parties understand and agree to their financial responsibility ensures the medical billing process will proceed smoothly. Likewise, if the patient’s insurance policy includes a copayment, or a small fee collected at the time of the appointment, the patient should be informed of the amount they will have to pay. Some offices collect copayments before the patient receives medical services.
When a patient receives medical services from their physician, these services are recorded and placed in the patient’s medical record. It is important for the physician to record all medical services so the office can create an accurate medical bill to send to insurance providers or patients.
In order to bill for the visit, medical coders translate all diagnoses and medical procedures performed during the patient’s visit into a series of medical code sets that act as a universal language within the healthcare industry. These codes streamline the recording of medical services and ensure that these services are accurately represented between medical facilities and insurance providers. Medical codes were summarized in the previous course, and will be covered more comprehensively in later courses, but to recap, different medical code sets are used to communicate diagnosis and treatment.
After the medical coder has determined the patient’s diagnosis and treatment(s) administered, and coded these using the ICD and CPT, the medical bill can be assembled. This transaction for the visit, including all charges and payments made by the patient, is called the patient ledger. In the ledger, the medical biller calculates the patient’s balance by adding any previous balances and new charges, subtracting payments made (either by the insurance company or the patient). This amounts to the patient’s current balance. This information is given to the patient as a receipt. The patient can then check out.
Coding and Billing Compliance
Before a bill can be officially recorded and sent off to the payer, it must first satisfy certain official requirements. These requirements differ between coding and billing procedures, as well as insurance providers and types of medical services provided. For example, the billing process must be compliant with requirements set by the Health Insurance Portability and Accountability Act (HIPAA), and the Office of Inspector General (OIG). These requirements will be discussed in greater detail in later courses.
Generally speaking, part of achieving necessary compliance in medical billing is ensuring that fees are charged accurately. The medical biller must confirm that each charge is related to a specific procedure code. Different medical facilities have different charges and fees for their service, so charges must match the standard set by the specific medical practice (in this case, a physician’s office). Different practices usually have their usual fees listed in a standard fee schedule.
The medical biller must also confirm that every code is, in fact, billable. Whether or not a code is billable depends on the payer, generally the insurance provider. In the case of insurance providers, each payer has a set of rules that determine what they can and cannot be billed for under their policyholder’s plan. It is important for the medical biller to be compliant with the payer’s rules. If a bill is sent out to a payer that includes charges outside of these rules, the bill may be denied and returned to the physician’s office to be corrected. Denied claims are time consuming, resource wasting, and complicate the billing process for all parties involved.
Transmitting the Claim
Once all diagnoses and medical procedures have been recorded, coded, and checked for compliance, the bill is ready to be sent out to the insurance company, or payer. This is a very important step in the medical billing process. This insurance claim provides the payer with important information about the diagnosis, procedures, and the charges garnered by the patient. An accurate, expedite insurance claim ensures the healthcare provider will be reimbursed in a timely fashion, and that the patient will not be left on the hook for lingering medical payments.
The majority of practices file and submit claims electronically. This is the most efficient and accurate way to process claims, and it saves the industry a significant amount of money compared to paper submissions. In fact, one of the reasons for the switchover from ICD-9-CM to ICD-10 is that the newer code is more flexible and optimized for electronic usage. Submitting claims electronically reduces the amount of manual data the medical biller must perform. With minimal analog interaction, electronic submissions reduce the amount of errors made, and subsequently increase the amount of “clean claims” submitted to health insurers.
Different healthcare providers and insurance companies use various kinds of software to send and receive insurance claims. It is important for the medical biller to become familiar with the kind of software used in their facility. Just because using technology is a faster, easier, and more accurate way to send and receive insurance claims does not mean it is error proof. Even as certain kinds of insurance claim software automatically flag for errors, proficiency with the software saves time and money for all parties involved.
Both paper and electronic claims can be submitted in a number of ways. Typically, a medical practice will send an insurance claim to the insurance provider using a clearinghouse. A clearinghouse is a private, third-party company that acts as a liaison between healthcare providers and insurers. Used primarily with electronic claims, clearinghouses will receive insurance claims from the healthcare provider, format the claim in accordance with insurer requirements, and submit the claim to the insurer.
In the case of high volume insurers, such as Medicaid, claims may be submitted directly to the insurance provider. Again, insurance providers such as private payers, Medicare, or TRICARE all institute various requirements in the processing of claims. Because a clearinghouse is not always used to format claims correctly, it is important to understand the various requirements of each insurance provider and be able to submit accurate, compliant claims directly.
The process of submitting insurance claims, including submitting through clearinghouses, insurance requirements, and the different kinds of software, will be covered more comprehensively in later courses.
Receiving Payment from Insurance Companies
When a payer (usually the insurance provider) receives an insurance claim from a clearinghouse or the healthcare provider directly, the claim is reviewed through a process called adjudication. During adjudication, the insurance provider puts the claim through a number of different steps, considering various factors, in order to evaluate the bill. Here, the insurance provider determines whether they will pay the entire bill, a portion of the bill, or if they will deny the bill outright. The amount the insurance provider pays is based on the policy held by the patient and its contract with the medical practice.
After the claim goes through adjudication, the decision to pay all, some, or none of the bill is sent back to the healthcare provider in the form of a report. If the insurance provider decided not to cover the entire bill, the first step of the medical biller is to determine whether or not more than one insurance provider covers the patient. If the patient is covered by additional insurance plans, the medical biller sends a claim for the remaining bill is sent to this second payer.
Another major step for the medical biller is to confirm that the charges and fees match up between medical practice and insurance company. It is rare that fees for both parties match up perfectly. Again, the amount reimbursed to the healthcare provider is based on the agreement they have with the individual insurance company. Medical billers evaluate each payment made by the insurance provider to confirm a number of factors.
First, the medical biller should check to see if all procedures listed on insurance claim sent out by the healthcare provider also appear on the statement received from the insurance company. Similarly, all codes included in the claim must also appear identical in the insurer’s payment transaction. If all procedures match, and the codes for these procedures are identical, the medical biller reviews the payments for each procedure. Each payment should be in accordance with the contract between healthcare provider and payer. If the insurance provider opted not to pay for certain procedures, these unpaid charges should be explained in full on the report.
If any discrepancies are found in the transaction, the healthcare provider must enter into an appeal process. This process includes different rules and regulations depending on the state and the insurance contract. In the end, it is crucial that the provider receives the maximum appropriate reimbursement as agreed upon between the practice and the payer.
If the procedures and codes listed in the insurance provider’s transaction report match those sent by the healthcare provider, all charges are compliant with the financial agreement between the both parties, and the healthcare provider has received appropriate reimbursements for their medical services, these payments are then applied to the patient’s account.
In cases where the insurance provider did not cover some (or any) service rendered, leaving portions of the bill unpaid, these leftover charges are passed on to the patient. The medical biller must confirm that the amount reimbursed by the insurance provider, in addition to the total billed to the patient, equals the expected cost for all of the medical services rendered.
When billing the patient directly, it is important that the bill contains any and all information pertaining to entire transaction. Again, the medical biller must confirm that the patient bill contains a list of services provided by the medical practice, as well as the dates these services were rendered, the payments already made by the insurance provider deducted from the overall bill, and the leftover balance the patient will be responsible for paying. Making sure this information is accurate and clear is done in order to ensure the patient understands his or her financial responsibility, and will help avoid any potential complication in receiving reimbursement from the patient.
When a patient is sent a bill with the remaining balance for the medical services provided, a payment date is set and listed on the bill itself. Once the patient’s payment is received, and the healthcare provider has been reimbursed for all services provided, the information is filed in the patient’s record and the transaction is effectively closed.
If the patient fails to pay a bill on time, the healthcare provider is responsible for following up with the patient and handling any additional billing issues. If the balance remains unpaid for a certain amount of time, a collections process is initiated in order to receive reimbursement for the overdue bill. The amount of time allotted before the collections process is instated, and how to go about the collecting reimbursement, depends on the healthcare provider’s financial policy.
Let’s briefly review the steps of the medical billing procedure leading up to the transmission of an insurance claim. When a patient receives services from a licensed provider, these services are recorded and assigned appropriate codes by the medical coder. ICD codes are used for diagnoses, while CPT codes are used for various treatments. The summary of services, communicated through these code sets, make up the bill. Patient demographic data and insurance information are added to the bill, and the claim is ready to be processed.
A number of technical protocols and industry standards must be met for insurance claims to be delivered expediently and accurately between medical practice and payer. Medical billing specialists typically use software to record patient data, prepare claims, and submit them to the appropriate party, but there isn’t a universal software application that all healthcare providers and insurance companies use. Even so, insurance claims software use a set of standards, mandated as by the HIPAA Transactions and Code Set Rule (TCS). Adopted in 2003, the TCS is defined by the Accredited Standards Committee (ACS X12), which is a body tasked with standardizing electronic information exchanges in the healthcare industry. There are two different methods used to deliver insurance claims to the payer: manually (on paper) and electronically. The majority of healthcare providers and insurance companies prefer electronic claim systems. They are faster, more accurate, and are cheaper to process (electronic systems save around $3 per claim). But because paper claims have not yet been completely removed from the insurance claims process, it is important for the medical biller and coder to be well versed with both electronic and hardcopy claims.
Filing Electronic Claims
Certain technologies have been introduced into the system in order to expedite claim processing and increase accuracy.
Software. Some healthcare providers use software to electronically enter information into CMS-1500 and UB-04 documents. Using “fill and print” software eliminates the possibility for unreadable information. This software may also include certain types of “scrubbing,” or tools that check for errors in the documents. While these tools do decrease the amount of errors made in filling out claim forms, they are not always 100 percent accurate, so medical billers should remain diligent when filling out forms using software.
Optical Character Recognition (OCR)
OCR equipment scans official documents, electronically isolating and recording information provided in the different fields, and transferring (or auto-filling) that information into other documents when necessary. While OCR technology helps make hardcopy claim processing much more efficient, human oversight is still needed to ensure accuracy. For instance, if the OCR miscalculates a simple digit in a medical code, that error must be flagged and manually corrected by a medical billing specialist.
Note that when OCR equipment is not available, it is possible for a medical billing specialist to manually convert CMS-1500 and UB-04 documents into digital form using conversion tools called “crosswalks” (note that the same term applies for tools used to convert ICD-9-CM codes to ICD-10-CM). You can find crosswalk references from a number of different sources.
Filing Manual Claims
Paper claims must be printed out, completed by hand, and physically mailed to payers. The healthcare industry uses two forms to submit claims manually. Since processing paper claims requires more manual interaction with forms and data, the opportunity for human error increases compared to electronic claims. Documents can be printed improperly, and handwritten codes can be incorrect or illegible. The forms can also be mailed to the wrong address, with insufficient postage, or disrupted by logistical complications with the delivery services. These errors are costly for the healthcare provider, often resulting in form resubmission (a time-consuming process) and payment delays.
Generally, healthcare professionals like family physicians use form CMS-1500, while hospitals and other “facility” providers use the UB-04 form.
The CMS-1500 is the universal claim form used by non-institutional healthcare providers (private practices, etc.) to bill Medicare for Part B covered services and some Medicaid-covered services, and is accepted by most health insurance providers. The CMS-1500 is maintained by the National Uniform Claim Committee (NUCC), and was previously updated to include National Provider Identifiers (NPIs), or unique numbers required by the Health Insurance Portability and Accountability Act (HIPAA).
Form CMS-1500 contains all the basic information needed to submit an accurate claim. This includes fields for the patient’s demographic information, insurance information, and boxes in which to provide medical codes and corresponding dates of service. Certain boxes are used exclusively for Medicare and/or Medicaid. It is important to note that different payers may provide different instructions on how to complete certain item numbers. The medical biller and coder should be familiar with specific payer requirements before filling out the form.
Form UB-04, also maintained by the NUCC, is very similar to the CMS-1500, but it is used by institutional healthcare providers, such as hospitals. Like the CMS-1500, the UB-04 is used in lieu of electronic claims when the facility meets any number of exceptions granted by the ASCA. It is the responsibility of the facility to self-assess whether these designated exceptions apply to their operation, granting usage of manual claims. Also similar to the CMS-1500, certain payers may not require all fields, or data elements, to be completed.
The role of clearinghouses
Once a file is created using these standards, it is usually sent off to a clearinghouse. The clearinghouse is a third-party operation that primarily acts as a middleman between healthcare providers and insurance carriers.
Think of the clearinghouse as a central hub, or a single location where all claims are sent to be sorted and directed onward to all the various insurance carriers. Typically, clearinghouses use internal software to receive claims from healthcare providers, scrub them for errors, format them correctly in accordance with HIPAA and insurance standards, and send them to the appropriate parties. Clearinghouses generally keep medical practices in the loop during this process by providing reports on the status of claims.
This third party is necessary because healthcare providers typically have to send high quantities of insurance claims each day to a variety of different insurance providers. Each of these insurance providers may have their own submission standards. If a medical practice’s billing staff was solely responsible for transmitting insurance claims under both insurance and HIPAA requirements, the potential for error would increase dramatically, not to mention the time required for formatting each claim to specific insurance carrier.
Please view the videos below:
Optional reading assignment:
(Understanding Health Insurance, by Green and Rowell. 10th Edition)
"Processing an Insurance Claim", textbook pages 54-57.