The school where Machelle Van Cleve receives her medical assistant training offers an optional job-shadowing module. For her assignment she chose a nearby health center, where she observed the administrative responsibilities of the medical assistants employed in this multispecialty practice. Machelle found that some of the offices were organized and efficient, whereas others lacked a structured routine, especially in the insurance department. Machelle, a detail-oriented person who enjoyed her studies related to billing and coding, heard numerous comments from employees in the administrative area related to the volumes of work in the billing offices. Her office manager explained that the mountainous paperwork was created as a result of managed care requirements, rejected claims needing further research, and inconsistencies in the demands of the various insurance companies. Machelle agreed that keeping up with the requirements and regulations of the many third-party payers and government entitlement programs must be an overwhelming task. She concluded that billing and reimbursement are at the heart of the medical facility, and the correct completion of insurance claim forms is central to the success of the practice. She realized that becoming familiar with the complexities of the insurance claims process would be challenging, but she was convinced that through education, organization, and dedication she could become a valuable employee and an advocate for the patients who needed her assistance in resolving issues related to their claims for reimbursement.

While studying this chapter, think about the following questions:

• What will Machelle find is one of the most important, and basic, tasks that must be done properly before even beginning the insurance claim preparation?

• Why is it important for Machelle to learn the specific insurance billing requirements of different insurance companies and third-party payers?

• What has Machelle learned about the importance of auditing claims before they are sent to the insurance carrier for reimbursement?

• What does Machelle know about reimbursement and insurance claims follow-up?

Medical insurance means many things to many people. To some, it is a mound of paperwork. To others, it is a mass of confusion and regulations that seem to constantly change. To a patient with an illness or injury, health insurance helps defray the high costs associated with healthcare.

The universal claim form, originally called the HCFA-1500, was first developed in 1988 by the Health Care Financing Administration (HCFA) and approved for use by physicians and providers of outpatient services when submitting Medicare Part B claims for reimbursement. In 2001 the HCFA was renamed the Centers for Medicare and Medicaid Services (CMS), and the claim form was renamed the CMS-1500 Health Insurance Claim Form, commonly known as the CMS-1500. The form was subsequently adopted by almost all health insurance companies and third-party payers for use in the submission of physicians’ claims for reimbursement. The current version of the CMS-1500 was adopted in August, 2005. As of May, 2008, only the CMS-1500 (08-05) claim form may be used to submit insurance claims.

Types of Claims

A medical assistant may submit insurance claims to a third-party payer or an insurance carrier either on hard copy (paper) or electronically. Hard copy claims are insurance claims submitted manually, on paper, by surface mail (i.e., the U.S. Postal Service). Electronic claims are insurance claims that are submitted to an insurance carrier via electronic media, such as the Internet. Most of today’s computer programs generate claims internally from the information entered into the database.

Hard Copy (Paper) Claims

Advantages and Disadvantages of Paper Claims

Paper (hard copy) claims have advantages and disadvantages. The advantages include minimal start-up costs (because the forms are readily available through many vendors) and the ability to attach documentation explaining unusual circumstances that might affect reimbursement. The cost in time, labor, and postage is higher with paper claim submission, and reimbursement is much slower. Paper claims also require a lot of storage space.

Intelligent Character Recognition

Insurance claims created on paper (hard copy) are processed at the insurance payer using intelligent character recognition (ICR). ICR is a system that scans documents and captures claims information directly from the CMS-1500 form. Medicare, Medicaid, TRICARE (formerly CHAMPUS), and many other insurance carriers have adopted the ICR system. The ICR system has replaced the optical character recognition (OCR) process, which had been in use until the early twenty-first century.

At the insurance carrier, ICR scanners transfer the information on claim forms into computers. This transfer is done using a red bulb scanner, which causes the red preprinted portion of the CMS-1500 form to appear invisible to the computer. The scanner “captures” only characters printed in black ink on the form and transfers them to the computer’s memory. The resulting image allows for “clean” recognition of the data entered on the CMS-1500 form; that is, the data characters are not obstructed by the lines and text of the form.

The benefits of ICR scanning include greater efficiency in processing claims, improved accuracy, more control over the data input, and reduced data entry cost for the insurance carrier.

The medical assistant should use the following rules to complete the paper CMS-1500 form correctly so that the insurance carrier can scan the claim:

• Entries should be clear and sharp; carbon copies are not acceptable.

• Use pica type (10 characters per inch). The equivalent computer font is Courier 10 or OCR 10.

• All uppercase letters should be used.

• All punctuation should be omitted.

• All birth dates should be in this format: MM DD YYYY (with a space between each set of digits).

• Each entry should be kept within its respective block; all characters (e.g., X, Y, N) must fall completely within the designated block.

• A blank space should be substituted for the following:

Dollar signs and decimal points in charges and in ICD-9-CM codes

Dashes preceding procedure code modifiers

Parentheses around telephone area codes

Hyphens in Social Security numbers

• Titles and other designations (e.g., Sr., Jr., II, or III) should be omitted unless they appear on the identification (ID) card.

• When the charge is expressed in whole dollars, two zeros should be used in the “cents” column.

• Do not enter the alpha character “O” for a zero (0).

• If a typewriter is used, do not use lift-off tape, correction tape, or correction fluid.

• Because photocopies of claims cannot be scanned, all resubmissions must be prepared using the original (red print) claim form.

• No handwritten data (other than signatures) may be included on the form.

• Nothing should be stapled to the form.

• The name and address of the insurance company should be inserted in the proper area in the top margin of the claim form.

Electronic Claims

As mentioned, electronic claims are insurance claims that are transmitted over the Internet from the provider to the health insurance company. Most claims-processing software is designed to permit electronic claims generation. A mandate included in the Health Insurance Portability and Accountability Act (HIPAA) required the development of “transaction and code sets” for all insurance-related information sent electronically, including claim form submissions, claim status requests, and remittance (payment) processing.

The transaction and code set for CMS-1500 electronic claims submission is the ASC X12N 837P (HIPAA 837 Health Care Claim: Professional [837P]). All insurance billing data entered into the computer software program (i.e., patient, provider, charge, diagnosis, and procedure) is reformatted by the software program to conform with the transaction and code sets format and guidelines. For more information on implementation guides for transaction and code sets, refer to the Evolve site at evolve.elsevier.com/kinn).

HIPAA 837 Health Care Claim

Professional (837P) Overview

As part of the Health Insurance Portability and Accountability Act of 1996, standards were developed to protect patients’ health information when it was transmitted electronically. These standards, known also as transaction and code sets, mandate the format of insurance claims, remittance information, claims attachments, and claims status submitted electronically. The insurance claim form for physician and provider services is called the HIPAA 837 Health Care Claim: Professional, or 837P. This standard contains the format and establishes the data contents of the Health Care Claim Transaction Set (837) for use in the context of an electronic data interchange (EDI); that is, data that are transmitted electronically via the Internet. This transaction set can be used to submit healthcare claim billing information, encounter information, or both from providers of healthcare services to payers, either directly or via intermediary billers and claims clearinghouses.

Since 2003, all insurance claims submitted electronically, regardless of whether the claim is submitted directly to the payer or to a clearinghouse, have had to be submitted using the 837P standard, to comply with the HIPAA mandates. Any provider, payer, employer, or other entity that does not use these standards can be removed from participation in federal programs such as Medicaid, Medicare, and TRICARE and also may face stiff civil and/or criminal fines and imprisonment. All vendors, providers, clearinghouses, employers, and health insurance carriers that transmit protected health information electronically must have updated software that conforms to the HIPAA standards, including but not limited to the 837P. These software upgrades will be transparent to the medical assistant entering data into the computer for insurance claims processing; in other words, the format, screens, steps, and processes for entering data into the computer for the purpose of generating insurance claim forms, whether on paper to be mailed or to be transmitted electronically, should look and feel the same as before the transaction and code sets were implemented.

The CMS Web site (cms.gov) provides more information about the Transaction and Code Sets for the HIPAA 837 Health Care Claim: Professional, and the standards for other electronically submitted data, such as the Claims Payment and Remittance Advice (835), Healthcare Claims Status (276/277), Coordination of Benefits (837), and Referral Certification and Authorization (278).

Electronic Claims Submission

Electronic claims can be submitted in several ways. Claims can be transmitted directly to the insurance carrier, also known as direct billing, or to a claims clearinghouse, which then submits the claims to the insurance carrier.

Direct Billing.

Direct billing is the process by which an insurance carrier allows a provider to submit insurance claims directly to the carrier electronically. Most major insurance carriers, including Medicare and Medicaid, provide small computer programs to providers that are used to enter patient and insured information, charges, and provider detail directly into the program. These data are then transmitted electronically directly to the insurance carrier. Many carrier-direct systems are supplied free of charge to the provider, but the direct system can transmit only to specific carriers.

Clearinghouse Submission.

A clearinghouse is a vendor that allows a provider to submit all the insurance claims generated by the provider to the clearinghouse using special software. The clearinghouse then audits and sorts the claims and sends them in batches electronically to each of the different insurance carriers. A clearinghouse charges the healthcare provider a small fee for the service of receiving claim transmissions, checking and preparing the claims for processing, consolidating claims so that one transmission can be sent to each carrier, and submitting claims in correct data format to the applicable insurance payer. Other services that clearinghouses typically provide include:

• Auditing claims to make sure all required fields are completed and the data are correct

• Reporting the number of claims submitted and the number of errors and their specifics

• Forwarding claims to insurance carriers that accept electronic claims (e.g., Medicare, Medicaid, Blue Cross/Blue Shield, and others) or to another clearinghouse that may hold the contracts with specific payers

• Keeping provider offices updated as new carriers are added to the database

• Generating informative statistical reports

Clearinghouses are also called third-party administrators (TPAs), and they are designed to receive electronic claims from any provider.

Advantages of Electronic Submission

Typically, with electronic claims processing, payments are received in less than half the time required for turnaround of paper claims. Very soon after claims have been transmitted, the clearinghouse sends the provider tracking reports that describe which claims were received, audited, and forwarded to the insurance carrier. These tracking reports also provide information regarding rejected claims and those needing additional information.

Electronic claims processing reduces payment turnaround time by shortening the payment cycle and can reduce average error rates to less than 1% or 2%. Some insurance companies even waive the attachment requirements for many procedures when claims are submitted electronically. For additional information on advantages and disadvantages, visit the Evolve site at evolve.elsevier.com/kinn).

21-1

Critical Thinking Application

Machelle is interested in learning more about filing claims electronically. In the medical facility where she is doing her externship, she has asked to work with Frank Hern, who performs this procedure in the office. How can working closely with Mr. Hern benefit Machelle with regard to this subject?

Data Gathering Guidelines

When the first appointment is made for a patient, it is routine to ask the patient for all pertinent insurance information. Much of this information is on the Patient Registration form that is completed when the patient comes to the medical office for the initial visit; it is inserted into the medical chart and entered into the computer’s patient database. This information should always be collected from every new patient seen by the provider. Returning or established patients should be asked during each visit whether their insurance information is complete and current. Many offices use a form that allows the patient to provide address and phone number updates, in addition to new insurance information.

The information needed to complete an insurance form (Table 21-1) is gathered from several sources: (1) the Patient Registration form, (2) the completed Verification of Eligibility and Benefits form, (3) referral and authorization information (when required by the insurance carrier), (4) the patient’s medical record, (5) the encounter form or charge ticket, and (6) a photocopy of the patient’s insurance card or cards, driver’s license or state-issued ID card, and student ID (if applicable and available). The Current Procedural Terminology (CPT), Health Care Common Procedural Coding System (HCPCS), and International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM) coding manuals and the individual insurance payer’s claims processing manual or guidelines are also necessary resources for preparing insurance claims. Procedure 21-1 presents the steps for gathering patient and other information needed prior to completing the insurance claim form.

TABLE 21-1

Information Required for Completion of CMS-1500 Form

BLOCK	INFORMATION NEEDED
	Completed Patient Registration form
	Photocopy of insurance card or cards—front and back
	Pertinent information from Verification of Eligibility and Benefits form
	Preauthorization and/or referral number (when applicable)
Section 1: Carrier Block
Carrier Block	Insurance carrier’s address
Section 2: Patient/Insured
1	Type of insurance If patient’s condition or illness is related to employment, auto accident, or some other type of accident, provide: • Date of onset of condition or accident • Responsible party’s name, address, and phone number • Insurance carrier of responsible party, including address and phone number • Insurance ID number, policy, and/or group number
1a	Insured’s identification (ID) number (primary insurance)
2	Patient’s full name
3	Patient’s date of birth and gender
4	Insured’s name (primary insurance)
5	Patient’s information • Permanent address (including apartment number if appropriate) • City, state, ZIP code • Telephone number
6	Patient’s relationship to insured
7	Insured’s information • Permanent address (including apartment number if appropriate) • City, state, ZIP code • Telephone number
8	Patient status • Employed? • Full- or part-time student?
9	Secondary (other) insured’s name*
9a	Policy or group number of secondary insurance*
9b	Secondary insured’s date of birth and gender*
9c	Secondary insured’s employer or school name*
9d	Secondary insured’s insurance plan or program name*
10a-c	If patient’s condition or illness is related to employment, auto accident, or some other type of accident, make sure information is obtained as outlined in Block 1
11	Insurance policy, group, or FECA number of primary insurance
11a	Primary insured’s date of birth and gender
11b	Primary insured’s employer or school name
11c	Primary insured’s insurance plan or program name
11d	Determine whether the patient also is covered by a secondary health insurance plan
12	Confirm that the patient’s release of information form has been signed and dated and is in the patient’s record
13	Confirm that the insured’s authorization of benefits form has been signed and dated and is in the patient’s record
Section 3: Physician/Supplier
14	Date illness, injury, or pregnancy began
15	Determine whether patient has had same or similar symptoms
16	From-To dates if patient was unable to work at current occupation
17	Name of ordering or referring provider
17a	Not required
17b	Ordering or referring provider’s NPI number
18	From-To dates if patient encounter included an inpatient hospital stay
19	Determine whether insurance carrier in carrier block and Block 1 require any information entered in this field
20	Determine whether an outside lab was used; if so, enter charges billed to provider for outside lab services
21	ICD-9-CM code or codes for patient’s condition, illness, or injury (maximum of four per claim)
22	Is Medicaid claim being resubmitted? If yes, provide reference number from original Medicaid claim submitted
23	If prior authorization and/or referral is required, provide authorization (approval) number from insurance payer
24A	From-To dates of service for current encounter
24B	POS code
24C	If an emergency, put a Y in this box
24D	CPT and/or HCPCS code CPT and/or HCPCS modifier(s) (maximum of four per charge line)
24E	Block 21 field or reference number (1, 2, 3 and/or 4)
24F	Total charge for CPT- or HCPCS-coded services listed in 24D. • If more than 1 day or unit is indicated in Block 24G, multiply the charge for the service(s) coded in Block 24D by the number of days/units in Block 24G; enter the result in Block 24F.
24G	Total number of days or units
24H	EPSDT or Family Plan code (Medicaid or AFDC)
24I	Qualifier ID code (if no NPI number is available)
24J	Rendering (treating) provider’s NPI number—unshaded field PIN (if no NPI number is available)—shaded field
25	Rendering provider’s federal tax ID number (EIN or SSN)
26	Patient’s account number with rendering provider
27	Determine whether contract or agreement between provider and insurance carrier allows provider to accept assignment
28	Total charges from Block 24F, lines 1-6
29	Amount paid by patient, insured, or other insurance
30	Balance due, if any amount paid is shown in Block 29
31	Signature of provider performing service or procedure
32	Address of facility where services were rendered
32a	NPI number of service facility in Block 32
32b	Qualifier ID number and PIN of facility in Block 32 (if no NPI is available)
33	Name, address, and phone number of performing (rendering) provider
33a	NPI number of provider in Block 33
33b	Qualifier ID number and PIN of provider in Block 33 (if no NPI is available)

AFDC, Aid to Families with Dependent Children; CPT, Current Procedural Terminology coding method; EIN, Employer’s Identification Number; EPSDT, Early and Periodic Screening, Diagnosis, and Treatment; FECA, Federal Employees Compensation Act; HCPCS, Health Care Common Procedural Coding System coding method ; ICD-9-CM, International Classification of Diseases, Ninth Revision, Clinical Modification coding method; NPI, National Provider Identifier; PIN, personal identification number; POS, place of service.

*Only required if a secondary insurance exists and is to be submitted to the insurance carrier.

Procedure 21-1

Gather Data to Complete CMS-1500 Form

CAAHEP COMPETENCIES: II.C.II.1., IV.C.IV.6., IV.P.IV.3., V. P.V.6., VII.P.VII.1., VII.P.VII. 2., VII.P.VII.3., IX.A.IX.2.

ABHES COMPETENCIES: 3.x

GOAL: To gather all information and documentation required for completing an insurance claim.

EQUIPMENT and SUPPLIES

• Patient Registration form

• Photocopy of patient’s insurance card or cards, driver’s license or state-issued identification card, and student ID (if applicable).

• Verification of Eligibility and Benefits form

• Preauthorization and/or Referral form

• Encounter form (charge ticket or superbill)

• ICD-9-CM coding manual

• CPT coding manual

• HCPCS coding manual

Procedural Steps

1. Have the patient or patient’s guardian complete the Patient Registration, Release of Information, and Authorization of Benefits form or forms in full and return them to the medical assistant.
PURPOSE: To gather the required information to enter into the computer, so that the documents and files needed to ultimately receive the maximum reimbursement from the carrier. This process creates the record and allows the physician to begin documentation that will be used to complete the insurance claim form.

2. Ask for the patient’s and the insured’s driver’s license and insurance card or cards. If the patient is a student, ask whether he or she has a student identification (ID) card; if so, request it from the patient. If a patient has more than one insurance policy, it is important to get the name, address, group, and policy number for each company.
PURPOSE: To obtain state-issued identification of the patient so that the physician verifies that he or she is treating the right patient (who is eligible for benefits).

3. Photocopy the back and front of the patient’s insurance card and place the photocopy in the medical record and/or the patient’s insurance file. Most medical offices also photocopy the patient’s and insured guarantor’s driver’s license or other state-issued ID card (and, when applicable, a student ID card) for verification of the patient’s and insured’s identity.

4. Confirm the patient’s and insured’s full name, address, phone number, date of birth, gender, and insurance information by comparing the Patient Registration form, insurance ID card, and state-issued ID card.

5. Determine whether someone other than the patient is the guarantor. The guarantor is the person or entity responsible for payment. The guarantor may be the patient, the insured, or a third party. If neither the patient nor the insured is the guarantor, obtain the guarantor’s address, date of birth, and employer information, in addition to the guarantor’s relationship to the patient (e.g., spouse, parent, self, or other).

6. Call the employer and confirm employment (optional). If the patient is insured under a group health plan, workers’ compensation, TRICARE, or some other types of insurance, this information can be confirmed when verifying eligibility and benefits.

7. Confirm that the patient has signed and dated the Release of Information form.
PURPOSE: To prove that the patient has agreed to allow the physician to release information to the insurance company or other third-party payor so that payment can be made on the claim.

8. Confirm that the insured has signed the Authorization of Benefits form. Signatures to authorize insurance billing, supplying of information to insurance companies, and acceptance of assignments of benefits (if appropriate) should be obtained from all new patients and at the beginning of each new calendar year.

9. Contact the insurance carrier and perform a verification of benefits and insurance coverage.

10. Obtain any precertification or referral authorization or authorizations required by the insurance carrier or payer.

11. Code the diagnosis or diagnoses for the encounter using the ICD-9-CM coding manual.

12. Select any qualifying circumstance, physical or patient status, or other modifiers as appropriate.

13. Code the procedures and services rendered during the encounter using the CPT and/or HCPCS coding manual.

14. Select any CPT and/or HCPCS modifiers as appropriate.

15. Using Table 21-1 or a similar list of information to gather in preparation for insurance claim submission, confirm all information needed is available.

Verification of Eligibility and Benefits

Once the patient’s and the insured’s demographic and insurance information has been collected, the next step is to verify the patient’s eligibility and benefits. This usually is done by phone, by calling the insurance carrier or carriers for the patient and confirming that the patient is covered by the insurance; this also provides an overview of the benefits available for the patient from the insurance policy. The information obtained over the phone should be verified by either fax or e-mail confirmation from the insurance carrier. For more information about verification of benefits and to see an example of a verification form, visit the Evolve site at evolve.elsevier.com/kinn.

Preauthorization and/or Referral

If any diagnostic or therapeutic services or procedures are to be rendered by the provider that require preauthorization approval, perform a preauthorization to obtain an authorization number. The authorization number, which confirms that precertification was performed, is placed in Block 23 on the CMS-1500 form. For more information about preauthorization and to see an example of the form, refer to the Evolve site at evolve.elsevier.com/kinn.

Completing the CMS-1500 Form

The CMS-1500 Health Insurance Claim Form (Figure 21-1) is used by most health insurance payers for claims submitted by physicians and suppliers. The information needed to complete an insurance claim form includes the patient’s and the guarantor’s demographic and insurance information; the name, address, and phone number of the insurance company; the diagnostic, treatment, and procedures and services information; and the provider’s billing information, including name, address, phone number, place of service, and the tax and provider identification numbers.