Chapter 5
Hospital Billing Process
1. Define terms, phrases, abbreviations, and acronyms.
2. Demonstrate an understanding of the billing process and its purpose.
3. Discuss the key provisions of participating provider agreements (PAR).
4. Identify variations in claim requirements by payer type and type of service.
5. Explain the difference between traditional, fixed, and Prospective Payment Systems (PPS) reimbursement methods.
6. Discuss the content and purpose of the Charge Description Master (CDM).
7. Differentiate between coding systems required for outpatient services versus inpatient services.
8. Discuss the purpose of the detailed itemized statement and how it relates to the claim form.
9. Explain the difference between a clean and dirty claim, and discuss the importance of submitting a clean claim.
10. Explain the significance of accounts receivable (AR) management.
11. Demonstrate an understanding of phases of the hospital revenue cycle.
Accounts receivable (A/R) management
Ambulatory Payment Classifications (APC)
Charge Description Master (CDM)
Electronic data interchange (EDI)
Inpatient Prospective Payment System (IPPS)
Medicare Severity-Diagnosis Related Groups (MS-DRG)
Outpatient Prospective Payment System (OPPS)
Participating provider agreement
Prospective Payment Systems (PPS)
Resource-Based Relative Value Scale (RBRVS)
American National Standards Institute
Ambulatory Payment Classifications
Centers for Medicare and Medicaid Services
Health Care Financing Administration
Health Care Common Procedure Coding System
Health Insurance Portability and Accountability Act
International Classification of Diseases, 10th Revision, Clinical Modification
International Classification of Diseases, 10th Revision, Procedure Coding System
Inpatient Prospective Payment System
Medicare Severity-Diagnosis Related Groups
National Uniform Billing Committee
Outpatient Prospective Payment System
Resource Based Relative Value Scale
Usual, customary, and reasonable
The role of hospital billing and coding professionals is complicated because of the ever-changing health insurance environment and variations in payer guidelines. It is essential for billing and coding professionals to understand payer guidelines to ensure that accurate reimbursement is obtained and to ensure compliance with payer guidelines. A review of several provisions of the participating provider agreement (PAR) “payer contract” will illustrate how payer guidelines vary and the significant impact they have on the billing process. A discussion of how charges are captured, coding systems, and claim forms will provide a basis for understanding the billing process. The chapter will close with an overview of the hospital revenue cycle from patient admission to collections. Many of the concepts presented in this chapter are presented to provide an overview of the hospital billing process. These concepts will be expanded upon in future chapters.
Payer Guidelines
Participating Provider Agreement (PAR)
The hospital’s payer mix includes various payers that provide coverage to patients seen at the hospital. Medicare, Medicaid, TRICARE, Blue Cross/Blue Shield, Worker’s Compensation, and various managed care plans are generally part of the hospital’s payer mix. Hospitals and other providers may elect to enter into a written agreement to participate with payers, known as the participating provider agreement. A participating provider agreement (PAR) is a written agreement between the hospital and a payer that outlines the terms and conditions of participation for the hospital and the payer. Figures 5-2 and 5-3 highlight common provisions related to patient care services, patient financial responsibility, billing requirements, and reimbursement as outlined below.
Charge Submission Requirements
TABLE 5-1
Hospital Service Categories Facility Charges | CMS-1500 | CMS-1450 (UB-04) | Variations |
Outpatient | |||
Ambulatory surgery—performed in a hospital outpatient Surgery Department | X | Some payers require ambulatory surgery charges to be submitted on the CMS-1500 | |
Ambulatory surgery—performed in a certified Ambulatory Surgery Center (ASC) | X | ||
Emergency Department | X | Some payers require outpatient department charges to be submitted on the CMS-1500 | |
Ancillary departments: Radiology; Laboratory; Physical, Occupational, and Speech Therapy | X | Some payers require outpatient department charges to be submitted on the CMS-1500 | |
Other outpatient services: infusion therapy and observation | X | Some payers require outpatient department charges to be submitted on the CMS-1500 | |
Hospital-based primary care office | X | Physician services may be billed by the hospital when the physician is employed by the hospital | |
Other hospital-based clinic | X | ||
Inpatient | |||
All services and items provided by the hospital during the inpatient stay | X | Emergency Department charges are included on the inpatient claim when the patient is admitted from the ER | |
Non-patient | |||
A specimen received and processed; the patient is not present | X | Some payers require outpatient department charges to be submitted on the CMS-1500 |
CMS-1450 (UB-04) is used to submit charges to Medicare Part A.
Electronic Claims
In accordance with HIPAA regulations, standard formats for electronic transactions, including submission of claims, have been adopted. The standard formats adopted were developed by the American National Standards Institute (ANSI). The standard transaction format for the CMS-1500 is the ANSI X12 837 and the format for the CMS-1450 (UB-04) is the ANSI X12 837I. The standard transaction formats contain elements found on the CMS-1500 and CMS-1450 (UB-04) paper claims. The current standard format, Version 5010, was adopted and the compliance date for all HIPAA covered entities to transition to Version 5010 was January 1, 2012. Details regarding Version 5010 can be viewed on the CMS Web site at www.cms.gov/ICD10/11a_Version_5010.asp#TopOfPage.
Reimbursement Methods
Traditional Payment Methods
• Fee-for-Service is a reimbursement method that provides payment for hospital services based on an established fee schedule for each service.
• Fee Schedule is a listing of established, allowed amounts for specific medical services and procedures.
• Percentage of Accrued Charges is a reimbursement method that calculates payment for charges accrued during a hospital stay based on a percentage of accrued charges.
• Usual, Customary, and Reasonable (UCR) is based on a review of the usual and customary fee to determine the fee that is considered reasonable.
Fixed Payment Methods
Capitation is a reimbursement method that provides payment of a fixed amount, paid per member per month. Capitation methods are generally used to provide reimbursement for primary care physician services and other specified outpatient services provided to managed care plan members.
Case Rate is a set payment rate paid to the hospital for the case. The payment rate is based on the type of case and resources required to treat the patient.
Contract Rate is a set payment rate as agreed to in a contract between the hospital and the payer.
Flat Rate is a set payment rate for the hospital admission regardless of charges accrued.
Per Diem is a set payment rate per day rather than payment based on the total of accrued charges.
Relative Value Scale (RVS) assigns a relative value that represents work, practice expense, and the cost of malpractice insurance to each professional service code.
Reimbursement Method Variations
TABLE 5-2
Reimbursement Method Variations
SERVICE LEVEL | |||
Payer | Outpatient Services | Inpatient Services | Professional and Non-patient Services |
Government Programs Medicare, TRICARE, Medicaid (implemented under Prospective Payment System) | Ambulatory Payment Classifications (APC) | Medicare Severity-Diagnosis Related Groups (MS-DRG) | Resource-Based Relative Value Scale (RBRVS) |
PPS method basis | Hospital is reimbursed a set fee based on the APC payment rate for the procedure performed. | Hospital is reimbursed a set fee based on the MS-DRG payment rate for the patient’s condition and related treatment. | A relative value is assigned to each CPT code, which represents physician time, skill, and overhead. |
Commercial and Other Third-Party Payers | Case rate Contract rate | Case rate Contract rate | Fee-for-service Fee schedule |
Blue Cross/Blue Shield, Aetna, Humana, workers’ compensation | Fee-for-service Fee schedule Percentage of accrued charges | Fee-for-service Flat rate Percentage of accrued charges Per diem | Relative value scale (RVU) Usual, customary, and reasonable (UCR) |
Managed Care Plans | Case rate Contract rate | Case rate Contract rate | Capitation Contract Fee schedule |