Today the health insurance industry consists of a large number of insurance companies offering a wide spectrum of coverage through many different plans and government-sponsored programs (Figure 11-1). Hospitals provide services to patients for treatment of conditions that are covered under various health insurance plans. The process of submitting claims for hospital services is complex because of variations in plan types, coverage, reimbursement, and billing requirements. It is important for hospital personnel involved in billing and coding services to have an understanding of these variations to ensure compliance with plan requirements and to obtain accurate reimbursement. A discussion of all payer plan variations is beyond the scope of this text. In fact, the insurance industry is so diverse that much of the required knowledge can only be gained through experience with the various payers. This chapter provides an overview of key elements of various types of health care coverage and payers.

FIGURE 11-1 Evolution of the health care industry.

Types of Health Insurance Plans

Historically, health insurance plans provided health insurance coverage for most health care services provided to patients. Payment for health care services was made on a fee-for-service (FFS) basis. These health insurance plans are commonly referred to as traditional fee-for-service plans. Over the past decades, payers have implemented plans to control the rising cost of health care by managing health care services provided to patients. These plans are referred to as managed care plans. There are distinct differences between traditional fee-for-service and managed care plans. The following section provides a review of fee-for-service and managed care plans. It is critical for hospital personnel to understand the difference between these plans in order to obtain the appropriate insurance information and to understand billing requirements for services provided by the hospital.

TABLE 11-1

Managed Care Plans

Type of Plan	Services	Monitored Care “Gatekeeper”	Care Providers		Cost-containment	Reimbursement	Patient Responsibility
	Preventive, Diagnostic, and Therapeutic Services	PCP	Participating Network Providers	Non-PAR Out-of-Network Providers	Referrals, Precertification, Second Opinion	Periodic Fixed Payment Predetermined	Copayment/Coinsurance/Deductible
Health Maintenance Organization (HMO)	Yes	Yes	Yes	No benefits	Yes	• Fee schedule • Contract • Capitation	Yes Varies by plan
Preferred Provider Organization (PPO)	Preventive service coverage varies	No	Yes	Yes Higher out-of-Pocket Cost	• Authorization required • No referrals required	• Fee schedule • Contract • Discounted fees • Capitation	Yes Varies by plan
Point of Service (POS)	Yes Reduced benefits	Yes	Yes	Yes Higher out-of-Pocket Cost	Yes Varies by plan	• Fee schedule • Contract • Capitation • Fee-for-service	Yes Varies by plan
Exclusive Provider Organization (EPO)	Yes	Yes	Yes	No benefits	Yes	• Fee schedule • Contract • Discounted fees • Capitation	Yes Varies by plan

Health Maintenance Organization (HMO)

A Health Maintenance Organization (HMO) is a managed care organization that provides comprehensive health care services (preventive, diagnostic, and therapeutic) to members through a network of participating providers. Members are required to obtain care from providers within the plan network. All patient care services are monitored and managed by a primary care physician (PCP). Health care services are reimbursed based on the capitation method, which pays a predetermined fixed amount. HMO plans optimize the use of health care services through utilization management requirements, such as referral, preauthorization, and utilization review. HMO members are responsible for copayments for specified services as outlined within the plan. The plan may require the patient to pay coinsurance and/or deductible amounts.

Preferred Provider Organization (PPO)

A Preferred Provider Organization (PPO) is a managed care organization that provides diagnostic, therapeutic, and preventive services to its members through a network of preferred providers. Members are encouraged to seek care from providers within the preferred network. PPO plans allow patients to seek care outside of the preferred provider network. Plan members generally pay higher out-of-pocket costs when care is rendered by providers outside the network. Plan members are responsible for a deductible and a coinsurance amount as specified by the plan. Patient care services are not monitored and managed by a PCP. Preferred Provider Organizations (PPO) negotiate discounted fees with a group of providers such as hospitals, physicians, clinics, ambulatory surgical centers, diagnostic imaging centers, and laboratories. Some PPO plans provide reimbursement based on capitation.

Point of Service (POS)

A Point of Service (POS) plan is a managed care plan that includes features of an HMO and PPO plan to provide diagnostic, therapeutic, and preventive services to members of the plan. POS plans allow the patient to decide what system to use at the point when services are rendered. All patient care services are monitored and managed by a PCP. The plan allows members to obtain care from providers within or outside the provider network. Higher coinsurance and deductible payments are generally required when care is obtained from an out-of-network provider. Utilization management requirements vary by plan; however, a referral must be obtained for care beyond the scope of the PCP, whether seeking care from a network or an out-of-network provider.

Exclusive Provider Organization (EPO)

An Exclusive Provider Organization (EPO) is a managed care organization that provides diagnostic, therapeutic, and preventive health care services to members of the plan. EPO plans have many of the same characteristics as preferred provider plans. EPO plan members are required to obtain care from providers within the exclusive provider network. All patient care services are monitored and managed by a PCP. Utilization management requirements vary by plan; however, a referral must be obtained for care beyond the scope of the PCP and preauthorization is required for specified services, such as a surgery. Exclusive Provider Organizations (EPO) negotiate discounted fees with a group of providers such as hospitals, physicians, clinics, ambulatory surgical centers, diagnostic imaging centers, and laboratories. Some EPO plans provide reimbursement based on capitation. The patient may be responsible for copayment, coinsurance, and deductible amounts, as outlined in the plan.

The health insurance industry consists of a large number of insurance companies offering a wide spectrum of coverage through many different insurance plans. The plans discussed here have been adopted by various private and government payers. It is important for hospital billing and coding personnel to have an understanding of the various private and government payers to ensure compliance with payer requirements.

BOX 11-3 CONCEPT REVIEW
Types of Health Insurance Plans

Traditional fee-for-service plans

• Basic health Insurance

• Major medical insurance

Managed care plans

• Health Maintenance Organization (HMO)

• Preferred Provider Organization (PPO)

• Point of Service Plan (POS)

• Exclusive Provider Organization (EPO)

BOX 11-1 Test Your Knowledge
TYPES OF HEALTH INSURANCE PLANS

True/False

1. Four types of managed care plans are Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), Point of Service (POS), and Exclusive Provider Organization (EPO).	T	F
2. The primary care physician (PCP) is the plan provider responsible for monitoring and managing the patient’s care according to the managed care provisions.	T	F
3. Basic medical insurance provides coverage for large medical expenses incurred as a result of a catastrophic or prolonged illness.	T	F
4. Under fee-for-service plans, the patient is generally responsible for the deductible and coinsurance, which is a percentage of the approved charges.	T	F
5. Fee-for-service plans are health insurance plans that incorporate the provision of coordinated health care services and cost-containment measures to monitor and manage health care services provided to members of the plan.	T	F

Fill-in-the-Blank

6. Five _____- ________ measures incorporated into managed care plans are primary care physician (PCP), provider network, referrals, preauthorization, and utilization review.

7. Under fee-for-service plans, reimbursement is determined for each service rendered based on a ________ __________.

8. Managed care plans use various methods including fee schedule, discounted fee-for-service, or capitation. Reimbursement for services provided under managed care plans is generally based on a ___________, which provides payment that is a predetermined, fixed amount.

9. __________ health insurance provides coverage for the cost of health care services required to diagnose and treat the patient’s condition. _______ __________ health insurance provides coverage for large medical expenses incurred as a result of a prolonged illness.

10. _________ __________ is part of the utilization management process whereby patient cases are reviewed to determine whether the care provided met medical necessity requirements and to determine if care was appropriate based on the patient’s condition.

Matching

Select the answer option that matches the descriptions below.

A Point of Service (POS)

B Accrued charges

C Preauthorization

D Exclusive Provider Organization (EPO)

E Provider network

F Preferred Provider Organization (PPO)

G Health Maintenance Organization (HMO)

H Primary care physician (PCP)

I Referral

J Fee-for-service

11. ____ The total amount of all charges incurred during a hospital patient visit.

12. ____ A managed care organization that provides diagnostic, therapeutic, and preventive health care services to members. Plan members are required to obtain care from providers within the exclusive network of providers. All patient care services are monitored and managed by a PCP.

13. ____ Traditional health insurance plans that provide health insurance coverage for services rendered and reimbursement is determined for each service rendered based on a fee schedule.

14. ____ A managed care organization that provides comprehensive health care services to members, managed by a primary care physician (PCP), through a network of participating providers. Members are required to obtain care from providers within the network. Providers are paid a predetermined, fixed payment capitation.

15. ____ A managed care plan that includes features of an HMO and PPO plan to provide diagnostic, therapeutic, and preventive services to members of the plan. The plan allows the patient to decide what system to use at the point when services are rendered. Care is managed by a primary care physician (PCP). Members are allowed to obtain care outside the provider network.

16. ____ A process required by a managed care plan to obtain approval for a service before the service is rendered.

17. ____ A managed care organization that provides diagnostic, therapeutic, and preventive services to its members through a network of preferred providers. Members may obtain care from a non-network provider. Patient care services are not monitored and managed by a PCP.

18. ____ The managed care plan provider that is responsible for monitoring and managing the patient’s care according to managed care plan provisions. This provider is also referred to as the “gatekeeper.”

19. ____ Consists of providers such as physicians, imaging centers, laboratories, and hospitals who agree to provide health care services to plan members for a predetermined fixed payment.

20. ____ The process of one physician transferring the care of a patient, for a specific illness or injury, to another physician.

Third-Party Payers

Payment for hospital services is received from patients and various third-party payers. Third-party payer is a term used to differentiate between the patient and any organization or other entity that provides coverage for health care services. Blue Cross, Aetna, Medicare, and TRICARE are examples of third-party payers. Third-party payers represent the largest portion of reimbursement for hospital services. They provide coverage for health care services through many different types of plans that represent variations in the billing and coding process for hospital services. Third-party payers that cover hospital services can be categorized as private and government payers. Private payers offer group health insurance plans, individual health insurance plans, and liability plans, such as automobile, personal injury, and workers’ compensation insurance. Government programs include Medicare, Medicaid, Children’s Health Insurance Program (CHIP), TRICARE, and the Civilian Health and Medical Program of the Veterans Administration (CHAMPVA).

Private Payers

A private payer is any type of health insurance plan that is paid for by someone other than the government. Private payers offer coverage for health care services to members of employer groups, organizations, or individuals who purchase health insurance. Private payers offer a wide range of health care benefits through a variety of different plans. The group or individual who purchases private health insurance can select the plan that provides coverage needed and is within specified budget parameters. Health insurance plan coverage and billing specifications vary by plan. Plan provisions include details regarding coverage, determination of primary or secondary payer status, patient responsibility, claim submission, and the appeals process. Private health insurance can be categorized as group health insurance, individual health insurance, and other health insurance.

Group Health Insurance

Group health insurance is insurance purchased by an employer or other organization for the purpose of providing coverage for medical services rendered to employees or members of a group. Groups that provide health insurance coverage generally offer more than one type of plan so that members can select the coverage that best meets their needs. Group health insurance plans can cover an individual member and various family members, such as a child or spouse. Group plans provide coverage for a wide range of health care services. Plan premiums are generally lower than individual health insurance premiums because the cost of the plan is spread among all the members who are enrolled in the plan.

Individual Health Insurance

Individual health insurance is insurance purchased by an individual directly from an insurance company. The individual’s employer may not offer coverage, or the individual may be self-employed. Individual health insurance plans cover the individual and can also cover various family members, such as a child or spouse. Premiums for an individual plan are generally higher than premiums for a group plan because the cost is not spread among members of a group. Individual plans may not provide the wide range of benefits that a group plan might provide.

Other Health Insurance

Hospitals provide diagnostic and therapeutic services to patients who are covered under other types of insurance, such as liability insurance. Liability insurance covers losses to a third-party caused by the insured, by an object owned by the insured, or on premises owned by the insured. Liability policies also provide coverage for health care services required for an illness or injury that is related to a liability. An example of liability insurance is personal injury insurance. Common examples of personal injury insurance include auto insurance and worker’s compensation insurance.

Personal Injury Insurance

Personal injury insurance provides personal injury protection (PIP) coverage for losses incurred as a result of another individual or company’s negligence. Personal injury losses can involve property damage and/or health care issues. A personal injury claim must be filed for health care services that are required. Hospitals have policies and procedures regarding payment for services involving personal injury liability. Some facilities require the patient to pay for services and seek reimbursement from the liability insurance company. If liability is not determined, the medical insurance plan may be billed. If liability is determined, coverage will be provided up to a maximum amount allowed by the personal injury insurance. When a personal injury claim exceeds the benefit amount, the benefits are exhausted. When the benefits are exhausted, the medical insurance may be billed.

Automobile Insurance

Automobile insurance protects an individual against financial loss resulting from an automobile accident. It is a contract between the insured and the insurance company. The insured pays a premium and the insurance company agrees to cover losses incurred as defined in the policy. Automobile insurance provides coverage for damaged property, and many policies cover health care services. Automobile insurance provisions vary by state. In most states, insurance options include bodily injury and personal injury protection (PIP). Bodily injury is generally required by all states because it covers injuries caused by the insured to someone else while the insured party is driving. PIP is also referred to as “No-Fault” because medical expenses are covered under each insured’s plan regardless of fault. The PIP plan will cover medical expenses up to a specified limit as outlined by the insured’s plan. If the PIP benefits are exhausted a claim may be submitted to the individual’s medical insurance plan.

Hospitals require patients in need of health care services related to an automobile accident to provide information regarding the automobile insurance, such as the insurance company name, the policy number, and the name of the insured. The hospital will submit a claim to the automobile insurance company outlining charges for services rendered. The claim must be completed accurately with information required to tell the payer the claim is for services related to an automobile accident.

Hospitals may also provide health care services to diagnose and treat conditions that are work related and covered under workers’ compensation insurance.

Workers’ Compensation Insurance

Workers’ compensation insurance is generally paid for by employers to cover the cost of medical services for injuries that occur on the job. Workers’ compensation insurance is regulated by the state and federal government. Workers’ compensation laws vary by state. State laws require employers with a specified number of employees to provide insurance for work-related injuries. Workers suffering from work-related injuries or diseases are entitled to benefits for lost wages and medical expenses arising as a result of the injury or disease.

Hospital procedures for workers’ compensation cases vary according to plan. All workers’ compensation cases require a Notice of Injury report to be filed with the employer within a specified period of time. The hospital will submit a claim that summarizes all charges for services required to treat the work-related injury. The payer may require a written report of the patient’s medical condition and treatment. The information submitted by the hospital is used by the payer to verify that the injury was work related.

BOX 11-4 CONCEPT REVIEW

Private Payers

• Group health insurance

• Individual health insurance

Other Payers

• Automobile insurance

• Personal injury insurance

• Workers’ compensation insurance

Government Payers

The health insurance industry has evolved over the past decade and the government has become the largest payer of health care services. In the 1960s a growing concern over the rising cost of health care and limited access to care for the poor and elderly resulted in the implementation of several federally sponsored government health insurance programs. In 1965, through an amendment of the Social Security Act of 1935, health insurance for the aged, called Medicare, was implemented. Another program, Medicaid, was implemented to provide coverage for health expenses to low-income individuals. In 1966, the U.S. Congress created the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS), now known as TRICARE, to provide coverage for medical care provided to individuals in the military. Government health care expenditures have increased exponentially over the years. As the largest payer of health care services, the government sets the pace in the health care industry by establishing policies regarding provision of care, processing claims, and payment for services (Figure 11-6).

Hospitals provide health care services to members of various government-sponsored programs. It is important for hospital billing and coding personnel to gain an understanding of various elements of each program. This section provides an overview of key factors in billing for services covered under Medicare, Medicaid, TRICARE, and the Civilian Health and Medical Program of the Veterans Administration (CHAMPVA), including administration, eligibility, coverage, plan options, and coordination of benefits.

Medicare

Medicare is a federally funded program implemented under Title XVIII of the Social Security Act of 1965 to provide coverage for health care services to the elderly and other specified groups. The purpose of the program is to provide coverage for health care services provided to the following:

• Individuals 65 years of age or older

• Individuals who are eligible for Social Security disability

• Individuals with end-stage renal disease (ESRD)

Medicare is administered by the Centers for Medicare and Medicaid Services (CMS), a federal agency within the Department of Health and Human Services (DHHS). CMS was formerly known as the Health Care Financing Administration (HCFA). CMS is responsible for three national health care programs that benefit over 81 million Americans:

• Medicare

• Medicaid

• Children’s Health Insurance Program (CHIP)

Two divisions within CMS that are chiefly responsible for the Medicare program are the Center for Medicare Management and the Center for Beneficiary Choices as illustrated in Figure 11-7. The Center for Medicare Management is responsible for the oversight of traditional fee-for-service Medicare. It serves as the focal point for all interactions with health care providers, intermediaries, and carriers for issues relating to CMS policies and operations. Responsibilities of the Center for Medicare Management include the management of fee-for-service administrative contractors and the development of policies regarding coding and payments.

The Center for Beneficiary Choices manages Medicare Advantage Plans, consumer research, and grievance and appeal functions for the Medicare program. The division serves as the focal point for all interactions with beneficiaries, their families, caregivers, health care providers, and others operating on their behalf concerning improving the beneficiaries’ ability to make informed decisions about their health and about program benefits administered by CMS.

Medicare Administrative Contractor (MAC)

A Medicare Administrative Contractor (MAC) is an insurance company or other entity that contracts with the Federal government to handle functions related to enrollment and processing of claims for the Medicare program. Medicare contractors were previously known as fiscal intermediaries (FI) or Medicare carriers. CMS published a notice of change, effective October 1, 2005, stating fiscal intermediaries will be replaced with new contractors referred to as Medicare Administrative Contractors (MAC). From 2006 to today, CMS has awarded contracts through competitive procedures to MACs in 15 jurisdictions. To further improve effectiveness and efficiency, the original 15 jurisdictions are being consolidated into 10 jurisdictions. Contractors may be awarded the contract for Medicare Part A and/or Medicare Part B. Additionally, Medicare awards specialty contracts for durable medical equipment, home health, and hospice. Medicare Administrative Contractors (MAC) may vary by jurisdiction, for example First Coast Service Options, a division of Blue Cross and Blue Shield, is the MAC for jurisdiction “N,” and Noridian Administrative Services is the MAC for jurisdiction “F.” Figure 11-8 illustrates the 10 jurisdictions and provides examples of contractors for several of those jurisdictions. More information regarding MAC jurisdictions can be found on the CMS Web site.

BOX 11-5 CONCEPT REVIEW
Medicare

Federally funded program implemented in 1965

• Under Title XVIII of the Social Security Act

Provide coverage for health care services

• Individuals 65 years of age or older

• Individuals who are eligible for Social Security disability

Center for Medicare and Medicaid Services (CMS)

• Medicare Administrative Contractors (MAC)

Eligibility

In accordance with Medicare eligibility requirements, individuals eligible for Medicare are those who meet the following criteria:

• Worked for at least 10 years as a Medicare-covered employee (contributions were made for Social Security)

• Are age 65 years or older

• Are citizens or permanent residents of the United States

• Are eligible for Social Security disability benefits or

• Have end-stage renal disease (ESRD)(permanent kidney failure requiring dialysis or transplant)

Coverage

Coverage provided under the Medicare program is defined in four parts: Medicare Part A, Part B, Part C, and Part D, as illustrated in Figure 11-9. Each part of Medicare provides benefits for specific services.

Medicare Part A

Medicare Part A is referred to as “hospital insurance” because it provides coverage for medically necessary inpatient care provided in a hospital, skilled nursing facility, or a psychiatric facility. Coverage for hospice, home health care, and blood is also provided under Medicare Part A. Medicare Part A coverage is automatically assigned to individuals who are retired and receiving Social Security, railroad retirement beneficiaries, and individuals who are receiving Social Security disability benefits. Medicare Part A does not require the beneficiary to pay a premium unless he or she does not meet the Medicare 10-year covered employment requirement.

Medicare Part A benefits are paid based on a benefit period. A benefit period begins on the first day a patient is admitted to the hospital, as defined by Medicare. The period ends when the patient has not been in the hospital for 60 consecutive days. This period is also referred to as an episode of care. Major categories of coverage under Medicare Part A are:

1. Inpatient hospitalization, which includes room and board (semi private), medications, supplies, nursing care, and other hospital services.

2. Skilled nursing facility care provided by a Medicare-approved nursing facility. Nursing facility services are covered when the patient is admitted to a nursing facility from a hospital after a minimum stay of 3 days in the facility.

3. Home health care provided on a part-time or intermittent skilled care basis, including home health aide services, durable medical equipment, supplies, and other services.

4. Hospice care services provided to a patient who is terminally ill for the purpose of relieving pain and symptoms.

5. Blood required during a patient stay, after the first 3 pints.

Medicare beneficiaries are required to pay a Medicare Part A deductible and coinsurance. Deductible and coinsurance amounts may change annually. The Part A deductible for 2013 is $1,184.00. The Part A coinsurance requirement is $296.00 per day for inpatient hospital days 61 to 90. The coinsurance requirement for inpatient hospital days 91 to 150 is $592.00 per day. Medicare beneficiaries are entitled to Lifetime reserve days. Lifetime reserve days are 60 days of hospitalization, per lifetime, that the beneficiary may use Reserve days at his or her discretion. Lifetime reserve days may be used to cover patient stays beyond 90 days. The patient is responsible for all hospital charges for stays over 150 days, beyond lifetime reserve days. Table 11-2 illustrates Medicare Part A covered services, amounts paid by Medicare, and the patient’s responsibility for the major classifications of coverage.

TABLE 11-2

Medicare Part A Benefits

Services	Benefit	Medicare Pays	Patient Pays
Inpatient Hospitalization Semiprivate room and board, general nursing, and miscellaneous hospital services and supplies (Medicare payments are based on benefit periods) Includes: hospitalization in a hospital, psychiatric, rehabilitation, or long-term care facility	First 60 days	All but $1,184	$1,184 deductible
	61st to 90th day	All but $296 a day	$296 a day
	60 reserve days benefit^†	All but $592 each day after 90	$592 a day
	Beyond 150 days	Nothing	All costs^†
Skilled Nursing Facility Care Patient must have been in a hospital for at least 3 days and enter a Medicare-approved facility generally within 30 days after hospital discharge^‡ (Medicare payments based on benefit periods)	First 20 days	100% of approved amount	Nothing
	21st to 100th day	All but $148.00 a day	Up to $148.00 a day
	Beyond 100 days	Nothing	All costs
Home Health Care Part-time or intermittent skilled care, home health aide services, durable medical equipment and supplies, and other services	Unlimited as long as Medicare conditions are met and services are declared “medically necessary”	100% of approved amount; 80% of approved amount for durable medical equipment	Nothing for services; 20% of approved amount for durable medical equipment
Hospice Care Pain relief, symptom management, and support services for the terminally ill	If patient elects the hospice option and as long as doctor certifies need	All but limited costs for outpatient drugs and inpatient respite care	Limited cost sharing for outpatient drugs and inpatient respite care
Blood	Unlimited if medically necessary, after the first 3 pints	All but first 3 pints per calendar year^§	For first 3 pints

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Mar 24, 2017 | Posted by admin in NURSING | Comments Off

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Cost-Containment Measures

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