Basic RCM Module

GEBBS Healthcare Solutions Private Ltd
All Rights Reserved.
Document Name Basic Medical Billing Manual

Release date 1st October 2011
Process owner Jaswant Bangera
Prepared By Jaswinder Kaur Ranu
Distribution Training Team
Reviewed & Approved Jaswant Bangera
SNO DATE REVISION STATUS REASON FOR AMENDEMENT

1 1/10/2011 3.0 Initial release
1|Page GHS/WI/TRAR/01 Ver3.0 /Aug 2011

Basic Medical Billing

DISCLAIMER
The content, concepts, approaches and methods proposed in this document are confidential and
proprietary and are provided solely for the purpose of training at GeBBS Healthcare Solutions. This
document may not be reproduced or reviewed by any person not an employee of GeBBS. Recipients
using this manual agree to be bound by the copyright and intellectual property laws of the United
States of America.

Contents
1.0 Introduction to US Healthcare..........................................................................................5
1.1 Healthcare in India and the US ........................................................................................................ 5
1.2 Patient, Provider and Payer relationship......................................................................................... 6
1.3 Generic Healthcare Terminology:.................................................................................................... 7
2.0 Concept of Health Insurance ..........................................................................................12

2.1 Insurance Classification ................................................................................................................. 15
2.2 Introduction to Indemnity and MCO ............................................................................................. 16
2.3 Traditional Indemnity .................................................................................................................... 16
2.3.1 Classification of Traditional Plans ......................................................................................... 17
2.4 Managed Care Plans ...................................................................................................................... 18
2.4.1 HMO ...................................................................................................................................... 20
2.4.2 POS ........................................................................................................................................ 22
2.4.3 PPO........................................................................................................................................ 24
2.4.4 EPO ........................................................................................................................................ 25
2.5 Types of Physician Groups ............................................................................................................. 26
2.5.1 Physician Hospital Organization (PHO) ................................................................................. 26
2.5.2 Independent Practice Association (IPA)................................................................................ 27
2.6 Federal Insurance .......................................................................................................................... 28
2.6.1 Medicare ............................................................................................................................... 29
2.6.2 Railroad Medicare ................................................................................................................. 38
2.6.3 Medicaid................................................................................................................................ 39
2.6.4 SCHIP ..................................................................................................................................... 41
2.6.5 CHAMPUS /TRICARE.............................................................................................................. 41
2.6.6 CHAMPVA.............................................................................................................................. 43
2.6.7 FEHB (Federal Employees Health Benefit Plan) .................................................................... 43

2.7 Liability insurance .......................................................................................................................... 45
2.7.1 General Liability .................................................................................................................... 46
2.7.2 Auto Accidents Insurance ..................................................................................................... 46
2.7.3 Worker’s Compensation ....................................................................................................... 50
2.8 Commercial Insurance ................................................................................................................... 57
2.8.1 Individual Plans ..................................................................................................................... 57
2.8.2 Group plans........................................................................................................................... 58
2.8.3 BCBS ...................................................................................................................................... 59
3.0 Billing Terminologies.......................................................................................................60

4.0 Introduction to Medical Billing .......................................................................................74
4.1 BPO/Outsourcing ........................................................................................................................... 74
4.2 Revenue Cycle Management ......................................................................................................... 75
4.2.1 Patient Scheduling ................................................................................................................ 77
4.2.2 Benefit and Eligibility Verification......................................................................................... 77
4.2.3 Pre-registration/Pre-admission............................................................................................. 78
4.2.4 Patient Encounter ................................................................................................................. 78
4.2.5 Registration/Patient Demographic Entry.............................................................................. 79
4.2.6 Medical Transcription ........................................................................................................... 81
4.2.7 Medical Coding...................................................................................................................... 81
4.2.8 Charge Capture ..................................................................................................................... 94
4.2.9 Life Cycle of an Insurance Claim............................................................................................ 96
4.2.10 Types of Claims ..................................................................................................................... 97
4.2.11 Clearing House ...................................................................................................................... 98
4.2.12 Cash Posting/Payment Posting ........................................................................................... 101
4.2.13 Accounts Receivables.......................................................................................................... 102
5.0 Related forms/documents............................................................................................103

6.0 List of Abbreviations .....................................................................................................116
MEDICAL SPECIALTIES ......................................................................................................119

Glossary.....................................................................................................................................122
1.0 Introduction to US Healthcare
Objectives
At the end of this session you will be able to understand
 Major differences between the Indian and US Healthcare System

 Patient, Provider and Payer relationship
 Basic Healthcare Terminology
1.1 Healthcare in India and the US

Health care industry in the US is completely different from the healthcare setup in India. People in
the US believe in the “Prevention” model rather than the “Cure” model. The average life span of
an individual in US is around 75 years and it is still in the increasing trend with advancement in
disease management techniques. According to a very recent survey, almost 89% of the US
population has a health insurance plan to help them share the medical expense. The Medical
Insurance Industry alone consumes about 14% of the US Gross Domestic Product (GDP). The
entire Healthcare system revolves around 3 P: Patient, Provider and Payer relationship. The
diagram below helps us understand it better.
INDIA US
DOCTOR PATIENT
GETS TREATMENT PAYS

TREATS PAYS PREMIUM
PATIENT
5|Page G H S / W PROVIDER
I/TRAR/01 Ver3.0 /Aug 2011
INSURANCE
Some of the major differences can be listed as follows:-
INDIA US
Large % (more than 85%) of the population is

Less % of Health Insured
covered under Medical Insurance.
Scope of coverage of plans is limited Scope of coverage is high
Pay first and claim later (No credit facility) Credit facility is extended to the Patient
Filing of claims with insurance is the Filing of claims with insurance is the
responsibility of the insured responsibility of the Provider.
1.2Patient, Provider and Payer relationship

The three entities in healthcare industry can be denoted as the as the three “P”s of the
healthcare industry.
 Patient – AKA Client; Subscribers; Members; Policy Holders; Beneficiaries; Enrollees;

Employees; Dependents; Insured
 Provider – Doctors; Hospitals; SNF; Hospice; DME Suppliers; Home Health Agencies; Rehab
Centers; Pharmacy
 Payer – Insurances; Carriers; Insurer
Health Insurance Overview: Insurance is all about managing risk. It is purchased to protect oneself
and the loved ones from a devastating financial loss. It is like a gamble between the patient and the

payer. The insurance company bets that they will take in more money in premiums than they have to
pay out in benefits, whether it is for health or life or accident or homeowners insurance. The patients
also pay monthly premiums thinking just in case something happens then they will have coverage
from the Insurance Company and hence not a big financial risk on their head rather a shared cost
between the two. Health insurance is a contract that a patient has with the insurance company
wherein the payer pays a portion of medical expenses if the patient develops some health related
concerns e.g. gets sick or hurt and have to visit a doctor’s office or hospital. Some contracts also
specify that insurance company will pay a portion of your medical expenses to ensure the patient
doesn’t get sick such as paying for annual physicians or immunizations (Prevention is better than Cure
concept). However the amount of the bill the insurance company will pay and under what
circumstances they’ll pay it is known as ‘coverage’ and will vary from policy to policy.
1.3 Generic Healthcare Terminology:

Provider – Someone who provides the health care service or treatment to a patient in the US is called
‘Healthcare Service Provider’ or only ‘Provider.’ E.g. Doctor, Hospitals, Pathology lab, etc..
Carrier – Health Insurance companies in the US are called ‘Carriers’ or ‘Administrative Agents’ or
‘Underwriters’ or ‘Insurers’; they carry the risk of healthcare cost reimbursement to policy holders.
Insurance – Insurance is defined as contract the equitable transfer of a risk or loss; from one entity to
another in exchange for a premium. It can be thought of as a guaranteed small loss to prevent a large
one. It is also defined as a contract between two parties whereby one party called insurer undertakes
the risk/loss in exchange of a Premium and care rendered.
Subscriber – An individual who buys an insurance policy (either through employer or other means) is
called a ‘Subscriber’ or ‘Enrollee’ or ‘Certificate Holder.’ The Insured is the term used to designate the
person who represents the family unit in relation to the insurance program. This may be the
employee, whose employment makes this coverage possible. This person may also be known as the

enrollee, certificate holder, policyholder or subscriber i.e. an insured is the person who takes an
insurance policy to cover the risks that the person might incur.
Underwriter - The officer/person at Insurance end, who approves or disapproves the policy, is called
as Underwriter. The entire process of approving or disapproving the policy to a subscriber is called as
Underwriting.
Pre-existing Condition - The pre-existing condition is a health condition or illness that a subscriber has
even before the start of coverage of his health insurance plan. It’s an illness that exists before the
Insurance coverage starts. Generally the insurances do not give coverage for pre-existing conditions
and the patient needs to specify about it at the time of appointment itself to his doctor. This will help
avoid the unnecessary billing of the provider to the insurance and the correct billing to the patient. For
e.g. If a patient has Diabetes from birth and he applies for a health insurance plan, then the
treatments related to Diabetes will not be covered by the insurance. When this patient visits the
doctor for treatment; the insurance will cover for all the other treatments but not anything related to
treatment of Diabetes. Hence the patient should clearly specify the doctor at the time of treatment
only that the Insurance will cover only those treatments not related to Diabetes only. The office staff
shall also keep in mind the same and do correct billing/recommend for correct billing through notes.
Premium - The periodic payment to an insurance company or a health care plan for health care
coverage is a premium
Copayment / Co-pay- It is a flat amount that a patient/subscriber pays at the time of medical service
or to receive a medication. Each health insurance plan establishes this cost earlier and it has to be paid
up front by the patient before taking the service. Insurance companies use these co-pays in part to
share expenses with a subscriber. The concept of giving co-pay upfront helps insurances avoid
unnecessary visits a patient wants to make to a doctor for nontrivial injuries/illness.
Deductible- The fixed amount apart from co-pay that a patient has to meet prior to coverage given by
the Insurance is called as deductible. This is normally in annual terms for e.g. a patient has to pay a

deductible of $1049 annually apart from the $10 co-pay (which he gives for every visit). Till the time
patient doesn’t cover $1049 from his pocket for all medical expenses in a year the insurance will not
start the reimbursement from its side. Hence it becomes very necessary for a patient to meet his
deductible before the insurance starts reimbursing.
Co-insurance - A percentage cost share between a patient and his different insurance payers is called
as co-insurance. It’s a percentage of the bill that a patient is required to pay which may be in addition
of deductible & co-pay.
Life time maximum – The total amount that the insurance company pays for the life of the policy is
called as life time maximum.
Stop Loss Clause (Catastrophic limit) - It is a slab amount fixed by the patient which would be his / her
total out of pocket expense. Once the cumulative total reaches this slab amount, the Insurance
Company would start paying 100% of the allowed amount. There would not be any patient’s
responsibility.
Out-Of-Pocket Expense- The amount that a patient has to pay for his medical treatment is called as
OOPs. They comprise of co-pay, deductible & co-insurance.
Service – Treatment rendered to a patient is called as ‘Service’ or ‘Healthcare Delivery.’
Place of Service – Dispensary/Clinic/Hospital where the patient encounter occurs. It’s also referred as
an ‘office’ or a ‘Facility.’
Encounter – When a patient meets with a doctor in a clinic/converses in regards to his health status; it
is called a Patient-Provider encounter.
Guarantor - is a person who takes any responsibility on behalf of the patient. Guarantor promises
payment due to provider, in case insurance or patient does not make payments either partially or
fully. If there is no other person to guarantee, then the patient becomes his/her own guarantor

AOB – Assignment of Benefits: This is a written authorization / Declaration given by the patient
stating that the benefits (payment) due to the Provider could be directly sent to the provider. If AOB is
not signed the payment by default would be sent to the patient. This document is used due to the fact
that it is the patient who authorizes the benefits to be assigned to the provider for the services
rendered by the provider. Hence in the US health care industry patient plays a very important role and
contributes greatly towards the providers functioning on the billing cycle.
ROI - Release of information: This is a written authorization / Declaration given by the patient stating
that the “Patient Medical information” could be released to the insurance / payer by the provider if
necessary for the claim to be processed and paid.
Billed Amount: The amount billed/charged by a provider for the service he has rendered is called as
Billed amount/charged amount/charges billed.
Allowed Amount: The maximum allowable amount a insurance approves & agrees to pay for the
services rendered by a provider is called as allowed amount/approved amount.
Participating Provider: A provider who agrees to get in contract with an insurance company and
accepts the pricing they have set for the different procedures keeping in mind that the remaining
balance (the difference between billed amount and allowed amount & termed as contractual
agreement) will not be billed to the patient; is called as Participating Provider. The provider waives off
the contractual agreement amount if he is a participating provider. They are also called as Par
Providers.
Hence for Participating Providers, the concept is,

Billed Amount – Allowed Amount = Contractual Agreement – Waived Off (Par Provider)
10 | P a g e GHS/WI/TRAR/01 Ver3.0 /Aug 2011

Non Participating Provider: A provider that doesn’t accept the terms for contract with an insurance
company is called as Non Participating provider. They bill the patient for the remaining balance
(Contractual Agreement). They are also called as Non Par Providers.
Hence for Non Participating Providers, the concept is,

Billed Amount- Allowed Amount = Balance Bill - Flipped to Patient account for payment (Non Par)
In-network provider: When the Insurance makes a group of providers for a plan; all the different
providers inside this group or network are called as In-network provider. These all in network
providers are participating providers.
Out of Network provider (OON): When there are providers who may be participating with a insurance
but are not part of a network formed for certain plan, they are referred as Out of network provider.
They are called as Out of Network Providers (OON).
Claims: A Claim is a document / a pre defined template with patient & visit details that would be sent
across by the provider to the Insurance. The purpose of filing this claim to the insurance is to get
payment from the insurance for the services rendered to the Patient by the Provider.
Types of Claims:
Paper Claim: Submitted on paper by Billing Office or Providers Office including optically scanned claims that are
converted to electronic form by the Insurance Carrier. The forms used are: HCFA 1500, HCFA 1450 or UB-92.
Electronic Claims: This is submitted to the Insurance carrier via a CPU, tape disk, digital fax etc. Different
Formats used for electronic claims are:
1) NSF {National Standard Format}: This is used by Govt. it is a rigid format with 320 bytes.
2) ANSI {American National Standard Institution}: Private Institution uses this. It is of 132 bytes, and it is a
flexible one unlike NSF.

Exercise 1
 Compare the Indian and US Healthcare Systems

 Compare the Patient-Provider-Payer relationship between India and the US
 How does the Healthcare System works
 Revise the basic healthcare terms that you have studied in this session
 Discuss on can OON be participating or non participating provider
2.0 Concept of Health Insurance
Objectives
 What is health insurance and policy

 Group Insurance vs. Individual Insurance
 Classification of Insurance
 Concept of Indemnity and MCO
 Types of Traditional Indemnity Plans and MCO

What is Health Insurance?
“Health insurance is a contract between a patient and an insurance company. This contract covers the
risk of any losses against future illness or injury for the insured.” The person giving the assurance is
called the insurer (insurance company) and the person who receives the protection is called the
insured (policy holder). Simply put, health insurance is protection against any medical costs. A health
insurance policy is a contract between an insurer and an individual or group, in which the insurer
agrees to provide specified health insurance at an agreed-upon price (the premium) to the insured.
There are very much possibilities that this coverage is not just given to the subscriber but also to his
dependants. For e.g. a policy may not just cover a husband but also the spouse; children; parents etc.
These policies are taken up by the subscribers either individually or through groups. Group Insurance
is a single insurance policy that covers a specific group of people. Examples of groups include
employees of a company, members of a professional organization, or alumni of a college. Many group
policies include dependants of the group members too.
Group Insurance vs. Individual Insurance:
It is very important for a subscriber to know about kind of coverage that will be provided by the
Insurance organizations. While there are lots of different ways to get health insurance, it is good for a
subscriber to know what benefits he may be eligible for before he starts his Health insurance search.
Most of the Americans get their health insurances through their employers (EGHP: Employer Group
Health Plan). These health plans are subject to state and federal law. According to National Coalition
on Health Care, in 2005 round 83% of employees in the US were covered by their employers health
group plans because of better rates(as it depends on number of employees in a firm: SGHP: Small
Group Health Plan/LGHP: Large Group Health Plan). The insurances offered under group plans include
health, dental, vision, life, accidental death & dismemberment, short term disability, long term
disability, prescription drugs, long term care and dependent care. More established employer groups
may get better rates than new ones because the insurer has more claims history to rely on. The
insurance company sees it as good risk for group plans because they will probably end up paying out
very little for many people in the group while collecting premiums from everyone. Most group policies
guarantee to accept any member of the group as the purpose of a group plan is to spread the risk of
claims over wider group of people. We will always have a mix of healthy people to some with illness.
Normally this also translates into premiums that are much lower than those found in individual health
insurance plans and are at same price for everyone in the group regardless of their health. Also
sharing of the part of premium by the Employer makes it even better for an employee to bear.

The Individual health plans on the other hand are subject to state laws and differ from state to state.
These are bought by the individuals for themselves and their dependants. Because the family is being
insured, this type of insurance costs more. Individual plans are used by those who are not working
with an employer or are self employed. Also the scope of coverage is more in group health plans than
individual ones because the groups get good deals of plans from the Insurance companies. OOPs
incase of group plans are less than the individual plans. An individual may purchase an individual plan
separately to increase the coverage given by his employer; the two policies just might give him all the
coverage. In group policies, the choice of service is however limited to what was offered and agreed
by the employer. For individual plans, under the process of underwriting the physical examination
report helps an underwriter to decide policy details whereas in group plan this may not necessarily be
a mandate for the employees. The group health plan is uniform for all the employees of a firm and
cannot be changed as per individual discretion where as the individuals can upgrade or change their
plans as and when required.

2.1 Insurance Classification
Insurances are of many kinds: Life; Health; Accident; House owners insurance etc. For all our purposes
at GeBBS, we shall lay stress on Medical (Health) and Liability Insurance. Conceptually insurances can
broadly be classified as under:

2.2 Introduction to Indemnity and MCO

Health care in America has dramatically changed from what it was used to be and what it is now.
Twenty-five years ago, most people in the United States had Traditional/Indemnity insurance
coverage. A person with indemnity insurance could go to any doctor, hospital, or other provider
(which would bill for each service given), and the patient would pay part of the bill & claim later from
the Insurance. Today however, more than half of all Americans who have health insurance are
enrolled in some kind of a managed care plan, an organized way of both providing services and paying
for them. The cost of treatment is well shared between the Insurance and the patient now. Different
types of managed care plans work differently and include Preferred Provider Organizations (PPOs),
Health Maintenance Organizations (HMOs), and Point-Of-Service (POS) plans.
Let us understand what traditional indemnity plans consist of.
2.3 Traditional Indemnity

Indemnity Plan or Fee for Service (FFS) plans gives options of basic coverage, major medical or
comprehensive coverage to an individual/group. With an indemnity plan (or fee-for-service), a person
can use any medical provider (Dr/Hospital) and the patient or the doctor (very rarely) sends the bill to
the insurance company using their reimbursement forms, which pays part of it. There are certain
requirements before the reimbursement stage, full deductible has to be paid; they focus on treating
health problems but not preventing them(These plans don’t usually cover annual Check Ups); FFS
plans may also limit the number of days for stay in hospital and still receive coverage. Usually, there is
a deductible such as $200-$250 to pay each year before the insurance starts paying. Once the person
meets the deductible, most indemnity plans pay a percentage of what they consider the "Usual and
Customary" charge for covered services. They generally pays 80% of the Usual and Customary costs
and the patient pays the other 20 percent, which is known as coinsurance. If the provider charges
more than the Usual and Customary rates, the patient will have to pay both the coinsurance and the
difference. The plan will pay for charges for medical tests and prescriptions as well as from doctors
and hospitals.

2.3.1 Classification of Traditional Plans
Traditional plans can be classified on the basis of their coverage.
Basic Coverage: It would cover a beneficiary in case of a serious illness. It covers expenses incurred on
account of:
o Hospitalization; Surgery; Anesthesia

o General Nursing care; Lab tests, X-rays
o Operating & recovery rooms
o Emergency room services & very few outpatient charges

Major Medical Plan: This is a supplementary plan to Basic coverage.
o It covers all the Outpatient treatments and Physician charges

o The Insurance plan will reimburse 80% of the bill and the patient will pay the other 20%
Comprehensive Plan: It is a policy that combines the coverage offered in Basic and Major Medical
Plans in addition with the Prescription charges
o The premiums of these plans are high comparatively & they have lower co-insurance
o The subscriber is required to pay a co-insurance of 20% on the medical expense incurred.
o The concept of Stop-Loss Clause is predominant in Commercial Plans than other Traditional
Plans
o There are some Plans that cover other services such as Pharmacy Benefits / Drug Plans, Dental
Plans etc.
2.4 Managed Care Plans
Managed Care Organization as the name suggests is “management of patient care and provider’s
reimbursement.” It is a contract between the insurance and providers where the insurance carrier
agrees to pay for the services rendered until & unless the provider provides cost-effective and
efficient services to the patients. While some managed care plans can bear a close resemblance to an
FFS plan, the focus of managed care is on preventive health care. The idea is that by allowing coverage
for Check Ups and other preventive services, doctors can identify potentially serious illness early.
MCPs use networks of selected doctors, hospitals or clinics and other health care providers that have
contracted with the plan to provide comprehensive health services to a member at reduced group
rate. Because of this managed care plans are more affordable than FFS plans of similar coverage. In
addition, by centralizing billing and administrative functions, networks can also lower their overhead
costs with a larger group of audience to cater services to in benefit of faster processing of claims from

the payers. This is other word referred to a 3P program where in the Provider, Patient and the third
Party administrator plays an important role.
Features of Managed Care:
o The liability of the insured is always a prefixed amount (TOS Payment).

o Insured is provided with a network of Providers
o Referral Authorization Number plays an important role
o Focus on preventive medicine is high
Types of Managed Care Plans
There are methods through which the insurances involve them in administering the Healthcare service
reimbursed to the insured. Depending upon the methods the classification can be made into the
following categories:
o HMO - Health Maintenance Organization
o POS – Point of Service
o PPO – Preferred Provider Organization
o EPO – Exclusive Provider Organization
Let us now discuss these in detail one by one.

2.4.1 HMO
HEALTH MAINTENANCE
P ORGANISTAION - HMO
A
T RAN
PCP SPECIALIST
I
E
N NOT
COVERED
OUT OF NETWORK
T
EXCEPTION - EMERGENCY
HMOs are the oldest form of managed care plan for individuals. HMO’s coverage includes
access to Primary care Physician, Emergency Care, Specialists and Hospitalization when needed. These
plans are usually cheaper than the other MCPs but yet they give least amount of control over choosing
any health care provider. There are usually no deductibles, but small co-pay for each office visit ($10-
$25). The subscriber is supposed to select his PCP as one of the only doctors present in the network of
the HMO organization. This PCP will only be the in charge of coordinating this subscriber’s medical
care. In case the patient needs to visit a specialist, the PCP has to be the first point of contact and once
a referral is obtained from the PCP then only the patient can meet the specialist. The Specialist seen
must also be working within the HMO network, otherwise the whole cost for the specialist would turn

out to patient’s responsibility. The referral number given by a PCP to the patient to visit the specialist
is called as RAN (Referral Authorization Number); this number shall be mentioned on the claim that a
specialist submits to the HMO for reimbursement.
HMOs will always give patients a list of doctors from which they have to choose a primary care
doctor for themselves. This PCP coordinates the patient's first level of care, which means that
generally the patient must contact the PCP for all his first/initial health related concerns and then if
need be referred to a specialist. Because of this the PCPs are also referred to as ‘Gatekeepers’ in HMO.
The referrals may be in network or out of network however the in network referrals are shared by the
insurance in contrary to out of network where the patient bears the cost. The PCPs are compensated
in HMOs through a method called as Capitation. It is also called as ‘Per Member per Month’, method
wherein the PCP is paid monthly a bulk amount for the number of members visiting him. He will have
to render the services to all the members despite of number of visits made by them. In case of no
member visit; PCP still gets his capitated share from the insurance. There is also a small copayment
and no deductible in HMO plan. In an HMO, members are covered only for services obtained from in-
network providers, unless an emergency forces the member to seek out-of-network treatment but in
case of emergency insurance company should be informed within 24 hours. The policy members are
charged with fixed and predictable monthly pre- payments and modest copayments.
Advantages of HMOs
Low out-of-pocket costs as deductible gets omitted
Focus on wellness and preventive care
Typically no lifetime maximum/payout (meaning the HMO will continue to cover the patient as long as
he is a member).
Disadvantages of HMOs
Fewer Choices for Specialized Care
Difficult to get specialized care without first meeting the PCP
Care from non-HMO providers generally not covered

2.4.2 POS
POINT OF SERVICE - POS

P
A OPTS
RAN
T A PCP PCP SPECIALIST
I
E OPTS OONP OUT OF NETWORK
N COVERED – BUT
LESSER
T REIMBURSEMENT
OONP – Out Of Network Physician
With the restrictions that came in buying an HMO plan, the individuals were given another plan to
select: Point of Service. A Point-of-service health plan allows the covered person to decide receive the
service from network provider or a OON provider i.e. at the point of service the patient decides to visit
either a HMO network provider or a out of network provider; depending on the medical treatment he
is looking forward to. There are different levels of benefit associated with the use of Participating
Providers. This is the most flexible & expensive plan.
POS can be obtained in the following ways:-

An HMO may allow members to obtain limited services from non-participating providers.
An HMO may provide non-participating benefits through a supplemental major medical policy.
A preferred provider by the patient may be seen to provide both participating and non-participating
levels of coverage and access.
So in other words, if a person sees anyone in network physician it works like an HMO plan, there will
be small co pay & no deductible & if a person sees any out of network physician then this plan acts like
a Preferred Provider plan for individual with a higher copayment and deductible hence increased OOP.
Advantages of POS plans

Flexibility in choosing the provider and the plan at the time of service
Minimum out-of-pocket as compared to other plans
No "PCP" for out-of-network care
Disadvantages of POS plans:

Substantial out-of-pocket for out-of-network providers

2.4.3 PPO
E PREFERRED PROVIDER
ORGAINSATION - PPO
M
P
L DISCOUNT
NO PCP
PPO
O
Y COVERED – BUT OUT OF NETWORK
LESSER
E REIMBURSEMENT
E
Preferred Provider Organization (PPO): A PPO is a form of managed care for group plans. A PPO has
arrangements with doctors, hospitals, and other providers of care who have agreed to accept lower
fees from the insurer for their services. As a result, the patient's cost sharing should be lower than if
the patient goes outside the network. In addition to the PPO doctors making referrals, plan members
can refer themselves to other doctors, including ones outside the plan.
Rather than prepaying for medical care, PPO members pay for services as they are rendered. The PPO
sponsor (employer or insurance company) generally reimburses the member for the cost of the

treatment, less any co-payment percentage. In some cases, the physician may submit the bill directly
to the insurance company for payment and get paid for it while the member pays his copayment.
PPO plans usually have a deductible and a copayment. If one chooses to go outside of the network he
has to pay for the difference
Advantages of PPOs Disadvantages of PPOs

Choice of healthcare provider Increased paperwork and expenses than HMOs
Limited out-of-pocket costs Higher cost sharing for using out-of-network providers
2.4.4 EPO
E EXCLUSIVE PROVIDER
ORGAINSATION - EPO
M
P
L NO PCP
DISCOUNT PPO
O
Y NOT
OUT OF NETW ORK
E COVERED
An Exclusive Provider Organization (EPO) is a variation of a PPO. EPOs contract with providers on a
discounted basis, but enrollees must receive care within the network. EPOs, like PPOs, provide no
penalty to providers if the patient opts to obtain care outside the network. Instead, the enrollee
assumes responsibility for out-of-network costs.

Exercise 2
 Compare the differences between a traditional Indemnity and managed care plans
 Discuss the salient features of each of the MCO plans that you have studied
 Speculate on the benefits of each MCO plan in terms of patient, provider and payer
Physician Groups & Types of Insurances:

Objectives
 Nature and types of physician groups

 Classification of insurance in terms of Federal and Private institutions
 Types of federal insurances
 Medicare and it’s components
 Eligibility criteria for Medicare
 Terminology associated with Medicare
2.5 Types of Physician Groups

Certain private physician practices and hospitals come together to form groups to aid in the
management and administration healthcare.
2.5.1 Physician Hospital Organization (PHO)

A hospital and a physician organization, or a physician group creates a Physician Hospital Organization.
A PHO is created to assist the Managed Care Organization contracting on behalf of the parties. The
best PHO’s include a physician organization that has its own structure, providing a means for
reviewing pertinent issues both internal and external, such as contracts, payer disputes, or physician
monitoring.

2.5.2 Independent Practice Association (IPA)

An Independent Practice Association consists of physicians who have not combined their assets and
liabilities and are not practicing in a truly integrated fashion. They maintain their separate practices
and participate in the IPA as a means to contract with HMOs or other health plans. Providers may also
see patients who are not enrolled in HMO plans. Where IPAs primarily contract with the HMO to
provide services to the HMO members, the HMO model typically is called the IPA model HMO.
IPA’s are developed in two ways.- Providers may market themselves as an IPA group and perform their
own administrative functions, or payers (Insurance co.) may develop an IPA from a panel of contracted
providers.
Depending on the types available today, Insurances can be classified as:-
1. Public or Federal Insurance
These Insurance plans are also called Federal Plans or State run programs.
The Government of the US runs these insurance plans.
These are plans promoted either by the Federal or by the State government. They are always rolled
out for specifically identified sections of the society
2. Private or Commercial Insurance
Commercial Carriers are those that are administered by private bodies hence they are also called
private insurances. There are thousands of commercial insurance companies in US. BCBS, Aetna,
Cigna, Humana, United Health Care are some of the major US commercial carriers.

2.6 Federal Insurance
Federal Plans (Indemnity plans) also called Public plans are promoted either by the Federal or the
State government. They are always rolled out for specifically identified section of the society.
OIG
DHHS
SSA
RRB
HCFA (Now called
as CMS)

Some of the plans that are under this category are:
o Medicare
o Railroad Medicare
o Medicaid
o CHAMPUS
o CHAMPVA
o FEHBP
o SCHIP
2.6.1 Medicare
Medicare is a federal insurance, which primarily takes care of the healthcare needs of people who are
aged 65 years and above. It came into existence from the year 1965. It is managed by CMS (formerly
known as HCFA). Guidelines of Medicare are uniform in all the 50 states.
Medicare Eligibility Guidelines
a) Individuals who are 65 years and above and have paid FICA (Federal Insurance Contributions Act)
taxes or Railroad Retirement taxes and gained 40 credits (10 years of work)
b) Adults who are permanently disabled
c) Individuals suffering from End-Stage Renal Disease (ESRD)

Medicare ID – Medicare ID consists of 9 numeric digits (individual's SSN) followed by an alpha suffix.
Types of Medicare Insurance
There are 4 types of Medicare plans.
i. Medicare Part A
ii. Medicare Part B
iii. Medicare Part C
iv. Medicare Part D
Medicare Part A (Hospital Insurance -HI)
Medicare Part A coverage is for Hospitals Insurance (HI) and other related types of care.
Medicare Part A coverage extends to the following costs:
o Inpatient hospital care

o Medicare certified hospitals
o Inpatient care in Skilled nursing facility
o Hospice
o Home healthcare
The only type of "nursing home" care Medicare helps pay for is Skilled Nursing Facility (SNF) care.
Home healthcare
If a patient is confined to their home and requires skilled care for an illness or injury, Medicare can pay
for care provided by a home health agency.
Hospice care
An organization, which is primarily designed to provide pain relief, symptom management and
supportive services for the terminally ill (last stages of their life) and their families can also be covered
under Medicare
Note:-
Medicare Part A can be brought by a person less than 65 years of age after paying the premium.
Medicare Part B: Supplemental Medical Insurance (SMI)
Medicare Part B coverage is for Physician services and other related types of care.
o Physician services :
(Meaning: the professional services of physicians, including surgery, Consultation, home, office
and institutional services.)
o Outpatient hospital services
o Diagnostic tests
o Clinical lab. Services
o Outpatient physical therapy
o Speech therapy services

o Ambulance transportation
o Rural health clinic services
Medicare does not pay for most services like prescription drugs, examinations for prescribing or fitting
eyeglasses or hearing aids, hearing aids, or routine eye exams. In most cases, Medicare covers
screening mammograms once every two years. Pap smears are covered once every three years.
Enrollment for Medicare
Enrollment for Medicare is during Jan, Feb and March each year but the policy comes into effect only
in the month of July. This enrolment period is called General Enrollment period. If a person is already
getting Social Security or Railroad Retirement benefit payments when you turn 65, he/she will
automatically get a Medicare card in the mail about three months before your 65th birthday as part of
an enrollment information package. If he does not receive such benefits, he is to intimate the SSA
before the 65th birthday to facilitate timely coverage.
Medicare Premiums and Deductibles for 2009
Part A Premium: $421 (not paid by 99 percent of beneficiaries)
Part A deductible: $1024
Part B premium: $98.60
Part B deductible: $135
The Centers for Medicare & Medicaid Services updates the premiums, deductibles and co-payments
made by Medicare beneficiaries each year. These adjustments are made according to formulas set by

statute. By law, the monthly premium for Medicare Part B must be sufficient to cover 25 percent of
the program’s costs, including the costs of maintaining a reserve against unexpected spending
increases. The federal government pays the remaining 75 percent.
Conditions for Part A & B
• Part A coverage (in the case of full contribution) is for a lifetime.
• Part B coverage will apply to persons who enroll for it and would end if the premium is
discontinued.
• In the case of a "Wage Earner" the Medicare Id Number is always his or her SSN number
followed by "A". The IDs and the SSN would also match in case suffix is "M", "M1" or "T".
• In case someone has procured Medicare coverage on the basis of the "Wage earner", the SSN
would not match with the ID numbers.
• In the case of Railroad Medicare, the Ids have a prefix.
• Every person is the owner of his own policy. Relationship to subscriber is always self.
• UPIN is mandatory for billing referral services in Medicare.
• In disabled category the coverage ends when the disability of the subscriber ends.
Medicare Part C (Medicare Advantage/ Medicare managed care)
Medicare part C is Medicare + choice. It is a managed Choice Plan. This plan is extended only to
existing policy holders of Medicare part A & B. It is also called as Medicare Replacement Policy. Here, a
beneficiary chooses a managed care plan which has benefits of both Part A and Part B for medical
coverage as well as HMO benefits. This is generally referred to as 'enrollment in an HMO' wherein
Medicare stops paying once the patient opts for this plan although the patient may continue to show
Medicare as his primary insurance
Advantages of Medicare plus Choice

More services including preventive care (like eye care, hearing aids and routine examinations) are
covered than with just Medicare
Lesser out of pocket than with traditional HMO
Medicare Part D
Medicare Part D is for Drug Prescriptions and Durable Medical Equipment.
Let us understand some terminology related to the Medicare program
a. Medicare Cross Over
Medicare will automatically forward claims to the secondary carrier for payment for its participating
providers. This is called as Automatic Cross over. Generally it is the providers who have to file the
claims to the secondary insurance for payment but Medicare does this for all its par- providers.
b. Limiting Charge
The limiting charge applies to non-participating providers in the Medicare Part B program when they
do not accept Medicare assignment. It is 115 percent of the physician fee schedule amount.
The beneficiary is not responsible for billed amounts in excess of the limiting charge for a covered
service.
Non Participating Participating
Fee Schedule Amount = $95.00 Fee Schedule Amount = $100
Limiting Charge Calculation
115% x $95 = $109.25 None
Maximum Each Can Collect

$109.25 $100
c. Medigap
Medigap is the health insurance that private insurance companies sell to help fill gaps in the
Original Medicare Plan. Medigap policies are also known as “Medicare Supplement Insurance
“(MSI). Medigap policies pay most - if not all - of the costs for coinsurance under the Original
Medicare Plan. These policies may also cover the Original Medicare Plan Deductibles. Some
policies include extra benefits to help pay more of those things that Medicare doesn't cover, like
prescription drugs. To determine if Medicare is the primary payer, providers must ask the
beneficiary about any additional health insurance coverage that he or she may have. To obtain the
most updated information, providers should ask about any other health insurance coverage at
each patient visit.
Medigap Plans: Examples
o AARP
o American Pioneer
o Empire Health Choice
o Premera Blue Cross
o Bankers
o Group Health Incorporated
d. MSP RULES : Medicare Secondary Payer Rules
Medicare Secondary Payer” is the term used by Medicare when Medicare is not responsible for
paying a claim first. When Medicare began on July 1, 1966, it was the primary payer for all
beneficiaries, except for those who received benefits from the Federal Black Lung Program and
Workers’ Compensation (WC) and for those who receive all covered health care services through the

Veterans Health Administration (VHA) programs. Beginning in 1980, changes to Medicare laws
increased the number of coverage and benefit programs that are primary to Medicare.
Table 1 lists some common situations when Medicare may be the primary or secondary payer for a
patient’s claims:
Table 1: MSP rules


2.6.2 Railroad Medicare

Railroad Medicare is a Medicare plan that is tailor made for the enrollees of Railroad Retirement
Board (RRB). Railroad workers are covered under the Medicare program just like workers covered
under social security. Railroad retirement payroll taxes include a Medicare hospital insurance tax just
like social security payroll taxes. RRB is an independent agency in the executive branch of the Federal
Government that administers retirement benefits for the Railroad Employees.
Railroad Medicare ID card
The Health insurance ID card for Railroad Medicare enrollees is similar to the Traditional Medicare
card with some differences
 “Railroad Retirement Board” as the title

 ID number starts with an alphabet like “A” followed by 9-digit numeric policy ID
Exercise 3
 Study the difference between a PHO and an IPA

 Revise the various terms associated while dealing with Medicare
 What do you think are the benefits for an HMO/payer that offers Medicare HMO policy

Medicaid
Objectives
 Medicaid and its features

 Concept of Medicaid Spendown
 Salient features of the CHAMPUS and CHAMPVA plan
 Types of Federal Employees Health Benefit Plan
2.6.3 Medicaid
Medicaid is a Federal Insurance that is run by the states. The Medicaid guidelines hence differ from
one state to another. Medicaid is basically a 'poor man’s policy' that came into existence in the year
1965 along with Medicare. Medicaid can never be a primary insurance when the Patient has some
other insurance with him.
What is Medicaid Spendown?
When a person’s income is more than the amount allowed by Medicaid, the eligibility worker will
figure out exactly how much greater the income is than the amount allowed. This is called "Excess
Income." If the person can show that his/her medical bills are equal to or greater than the excess
income, the person can still get Medicaid. This is called "Spend-down."
Persons who become eligible under a spend-down are only eligible for a limited time, and they will still
have to pay some of their own medical bills.

Important to note: Medicaid is available to US Citizens, refugees and certain lawfully admitted aliens.
Also, every Medicaid member must have a valid SSN.

2.6.4 SCHIP
The State Children’s Health Insurance Program (SCHIP) is a United States federal government program
that gives funds to states in order to provide health insurance to families with children. The program
was designed to cover uninsured children in families with incomes that are modest but too high to
qualify for Medicaid.
States are given flexibility in designing their SCHIP eligibility requirements and polices within broad
federal guidelines. Some states have received authority through waivers of statutory provisions to use
SCHIP funds to cover the parents of children receiving benefits from both SCHIP and Medicaid,
pregnant women, and other adults.
2.6.5 CHAMPUS /TRICARE
CHAMPUS refers to Civilian Health and Medical Program for Uniformed Services This refers to a
medical benefit program instituted for the Uniformed Service personnel. Beneficiaries are active /
retired personnel and their dependents. The plan was instituted in 1966. It is not an Insurance
program, a Service benefit program. The claims are processed by Fiscal Intermediaries. The
beneficiaries can use only an Army/ Naval hospital. Service obtained from a Civilian hospital would
come under the head Cooperative Care
The coverage under this plan is extended to:

o The dependants of active and retired uniformed service personnel
o The dependants of active-duty reservists called on duty for >30 days
o Dependants of service personnel who have died in active service
o Any person who has opted out of service after serving for a certain period gets automatically
excluded from the coverage.
Prior to obtaining the benefit under the scheme one has to get enrolled with the Defense Enrollment
Eligibility Reporting System (DEERS).

Medicare is always primary to CHAMPUS. PALMETTO is a prominent carrier for CHAMPUS.
TRICARE, as the name suggests, includes three options for the kinds of plans (Tri - Three); TRICARE
Standard, TRICARE Extra and TRICARE Prime.
TRICARE Standard
TRICARE Standard provides benefits similar to the original CHAMPUS program. Under TRICARE
Standard, beneficiaries can use any civilian health care provider that is payable under TRICARE
regulations. The beneficiary is responsible for payment of an annual deductible and coinsurance, and
may be responsible for certain other out-of-pocket expenses. There is no enrollment fee for TRICARE
Standard.
TRICARE Extra
TRICARE Standard beneficiaries can elect to use the TRICARE Extra option by using a civilian health
care provider from within the regional contractor's provider network. In this way, TRICARE Extra
represents a Preferred Provider Organization (PPO). When using TRICARE Extra, the beneficiary's
coinsurance amount is considerably reduced and there is no fee for use of the TRICARE Extra benefit
other than the coinsurance.
TRICARE Prime
TRICARE Prime is a health maintenance organization (HMO) style plan. Under TRICARE Prime,
beneficiaries must choose a primary care physician (PCP) and obtain referrals and authorizations for
specialty care. In return for these restrictions, beneficiaries are responsible only for small copayments
for each visit. There is an annual enrollment fee for TRICARE Prime for military retirees and their
family members. There is no enrollment fee for active duty military and their family members.

2.6.6 CHAMPVA
CHAMPVA stands for Civilian Health And Medical Program of the Department of Veterans Affairs. The
program was established in 01/08/73. Veteran is any person who served in the US army during the
war; is no longer in service; has had an honorable discharge from service. The plan is a service benefit
plan.
The plan covers the following people:
o Dependents of active / retired personnel and their dependents
o Dependants of war veterans who have suffered a total or partial permanent disablement.
Dependants of war veterans who have lost their lives as a result of a service connected
disabilities.
o The beneficiaries over the age of 65 years are transferred to the Medicare plan.
2.6.7 FEHB (Federal Employees Health Benefit Plan)
The U.S. Office of Personnel Management, Office of Insurance Programs, administers the Federal
Employees Health Benefit Plan (FEHBP), the largest employer-sponsored health insurance program in
the world. There are over 380 health plans that are administered.
There are three basic types of plans available under FEHBP:
o Managed Fee-for-Service Plans
o Health Maintenance Organization Plans (HMOs)
o Plans Offering a Point of Service (POS) Product

Managed Fee-for-Service Plans
These plans reimburse for covered services after the services are received. If you enroll in one of these
plans, you may choose your own physician, hospital, and other health care providers. These plans are
considered "managed" because they all contain features such as precertification of hospital
admissions and utilization review of on-going care. In addition, most of the fee-for-service plans have
preferred provider arrangements in many parts of the country.
Fee-for-service plans include the Service Benefit Plan, sponsored by Blue Cross and Blue Shield, and
plans sponsored by unions and other employee organizations. Several employee organization plans
are open to all eligible employees who are full or associate members of the organizations that sponsor
the plans; other employee organization plans are restricted to certain groups and/or agencies
Health Maintenance Organization Plans (HMOs)
These plans provide a comprehensive array of medical services, emphasizing prevention and early
detection of disease, through contracted physicians, hospitals, and other providers in particular
locations. Each HMO is open to employees within the plan's enrollment area. You cannot enroll in an
HMO if you are located outside its enrollment area.
Plans Offering a Point of Service (POS) Product
Some FEHBP plans have begun to blend their features. A number of fee-for-service and HMO plans
now offer both forms of health care delivery, known as "in network" and "out of network." In an HMO
that offers a POS product, the POS product acts like a fee-for-service plan: The HMO's enrollees may
use non-affiliated (out of network) providers if they wish, but the services will cost them more--in
terms of deductibles and coinsurance--than if they used plan providers. In a fee-for-service plan with a
POS product, the POS product acts like an HMO: If they agree to let their medical care be managed by
a plan-affiliated gatekeeper physician (in network), plan enrollees will get a better benefit, usually in
the form of richer benefits and lower co pays or coinsurance.
Important to note: FEHBP Is not free healthcare

The Government pays 71% of the premium and the employee/retiree pays 29%. If one is currently on
Medicare, Medicare becomes the payer and FEHBP becomes the second. For new enrollees, Medicare
Part "B" is NOT mandatory.
Exercise 4
 Discuss the concept of Medicaid Spendown

 Is FEHBP a federal plan or commercial? Discuss.
Liability Insurances
Objectives
 Liability Insurance
o General
o Auto
o Worker’s Compensation
 Terminology associated with Worker’s Compensation and Auto Insurance
 How to identify liability insurance cases from general medical insurance cases
2.7 Liability insurance
These are plans that provide the subscriber coverage against the risk stated on the policy. It is not a
health hazard that is insured but any other liability. In the billing scenario they are registered for billing
because they cover any healthcare cost that they may incur due to the incidence of that particular
risk.

These insurances will not have any priority till the risk insured has caused the healthcare encounter.
Liability Insurance can be classified into the following categories based on the risk covered:
o General Liability Insurance

o Auto Accidents Insurance
o Worker's Compensation Insurance
2.7.1 General Liability
These are plans that insure all other type of accidents. Some examples of General Liability plans are:
o House Owner's Risk Insurance

o Fire Insurance
o School Insurance
2.7.2 Auto Accidents Insurance
Auto Accident Insurance protects the subscriber against financial loss in case of an accident. It is a
contract between the insurance company and the subscriber in which the subscriber pays the
premium and insurance agrees to pay for losses defined in the policy. Some salient features of auto
insurance are as under:
o Auto Accident Insurance provides against property, liability and medical coverage.
o Property coverage pays for damage to or theft of your car.
o Medical coverage pays for the cost of treating injuries, rehabilitation, lost wages and
sometimes funeral expenses
o An Auto Accident Insurance policy has six types of coverage. Most states require the
subscriber to buy some of them, if not all.

Let us study come components of liability insurance that impact payments for providers
1. Medical Payments or Personal Injury Protection

This coverage pays for the treatment of injuries to the driver and passengers of the subscriber’s
car.PIP can cover medical payments, lost wages and cost of replacing services normally performed by
someone injured in an auto accident. It may also cover funeral costs
3.0 Bodily Injury Liability
This coverage applies to injuries the subscriber/designated driver cause to someone else.
The subscriber and family members listed on the policy are also covered when driving someone else's
car with their permission. It is very important to have enough liability insurance, since if involved in a
serious accident, may incur large expenses.
4.0 Uninsured & Underinsured Coverage
Uninsured coverage pays reimbursements, if the subscriber/member of family or a designated driver

is hit by the at-fault uninsured driver or a hit-and-run driver
Underinsured coverage pays reimbursements to the subscriber if the at-fault driver has insufficient
coverage to pay for the total loss. This coverage also pays when the subscriber is hit as a pedestrian
Few Common Terminologies related to Auto Accident Insurance

o Contract Maximum
Some insurance companies have a maximum payable amount on certain illness or certain policies.
The insurance policy may say that it will pay a pre-fixed amount on a particular illness or it might also
fix a limited amount for a calendar year. This total amount payable on a patient's policy based on
his/her contract is called 'Contract Maximum'.
After the insurance payment, if there is a balance for the provider, the patient is billed for the
balance.
o No fault Clause
The 'No-Fault' is the system adopted by insurance companies in making compensations to its
subscribers regardless of who was at fault in the accident. This system is intended to lower the cost of
auto insurance by taking small claims out of the courts This benefit which is a mandatory coverage,
vary by state to state. It applies only to states where insurance companies pay 'first-party' benefits and
where there are no restrictions on the right to sue
Drivers in no-fault states may sue for severe injuries if the case meets certain conditions
Attorney's Note
Documents supporting AA claims
o Physician's Note / Report

o First Injury Report
o Witness Report
Insurance Companies offering AA Plans
All private insurance companies can roll out policies for Auto Accidents.

Some of the insurance companies offering AA Plans:
o Scor Reinsurance Company

o Chubb Group of Insurance
o Nationwide
o Safeco Corporation
o Erie Insurance Company
How does it work?
In order for the Insurance to open a claim the auto accident needs to be reported to the insurance.
Initially the FIR and case sheet would be sufficient information to open a claim.
Details required in-order to file a claim to the Auto-Insurance Company for reimbursement is:
- Copy of the Insurance card

- Police report (FIR)
- Supporting documents
- Patient’s contact info
- Claim adjustor’s name
- Claim number
- Date of injury
Auto accident policy: Card Copy Samples

2.7.3 Worker’s Compensation
Workers who are injured on the job or contract a job-related illness are benefited through a program
known as Workers Compensation. Employees who meet with employment related accidents are
covered to have their medical costs as well as be entitled for disability. Here the employer takes up

the insurance and pays the premium for the policies. The entire premium is paid by the Employer and
is not shared between the employer and employees
What does W/C cover?
WC covers injuries that were sustained as a result of work or at the workplace. It’s not necessary that
the injury needs to happen at work place. As long as your injury is job-related, it's covered. For
example, an employee is covered if one is injured while traveling on business, doing a work-related
errand or even attending a required business-related social function. WC also covers occupational
diseases. Occupational diseases are illnesses caused by substances or conditions that the worker was
exposed to at the workplace. Employees can claim compensation if they develop disease/condition
due to the work conditions.
Are all on-the-job injuries covered?
Most are. The workers' compensation system is designed to provide benefits to injured workers, even
if an injury is caused by the employer's or employee's carelessness. But there are some limits.
Generally, injuries that happen because an employee is intoxicated or using illegal drugs are not
covered by workers' compensation.
Coverage may also be denied in situations involving:
o Self-inflicted injuries (including those caused by a person who starts a fight)

o Injuries suffered while a worker was committing a serious crime
o Injuries suffered while an employee was not on the job, and
o Injuries suffered when an employee's conduct violated company policy.
Types of Worker’s Compensation Insurances
There are different kinds of Worker’s Compensation Insurances. They are:

o Federal Insurances
o Private Insurances
o Self-Insured Plan
1) Federal Insurance – Run and maintained by the government of the state.
2) Private Insurances – They are similar to Private Health Care insurances to which they have to pay
premium.
3) Self-insured – A group of Employers come together to form their own Insurance and pay for the
injury of their own Employees.
OWCP: Office of Worker’s Compensation Program
Each work related injury has to be reported to the Office of Worker’s Compensation Program (OWCP)
or to the Worker’s Compensation Board (WCB). Every work related injury that is reported to the
OWCP/WCB would be given a case# or claim #. Every time a claim is sent to the worker’s
compensation insurance, the claim# or WCB case# needs to be mentioned on it.
The Worker’s Compensation Board is called by different names in different states for instance, in
Texas it is known as the TWCC (Texas Worker’s Compensation Council), in Alaska and Colorado it is
simply known as the Worker’s Compensation Division of that State.
How does it work?
An employee, when injured on the job, must either go to a designated physician or use the services of
his or her own physician for an Independent Medical Exam (IME). A predefined amount is paid to the

physician who performs the IME. Providers need to make sure that they collect a “Statement of
Injury” from the patient’s employer before rendering treatments to the patient.
In order to file a claim to WC for reimbursement the following details are required.
 WC insurance name, address, telephone number, etc

 All relevant supporting documents
 Injury / illness report
 Claim number
 Date of injury / illness
Types of State Compensation Benefits
Medical Treatment - hospital, medical & surgical services
Disability (temporary or permanent) - Weekly or monthly payments based on rating of percentages of

permanent disability or lump sum payment
Death Benefits for Survivors - cash payment to dependents of fatally injured employee
Rehabilitation Benefits - in case of several disabilities, can be either vocational or medical

rehabilitation
Workers Comp Terminologies
a. Bill
This is the notification sent to the insurance company that payment of an amount is due under the
terms of the policy. (This is also called as claim in commercial insurance).
b. Adjustor

When an employer group takes up a Worker’s Compensation Insurance, a personal within the
insurance called the CLAIMS ADJUSTER is appointed who adjudicates the claim and decides upon the
release of payment for a particular bill.
c. Injury Date
The date when the employee was injured, (This injury date should be mentioned on every bill that is
sent to the insurance company.)
Bill Review Company
The Third party administrates who processes the bills on behalf of the insurance company is called as
BILL REVIEW COMPANY (also known as pricing centers).
d. First Report Of Injury

The document used by the employer to report the injury to the INSURANCE or OWCP is called the first
report of injury.
e. EOR (Explanation of Review)

The Statement Sent to the insurance from the bill review company on how the claim was processed
(whether denied or approved for payment) is called EOR (it is also known as pricing sheets). Normally
in worker’s comp the EOR and the payment are sent separately.
f. IME (Independent Medical Examination)

The insurance nominates a neutral doctor to examine a patient and to submit a report to the
insurance on whether the Employee needs further treatment on the injury or not. When IME is being
conducted, no bills are paid until the release of the result.

If IME is in the favor of the insurance company, then there wouldn’t be any payment for the claims
sent for that injury after the IME date.
g. Worker’s Compensation Arbitration or Appealing

If the provider feels that the payment by the insurance is not according to the guidelines or the denial
is incorrect then the same can be appealed to the respective Worker’s Compensation Board.
Appealing to the WCB, however, is not free of costs and the provider ends up paying to the WCB of
that State.
h. Worker’s Compensation Adjudication

In most states, employers are required to purchase insurance for their employees from a workers'
compensation insurance company -- also called an insurance carrier. However, in some states, smaller
companies (with fewer than three or four employees) are not required to carry workers'
compensation insurance. In some states, larger employers who are clearly solvent are allowed to self-
insure, or act as their own insurance companies. Claims adjudication might be done in house (within
the insurance) or in a Bill Review Co. Most of the Workers comp insurance do not process claims in
house and the claim are forwarded to a bill review company for processing. The EOR (Explanation Of
Review) is then sent to the insurance who issues the payment to the Provider or Hospital. WC claims
are usually sent as paper claims in CMS - 1500 for Medical Billing and UB - 04 for Hospital Billing.
Insurances offering WC Plans
o Liberty Mutual
o Safe & Co
o Crawford & Co
o Labor & Industries

o Care works of Ohio
o Gates Mc Donald Health Plus
o Tamarkin Company
o Grange Insurance Companies
How to identify Liability Insurance EOB
If we find either "Work related injury", or "Worker's Compensation", or "Injured at work", or "MVA",
or "MVC", or "Auto Accident" in the charge or demo sheet then we must bill the Liability Ins. Apart
from this, in few clients there is a separate field called as "Financial Class" wherein we can find the
codes to identify the type of insurance.
Example: WC represents Worker's Compensation, AA or Auto represents Auto accident.
We can also identify with the help of the diagnosis codes. Generally "E-codes” are injury codes that
describe the cause of the injury. The diagnosis codes which start with "8" injury codes due to
accidents.
Exercise 5
 Research on the types of disabilities in the context of Worker’s Compensation

 What do you understand by ‘no fault’ insurance? Isis State dependent.
 How can you distinguish a EOB for a liability insurance reimbursement
Session 6
Objectives

 Types of commercial insurance plans

 BCBS as an example of a commercial insurance company
2.8 Commercial Insurance
Commercial Carriers are those that are administered by private bodies hence they are also called
private insurances. There are thousands of commercial insurance companies in US. BCBS, Aetna,
Cigna, Humana, United Health Care are some of the major US commercial carriers.
Private insurance plans can be of two types
o Individual Plans or
o Group Health plans (EGHP, LGHP & SGHP)
2.8.1 Individual Plans
Individual health insurance covers the medical expenses of only one person or family. Unlike group
insurance, individual insurance is directly purchased from the insurance company.
Individual insurance is somewhat more risky for insurers than group insurance, since group insurance
allows the insurer to spread risk over a larger number of people. For this reason, individual insurance
is generally more difficult to obtain, and more costly than group insurance

2.8.2 Group plans
Many employers offer group health insurance as part of their employee benefits package. Other
groups that may offer insurance coverage include churches, clubs, trade associations, chambers of
commerce, and special-interest groups. Under a group health insurance arrangement; the insurance
company agrees to insure all members of the group, regardless of current physical condition or health
history. The only condition is that the group members must apply for insurance within a specified
eligibility period.
Types of Group Plans
1. EGHP
The Employer Group Health Plan is a health plan offered to the employees through the
employer.
2. LGHP
These refer to Large Group Employer Health Plan, here the employer who is promoting this
plan would be employing more than 100 employees or among the employers who have come
together at least one of them would be employing >/= 100 employees
3. SGHP
SGHIP refers to a Small Group Health Plan. This a plan rolled out by an employer employing
less than 20 employees. It is a policy that combines the coverage offered in Basic and Major
Medical Plans. The premiums of these plans are high. Comparatively lower co-insurance. The
subscriber is required to pay a co-insurance of 20% on the medical expense incurred. The
concept of Stop-Loss Clause is predominant in Commercial Plans
Let’s take BCBS as an example of a major commercial carrier in the US

2.8.3 BCBS
Blue Cross Blue Shield is the most prominent commercial insurance company in US. However calling it
an insurance company is a misnomer since 39 independent healthcare providers fall under the
umbrella of Blue Cross Blue Shield. It is stated that one out of every three members is a BCBS member.
Blue Cross covers the Hospital Claims & Blue Shield covers the Physician Claims.
BCBS ID: BCBS policy ID begins with a 3-digit Alphabetic Prefix followed by numeric digits.
Exercise 6
 Are individual plans cheaper than group plans? Giving reasons discuss in class
 Are individual Is BCBS truly a commercial insurance company? Discuss.
 Discuss the names of some prime commercial players in the US.

Session 7
Objectives
 Common terminology associated with Medical Billing

 EOB calculations
 Concept of authorization
3.0 Billing Terminologies
Advance Beneficiary Notice - A provider gives an Advance Beneficiary Notice (ABN) to a Medicare
patient when he suspects that any service to be rendered would be denied by the patient’s coverage.
This allows him to ensure that the patient agrees to reimburse him in the event that Medicare denies
payment. It allows the patient to make an informed decision whether or not he wants to continue
with the service
Allowed Amount - Most Insurance companies have a fixed payable amount for each of the different
services performed by the physicians. This amount is taken from the fee schedule that the carrier is
using which may have been based on the UCR or the RBRVS system. The carrier will pay the allowed
amount to the physician regardless of how much the physician has billed.
Appeal - It is a request send to the insurance company for reconsideration of the claim

Assignment of Benefit (AOB) - This form, signed by the patient, authorizes the doctor’s office to collect
the patient’s benefits from his/her insurance company.
Authorizations
Prior Authorization
The Insurance Companies would require the providers to take an approval or permission before
rendering certain services which are generally of high cost. This is to ensure the efficiency,
appropriateness and medical necessity of the service rendered. Not all services require Prior
Authorization. The Insurance Company gives a number as an acknowledgment for the approval and
that number is called as Prior Authorization Number.
Retro Authorization - In case the provider fails to get a Prior Authorization due to some unavoidable
circumstance, he / she can inform the same to the Insurance Company after rendering the service
within certain duration. If the reason for not taking Prior Authorization is valid, the Insurance
Company may still approve the service and this process is called as Retro Authorization.
Referral Authorization - The process of a provider referring or directing the patient to another
provider is called as Referral. Here, the process of the PCP – Primary Care Physician directing the
patient to a specialist for further course of treatment is called Referral Authorization. During this
process a number is issued by the PCP to authorize the specialist visit and that number is called as RAN
– Referral Authorization Number.
Balance bill - When a non-participating provider bills the corresponding insurance the insurance
company only pays the allowed amount. The difference between the allowed amount and the billed
amount can then be billed to the patient. This is called Balance Billing. The balance bill would
therefore be the difference between the non-participating physician’s billed amount and the
corresponding carrier’s allowed amount for a service.

Beneficiary - A person who is eligible for the benefits under an insurance coverage is called a
beneficiary. He is either the person who pays the premium or a dependent of that person.
Benefits - The money that a patient’s medical coverage pays to compensate for the medical services
provided to the patient
Billed Amount - This is the amount charged by a physician as a compensation for his services. The
billed amount will reflect on the claim against the treatment that was performed.
Birthday Rule - Households with dual incomes often have more than one insurer, in such cases primary
and secondary insurance coverage needs to be determined. For commercial plans the subscriber or
insured’s insurance company is primary for the subscriber. In other words, the husband’s insurance
company is primary for him and wife’s insurance is primary for her. However, the primary insurance
company for any dependants is determined according to what is called the “Birthday Rule” according
to this whose birthday falls first in the year will be dependant’s primary and other will be secondary.
When parents have the same birthday, the parent which has had their plan longer pays first. Where
the parents are either divorced or separated, the plan of the parent who has legal custody will be
considered primary.
Claim - A claim is a request send by doctor’s billing staff on behalf of patient for payment of services
and benefits patient received
Coinsurance – The portion of the balance of covered medical expenses which a beneficiary or the
Secondary carrier must pay after primary insurance payment is called as coinsurance. It is always
expressed in terms of percentage.

Consultation - A consultation is a patient visit usually with a specialist seeking advice on course of
treatment. Usually it does not involve rendering of definitive medical care.
Contract maximum - The total amount payable on a patient’s policy based on his/her contract is called
the contract maximum. Some insurance companies have a maximum payable amount on certain
illnesses or treatments (for e.g. dental contract maximum, physical therapy contract maximum). A
contract maximum may be defined in terms of annual coverage or even lifetime.
Contractual Adjustment - Participating Providers accept the allowed amount of the Insurance
Company and they do not bill the patient for the difference between the billed amount and the
allowed amount. This difference between the billed amount and the allowed amount will be adjusted
as per the contract with the Insurance Company. This is also called as Negotiated savings or Discounts
or Adjustment amount or Contracted savings.
Coordination of Benefits - Provisions and procedures used by insurers to avoid duplicate payments for
subscribers and families insured under more than one group policy. COB attempts to ensure that
subscribers (and providers in turn) receive all benefits they are entitled to without profiting from
illness or injury. The purpose of the COB program is to identify that the health benefits available to a
Medicare beneficiary and to coordinate the payment process to prevent mistaken payment of
Medicare benefits.
Copayment - A provision in an insurance policy requiring the patient to pay a specified dollar amount
to a health care provider at the time of each visit and/or medical service they receive is called as
copayment. Usually, HMO plans have a copayment.

Deductible - It is a fixed amount determined by the Insurance Company which the patient has to pay
the provider towards his /her initial medical expenditure. Only after meeting the deductible the
Insurance Company starts its payment. Deductible cannot be paid at the time of service. The claim has
to be filed to the Insurance Company and the Insurance Company would process the claim and apply
the cost towards deductible. Provider would bill the patient later to collect the deductible. This is
because of two reasons; Accountability: The Insurance Company should know how much deductible
you are paying.
Allowed Amount: Deductible is applied from the allowed amount and not from the billed amount
Purpose of Deductible:
1. To avoid the exploitation of the policy by the patients.

2. Cost sharing: Deductible and Premium are inversely proportional to each other.
Denial – The inability of the insurance company to make payments on a claim after adjudication due
to various reasons is termed is as a denial.
Dependent - The spouse and children of the subscriber who are eligible for medical care under the
insurance contract
Effective date - The date from which a person is eligible for medical benefits under his insurance
contract is called as his policy’s effective date or validity date.
Evaluation and management service - Evaluation and Management services (E/M) are medical services
provided by most physicians for the purpose of diagnosing and treating illnesses, counseling, and
evaluating patients.

Explanation of benefits – It is a statement sent by the insurance company to the provider & in some
cases to the patient showing their share of reimbursement as a compensation of the services
rendered. It contains the breakup of the payments against specific dates of services and the
procedures/services rendered.
Fee schedule - Fee Schedule is nothing but the “pay structure” for each of the procedure codes that
insurance company has fixed. The insurance company will pay the provider/hospital based on this fee
schedule.
Free Look Period - Free look period is the trial period given to the Medigap policyholders. If a Medigap
policy holder is unhappy with the policy he can surrender the policy back to the Medigap insurance
before the time period specified by the Medigap plan (normally 30 days) and get his money back.
Hospice care – Hospice care is also called ‘palliative care’ which is any form of treatment which is
aimed at reducing the severity of an illness rather than providing cure. It is recommended for
terminally ill patients.
Inpatient Services – Healthcare services that a patient receives in a hospital which requires
hospitalization (more than 24 hours) are termed ‘Inpatient Services.’
Insurance Identification Number - This is a unique identification number assigned to each subscriber
by the insurance company. The claims and any correspondence for that subscriber and his dependents
will be sent under his ID#. The insurance companies use this number to access the subscriber’s
account in their computer systems

Medicare Select Insurance - Medicare Select insurance is ideally a Medigap plan, but it has all the
features of a Managed Care plan.
Medigap Insurance - Medigap insurance is a Medicare supplemental insurance that covers the
remainder of Medicare insurance. Medigap policies generally cover the Medicare’s Co-insurance (20%
of Medicare’s approved amount). Once Medicare processes the claim, it will transfer the information
to the Medigap carrier. This is indicated with a note at the bottom of the Medicare EOB stating, “Claim
information forwarded to (Medigap carrier name)”.
Non participating provider - Doctors who do not accept terms and conditions of payment as per the
insurance contract are called ‘Non-Participating Providers’ or ‘Non-Par Providers.’ These providers do
not accept the allowed amount as per the insurance company and expect to be reimbursed as per
their billed amount. They are also called out-of network providers.
Out of pocket – The sum total of all the expenses a patient has to bear despite having insurance
coverage is called as out-of-pocket expense. Deductibles, co-insurance, co-payment and balance bill
fall under “out of pocket expenses.
Outpatient Services - Healthcare services that a patient receives in a physician’s office or a hospital but
which does not require hospitalization (Less than 24 hours) are termed ‘Outpatient Services.’
Participating Physician - Doctors who accept terms and conditions of payment as per the insurance
contract are called ‘Participating Providers’ or ‘Par Providers.’ They accept the allowed amount set by
the insurance company. They are also called in-network providers.

S. no Par Providers Non-Par Providers
1 Accept the allowed amount in full Do not accept the allowed in full
2 Higher provider reimbursement Lesser provider reimbursement
3 More patients less patients
Cannot bill the patients for the Can bill the patients for the
4 Contractual adjustment Contractual adjustment
Place of service - - It refers to the physical location where the services performed e.g. an office,
laboratory, etc.
Pre certification / Preauthorization - Some insurance contracts require a pre-authorization or pre-

certification for specific services which involves informing the insurance company about a service to
be performed on an enrollee and getting an approval from the carrier that they would cover the
service. Carriers could define pre-certifications for certain diagnoses or services. The pre-certification
number given by the insurance company needs to be mentioned on the claim form for reimbursement
for that service.
Preexisting condition - Any illness, injury or condition existing prior to the effective date of a health
insurance contract is termed as pre-existing condition.
Pre-Determination - The process of the provider contacting the Insurance Company to get some
information about the patient’s policy is called as Pre-Determination. This is done to get information
like whether a particular service is covered or not, if covered does that require Prior Authorization, is
the patient’s Insurance active during the date of service, etc.

Premium – This is a periodical payment, usually monthly, made to purchase a medical insurance
coverage. The premium paid by numerous individuals to insurance company; contribute to a fund,
which protects these individuals against the cost of medical care when they require it
Primary care physician - The PCP (Primary Care Physician) is usually a general practitioner. He is the
equivalent of a family doctor, who when specialized treatment is required, refers the patient to a
specialist. For this reason, he is also called the referring physician.
Primary Insurance - Most people in the United States have more than one insurance. They may have
up to three insurances covering them. When a patient has more than one insurance company, the
insurance that takes the first responsibility for reimbursement is called as primary insurance. The
primary insurance also takes care of the majority of the reimbursement balance on a bill.
Provider ID numbers -
NPI (National Provider Identifier) - It is a number issued by the CMS to all providers in US. This is a
unique number which can be used with any Insurance Company. This is a replacement for PIN.
PIN (Provider Identification Number) - This is a number given by the Insurance companies providers
that are contracted. The provider’s record in the insurance companies system is retrieved using this
number.
TIN (Tax Identification Number) - is allotted by IRS (Internal Revenue Service) for the purpose of filing
taxes. TIN is allotted either to an individual or to a group of physicians (or business practices). TIN is
mandatory for claim submission and consideration of claim for payment.
UPIN (Unique Physician Identification Number) - This is an identification number given by Medicare to
all its participating providers. It is a six alpha numeric number.
Referral - Some insurance contracts require an authorization or a referral for the patients who need to
visit a specialist. Usually, the PCP is the referring doctor and the referral clearly states the diagnoses
and the medical necessity for a specialist visit.

Rejection/Rejected claim – A claim which lacks the mandatory information for adjudication is rejected
for resubmission. Such a claim is usually incomplete and does not clear the counter checks in the
provider’s automated system and hence does not get adjudicated.
Release Of Information (ROI) - This form authorizes the physician to release the patient’s medical
information to the billing office and the insurance company
Secondary Insurance – Most people in the United States have more than one insurance. They may
have up to three insurances covering them. When a patient has more than one insurance company,
the insurance that is responsible for the balance on a bill after the primary insurance has paid, is the
secondary insurance. They will pay their portion of the bill based on what the primary has already
paid. To determine their portion of the bill they will require a copy of the primary insurance’s EOB. For
this reason, a secondary claim is always sent with a copy of the primary EOB
Stop loss clause (Catastrophic limit) - It is a slab amount fixed by the patient which would be his / her
total out of pocket expense. Once the cumulative total reaches this slab amount, the Insurance
Company would start paying 100% of the allowed amount. There would not be any patient’s
responsibility.
Subscriber - The person who pays the premium to purchase an insurance policy. This person may
either pay the premium himself or as in most cases, the person’s employer may pay the premium or a
part of it on his behalf. It is very common in the US for an employer to purchase medical policies for its
employees.
Tertiary Insurance – The third insurance coverage that a patient may have is termed as his tertiary
insurance although it is not common to find tertiary insurances

Third Party Administrators – A Third Party Administrator (TPA) is an organization that manages certain
administrative processes for a company. In light of managed care a TPA is an organization that handles
certain processes for instance claims processing that would traditionally handed by a carrier. While
some third-party administrators may operate as units of insurance companies, they are often
independent.
Waiting period - The time between the effective date of a contract and the date the plan will assume
liability for certain services is called as waiting period. It is frequently in regard to pre-existing
conditions.
Waiver of Liability - This is a document signed by the patient stating he / she is responsible for the cost
of services that are not covered by the Insurance policy. This document is usually signed when the
provider is planning to do a service that is not covered by the Insurance policy.
Write off - When the participating physician’s billed amount is more than the corresponding carriers’
allowed amount, the insurance company will pay only its allowed amount and the difference between
the billed and the allowed amount will be written off or adjusted. This process is called as ‘Write Off.’
EOB Calculations

o Billed Amount - Allowed Amount = Contractual Adjustment
o Billed Amount- Contractual Adjustment = Allowed Amount
o Allowed Amount + Contractual Adjustment = Billed Amount
o Insurance Company Payment + Patient Responsibility = Allowed Amount
o Insurance Company Payment + Contractual Adjustment + Patient Responsibility =

Billed Amount
o Copayment + Deductible + Co insurance = Patient total Responsibility.
Calculation for Non – Participating provider’s EOB calculation
o Patient Responsibility = Copayment + deductible + Co insurance + Balanced Bill
Problem 1
Total Amount Charged: 652.96
Negotiated Savings: 208.95
Deductible/Co-pay: 50.00

Total Payable Amount @90%: 354.61
•What is the Allowed Amount? ____________
•What is the Patient Responsibility? ____________
•What is the Contractual Adjustment? ____________
Problem 2
Submitted Charges: 1,850.00
Allowed Amount: 1,100.00
Co-ins/Deductible: 150.00
Payment Amount: 950.00
Problem 3
Billed Charges: 478.00

Allowed Amount: 406.30
Deductible:
Total Benefit: 406.30
•What percentage was reimbursed? ____________
Exercise 7
 Are individual plans cheaper than group plans? Giving reasons discuss in class
 Are individual Is BCBS truly a commercial insurance company? Discuss.
 Discuss the names of some prime commercial players in the US.

Session 8
Objectives
 Outsourcing and related terms

 What is Revenue Cycle Management
 Flow of components in Revenue Cycle Management
o Patient scheduling
o Benefit and Eligibility Verification
o Pre-registration
o Patient provider Encounter
4.0 Introduction to Medical Billing
4.1 BPO/Outsourcing
BPO- Business process outsourcing
Outsourcing: Delegation of tasks or jobs from internal production to an external entity. Outsourcing is
the contracting of work from one company to another company. This could be of 2 types, Offshore
outsourcing & Onshore outsourcing. Offshore outsourcing is when the work is outsourced outside the
country like in the case of IKS or it could be onshore where it is outsourced within the country.
Client /Sub client:

Sub-client: It’s an Entity who outsources its non-core activity to the Billing office; it could be a
Hospital, clinic, lab, Physician, etc. Provider is our sub client and the

Client: The Billing office or the Central Billing Office (CBO) located in the US is usually our clients.
It’s an organization that receives work from another Billing company (for IKS, Billing companies in US
would be the client)
Every provider in the US has a Back office to manage his financial transactions efficiently and to
coordinate with the insurance and the patient.
The US Medical Billing Industry comprises of the following major components:
 Providers
 Insurance Companies
 Billing Offices
 Transcription Agencies
 Coding companies
 Clearing Houses
 Manufacturers and Marketers of Medical equipment and Pharmaceuticals
 Federal Government bodies
In short, Medical Billing is "The managing of the providers financial transactions"

What is RCM and how is it connected to Medical Billing?
4.2 Revenue Cycle Management
Revenue Cycle Management is the a comprehensive approach that evaluates, improves and manages
all components in obtaining patient encounter information ensuring patient safety while creating a
simplified, integrated workflow designed to optimize and expedite reimbursement.”
Hence, while the term Medical Billing may be restricted to some of the major components of the
industry RCM is a sum composite of all the processes that are in involved in managing the provider’s
revenue to ensure that he gets reimbursed appropriately and in a timely manner.

It is important to note here that management of revenue for providers can be for providers in an
outpatient setting or in a hospital setting. The steps below describe each step in RCM and some
components may not be necessary in certain settings while in others some additional subcomponents
may be added to enhance the process workflow. Following are the basic steps of RCM
1) Patient Scheduling
2) Benefit and Eligibility Verification
3) Pre-registration/Pre-admission
4) Patient Encounter
5) Registration/Patient Demographic Entry
6) Medical Transcription
7) Medical Coding
8) Charge Capture
9) Cash Posting/Payment Posting
10) Accounts Receivables
11) Denial Management
Let us study each of these in detail and try and visualize where you fit into this cycle
Re
Re

4.2.1 Patient Scheduling
Appointment or patient scheduling is the first step in Revenue Cycle Management. Scheduling allows a
patient to fix an appointment by virtue of online services provided by the provider or through the
consultant’s homepage. Larger group of providers or organizations make use of centralized scheduling
wherein the patient calls a number which is routed to an outsourced partner from where a
representative can schedule the appointment for a particular provider depending on the provider’s
availability. It can be done online, telephonically or personally by visiting the provider's office. The
schedule for an appointment can be requested by the patient or the referring provider's office from
the provider's front desk or a centralized billing representative.
Scheduling is an efficient management of the provider’s time and availability and leads to better
patient care. It leads to more satisfied patients as they avoid waiting and regret in the event of a
provider’s unavailability.
Scheduling is done at least a day before the encounter with the provider. It could even be scheduled
months before the appointment. The provider (or the billing office) needs time to be able to complete
the verification of the patients' insurance benefits before the scheduled meet so he can provide a
copy of the benefits and get an authorization of the patient on the same as a gesture of good faith.
4.2.2 Benefit and Eligibility Verification
Contrary to popular belief the verification of patient's insurance benefits and coverage also involves
verification of the provider's participating status with the carrier. For the provider it is essential to
verify the eligibility and benefits of the patients before they are seen in order to recognize the source
and the relative percentages of payments (patient or insurance) and safeguard payments for
treatment. On the flip side it is a good business practice and is considered a goodwill gesture to
provide the patients with their benefits.

Benefits and eligibility and usually done before the appointment in order to determine the relative
percentages of the reimbursement to the provider to be borne by the patient and the insurance. It is
usually done by the front office executive of the provider or the central billing office.
The process of benefit and eligibility verification can be done online (provided the benefits for the
provider's specialty are available online) or telephonically via an IVR or a live representative. In certain
instances the card copies have the desired information however the front desk executive does not
necessarily receive these until the day of the appointment. Hence, it is imperative at the time of
scheduling to gather as much information about the patient's insurance carrier with which to verify
benefits.
4.2.3 Pre-registration/Pre-admission
Sometimes the patient is registered into the provider's system even before the visit. This pre-
registration step may occur after the scheduling or after the verification of benefits although not all
provider’s have this requirement. This step is not mandatory for all providers.
4.2.4 Patient Encounter
Patient Encounter: This is a front office step in the Revenue Cycle Management and takes place onsite
at the provider’s office or facility by the provider.
A Visit can be either an Inpatient or an Outpatient visit.

An Inpatient visit is one where the patient is admitted in the facility for treatment for more than 24
hrs.
An Outpatient visit is one where the patient is taking the treatment in the facility within 24hrs.
The patient details which is called as demographic details are entered by the front desk executive into
the Registration form or the Demographic sheet and then into the software.

4.2.5 Registration/Patient Demographic Entry
The process of registration involves creating or updating an electronic record of the patient in the
provider's system. A patient record needs to be created (or updated) so that charges can be applied to
the treatment administered or services provided and the billing of claims to the insurance carrier can
be initiated. Registration is done at the provider’s office or the billing office after the appointment
when the front office executive procures a copy of the insurance cards and an authorization on the
AOB, ROI and the charge slip.
The patient details that the provider's office receives during scheduling are verified by virtue of photo
ID and/or insurance card.
Some provider’s may initiate the process of registration right after appointment scheduling. There the
process is termed as pre-registration. It is only after the patient presents himself for the visit that his
insurance card is photocopied and demographic details are correctly captured and entered/updated in
the system.
A patient could be either new patient or Established patient. A “New patient” is one who visits the
provider for the first time or after a period of 3 yrs.
An “Established patient” is one who is already been visiting the provider for the service.
Details that are captured during registration are as under
Patient details- demographic details

Insurance details with the Insurance card copy
Guarantor details
Employer details
AOB – Assignment of Benefits
ROI – Release of information

Exercise 8
 Is there a difference between the components of Medical Billing and RCM

 Is there a difference between Eligibility and Benefit Verification? Discuss.
 What do you understand by in-patient and out-patient services?
Session 9
Objectives
 Flow of components in Revenue Cycle Management (continued)

o Medical Transcription
o Medical Coding
 Procedure codes
 Diagnosis Codes
 Modifiers
 Charge Capture

4.2.6 Medical Transcription
Transcription was one of the premiere businesses to be outsourced from America. Transcription is the
process of converting audio files to typed records. Usually to conserve time providers dictate medical
data and save it in the form of wave files which are transcribed by a qualified medical transcriptionist.
The purpose of transcribed medical data is two pronged, a) To be used for claim reimbursement from
carriers and b) To provide legible medical information on the patient which can be coded by a medical
coder for the eventual purpose of claim submission. However not all providers find the need for
transcription services as they use charge tickets for their coding needs. A charge ticket is the financial
record source document used by the health care providers and other personnel to record the patient’s
treated diagnoses and the services rendered to the patient during the current encounter.
Typing patient medical records is a tedious and time consuming process and more than often
providers prefer to outsource that part of their job so they can concentrate on their core responsibility
which is patient care. Also, legible patient records are a must for reimbursement from carriers. A
qualified medical transcriptionist or rarely even a medical secretary can transcribe medical data. It has
the liberty of being done from the provider’s office or from the comfort of one’s home and hence
transcription is one of the leading outsourced businesses.
4.2.7 Medical Coding
Classification of Medical Codes
In order to put into a common language the thousands of terms, procedures, services, diagnoses etc.
that exist, some type of standardization needed to be created.
This became the basis for the 3 main types of coding systems that are used today

CODING
PROCEDURE CODES MODIFIERS
DIAGNOSIS CODES
Procedure Codes
They are codes that the provider uses to communicate to the insurer about the treatment rendered to
the patient. These procedures can be coded in 3 levels of specificity; the levels that can be adopted
are called:
 CPT (Current Procedural Terminology)

 HCPCS (Healthcare Common Procedure Coding System)
 Codes that are specific to the respective insurance company
HCPCS is an acronym for HCFA HealthCare Common Procedural Coding System.
It contains 3 levels of codes
Level 1 HCPCS codes

These are CPT (Current Procedural Terminology) that is used primarily by physicians and are billed on
HCFA 1500 forms. Current Procedural Terminology (CPT) is a coding system developed by the
American Medical Association (AMA) in 1966, to convert the medical, surgical and diagnostic services
rendered by the healthcare providers into five-digit numeric codes. The CPT code enables the
providers to communicate both effectively and efficiently to third-party payers about the procedures
and services provided to the patients. The providers are reimbursed based on the codes submitted for
the procedures and services rendered.
Since the practice of medicine is ever changing, the CPT manual also needs to be updated accordingly.
It is updated annually to reflect technologic advances and editorial revisions. It is very important to
use the most current CPT manual available to provide quality data and ensure appropriate
reimbursement.
Level 2 HCPCS (Federal HCPCS)
These codes are simply referred to as HCPCS codes and are used primarily by physicians but also DME
vendors and Home Health Agencies etc. They are used for products and services that are not
addressed in CPT such as injectable drugs, wheelchairs, oxygen, dental and orthodontic services, etc.
The CPTs does not contain all the codes needed to report medical services and supplies, hence CMS
developed the second level of codes - HCPCS. The codes begin with a single letter (A - V) followed by
four numeric digits. They are grouped by the type of service or supply they represent and are updated
annually by CMS with input from private insurance companies. Level II codes are required for
reporting most medical services and supplies provided to Medicare and Medicaid patients and by
most private payers.
These codes are maintained by the HCPCS National Panel. The National Panel is comprised of
representatives from the Blue Cross/Blue Shield Association (BCBSA), the Health Insurance Association
of America (HIAA) and CMS. The Panel is responsible for making decisions about additions, revisions
and deletions to these codes.

Level 3 HCPCS (Local HCPCS)
These are local codes which are assigned and used by Medicare and Medicaid providers. These are
used for practices not currently addressed in Level 1 or 2 codes. The third level contains codes
assigned and maintained by individual state carriers. Like Level II, these codes begin with a letter (W -
Z) followed by four numeric digits, but the most notable difference is that these codes are not
common to all carriers. Individual carriers assign these codes to procedures of their own discretion.
But the carriers must send written notification to the physicians and suppliers in their area when these
local codes are required. These codes are currently not in use.
CPT Code Classification
Nature of Treatment Code Category
1. Evaluation & Management 99201 to 99499
2. Surgery 10040 to 69990
3. Anesthesiology 00100 to 01999

99100 to 99140
4. Radiology 70010 to 79999

(Including Nuclear Medicine & Diagnostic Ultrasound)
5. Pathology & Laboratory 80049 to 89399
6. Medicine 90281 to 99199

Diagnosis Codes
The International Classification of Diseases - Ninth Revision - Clinical Modification (ICD -9-CM) is based
on the official release of the World Health Organization’s (WHO) Ninth Revision. In February 1977, a
steering committee was convened by the National Center for Health Statistics (NCHS) to provide
advice and counsel in developing a clinical modification of ICD-9. The term "clinical" is used to
emphasize the modification's intent: to serve as a useful tool to classify morbidity data for indexing
medical records, medical care review, ambulatory and other medical care programs as well as for
basic health statistics. To describe the clinical picture of the patient, the codes must be more precise
than those needed only for statistical groupings and trend analysis.
ICD9 codes as a diagnosis are required by commercial and governmental insurers before payment is
considered on medical claims. The codes are used to determine medical necessity which is a primary
component when deciding if a claim will be paid or denied.
ICD9 codes have also helped develop statistically derived treatment protocols for the treatment of
disease. I.e. based on this diagnosis – this treatment is normally provided, works the best and is most
cost effective.
The treating physician determines the ICD9 codes that will be billed. It represents a patient’s condition
and is maintained in the patient’s file for life. Therefore it must be extremely accurate

ICD 9 as Diagnosis Codes
The first part discussed will be Volume 1 and 2, the diagnosis codes part of ICD-9.
Volume 1 is a tabular listing of diseases and injuries and is divided into 17 sections generally along
anatomic or body sites. There are also 2 additional sections of codes referred to as V codes and E
codes.
Volume 2 is an alphabetical listing of the information found in Volume 1. For instance a “fractured
arm” would be found in Volume 1 only if you knew the ICD9 code for a fractured arm is 818. If you did
not know the code Volume 2 would be used to look under the words “fracture and arm”.
Volume 2 also contains an index for the E codes following the Table of Drugs and Chemicals.
There are also tables in Volume 2 (slide 43)
 Hypertension
 Neoplasm
 Table of Drugs and Chemicals
o E -codes : External Cause of Injury codes
External Cause of Injury codes (commonly called E codes) was developed by the World Health
Organization (WHO) as a supplemental code for use with the International Classification of Diseases
(ICD). These four-digit E codes provide a systematic way to classify diagnostic information that
doctors, nurses, and other health care providers have entered into the medical record. They are
standardized internationally; allow consistent comparisons of data among communities, states, and
countries (or across time for purposes of evaluation studies); and are easily used in computerized data
systems. If E codes are included in hospital records, the medical and financial consequences of

particular types of motor vehicle injuries can be examined.
E codes provide information about both the event during which the injury took place and the
individuals who were injured. For example, E codes can record whether the individual injured was a
passenger in a motor vehicle that collided with another motor vehicle (E813.1) or the driver of a
motor vehicle that collided with a train (E810.0). When combined with other information in the
medical record (especially N codes, which define the medical nature of an injury), E codes can tell us a
great deal about the types of events that produce injuries and the types of injuries they produce.
E codes are mandatory on death records for all persons whose deaths are injury related.
o V Codes: Report factors that are influencing the health status of the patient.
In the insurance industry V codes are usually non-specific like “need for prophylactic vaccination” or
“personal history of malignant neoplasm” or “radiological exam not elsewhere classified”. It is
important to know what you are paying for so many times additional information would be needed if
these are the only diagnosis codes being billed on a patient.
Some insurance carriers will not allow a V code to be used as the primary diagnosis at all.
V codes are usually used in 3 instances
 When a physician identifies circumstances in a person who is not currently ill but has come in
contact with a health services provider (i.e. for a vaccination)
 When an ill or injured patient requires specific treatment (i.e. chemotherapy)
 When the reason for contact with the health care system is not itself a current illness but may
affect future medical treatment ( i.e. family history of breast cancer)
The main terms associated with V codes reflect the nature of the medical services provided:

admission observation
aftercare problem with
attention to screening
examination status
history of supervision of
Modifiers
Modifiers are codes that are adopted by the physician to reaffirm to the carrier that the procedure
performed was altered or modified due to certain unavoidable circumstances.
Modifiers are of two types, CPT and HCPCS modifiers. Formats of both are as under
CPT Modifier
Format : 2 Digits
HCPCS Modifier
Format : 1 Alphabet followed by a number (or) 2 digits numeric
CPT MODIFIERS
o 21-Prolonged E&M service

The physician seeing a diabetic patient and he is providing highest level of E&M service (99313). In this
case, the physician meets the patient's family to discuss about the treatment plan and future care and

he is taking total time of 55 minutes. But the normal amount of time to be spent for 99313 is 35
minutes. But he has spent extra 20 minutes for providing that E&M service. Hence this E&M service is
considered as prolonged E&M service and the modifier 21 would be added to the code 99313.
E.g.: Correct coding: 99313-21
o 22-Unusual Procedural Service

If a patient is admitted for a surgery (ex: Gastrectomy, total, 43620) and the surgery is carried out.
During the surgery, the blood loss is very high for this particular patient. Hence prolonged hemostasis
(stopping the blood loss) is done. In this case, the service provided is more than normally provided for
that particular surgery. Hence time involved in that surgery is greater than the usual time required for
that surgery. In this case, modifier 22 is used with this particular surgery code (43620) to denote that
this procedure is prolonged due to unusual circumstances.
o 23-Unusual Anesthesia
A child has fallen on to the glass and the glass pieces to be removed from the patient hand. For this
procedure, it doesn't actually require general anesthesia. But the child is panic, unmanageable and it
doesn't cooperate for the surgery, then general anesthesia should be given to carry out that surgery.
In this condition, modifier 23 appended to the anesthesia code.
o 24-Unrelated E&M service

During the postoperative period by the same physician. If the patient has undergone a surgery
(Appendectomy), and now he is in his postoperative period. Now he has developed common cold and
cough. This cold and cough is not related to the condition (Appendicitis) for which the surgery was
carried out and E&M service (99212) is provided by the same surgeon for cold and cough during his

postoperative visit. In this condition, The E&M service provided is accompanied by modifier 24 to
denote that it is an unrelated E&M service during the postoperative period by the same physician.
o 25-Significant, separately identifiable E&M service by the same physician on the same day
of a procedure
A patient is seen for the re-evaluation of the hypertension, and the physician provides E&M service
(99214) for the hypertension. But the patient states another problem that he is having hearing
trouble. Then the physician examines his ear and finds out there is extensive amount of earwax. The
physician provides a surgical service of removing the earwax. Both the E&M and wax removal has
been done on the same day and there is no relation between the earwax removal and the re-
evaluation of hypertension. Hence the E&M service provided should be appended with modifier 25 to
denote that as a significant, separately identifiable E&M service on the same day of another
procedure (wax removal, 69210).
E.g.: Correct coding: 99214-25, 69210
o 26-Professional Component
A patient is injured in his left knee. The patient is seen by the radiologist for possible fracture in the
knee. The radiologist orders two views, x-ray of the left knee (73560) and he supervises and interprets
the radiology examination. To bill only for the physician component other than technical component,
modifier 26 is appended to the 73560.
o 47-Anesthesia by surgeon

If a surgeon is performing a surgery (carpal tunnel release), in which if the surgeon is personally
administering the regional or general anesthesia, modifier -47- would be appended to CPT code
64721.
o 50-Bilateral procedure
A patient presents with bilateral knee pain. He is seen by the radiologist and the radiologist orders
three views bilateral knee exam. In this case, modifier -50- is appended to the CPT code 73562 since
73562 is a unilateral code and the exam is done on both knees.
o 51-Multiple procedures
A patient presents to the ED department for multiple lacerations after walking into a glass door. He is
having lacerations on his forearm and eyelid. The physician performs the repair of the lacerations on
forearm (13120) and eyelid (12051). Since, these procedures are done at the same session; modifier -
51- is appended to the minor procedure i.e., 12051.
E.g.: Correct coding: 13120, 12051-51
o 52- Reduced services

A patient presents with foot ulcers due to diabetes. The physician starts initial assessment, takes a
comprehensive history, but before he can complete the E&M service, the patient becomes adamant
about leaving facility and leaves with her family against medical advice. In this case, the service was
not completed and it is a reduced service. Hence modifier -52- is appended to the E&M service
(99303).

o 54-Surgical care only
Patient presents for heart valve replacement (33410) and the cardiac surgeon provides only the intra-
operative portion of the surgery. In this case, modifier 54 would be added to 33410 to denote that
only intra-operative portion of the surgery was provided by this surgeon.
o 57-Decision for surgery

A patient presents with wrist pain after falling at home. The Physicians confirms the fracture of the
wrist through x-ray. He performs the E&M service (99283) to assess the patient and rule out any
additional fractures. Following E&M service, He decides to perform the surgery and he performs the
surgery for wrist fracture (25530). In this case, modifier 57 would be appended to 99283 since this
E&M service resulted in a major surgery for the wrist fracture. If the E&M service results in a minor
surgery (0-10 follow-up days) and if the surgery is done on the same day of the E&M service, modifier
25 would be added to the E&M service.
E.g.: Correct coding: 99283-57, 25530
o 59-Distinct Procedural Service

A patient presented for the removal of skin tags (a skin abnormality)(11200) from his back. At the
same session, the physician noted two small lesions (not skin tags) on the patient’s neck area. Biopsies
(tissue samples)(11100) were taken of each lesion, as each appeared different in its shape and size. In
this case, modifier 59 would be appended to 11100 to denote that this is independent procedure from
11200 since the anatomic sites and the type of procedures are different from each other.
E.g.: Correct coding: 11200, 11100-59

o 62-Two surgeons
When insertion of a pacemaker is performed by a surgeon and a cardiologist, both physicians should
use 33206 with addition of a 62 modifier to indicate that co surgery was performed.
Eg: Correct coding: 33206-62
o 66-Surgical Team
If a surgical team involving three surgeons is performing a complex surgery such as 63087(Vertebral
corpectomy), then each physician should report 63087 with modifier 66 appended to it.
Correct coding: 63087-66
o 80-Assistant surgeon
A patient is presenting for bypass surgery and during this surgery an assistant surgeon takes part in
the entire surgery, then the primary physician has to submit the CPT code 33510 and the assistant
surgeon has to report his services using same CPT code 33510 with modifier 80 appended to that.
Eg: Correct coding: 33510, 33510-80
o TC-Technical Component
A patient is injured in his left knee. The patient is seen by the radiologist for possible fracture in the
knee. The radiologist orders two views, x-ray of the left knee (73560). To bill only for the technical
component other than professional component, modifier TC is appended to the 73560.
E.g.: Correct coding: 73560-TC
Bundled CPT

It is not necessary that every CPT code should denote only a single treatment procedure. Where a
number of related procedures are to be performed on a patient in order to address the disease then a
single CPT code may be used to communicate the entire procedure. The cases where a single CPT code
signifies a group of procedures performed is called Bundling. These may be one of the common
reasons for denials; hence care should be taken to see whether we are entering procedures that can
be bundled as an unbundled procedure.
Let us take the case of billing for an appendectomy. The procedures involved would be:
 Incision
 Surgery
 Suturing
The above mentioned procedures all have independent CPTs but when the provider is sending out a
claim to an insurance company then it gets clubbed under a single CPT. In case the provider bills each
of the procedures separately then the insurance company would reject the claim for want of a
bundled code.
4.2.8 Charge Capture
The process of capturing coded medical record of a patient into his account in the provider's system is
called as charge capture. The charges (or procedure codes) may be present on a form called ‘super bill’
wherein the provider circles the diagnosis or procedures rendered or they may be submitted by the
coding team (if coding is involved).
Super bill (also called charge slip or routing form) is the financial record source document used by
health care providers and other personnel to record the patient’s treated diagnoses and the services
rendered to the patient during the visit.

Charge capture is done at the provider’s office or the billing office after the patient encounter. It is
essential in Revenue Cycle Management since it is necessary to enter charges on the claim forms for
reimbursement from the insurance companies.
The process involves entering the charges along with the provider details, DOS, referring provider and
such details into the patient's account by pulling up the patient record in the provider's system.
Note: All these functions are carried out in order to generate what is called as the Claim form –
Medical Bill that is sent as a mode of communication between the Billing office and the Insurance.
Let us try and understand what a claim form is and how the process of billing works in the next session
Exercise 9
 Discuss the importance of Medical Transcription in RCM

 Discuss the importance of coding in RCM
 Are modifiers appended to procedure codes? What id their significance?
Session 10
Objectives
 Life Cycle Of an Insurance Claim

o Paper Claims
o Electronic Claims
 Types of insurance claims for Physician and Hospital Billing

 Payment Posting/Cash Posting
 Process of Accounts Receivables and Denials Management
4.2.9 Life Cycle of an Insurance Claim
An insurance claim is a document/pre-defined template with the patient's demographic, insurance

and encounter details that is sent across by the provider to the insurance for the purpose of
reimbursement. The purpose of filing a claim is to get reimbursement from the insurance for the
services rendered to the patient by the provider.

4.2.10 Types of Claims
The Claim Form can be sent to the insurance either as a Paper claim or as an Electronic claim format.
Paper claims are sent either through fax or mail. When compared to electronic claims sending paper
claims involves more labor and time. Electronic claims are much faster and easier to be generated and
sent.
The Claim forms can generally be classified into 2 types
a. Physician Claim form – CMS 1500

b. Hospital Claim form – CMS 1450 / UB-04
[CMS stands for – Center for Medicare and Medicaid services, UB stands for - Universal Billing]
Paper Claims
Papers claims as the name suggests are submitted on paper by the Billing Office or the Providers
Office. These also included optically scanned claims that are converted to electronic form by the
Insurance Carrier/Clearing House.
Electronic Claims
These are submitted to the Insurance carrier via a CPU, tape disk, digital fax etc. Different Formats
used for electronic claims are:
1) NSF {National Standard Format}
This is used by the Federal Government. It is a rigid format with 320 bytes.
2) ANSI {American National Standard Institution}
Private Institutions use this. It is of 132 bytes and is a flexible format unlike NSF
After the claims leave the provider’s billing software what happens to them?
Let us now try and understand the role of a clearing house.

4.2.11 Clearing House
The Electronic claims like paper claims cannot be sent to the insurance straight and needs to be sent
through an intermediary organization called the “Clearing house”. This acts as a link between the
Provider and the Payer and checks for all errors / formatting checks pertaining to the E – claims.
The Functions of the Clearing house are as follows:

 Preliminary Screening
 Conversion to Insurance specific formats
 Dispatching
Preliminary Screening: This step involves basic screening of editing and auditing wherein Syntax errors,
formatting errors, missing information and other electronic checks are done. If errors are found the
claims are not sent to the insurance but sent back to the provider’s billing office for correction. These
claims are called as “Dropped Claims”.
Conversion to Insurance specific formats: The Claims are now converted as per the insurance format
based on which insurance they claim needs to be sent.
Dispatching: The Claims are now dispatched to the respective insurance after all the checks and
screening.
The Clearing house sends a Periodic report called as the “Scrubber Report”. This Report contains
details of all claims received from the Billing office such as the number of claims dropped, claims
forwarded to the payers and claims received from the provider’s billing office.
Claims Adjudication
In its true sense this process is not a part of the RCM cycle although decisions of this step impact the
RCM cycle tremendously because this process is directly related to the provider’s payment.

The insurance company (PAYERS) have performs 3 basic functions while processing the claims that
they receive from the provider billing office.
o Pre Edit and Audit

o Claims Adjudication
o Communication of Decision
Pre Edit and Audit: This is a Preliminary check for errors that could be found in the claim such as
(missing fields, name, address incorrect etc….)
Claims Adjudication: This is a very important step where the “Decision on the claim is made as to
whether to PAY it or DENY it. There are claims adjudicators who are experienced in the medical billing
field and are trained to adjudicate the claim, they are the ones who take decisions on the claims and
process it towards payment or denials. The claims that are not processed towards payment and are
denied are called as “Unprocessed Claims”.
Communication of Decision: This is the final step in any claims processing wherein the decision as to
whether the claim is paid or denied is communicated to the provider using a document called the EOB
– EXPLANATION OF BENEFITS. EOB could be called by several names such as Remittance advice.
statement of account , Provider voucher etc…Like how a CLAIM is used to communicate the
Treatment and the charges and other details to the insurance likewise the EOB is used to as a mode of
communication from the payer to the provider.

Claims adjudication for E-Claims
100 | P a g e GHS/WI/TRAR/01 Ver3.0 /Aug

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Claims adjudication for Paper Claims
4.2.12 Cash Posting/Payment Posting
Cash Posting is a process of recording payment details as received from the insurance company (in the
form of an EOB or a remittance advice) and the patient. It is done in order to maintain a record of the
payments received and also to ascertain the denials if any and the necessary follow-up. After the
insurance company responds to the claim in the form of an EOB (refer to the glossary for definition)

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the results either payments or denials are entered in the provider's system. So also, the payments
received from the patients are entered in the payments account. Cash posting is usually done in the
billing office however patient payments, for instance, copayments may be entered at the provider's
office or at the billing office.
The insurance company sends a check as payment for services along with a record of payment
information called EOB which explains in depth the details of payments against specific DOS and the
corresponding medical codes. The payments and other insurance details like check number and date
from the check and treatment details from the EOB are entered against the DOS into the patient
account. In case of denials only the EOB is sent and the same is recorded as such. On the basis of the
EOB the payments are transferred to the patient if need be.
4.2.13 Accounts Receivables
It is a measurement of charges not yet collected. The purpose of AR is to collect payment on pending
or denied charges. The key to accounts receivables is follow-up which can be of two kinds; Insurance
follow up which is to collect payment from the insurance company and Patient follow up which is to
collect on the patient's responsibility.
The process of AR begins on receipt of a denial or incorrectly/underpaid claim. It follows

payment/cash posting and is usually done from the billing office. It is done by analyzing the reason for
denial/underpayment and following up with the carrier telephonically.
Exercise 10
 Discuss the differences between paper and electronic claims adjudication

 Speculate on the clearing house functions for paper claims processing
 What is the difference between AR and Denial Management
2011
5.0 Related forms/documents
1. Insurance Card Copy
Contents of the Insurance card
o Insurance Details
o Name of the insurance
o Plan name & code
o Policy ID Number
o Group Name / Number
o Name of subscriber
o Relationship to subscriber
o Claims mailing address

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Policy ID #
Subscriber’s
Name

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2. Registration Form
INSURANCE
PATIENT’S PATIENT’S
NAME & Address
ADDRESS NAME
AOB
Contents of a registration form
Patient Details:
o Patient Name
o Date of Birth
o Sex
o Marital Status
o SSN
o Residential Address
o Telephone Number
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o Email
o Spouse Information
o Emergency Contact Information
Employer’s details:
o Name of employer
o Address
o Telephone Number
o Type of business
Insurance details:
o Name of Subscriber
o Name of insurance
o Number of insurance policies
o Type of insurance
o Policy ID Number
o Group Number / Name
o Relationship to subscriber
Guarantor Details:
o Name of Guarantor
o Address & Telephone Number
Assignment of Benefits (AOB)

Release of Information (ROI)
Promissory Note

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3. Charge Ticket
Codes are already assigned and

the appropriate treatment is just
ticked off by the physician while
rendering the treatment. –
CHARGE TICKET
Contents of the Charge ticket
o Patient's Name
o Date of Birth & SSN
o Medical Record Number
o Patient Account Number
o Name of Facility
o Place of Service
o Date(s) & Time of Service
o Procedure Codes
o Diagnosis Codes

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4. EOB
It is a statement / document sent by the insurance company to a participant in a health plan, listing
services, amounts paid by the plan and details of balance billing if any.
Other Names of EOB
o Statement of Benefits
o Explanation of Payments
o Notice of Payment
 Name & Address of Insurance

 Provider's Name
 Provider's Number
 Patient Name
 Patient Account Number
 Policy ID Number
 Date(s) of Service
 Claim Number
 Date of Birth of patient
 Procedure Code
 Diagnosis Code
 Modifiers
 Place of Service
 Number of Service or Units
 Type of Service
 Billed Amount
 Allowed Amount
 Paid Amount
 Deductibles
 Coinsurance

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 Group Number
 Check/Electronic Fund Transfer Number
 ICN/TCN - Internal/Transaction Control Number
 Denial Codes

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Allowed
CPT code – Billed Patient
amount
procedure amount responsibility
code
Date of Remark code –

service denial code wi
the reason
explained
Insurance
name and
address
Provider
name and
address

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5. Prior Authorization Form

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6. Retro Authorization Form

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7. Referral Authorization Form

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8. Medicare Policy ID Prefixes
Medicare Policy ID Suffixes

A Retired worker over 65 or disabled worker
B Wife (over 65) of retired or disabled worker
B1 Husband of retired or disabled worker
B2 Wife whose entitlement is dependent on the care of a child
B3 Second wife
B4 Second husband
B5 Second wife (entitlement is dependent on child)
B6 Ex-wife (entitlement is dependent on child)
B7 Third wife (entitlement is dependent on child)
B8 Third wife
B9 Second ex-wife
BR Divorce husband's benefits
BT Second divorced husband's benefits
E Widowed Mother
E1 Mother (ex-wife) who survives the retired worker
E2 Second widowed mother
E3 Second mother (ex-wife) who survives the retired worker
E4 Widowed father
E5 Third widow, mother
E6 Third widow, mother, second claimant
E7 Widow, mother, third claimant
E9 Third surviving divorce, mother
F Parent category (the "F" suffix not used alone) for aged dependents
F1 Father
F2 Mother

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F3 Stepfather
F4 Stepmother
F5 Adopting father
F6 Adopting mother
F7 Second alleged father
F8 Second alleged mother
J, K Special beneficiaries whose entitlement depends on the number of quarters of employment
they have under Social Security.
J1,J2,K1,K2 Entitled to Part
J3,J4,K3,K4 Not entitled to Part A (but may have bought Part A coverage)
K5 Second Prouty wife entitled to deemed hospital insurance
K6 Second Prouty wife entitled to deemed hospital insurance
K7 Second Prouty wife not entitled to deemed hospital insurance
K8 Second Prouty wife not entitled to deemed hospital insurance
W Disabled widow
W1 Disabled widower
W2 Second disabled widow
W3 Second disabled widower
W6 Disabled surviving ex-wife
W7 Second disabled surviving ex-wife
T An individual entitled to Part A benefits, but not to Retirement and Survivor's or Railroad
Retirement Insurance, or who is entitled to Medicare based on chronic renal disease will use this
number. It applies whether or not the beneficiary elects to receive Part B.
M An individual enrolled in Part B who is not entitled to Retirement and Survivor's or Railroad
Retirement Insurance, and is not eligible for Part A, but may have bought Part A coverage.
M1 An individual enrolled in Part B only who meets the requirements for Part A but has not
applied

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6.0 List of Abbreviations
AAPC - American Academy of Professional Coders
ABN - Advanced Beneficiary Notice
AHA - American Hospital Association
AHIMA - American Health Information Management Association
AMA - American Medical Association
ANSI - American National Standard Institute
ASC - Ambulatory Surgical Center
BCBS - Blue Cross Blue Shield
CDC - Centers for Disease Control and Prevention
CDT - Current Dental Terminology
CHAMPUS - Civilian Health and Medical Program of the Uniformed Services
CHAMPVA - Civilian Health and Medical Program of the Department of Veterans Affairs
CLIA - Clinical Laboratory Improvement Amendments
CMS - Centers for Medicare and Medicaid Services
CPT - Current Procedural Terminology
DEERS - Defense Enrollment Eligibility Reporting System
DHHS - United States Department of Health and Human Services

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DME - Durable Medical Equipment
DMERC - Durable Medical Equipment Regional Carrier
DOD - Department of Defense
DRG - Diagnoses Related Groups
EDI - Electronic Data Interchange
EGHP - Employer Group Health Plan
EOB - Explanation of Benefits
EOMB - Explanation of Medicare Benefits
EPO - Exclusive Physician Organization
ESRD - End Stage Renal Disease
FDA - Food and Drug Administration
FEP - Federal Employees Program
FI - Fiscal Intermediary
GA - General Assistance
HCFA - HealthCare Financing Administration
HCPCS - Healthcare Common Procedure Coding System
HHS - United States Department of Health and Human Services
HIC - Health Insurance Claim Number
HICN - Health Insurance Claim Number
HIS - Indian Health Service

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HMO - Health Maintenance Organization
ICD-9-CM - International Classification of Diseases - Ninth Revision - Clinical Modification
IPA - Independent Practice Association
LGHP - Large Group Health Plan
MDC - Major Diagnostic Category
MSP - Medicare Secondary Payer
NCHS - National Center for Health Statistics
NIH - National Institutes of Health
NPI - National Provider Identifier
OIG - Office of Inspector General
OWCP – Office of Workers Compensation Program
PCP - Primary Care Physician
PHO - Physician Hospital Organization
PIN - Physician Identification Number
POS - Point Of Service Plans
PPO - Preferred Provider Organization
PRO - Peer Review Organization
RBRVS - Resource-Based Relative Value Scale
ROI – Release of information
SCHIP - The State Children’s Health Insurance Program

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SNF - Skilled Nursing Facility
SSA - Social Security Administration
SSI - Supplementary Security Income
SSN - Social Security Number
TANF - Temporary Assistance for Needy Families
TIN - Tax Identification Number
MEDICAL SPECIALTIES
There are various branches / specialties in the field of Medicine. A Clear understanding of these
Medical specialties & their significance is ultimately necessary.
Orthopedics- A branch of medicine concerned with the correction or prevention of skeletal

Deformities.
Ophthalmology - A branch of medical science dealing with the structure, functions, and diseases
of the eye
Podiatry - The medical care and treatment of the human foot
Geriatrics - A branch of medicine that deals with the Problems and diseases of old age and aging
People
Pediatrics - A branch of medicine dealing with the development, care, and diseases of children
Orthodontics - A branch of dentistry dealing with Irregularities of the teeth and their Correction
(By means of braces)
Nephrology - A medical specialty concerned with the Structure, functions & diseases of kidneys.
Rehabilitation - The process of restoring an individual (as a convict or drug addict) to a useful
and constructive place in society especially through some form of vocational, correctional, or
therapeutic retraining.

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Gastroenterology - A branch of medicine concerned with the structure, functions, diseases and
pathology of the stomach and intestines.
Surgery - Branch of medicine concerned with diseases and conditions requiring an operative
procedure.
Emergency Room (ER) - A hospital room or area staffed and equipped for the reception and
treatment of persons with conditions (as illness or trauma) requiring immediate medical care.
Radiology - A branch of medicine concerned with the use of radiant energy (as X rays or
ultrasound) in the diagnosis and treatment of disease
Physical Therapy - The treatment of disease by physical and mechanical means (as massage,
regulated exercise, water, light, heat and electricity). It is also called as physiotherapy
Occupational Therapy - Therapy by means of an activity. More creative activities are prescribed for
its effect in promoting recovery or rehabilitation
Speech Therapy - Therapeutic treatment of speech defects. This therapy is mainly recommended
for people who suffer from lisping and stuttering i.e., for those speak with involuntary disruption
or blocking of speech (as by spasmodic repetition or prolongation of vocal sounds)
Psychiatry - A branch of medicine that deals with the science and practice of treating mental,
emotional, or behavioral disorders.
Neurology - The scientific study of the nervous system especially with respect to its structure,
functions, and abnormalities
Cardiology - The study of heart, its action and diseases.
Anesthesiology - Branch of medical science dealing with anesthesia and anesthetics. It involves
loss of sensation and usually of consciousness without loss of vital functions artificially produced
by the administration of one or more agents that block the passage of pain impulses along nerve
pathways to the brain
Pathology - The study of the essential nature of diseases and especially the structural and
functional changes produced by them. The anatomic and physiological deviation from the normal
that constitute disease or characterize a particular disease is studied.
Internal Medicine - A branch of medicine that deals with the diagnosis and treatment of non
surgical diseases
Obstetrics - It is a branch of medical science that deals with birth and also its antecedents and
sequel.

2011
Gynecology - It is the branch of medicine that deals with the diseases and routine physical care of
the reproductive system of women.
Chiropractic Services - A system of therapy, which holds that disease, results from a lack of normal
nerve function and which employs manipulation and specific adjustment of body structures (as the
spinal column).
Family Practice - A medical practice or specialty that provides continuing general medical care for
the individual and family. Also termed as Family Medicine
Emergency Medicine - This branch of medicine encompasses the decision making and action
necessary to prevent death or any further disability for patients in health crises, as well as health
promotion and injury prevention efforts.
Environmental Medicine - This branch involves research into the health effects of environmental
pollution.
Intensive Psychotherapy - Psychotherapy involving thorough exploration of the patient's life

history, conflicts and related psychodynamics
Supportive Psychotherapy - Psychotherapy aiming at bolstering the patient's psychological

defenses and providing reassurance, as in crisis intervention, rather than probing provocatively
into the patient's conflicts.
Pulmonology - The branch of internal medicine dealing with diseases and disorders of the lungs
and respiratory (breathing) system.
Forensic Psychiatry - The application of psychiatry in courts of law, e.g., in determinations for
commitment, competency, fitness to stand trial, responsibility for crime.
Etiology - A branch of medical science dealing with the causes and origin of diseases. This also
involves study of the mode of operation of diseases.
Acupuncture - Chinese practice of puncturing the body with needles at specific points to cure
diseases or to provide local anesthesia for relieving pain in surgery.
Audiology - A branch of medicine dealing with hearing and therapy of individuals having impaired

2011
hearing.
Optometry - The profession concerned with the examination of the eyes and related structures to
determine the presence of vision problems and eye disorders and with the prescription and
adaptation of lenses and other optical aids or the use of visual training for maximum visual
efficiency.
Oral Surgery - The branch of dentistry concerned with the diagnosis and surgical and adjunctive
treatment of diseases, injuries, and deformities of the oral and maxillofacial region
Endoscopy - Examination of the interior of a canal or hollow viscus by means of a special

instrument, such as an endoscope.
Angiocardiography - X-ray imaging of the heart and great vessels made visible by injection of a
radiopaque solution.
Nuclear Medicine -A branch of medicine dealing with the use of radioactive materials in the
diagnosis and treatment of disease.
Preventive Medicine - A branch of medical science dealing with methods (as vaccination) of
preventing the occurrence of disease.
Maxillofacial Prosthetics - Branch of dentistry that provides prostheses or devices to treat or

restore tissues of the maxilla / jaws and associated facial structures that have been affected by
disease, injury, surgery or congenital defect, to provide all possible functions.
Neuropsychiatry -A branch of medicine concerned with both neurology and psychiatry.

The specialty dealing with both organic and psychic disorders of the nervous system. This
is the earlier term for psychiatry.
Glossary

2011
A
Abuse - Any incident or practice of a provider, physician, or supplier which, although not usually
considered fraudulent, is inconsistent with accepted and sound medical, business, or fiscal practices
and directly or indirectly results in unnecessary costs to the Medicare program, improper
reimbursement, or program reimbursement for services that fail to meet professionally recognized
standards of care or, in some cases, may be medically unnecessary.
Adjudication - The process of deciding whether to allow or deny a claim based upon the information
submitted and the eligibility of the recipient. For claims to be paid, the determination of the amount
to be allowed is based on the contract, type of coverage and prior utilization.
Adjustment - Additional payment or correction of records on a previously processed clam.
Admission - Entry to a hospital or other health care institution as an inpatient.
Ambulatory Surgical Center (ASC) - A facility that operates exclusively for the purpose of providing
outpatient services to patients.
ANSI format (American National Standard Institute) - Electronic format used to submit Medicare claim
forms. The ANSI format is used to file Medicare Part A or Part B claims to Medicare.
Anti - Kickback Statute - Federal statute outlawing certain forms of discounts, rebates and other
reductions in price which induce the purchase of items or services payable by Medicare or Medicaid.
Appeal - Written or verbal statement from a customer that conveys an explicit or implicit request for a
review of the initial determination of a claim.
Approved Charge - The amount that Medicare has determined is appropriate for payment.
Assigned Claims - Claims submitted to Medicare by a Part B provider who agrees to accept the
Medicare approved charges as payment in full for the rendered service.
Assignment - A process in which a Medicare beneficiary agrees to have Medicare's share of the cost of
a service paid directly to a physician or other Provider. The Provider agrees to accept the Medicare
approved charges as payment in full and will only collect money from the Medicare patient for non-

2011
covered Medicare services, any unmet Medicare deductible, and co-payment from the Medicare
patient.
Balance Billing - The difference between the billed amount and the amount approved by Medicare.
Beneficiaries - Persons entitled to Medicare benefits under the Social Security Administration.
Billed Amount - The amount charged for each service performed by the provider.
Buckslip - A form given to patients to gather identification, contact, insurance and other health-related
information.
Carrier - An insurance company that contracts with Health Care Financing Administration (HCFA) to
provide claims processing and payment for Medicare Part B services.
Claim - Forms submitted for payment of physician services, other medical services and supplies
provided to Medicare beneficiaries.
Clinical Laboratory: Improvement Amendments (CLIA) - Regulations which set quality and
performance standards for all laboratory testing. All providers of laboratory services are required to
be certified under the CLIA program.
Co-Insurance - A cost-sharing requirement that a beneficiary will assume a portion or percentage of

the costs of covered services.
Comprehensive Examination - A general multi-system examination, or complete examination of a

single organ system and other symptomatic or related body area(s) or organ system(s)

2011
Constitutional Symptoms - Symptoms that relate to the general conditions of a person's body (e.g.
fever, weight loss).
Contractor - A contractor for Medicare purposes is defined as a Fiscal Intermediary (FI), Carrier,
Durable Medical Equipment Regional Carrier (DMERC), or Regional Home Health Intermediary (RHHI).
Correspondence Control Number (CCN) - Number assigned to an inquiry or appeal (written or

telephone), which is used for identification purposes.
Covered Services - Services rendered to Medicare or Medicaid Patients that are reimbursable by the
program to the provider.
CPT (Current Procedural Terminology) - The coding system for physician services developed by the
CPT Editorial Panel of the AMA.
Crossover - A situation whereby Medicare will forward any gaps in coverage to the Medigap insurer
for payment. Medigap crossover only occur if correct Medigap information is completed on the
Medicare claim form and if the patient has previously sent a signed Medigap cross-over authorization
form to Medicare through a participating Medicare provider.
Date Of Service - The date the services were actually performed.
Deductible - The amount of money a patient must pay before Medicare begins to pay for services and
supplies covered under the program.
Detailed Examination - An extended examination of the affected body area(s) or organ system(s) and
any other symptomatic or related body area(s) or organ system(s).
Development Letter - A notice from Medicare that a claim submitted by a provider organization
cannot be processed without additional information/documentation. The letter identifies the
additional information needed and the date by which the information must be received by Medicare.

2011
Diagnosis - An action that identify the condition or cause of disease of the patient.
Diagnosis Coding - Translating the medical terminology used for each service and/or item provided by
a provider or healthcare facility (as noted in the medical records) into a code.
Diagnostic - Procedures used to discover the nature and underlying cause of illness.
DRGs (Diagnosis Related Groups) - Groupings of inpatients who are considered to be similar in terms
of diagnosis, treatment, and length of stay necessary for procedures.
Durable Medical Equipment (DME) - Medical equipment that is intended to be used over and over
again, usually by the patient or caregiver, rather than being used once or a few times and then
discarded. Examples include wheelchairs, hospital beds, and oxygen tanks.
Durable Medical Equipment Regional Contractor (DMERC) - An insurance company that contracts
with HCFA to provide Medicare claims processing and payment for supplies, DME, prosthetics, and
Orthotics.
Electronic Media Claims (EMC) - A Communications process by which claims are sent electronically
from a computer to a claim-processing center. EMC allows claim senders to bypass several steps of
the paper claims process by eliminating the need for mailroom processing and manual data entry by
claims examiners.
Employer Group Health Plan (EGHP) - A health insurance plan sponsored by either a patient's or the
spouse of a patient's employer where a single employer of 20 or more employees is the sponsor
and/or contributor to the EGHP, or two or more employers are sponsors and/or contributors and at
least one of them has 20 or more employees.
Entitlement - The first data that a Medicare beneficiary can receive benefits under the Medicare
program (e.g. the date of entitlement begins at age 65 for most beneficiaries).

2011
Eponym - A disease or syndrome that is named after a person.
Exclusions - A provision in the law stating situations or conditions under which coverage is not
afforded by the subscriber's contract. Or, can describe penalty imposed by HHS, OIG on providers
prohibiting them from billing Medicare or other government programs.
Expanded Problem Focused Examination - A limited examination of the affected body area or organ
system and any other symptomatic or related body area(s) or organ system(s).
Experimental or investigative - Any treatment, procedure, equipment, drugs, drug usage, or devices
not approved by the FDA.
Explanation of Medicare Benefits (EOMB) - A form that sent to a Medicare beneficiary after a claim is
processed which indicates how Medicare processed the claim.
Face-To-Face Time - Only the time that the physician spends meeting with the patient and/or family.
This includes the time in which the physician obtains a history, performs an examination, and counsels
the patient. Pre- and Post-encounter time is not included.
Fair Hearing - An independent determination related to claims for which the party has appealed the
review decision within six months of the date of notice of that decision. A Hearing Officer assigned by
the contractor renders the independent determination. A party is entitled to a Fair Hearing if the
amount in controversy is at least $100.00.

2011
Fee Schedule - A list of certain services and payable amounts indicating the maximum Medicare
payment for the service (e.g. clinical lab and durable medical equipment). Beginning in January 1992,
physician services are paid based on a fee schedule.
Fee-For-Service - Medicare benefits that allow beneficiaries to go to almost any doctor, hospital or
other health care provider they desire. Generally, a fee is charged to the patient each time a service is
rendered by a provider (i.e. co-insurance, Medicare deductible, costs for Medicare non-covered
services, or costs of services which are the result of a Written Advanced Notice).
Fiscal Intermediary (FI) - An insurance company that contracts with HCFA to process Medicare Part A
bills (Hospital insurance).
Focused Medical Review (FMR) - A two-fold educational process designed to ensure both
appropriateness of medical care and that the carrier's medical policy and review guidelines are
consistent with the standards of medical practice.
Fraud - Intentional deception or misrepresentation which an individual or entity makes, knowing it to

be false and that the deception could result in some unauthorized benefit.
GA - A modifier that indicates on a claim form that an Advance Notice form is on file and signed by the
patient
Global Fee - Combined technical (equipment charges) and professional (physician charge) billings or
payment
Health Care Financing Administration (HCFA) - The part of the Department of Health and Human
Services that operates the Medicare Program.

2011
Health Care Financing Administration Common Procedure Coding System (HCPCS) - Coding structure
designed to incorporate all medical services under a universal coding system.
Health Insurance Claim Number (HICN or HIC) - Refers to the number issued by the Social Security
Administration to a person covered under Medicare.
Health Maintenance Organization (HMO) - Entities that combine the functions of insurers and
providers of care, giving most necessary care for a prepaid fee and placing an emphasis on prevention
and careful assessment of medical necessity.
Health Professional Shortage Area (HPSA) - Medically undeserved areas where physicians are entitled
to a 10 percent bonus payment for all physician services (i.e., those services subject to the Medicare
physician fee schedule).
Hearing - An informal hearing held by a Hearing Officer to determine if the carrier's action on a claim
complied with Medicare law. A hearing may not be held unless the amount in controversy (minus
deductible and coinsurance) is at least $100. More than one claim may be used to satisfy the $100
requirement; however, a hearing must be requested within six months of an informal review.
Home Health Agency - An approved association or organization through which a Medicare patient
who is homebound receives skilled nursing and/or therapeutic care in the home.
Hospital - Institution with organized medical staff, with permanent facilities that include inpatient
beds and with medical services, including physician services and continuous nursing services.
Hospital Based Physician - An MD or DO under contract or arrangement to provide service in a hospital

setting, salaried or unsalaried, who renders treatment or services in the hospital environment.

2011
Inquiry - A written request for information usually pertaining to claim status or general information
such as deductible, entitlement, etc.
Intermediaries - Private organizations, usually insurance companies, that have contracts with the
Health Care Financing Administration to process claims under Part A (hospital insurance) of Medicare.
Internal Control Number (ICN) - A 13-digit number assigned to a claim, which is used for identification
purposes and retrieval purposes, if necessary.
International Classification of Disease-Ninth Revision-Clinical Modification (ICD-9-CM) - A national

coding method to enable providers to effectively document the medical condition, symptom or
complaint which is the base for rendering a specific service(s). This coding system consists of three to
five digit numeric or alphanumeric codes for this reporting. The coding structure includes a total of
three volumes of material.
Large Group Health Plan (LGHP) - A health insurance plan, which is contributed to by an employer or
employee organization having 100 or more employees, or a plan having at least one member, which
has at least 100 employees.
Licensed Physician - A Doctor of Medicine (MD) or a Doctor of Osteopathy (DO) who is legally
qualified to practice medicine and who is qualified to direct a treatment plan.
Limiting Charge - Limits the amount that nonparticipating physicians and certain suppliers can charge
a Medicare beneficiary for services rendered.
Managed Care/HMO - Medicare benefits plan that usually requires beneficiaries to pay a monthly
premium and a co-payment each time they go to the doctor or use other services, depending on their
plan. This plan typically allows beneficiaries to get all of their care from the doctors, hospitals, and

2011
other health care providers that are part of the plan. In emergency cases, beneficiaries are sometimes
allowed to receive care from healthcare providers outside the plan as well.
Major Diagnostic Category (MDC) - Grouping of like procedures for classification in Volume 3 of the
ICD-9-CM.
Medicaid - A federal program, established by Title XIX of the Social Security Act, that matches federal
dollars to the states to provide health insurance for categories of the poor and medically indigent.
Medical Review - A process that includes the application of medical criteria, knowledge, or judgment
to ensure that payments are made for items/services that is covered, appropriate, and medically
necessary.
Medically Necessary Services - Those services determined by Medicare to be: consistent with
symptoms or diagnosis and treatment of the insured's condition, disease, ailment or injury;
appropriate with regard to standards of good medical practice; provided not primarily for the
convenience of the insured, the hospital or the physician; and the most appropriate level of service
that can be safely provided.
Medicare - A federal health insurance program established by Congress for the elderly, the disabled,
and individuals afflicted with end stage renal disease (ESRD).
Medicare Fee Schedule - The resource-based fee schedule, which Medicare utilizes to reimburse/pay
for physician, laboratory, and supplier-services.
Medicare Part A - Part of the Medicare Program, which reimburses a portion of facility charges for
beneficiaries who receive services from certain institutions, such as hospitals (inpatient and
outpatient), skilled nursing facilities (SNF), comprehensive outpatient rehabilitation facilities (CORF),
and end stage renal disease (ESRD) facilities.
Medicare Part B - Part of the Medicare program which reimburses covered physician and supplier
services rendered in various places, such as a doctor's office, hospital, patient's home, nursing home,
etc.

2011
Medicare Records Index Number (MRN) - A summarized statement for providers, which includes
complete medical records of the patient for the particular DOS or from Admission through discharge
dates.
Medicare Secondary Payer (MSP) - A term used to identify Medicare as the secondary payer for some
or all claims submitted for a beneficiary. Medicare is identified as a secondary payer when a
beneficiary has insurance coverage additional to Medicare that is considered primary.
Medicare Summary Notice (MSN) - A form sent to a Medicare beneficiary, which indicates how
Medicare processed the claim.
Medigap - A privately offered, Medicare-supplemental health insurance policy designed to fill the gaps
in the limits of coverage that Medicare does not pay. Benefits may include payment of Medicare
deductibles, coinsurance, and balance bills, as well as, payment for services not covered by Medicare.
Medigap insurance must conform to one of ten federally standardized benefit packages.
Modifier - A two-digit alpha or numeric code, which is used in conjunction with a CPT, or HCPCS code
to give a new or different meaning to the code. Some modifiers decrease reimbursement (e.g., 26 -
professional component, 80 - surgical assistant) while other increase reimbursement (e.g., 50 -
bilateral procedure). Other modifiers serve to tell Medicare processors information about the service
billed (e.g., GA - Waiver of liability statement of file).
National Provider Identifier (NPI) - A unique number assigned to each Medicare provider.
Non – Assigned Claim – A claim potentially payable directly to the Medicare beneficiary
Non-Participating Provider - Physicians/ suppliers who elect not to participate in the Medicare
program. They may accept assignment on a claim-by-claim basis and may bill the patient up to the
limiting charge amount.

2011
Non - Physician Practitioner - A health care provider who meets state licensing requirements to
provide specific medical services. Medicare payment may be made for the professional services of
many non-physician practitioners, such as certified registered nurse anesthetists/anesthesia
assistants, physician assistants, clinical nurse specialists, nurse practitioners, nurse midwives, physical
therapists, occupational therapists, clinical psychologists, licensed clinical social workers, and
audiologists.
Non - Rendered Services - Services or supplies not provided to patient but billed to Medicare.
NSF (National Standard Format) - Electronic format used to submit Medicare Part B claim forms.
Optical Character Recognition (OCR) - An automated scanning system that reads the information
submitted on claim forms. With OCR, claims processing are faster and more accurate than manual
processing because of the need for little or no manual intervention.
Outpatient - A member receiving hospital care but not occupying a regular hospital bed or receiving
room, board and general nursing care.
Overpayment - An overpayment occurs when Medicare has paid a physician, provider or facility more
money than what should have been paid.
Participating Physician and supplier Program (PAR) - A Program that provides financial and
administrative for physicians and suppliers who agree in advance to accept assignment on all
Medicare claims.
Participating Provider - Providers (or suppliers) who sign an agreement or contract agreeing to
participate in the Medicare Program and accept the Medicare –approved amount for services as
payment in full.

2011
Participation - A participating provider is one who agrees to accept assignment on all claims submitted
to Medicare for processing. There are certain incentives for providers to become participating such as:
higher allowances, toll-free telephone lines for electronically submitting claims, no legal charge limits,
Medigap benefits and free advertising.
Patient - A person under treatment or care by a physician or surgeon or in a hospital.
Payment Floor - The timeframe established for carrier payment of Medicare Part B claims .As of
October 1, 1993, electronically submitted claims will be paid 14 days after the date of receipt, while
paper claims will be paid 27 days after the date of receipt. All clean claims (claims which do not
require additional development or other documentation for processing), whether electronic or paper,
must be processed within 30 days of receipt or the carrier will be required to pay interest in addition
to allowances for covered services.
Peer Review Organization (PRO) - An organization with HCFA to review the medical necessity and
quality of care provided to Medicare beneficiaries. Sometimes referred to as a Quality Improvement
Organization (QIQ)
Physician Payment Reform (PPR) - The term “Physician Payment Reform” is commonly used to refer to
various provisions of the Omnibus Budget Reconciliation Act (OBRA) of 1989, which standardized
many Medicare coverage and reimbursement policies.
Problem Focused Examination - A limited examination of the affected body area or organ.
Procedure Codes - Codes generally used to determine reimbursement for services rendered,
submitted on claims forms and other medical documentation. Procedure coding plays an important
role in the process of preparing your Medicare claim for payment.
Procedure Coding - Translating the medical terminology used for each procedure, service, and /or
item rendered by a provider or healthcare facility (as noted in the medical records) into a code.
Provider - A generic term for any person (e.g., a physician) or entity (e.g., a home health agency, a
hospital) approved to give care to Medicare beneficiaries and to receive payment from Medicare.

2011
Provider Claim Summary (PCS) - A summarized statement for providers, which includes payment
information for one or more beneficiaries.
Purchased Diagnostic Tests - A test (e.g., EKG, X-ray, ultrasound, etc.) purchased from an outside
supplier for which a physician bills, but does not personally perform or supervise.
Qui Tam - This is a provision in the law, which allows persons having knowledge of a false claim
against the government to bring an action in a Federal District Court for themselves on behalf of the
United States government.
Relative Value - Reflects the relativity in units of median charges among procedures, in any of the five
major categories of medicine.
Remittance - The payment of a Medicare claim by a Medicare Contractor.
Reopening - a reevaluation of a claim or review determination. It is not an appeal right. It is a

discretionary action in response to the identification of an error, fraud or the submission of new
material and information not available at the time of the last adjudication.
Review - The first formal level of appeal, following a denial of a claim; a request for additional
consideration of a previously processed service.
Sanctions - Penalties imposed on individuals who violated the Medicare program.

2011
Screening Services - Preventative Medicine service provided by a physician such as a routine physical
or mammography.
Skilled Nursing Facility - An institution or a distinct part of an institution, which has in effect a transfer
agreement with one or more hospitals and is primarily, engaged in providing inpatient skilled nursing
care or rehabilitation services.
Social Security Administration (SSA) - The branch of the Department of Health and Human Services
that operates the various programs funded under the Social Security Act. It also determines when an
individual becomes eligible for Medicare benefits.
Unbundled Service - A service, which is, considered part of the basic allowance of another procedure
but which is billed separately to Medicare. Medicare does not allow billing for incorrect unbundled
services.
Unique Physician Identification Number (UPIN) - A unique number assigned to each Medicare
physician, for identification purposes, regardless of the number of associations in which he/she may
practice.
Unit/Floor Time - Includes the time that the physician is present on the patient's hospital unit and at
the bedside rendering services of the patient.
Unlisted Code - Five-digit codes that are used to designate procedures not found in the CPT manual.
Coders may need to include narrative information with any unlisted code. Check with local Medicare
Contractor to determine what information should be included on Medicare claim form.
Up coding - A potentially fraudulent activity, which involves claims, submitted to Medicare for non-
covered/non-chargeable services, supplies, or equipment in a way that makes it appear that Medicare
covered services were rendered.

2011
Utilization - The percentage of usage by Medicare patients of a given facility or health care provider's,
services.
Waiver of Liability - A written notice given to the patient by the Provider in advance of any service or
supply furnished for which payment may be denied or reduced by Medicare as not reasonable and
medically necessary. This notification serves as protection for both the Provider and the patient (Also
called the Written Advanced Notice)

2011

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Document Name Basic Medical Billing Manual

SNO DATE REVISION STATUS REASON FOR AMENDEMENT

1|Page GHS/WI/TRAR/01 Ver3.0 /Aug 2011

Basic Medical Billing

2|Page GHS/WI/TRAR/01 Ver3.0 /Aug 2011

1.2 Patient, Provider and Payer relationship......................................................................................... 6

1.3 Generic Healthcare Terminology:.................................................................................................... 7

2.0 Concept of Health Insurance ..........................................................................................12

2.2 Introduction to Indemnity and MCO ............................................................................................. 16

2.3 Traditional Indemnity .................................................................................................................... 16

2.3.1 Classification of Traditional Plans ......................................................................................... 17

2.4 Managed Care Plans ...................................................................................................................... 18

2.4.1 HMO ...................................................................................................................................... 20

2.4.2 POS ........................................................................................................................................ 22

2.4.4 EPO ........................................................................................................................................ 25

2.5 Types of Physician Groups ............................................................................................................. 26

2.5.1 Physician Hospital Organization (PHO) ................................................................................. 26

2.5.2 Independent Practice Association (IPA)................................................................................ 27

2.6 Federal Insurance .......................................................................................................................... 28

2.6.1 Medicare ............................................................................................................................... 29

2.6.2 Railroad Medicare ................................................................................................................. 38

2.6.4 SCHIP ..................................................................................................................................... 41

2.6.5 CHAMPUS /TRICARE.............................................................................................................. 41

2.6.7 FEHB (Federal Employees Health Benefit Plan) .................................................................... 43

3|Page GHS/WI/TRAR/01 Ver3.0 /Aug 2011

2.7.1 General Liability .................................................................................................................... 46

2.7.2 Auto Accidents Insurance ..................................................................................................... 46

2.7.3 Worker’s Compensation ....................................................................................................... 50

2.8 Commercial Insurance ................................................................................................................... 57

2.8.1 Individual Plans ..................................................................................................................... 57

2.8.2 Group plans........................................................................................................................... 58

2.8.3 BCBS ...................................................................................................................................... 59

3.0 Billing Terminologies.......................................................................................................60

4.2 Revenue Cycle Management ......................................................................................................... 75

4.2.1 Patient Scheduling ................................................................................................................ 77

4.2.2 Benefit and Eligibility Verification......................................................................................... 77

4.2.4 Patient Encounter ................................................................................................................. 78

4.2.5 Registration/Patient Demographic Entry.............................................................................. 79

4.2.6 Medical Transcription ........................................................................................................... 81

4.2.7 Medical Coding...................................................................................................................... 81

4.2.8 Charge Capture ..................................................................................................................... 94

4.2.9 Life Cycle of an Insurance Claim............................................................................................ 96

4.2.10 Types of Claims ..................................................................................................................... 97

4.2.11 Clearing House ...................................................................................................................... 98

4.2.12 Cash Posting/Payment Posting ........................................................................................... 101

4.2.13 Accounts Receivables.......................................................................................................... 102

5.0 Related forms/documents............................................................................................103

4|Page GHS/WI/TRAR/01 Ver3.0 /Aug 2011

1.0 Introduction to US Healthcare

At the end of this session you will be able to understand

 Major differences between the Indian and US Healthcare System

1.1 Healthcare in India and the US

GETS TREATMENT PAYS

Some of the major differences can be listed as follows:-

Large % (more than 85%) of the population is

Scope of coverage of plans is limited Scope of coverage is high

1.2Patient, Provider and Payer relationship

 Patient – AKA Client; Subscribers; Members; Policy Holders; Beneficiaries; Enrollees;

6|Page GHS/WI/TRAR/01 Ver3.0 /Aug 2011

1.3 Generic Healthcare Terminology:

7|Page GHS/WI/TRAR/01 Ver3.0 /Aug 2011