Medical billing & coding is the process of submitting and following up on claims to insurance companies in order to receive payment for services rendered by a healthcare provider. The same process is used for most insurance companies, whether they are private companies or government-owned. Medical billers are encouraged, but not required by law to become certified by taking an exam such as the CMRS Exam, RHIA Exam and others. Certification schools are intended to provide a theoretical grounding for students entering the medical billing field.
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The medical billing process is an interaction between a health care provider and the insurance company (payer). The entirety of this interaction is known as the billing cycle. This can take anywhere from several days to several months to complete, and require several interactions before a resolution is reached. The interaction begins with the office visit: a doctor or their staff will typically create or update the patient's medical record. This record contains a summary of treatment and demographic information including, but not limited to, the patient's name, address, social security number, home telephone number, work telephone number and their insurance policy identity number. If the patient is a minor then guarantor information of a parent or an adult related to the patient will be appended. Upon the first visit, the provider will usually give the patient one or more diagnoses in order to better coordinate and streamline their care. In the absence of a definitive diagnosis, the reason for the visit will be cited for the purpose of claims filing. The patient record contains highly personal information, including the nature of the illness, examination details, medication lists, diagnoses, and suggested treatment.
The extent of the physical examination, the complexity of the medical decision making and the background information (history) obtained from the patient are evaluated to determine the correct level of service that will be used to bill the insurance. The level of service, once determined by qualified staff is translated into a standardized five digit procedure code drawn from the Current Procedural Terminology database. The verbal diagnosis is translated into a numerical code as well, drawn from a similar standardized ICD-9-CM(latest review being 10 [ICD-10-CM] database. These two codes, a CPT and an ICD-9-CM (will be replaced by ICD-10-CM as of 10/1/2013) are equally important for claims processing.
Once the procedure and diagnosis codes are determined, the medical biller will transmit the claim to the insurance company (payer). This is usually done electronically by formatting the claim as an ANSI 837 file and using Electronic Data Interchange to submit the claim file to the payer directly or via a clearinghouse. Historically, claims were submitted using a paper form; in the case of professional (non-hospital) services and for most payers the CMS-1500 form or HCFA (Health Care Financing Administration claim form) was commonly used. The CMS-1500 form is so named for its originator, the Centers for Medicare and Medicaid Services. At time of writing, about 30% of medical claims get sent to payers using paper forms which are either manually entered or entered using automated recognition or OCR software.
The insurance company (payer) processes the claims usually by medical claims examiners or medical claims adjusters. For higher dollar amount claims, the insurance company has medical directors review the claims and evaluate their validity for payment using rubrics (procedure) for patient eligibility, provider credentials, and medical necessity. Approved claims are reimbursed for a certain percentage of the billed services. These rates are pre-negotiated between the health care provider and the insurance company. Failed claims are denied or rejected and notice is sent to provider. Most commonly, denied or rejected claims are returned to providers in the form of Explanation of Benefits (EOB) or Electronic Remittance Advice.
Upon receiving the denial message the provider must decipher the message, reconcile it with the original claim, make required corrections and resubmit the claim. This exchange of claims and denials may be repeated multiple times until a claim is paid in full, or the provider relents and accepts an incomplete reimbursement.
There is a difference between a “denied” and a “rejected” claim, although the terms are commonly interchanged. A denied claim refers to a claim that has been processed and the insurer has found it to be not payable. Denied claims can usually be corrected and/or appealed for reconsideration. A rejected claim refers to a claim that has not been processed by the insurer due to a fatal error in the information provided. Common causes for a claim to reject include when personal information is inaccurate (ie: name and identification number do not match) or errors in information provided (ie: truncated procedure code, invalid diagnosis codes, etc.) A rejected claim has not been processed so it cannot be appealed. Instead, rejected claims need to be researched, corrected and resubmitted.
The frequency of rejections, denials, and over payments is high (often reaching 50%), mainly because of high complexity of claims and/or errors due to similarities in diagnosis' and their corresponding codes. This number may also be high due to insurance companies denying certain services that they do not cover (or think they can get away without covering) in which case small adjustments are made and the claim is re-sent. Depending on the denial, filing an appeal with the appropriate documentation and proof can successfully overturn the original decision.
A practice that has interactions with the patient must now under HIPAA send most billing claims for services via electronic means. Prior to actually performing service and billing a patient, the care provider may use software to check the eligibility of the patient for the intended services with the patient's insurance company. This process uses the same standards and technologies as an electronic claims transmission with small changes to the transmission format, this format is known specifically as X12-270 Health Care Eligibility & Benefit Inquiry transaction.[1] A response to an eligibility request is returned by the payer through a direct electronic connection or more commonly their website. This is called an X12-271 "Health Care Eligibility & Benefit Response" transaction. Most practice management/EM software will automate this transmission, hiding the process from the user.
This first transaction for a claim for services is known technically as X12-837 or ANSI-837. This contains a large amount of data regarding the provider interaction as well as reference information about the practice and the patient. Following that submission, the payer will respond with an X12-997, simply acknowledging that the claim's submission was received and that it was accepted for further processing. When the claim(s) are actually adjudicated by the payer, the payer will ultimately respond with a X12-835 transaction, which shows the line-items of the claim that will be paid or denied; if paid, the amount; and if denied, the reason.
In order to be clear on the payment of a medical billing claim, the health care provider or medical biller must have complete knowledge of different insurance plans that insurance companies are offering, and the laws and regulations that preside over them. Large insurance companies can have up to 15 different plans contracted with one provider. When providers agree to accept an insurance company’s plan, the contractual agreement includes many details including fee schedules which dictate what the insurance company will pay the provider for covered procedures and other rules such as timely filing guidelines.
Providers typically charge more for services than what has been negotiated by the doctor and the insurance company, so the expected payment from the insurance company for services is reduced. The amount that is paid by the insurance is known as an allowable amount. For example, although a psychiatrist may charge $80.00 for a medication management session, the insurance may only allow $50.00, and so a $30.00 reduction (known as a "provider write off" or "contractual adjustment") would be assessed. After payment has been made a provider will typically receive an Explanation of Benefits (EOB) or Electronic Remittance Advice (ERA) along with the payment from the insurance company that outlines these transactions.
The insurance payment is further reduced if the patient has a copay, deductible, or a coinsurance. If the patient in the previous example had a $5.00 copay, the doctor would be paid $45.00 by the insurance. The doctor is then responsible for collecting the out-of-pocket expense from the patient. If the patient had a $500.00 deductible, the contracted amount of $50.00 would not be paid by the insurance company. Instead, this amount would be the patient's responsibility to pay, and subsequent charges would also be the patient's responsibility, until his expenses totaled $500.00. At that point, the deductible is met, and the insurance would issue payment for future services.
A coinsurance is a percentage of the allowed amount that the patient must pay. It is most often applied to surgical and/or diagnostic procedures. Using the above example, a coinsurance of 20% would have the patient owing $10.00 and the insurance company owing $40.00.
In Medicare the physician can either be 'Participating' - in which they will receive 80% of the allowable Medicare fee and 20% will be sent to the patient - or can be 'Nonparticipating' in which the physician will receive 80% of the fee, and may bill patients for 15% or more on the scheduled amount.
For example, the regular fee for a particular service is $100.00, while Medicare's fee structure is $70.00. The physician will therefore receive $56.00 and the patient will pay $14.00. Similarly Medicaid has its own set of policies which are slightly more complex than Medicare.
Steps have been taken in recent years to make the billing process clearer for patients. The Healthcare Financial Management Association (HFMA) unveiled a "Patient-Friendly Billing" project to help healthcare providers create more informative and simpler bills for patients. Additionally, as the Consumer-Driven Health movement gains momentum, payers and providers are exploring new ways to integrate patients into billing process in a clearer, more straightforward manner.
For several decades, medical billing was done almost entirely on paper. However, with the advent of medical practice management software also known as health information systems it has become possible to efficiently manage large amounts of claims. Many software companies have arisen to provide medical billing software to this particularly lucrative segment of the market. Several companies also offer full portal solutions through their own web-interfaces, which negates the cost of individually licensed software packages.
Due to the rapidly changing requirements by U.S. health insurance companies, several aspects of medical billing and medical office management have created the necessity for specialized training. Medical office personnel may obtain certification through various institutions who may provide a variety of specialized education and in some cases award a certification credential to reflect professional status. The Certified Medical Reimbursement Specialist (CMRS) accreditation by the American Medical Billing Association is one of the most recognized of specialized certification for medical billing professionals.
The medical billing field has been challenged in recent years due to the introduction of the Health Insurance Portability and Accountability Act (HIPAA).
HIPAA is a set of rules and regulations which hospitals, doctors, healthcare providers and health plans must follow in order to provide their services aptly and ensure that there is no breach of confidence while maintaining patient records.
Since 2005, medical providers have been urged to electronically send their claims in compliance with HIPAA to receive their payment.
Title I of this Act protects health insurance of workers and their families, when they change or lose a job. Title II calls for the electronic transmission of major financial and administrative dealings, including billing, electronic claims processing, as well as reimbursement advice.
Medical billing service providers and insurance companies were not the only ones affected by HIPAA regulations, many patients found that their insurance companies and health care providers required additional waivers and paperwork related to HIPAA.
As a result of these changes, software companies and medical offices spent thousands of dollars on new technology and were forced to redesign business processes and software in order to become compliant with this new act. This was in part because providers who inadvertently released Protected Health Information to the wrong entity would now be exposed to litigation under HIPAA.
The major information need to be followed is to maintain privacy of both the patient's personal or demographic details as well as providers details.
In many cases, particularly as a practice grows beyond its initial capacity to cope with its own paperwork, providers farm out their medical billing process to a third party known as a Medical Billing Service. These entities promise to reduce the burden of paperwork for medical staff and recoup lost efficiencies caused by workload saturation, paving the way for further practice growth. A recent trend towards outsourcing in countries such as India has shown a potential to reduce costs, but it is not clear if this trend will continue or decline as a result of customer concerns over privacy.