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Dec 6, 2023

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M131/HIM1125 Section 03 ICD-CM Coding (5.5 Weeks) - Online Plus - 2023 Fall Quarter Term 1 Module 05 Inpatient and Outpatient Billing Module 05 Inpatient and Outpatient Billing  Preparing and Submitting a Claim to a Third-party Payer For both inpatient and outpatient services, preparing and submitting a claim to a third-party payer begins with patient registration as the beginning of the billing process. The start of the billing process requires 3 types of information that needs be complete and accurate for the third-party payer to accept the bill. These 3 types of information required for beginning the billing process are: 1. Obtain correct and complete patient demographic and financial information. 2. Verify the patient insurance benefits and indicate the type. (e.g., Medicare or Medicaid.) 3. Obtain any needed signature from the patient in order to be able to bill and collect directly from the insurer and have consent from the insured for release of information to the third-party payer. This would need to be verified as “on file” as a Consent of Benefits. This would indicate that the signatures and documents needed are on file to use for billing the third- party payer (insurance company). If these three types of information are not accurately completed the bill/claim form that is produced for payment will not be "clean" for submission. Clean means there are no errors in any part of the bill which would include patient data as well as coding. If the bill/claim is not “clean,” a delay of submission for payment will occur while corrections are made. This will also impact the adjudication of claim by the insurer (the decision to pay, reject, or deny the claim for payment).

After the patient registration or pre-encounter patient information is entered, providers and staff capture charges that are added to the bill as the patient receives treatment and services. This occurs as a link between the patient ordering system connected to a master document for the facility called the charge master and the facility billing system. This is based on provider’s documentation in the patient's medical record of diagnoses and procedures. During this time, the patient chart is reviewed and any missing documentation signatures, or charges are added. Once the chart is complete and all charges added, the chart is then sent to a coder to translate the provider documentation into billable codes that are sent to the billing department to complete the billing process. Coding is the interface between the provider documentation and a bill/claim. Coding must be accurate and complete in accordance with coding guidelines, facility criteria for reporting, and insurer criteria for paying. Billers use a type of software called a “scrubber” to determine if a bill/claim is “clean” or not. The software is designed to pick up any errors and flag any possible coding problems. If the bill/claim is not “clean” then the biller will need to correct patient information errors or refer coding flags to coders for possible changes in codes. The claim is “scrubbed” through a variety of editing programs that identify missing or incompatible information, such as a gender listed as a male with a delivery of a baby as the diagnoses and flags any possible incorrect coding. Any claims that fail these edits are then worked on by both coders and billers to correct or input missing, incompatible, or incorrect information. If the claim has no missing or incompatible information and no edits on the codes, it is considered a “clean” claim or bill. Once the organization believes the claim is "clean," it is submitted electronically to the third-party payer and usually goes through a clearinghouse that performs edits and conversions of data, before sending it on to the actual third-party payer. At this point, the claim enters the review or adjudication of the claim by the third- party payer (insurer) which can result in a decision to pay the claim, deny the claim and request information, or reject the claim altogether. 1. Paid claims: Claims that are paid in full by the insurer and are posted on the patient account.

2. Denied claims: Claims that are denied but information is requested are then worked on by the provider, biller, and/or coder to identify the reasons for denial and send the necessary information and/or corrected codes in the claim back to the insurer. 3. Rejected claims: Claims that have been rejected can be resubmitted after adjusting coding or information to comply with reason for rejection. This is called an appeal and is a formal way of asking the third-party payer to reconsider the decision to deny the claim. Claim appeals are commonly used in the situations below : 1. The provider did not file for preauthorization in a timely manner because of unusual circumstances. 2. The provider receives what is believed to be inadequate reimbursement for surgery or a complicated procedure. 3. The provider disagrees with the carrier's preexisting condition decision. 4. A patient has unusual circumstances that affect medical treatment. The final step of an appeal, if the third-party payer still denies part or all of the payment, is to request a peer review of the claim. A peer review is usually done by a group of unbiased providers and is usually a provider's last attempt to obtain payment. The decision of the peer review is usually final. However, a further appeal can be made to a state insurance commissioner if the provider, patient, or third-party payer feels they have been treated unfairly in the claims adjudication and appeals process. Proving Medical Necessity for Inpatient and Outpatient Billing For both Inpatient and Outpatient billing, accurate ICD-10-CM coding is required for providing proof of Medical Necessity for any services provided a patient. Medical Necessity is required as indicated by Medicare’s reasonable and necessary medical coverage policies. Other third-party payers also require proving Medical Necessity and generally follow the same Medicare policies. Another set of policies that determine Medical Necessity is called the NCD’s for National Coverage Determinations. This set of policies are often used for diagnostic and therapeutic services. The task of proving Medical Necessity is given to both the provider and the coder. The provider must provide the documentation for the coder to use or the needed codes cannot be used. If the documentation contains the diagnoses or reasons

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for the service, the coder must translate that documentation into codes that qualify for Medical Necessity and also follow coding guidelines. If a patient has a service that does not meet Medical Necessity by the insurer of the patient, a document signed by the patient is needed. This document is called an ABN or Advanced Beneficiary Notice. This is a notice presented to the patient before services are provided to inform them that the insurer may not cover the service indicated. The patient must sign the document which indicates that they were notified by the provider before the service was provided. This means the patient is liable for payment to the provider instead of the insurer if the insurer does not deem the service medically necessary and will not pay the claim. Medical Necessity Flow Chart The flow chart below indicates the process required for proving Medical Necessity from service provided to payment of either an inpatient or outpatient bill/claim. Determination of Inpatient Billing Determination of cost for inpatient billing is different than determination of cost for outpatient billing. Inpatient billing is determined by different methods than outpatient. The components that impact determining the cost of inpatient (hospital) services include IPPS, MS-DRG, and VBP; each are discussed in detail below. IPPS IPPS is the hospital inpatient payment system organized by CMS (Medicare) to help control the cost of inpatient services for those insured by Medicare. This provides payment to hospitals for each Medicare patient treated at set reimbursement rates instead of breaking down payment as a fee per service provided. Third-party payers and private insurance companies also follow the IPPS system. MS-DRG

MS-DRG stands for Medicare Severity Diagnosis-Related Groups and these groups are the basis for the set base rates for payment and these rates have been established prior to the inpatient stay. This system groups patients by diagnoses that are related. This was initially called DRG’s or diagnosis-related groups until 2008. In 2008 fiscal year, this base rate underwent a change by CMS. It was a revision in the payment base rate system that allowed hospitals to receive higher payment if the diagnosis-related group has diagnosis or severity that needed higher levels of care. This adjustment in the DRG system was named MS-DRG. The goal of this change was to increase payment to more severe patients and decrease payment for less sever patients. The way this shift was facilitated was to create three levels of severity still based on the condition of the patient as the reason for admission. The levels are determined by additional or secondary diagnoses codes assigned by the medical coder. This is why coding is so important in billing for inpatient claims. The levels of Medicare Severity are as follows: 1. Highest Level of Severity: Diagnoses codes indicate MCC’s (Major Co- Morbidities) which will require the highest level of care to treat the condition which caused the hospital admission (called the Principal Diagnosis) and is indicated by additional or secondary diagnoses codes. 2. Mid Level of Severity: Diagnoses codes indicate CC’s (Co-morbidities) which will require an increase in care for the condition which caused the hospital admission at a moderate level and will be indicated by additional or secondary diagnoses codes. 3. Lowest Level of Severity: No complications or Co-morbidities indicated. (non-CC) Therefore, no additional care was needed beyond the condition which caused the hospital admission. VBP In 2012, a program was added to the IPPS system called the Hospital VBP Program. It can be used only to participating acute IPPS hospitals. VBP means Value-Based Purchasing and allows adjustments to the bill generated based on incentives for quality of care given. The adjustment is determined on a case by case basis and the hospital’s Total Performance Score is used to factor the adjustment. A hospital can “earn” money back from the CMS payment that is at a reduced rate.

Outpatient Billing Outpatient Billing is determined differently than inpatient billing. 1. The Ambulatory Payment Classification (APC) payment system is used for reimbursing facilities for Medicare outpatient services. APCs are also mandatory for all hospital outpatient services and are used by all insurers and for self-pay. 2. APCs are used for inpatient services covered under Part B for Medicare beneficiaries. 3. A coinsurance amount is also calculated for each APC, based on 20% of the national median charge for services in the APC. 4. The APC is determined by services provided and diagnoses codes used to prove medical necessity. 5. The First Listed Diagnosis must prove Medical Necessity for any First Listed Procedure or for the service provided.

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