Reimbursement Methodologies

global prospective payment system example

Medicare system used to reimburse home health services: HHPPS, or home health prospective payment system

The Medicare Exception (2)

Medicare will still receive two separate bills; one bill for professional services from the physician on the CMS-1500 and the other for the facility, supply, and equipment charges from the ambulatory surgical center from the outpatient facility (also on the CMS-1500)

first-party payer

Patient reimburses healthcare provider for services

Managed care

means the third-party payer takes an active role in influencing cost and quality through its policies and provisions

Charge list, charge sheet, encounter form, and billing master

names used to summarize the supplies, procedures and diagnoses for a particular patient

Episode-of-care is a reimbursement system

reimbursement is based on the patient's particular condition/illness or a specified time period over which the patient receives care

fees

vary from provider to provider

UB-04 components

-demographics, including payer information -fee for each service from the chargemaster -charge list, with description -correct diagnosis, procedure, and supply codes

Episode-of-care reimbursement models

-determine payment based on one lump sum payment for all the care provided related to a disease or particular condition -many times based on a time factor

CDM (cargemaster) maintenance

-joint effort between all involved -critical to minimize risk of compliance violations for the organization

Chargemasters include

-procedure codes -description -charge

CDM AKA

-service master -price list -charge list -service item master

Healthcare reimbursement methodologies

1. Fee-For-Service 2.Episode-of-Care

Prospective payment systems

- Not always a global payment system - can be set up so that different payments are made to different providers—although the payment amount is not based on what was actually done but on historical averages

case-mix adjustment

- adjustment to the basic rate for difference in health condition and other considerations -done with the use of an OASIS form (outcome and assessment information set)

Minimum Data Set (MDS)

- provides clinical documentation about the resident's care - consists of an extensive database containing all of this clinical data - becomes part of the resident's health record

basic elements necessary for creating the UB-04 or CMS-1500 and the patient's statement

- the demographic information - third-party billing information - charge list reflecting final diagnosis codes, procedure codes, and supply codes

Ambulatory payment classification (APC) system

-A coding and reimbursement hierarchy for outpatient services that organizes CPT® and HCPCS codes into several hundred groups. Each code of Level I and II HCPCS are assigned a payment status indicator, identifying how it will be paid. These service bundles are the basis for Medicare reimbursement for many outpatient hospital services. Some hospital services such as anesthesia, recovery room, and many drugs and supplies are considered bundled into the APC payment and, therefore, reimbursement is minimized. Other procedures are not bundled or packaged such as ancillary services like x-rays, and MRI, and other minor procedures such as injections. These all have separate APC groups. Each CPT code is assigned to only one APC. The APC assignment does NOT change based on the diagnosis or condition of the patient. So in other words, it is only the CPT/HCPCS codes that drive the reimbursement.

Coding/Billing for Physician Professional Services (i.e. radiologist or pathologist)

-Diagnosis Codes - ICD-10-CM -Procedure Codes - CPT® -Billing - CMS-1500 form -rarely have supplies to be coded because the supplies are furnished by the facility

Coding/Billing for Healthcare Services at Physician's Office

-Diagnosis Codes - ICD-10-CM -Procedure Codes - CPT® -Supply Codes - HCPCS (if applicable) -Billing - CMS-1500 form

Coding/Billing for Non-Physician Professional Services at Independent Facility

-Diagnosis Codes - ICD-10-CM -Procedure Codes - CPT® -Supply Codes - HCPCS (if applicable) -Billing - CMS-1500 form

Coding/Billing for Physician Services at Independent Facility

-Diagnosis Codes - ICD-10-CM -Procedure Codes - CPT® -Supply Codes - HCPCS (if applicable) -Billing - CMS-1500 form

Coding/Billing for Outpatient Healthcare Institutions

-Diagnosis Codes - ICD-10-CM -Procedure Codes - CPT® (billing) -Supply Codes - HCPCS (as appropriate) -Billing - UB-04 form

Basic elements for healthcare reimbursement process

-Documentation (medical record/financial record) -Code assignment -claim preparation claim to payers -claim review -claim resolution

4 main parts to the superbill

-Provider information- name, degree, service location, and signature -Patient Information- patient's name, date of birth and insurance information -Service information- date of service, CPT and ICD-10-CM codes, modifiers, time, units, quantity for drugs, and authorization information - Additional information- notes and comments

Capitation

-a reimbursement method used by some managed care plans -third-party payer contracts with the healthcare provider(s) to pay a flat fee per individual enrolled in the healthcare plan

prior to 1920s and 1930s

-all reimbursement was between patient and provider -most common form of payment was first-party payer

Revenue codes

-are 4-digit codes -they indicate inpatient or outpatient, the department (cost center) where the service(s) originated, and each 4-digit code represents a range of services -Services described by revenue codes include room (accommodation) or an ancillary service. (The leading zeros are often dropped on revenue codes, making them appear as 3-digit codes). -Assigned based on the departments submitting charges to the charge list

Superbill

-charge list compiled by provider for each service, supply or procedure the patient receives and is used to prepare patient's billing statement - AKA: billing masters, charge sheet, encounter forms, charge tickets, communication forms (outpatient facilities may call them charges)

Episode-of-Care

1.Managed care - capitation 2.Global payment 3.Prospective payment

Fee-For-Service

1.Self-pay 2.Retrospective payment 3.Managed care

fraudulent practice

Auditors compare medical records, codes, and bills for consistency. Charging for services not documented in the patient record

Customary

Customary for the community

Coding Process

Diagnosis Codes: •ICD-10-CM Procedures Codes: •CPT® Supply Codes: •HCPCS

third-party payer

Entity other than the patient reimburses provider for services

UB-04

Healthcare Institutions (Non-Physician Office) Hospital Outpatient Radiology Emergency Room Nursing Home Ambulatory Surgery Urgent Care Clinics Mental Health Clinics Convalescent Homes And all other OP providers

Care received in the physician office where the physician or physician group owns the facility is always coded with the diagnosis code from

ICD-10-CM and procedures from the CPT codebook

MS-DRG

Medicare severity diagnosis related group

The Medicare Exception

Medicare requires all charges for same-day surgery to be billed on the CMS-1500

CMS-1500

Physician Office Physician and Non-physician Professional Services Outpatient (Ambulatory/Same-Day) Surgery for Medicare Patients

Reasonable

Reasonable for the situation

Global Payment/Prospective Payment Systems

Reimbursement based on: - Patient's condition/illness - A specified time period

Managed Care - Capitation

Reimbursement based on: Patient's condition/illness A specified time period

UB-04

Revenue codes are only required for UB-04

Steps in Determining an IPPS Payment

Step 1 -Hospitals submit a bill for each Medicare patient they treat to Medicare administrative contractor (MAC) (a private insurance company that contracts with Medicare to carry out the operational functions of the Medicare program—Part A and B). The MAC administers the funds and replaces the previous Medicare Carriers and Fiscal Intermediaries. Based on the information provided on the bill, the case is categorized into a Medicare severity diagnosis related group (MS-DRG), which determines how much payment the hospital receives. Step 2 -The base payment rate is comprised of a standardized amount, which is divided into a labor-related and nonlabor share. The labor-related share is adjusted by the wage index applicable to the area where the hospital is located and if the hospital is located in Alaska or Hawaii, the nonlabor share is adjusted by a cost of living adjustment factor. This base payment rate is multiplied by the MS-DRG relative weight. Step 3 -If the hospital is recognized as serving a disproportionate share of low-income patients, it receives a percentage add-on for each case paid through the PPS. This percentage varies depending on several factors, including the percentage of low-income patients served. It is applied to the MS-DRG-adjusted base payment rate, plus any outlier payments received. Step 4 -If the hospital is an approved teaching hospital it receives a percentage add-on payment for each case paid through the PPS. This percentage varies depending on the ratio of residents-to-beds. Step 5 -Next, the costs incurred by the hospital for the case are evaluated to determine whether it is eligible for additional payments as an outlier case. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. Any outlier payment due is added onto the MS-DRG-adjusted base payment rate.

Ambulatory surgical center (ASC) system

The ASC is a freestanding outpatient facility that provides outpatient surgeries to patients. Previously the payment system consisted of an ASC list with procedure codes grouped into the different payment rates. Inpatient procedures were also shifted into the outpatient setting. This trend identified a need to change the ASC list to APCs. It took many years for this transition to become a reality, and finally in 2008, the final rule established that the components of the ASC PPS would be updated every year as part of the annual OPPS rule-making process CMS uses the ambulatory payment classifications (APCs) established in the hospital OPPS as the mechanism for grouping ASC procedures. The APC relative payment weights for hospitals become the basis for calculating ASC payment rates under the new payment system

Prospective

The act of looking forward

facility charges are billed on (facility= hospital, surgery centers, urgent care centers,

UB-04

Usual

Usual for the provider's practice

prospective payment system

When the costs of healthcare services are projected and allowable reimbursement amounts set for future healthcare services

explanation of benefits (EOB)

a document or report sent to the policyholder and to the provider by the insurer that describes the healthcare services, the cost, the applicable cost sharing, and the amount that the particular insurer will cover

Global reimbursement

a fixed amount of money or a lump-sum payment designated to cover a related group of services

charge description master (CDM) or chargemaster

a healthcare provider's comprehensive price list of all supplies, services, and equipment usage fees for patient care.

CDM or Chargemaster

a large database used to collect information on all the goods and services provided to patients.

Current Procedural Terminology (CPT)

a medical code set that is used to report medical, surgical, diagnostic procedures and services to entities such as physicians, health insurance companies and accreditation organizations

UCR reimbursement methodology

an extension of the fee schedule retrospective reimbursement system

Healthcare Common Procedure Coding System (HCPCS)

a set of healthcare procedure codes based on the American Medical Association's Current Procedural Terminology (CPT) used to represent medical procedures to Medicare, Medicaid and several other third-party payers. (the code set is divided into three levels, level one is identical to CPT, though technically those codes, when used to bill Medicare or Medicaid are HCPCS codes)

Capitation

allows for certainty

charge description

also known as item description

fee-for-service reimbursement system

amount of reimbursement is determined by reviewing the services received by the patient

usual, customary, and reasonable (UCR)

amount paid for a medical service in a geographic area based on what providers in the area usually charge for the same or similar medical service

Inpatient rehabilitation facility patient assessment instrument (IRF PAI)

an 85-item tool to collect specific data about the patient so that the PPS rate can be calculated

Preferred Provider Organizations (PPOs)

are a less restrictive type of managed care

APC payment rates

are maximum reimbursement rates

Health Maintenance Organizations (HMOs)

exercise the most control over patient choice and provider treatment options

charge status

can be used for tracking when and how often an item has been charged

Global payments and prospective payment

closely related

Supplies provided by physician to outside facilities

coded and billed by the physician's healthcare support staff on the CMS-1500

Usual, customary, and reasonable reimbursement methodology

common reimbursement model used by third-party insurers

capitation payments

commonly referred to as PMPM ("per member per month")

charge

cost charged for the item

Retrospective payment

described as a fee-for-service that is reimbursed to providers after health services have been given

Medical biller

enters revenue codes on the UB-04 claim form

revenue code

four-digit code that represents a description and dollar amount charged for hospital services provided to a patient

CPT or HCPCS code

identifies the specific service or procedure

charge code

internally assigned unique number identifying each item listed

Diagnosis related groups (DRGs)

list groups based on diagnoses and procedures, treatments, and supplies hospitals used to treat those diagnoses for patients fitting a specific profile (age, sex, weight, complications, etc.)

Global payment

one payment is made to cover the multiple services

Fee-for-service reimbursement

payment in which providers receive payment for each service provided, and is a common method of calculating reimbursement

example of a managed care policy

pre-authorization- third-party payer requires the patient to obtain approval from the insurance company prior to scheduling surgery as a condition for the third-party payer to reimburse the provider for the surgery claim

non-physician professional service providers

provide services under the direction of a physician

RBRVS reimbursement system

seeks to set reimbursement rates for physician services based on three primary factors: •Physician work (effort) •Practice expense (overhead) •Professional liability (malpractice insurance)

Examples of fee-for-service reimbursement

self-pay, traditional retrospective payment, and managed care

care received from a standalone or independent healthcare facility (i.e. radiology clinic or independent lab)

services are coded and billed by the physician's staff and not the facility

UCR amount

sometimes is used to determine the allowed amount

hard coding

the CDM automatically assigns codes based on a unique identifier number for routine services

soft coding

the coding on procedures that vary from patient to patient performed by the coders

Medicare

the only government program considered to be health insurance. Medicare is defined as insurance because Medicare premiums are withheld from the paychecks of working Americans and used to fund the Medicare program

Reimbursement methodologies

the processes used by payers to determine how much is actually paid for healthcare services

Physician Care at Outside Facilities

the professional services are coded and billed by the physician's staff and not by the facility

Resource-Based Relative Value Scale (RBRVS)

the retrospective fee-for-service reimbursement methodology used by Medicare to determine reimbursement amounts for physician-based services

CMS-1500

the standard paper claim form to bill Medicare Fee-For-Service (FFS) Contractors when a paper claim is allowed

UB-04 form

the uniform institutional provider hardcopy claim form suitable for use in billing multiple third party payers

Codes

uniform from provider to provider since they must match the procedure code system (CPT®, and HCPCS) adopted in the United States

chargemaster maintenance

updated annually and must be changed whenever new services are added, when codes change, or when charges change

department code

used for accounting purposes to distribute revenue to appropriate location

fee-for-service reimbursement methodologies common elements

•Fee-for-service providers are reimbursed for each service they provide. •The more services a fee-for-service provider renders, the more reimbursement the provider receives. •Most fee-for-service reimbursement methodologies are based on a retrospective payment system. Reimbursement amounts are determined after the patient has already received the services. •Discounted fee-for-service arrangements are common. •The difference between the amount billed by the provider and the amount paid by a third-party payer in a fee-for-service environment may or may not be billed to the patient. Contractual agreements between patient, provider, and third-party payer determine whether or not the patient is billed some or all of the difference. •Medicare pays physicians using the resource-based relative value system, a discounted fee-for-service system. •Some states use the resource-based-relative-value-system multiplied by some form of a conversion factor for their Medicaid reimbursement, while others use a state mandated Medicaid fee schedule or a combination of both.

third-party payers include

•Government (Medicare/Medicaid) •Group/Individual Insurers •Industrial/Workers' Compensation •Automobile Insurers •Liability Insurers

basics of prospective payment systems

•Payment is not made on individual services provided but on predetermined calculated rates •Predetermined calculated rates are based on historical information/data and set for future healthcare costs •Prospective payment systems are based on averages of actual data and projections, not on individual services provided

four key reasons why healthcare reimbursement is different from other types of consumer purchases

•The consumer of healthcare services (patient) is often not the person who pays for healthcare goods/services. •Complex contractual relationships exist between patient, government, third-party payers, and providers. •The dollar amount actually collected by the provider for a service may vary widely depending on who pays for the service. •The government is the largest single payer of healthcare services, and the amount they pay is not governed by the price charged but by reimbursement rules and regulations based on laws.