Chapter 17

Copyright 2008, 2006, 2004 by Saunders an imprint of Elsevier Inc. All rights reserved.
Slide 1
Chapter 17
Hospital Billing
Slide 2
Learning Objectives
Name qualifications necessary to work
in the financial section of a hospital.
Explain the purpose of the
appropriateness evaluation protocols.
Describe criteria used for admission
screening.
Define the 72-hour rule.
Describe the quality improvement
organization and its role in the hospital
reimbursement system.
Slide 3
Learning Objectives
(contd.)
Define common terms related to hospital

billing.
List instances of breach of confidentiality
in a hospital setting.
State the role of ICD-9-CM Volume 3 in
hospital billing.
Identify categories in ICD-9-CM Volume 3.
State reimbursement methods used when
paying for hospital services under
managed care contracts.
Slide 4
Learning Objectives
(contd.)
Explain the basic flow of an inpatient

hospital stay from billing through receipt
of payment.
Describe the charge description master.
State when the CMS-1450 (UB-04)
paper or electronic claim form may and
may not be used.
Edit and complete insurance claims in
both hospital inpatient and outpatient
settings to minimize their rejection by
insurance carriers.
Slide 5
Learning Objectives
(contd.)
State the general guidelines for

completion of the CMS-1450 (Uniform
Bill [UB-04]) claim form.
Describe the history and purpose of
diagnosis-related groups.
Identify how payment is made based on
diagnosis-related groups.
State how payment is made based on
the ambulatory payment classification
system.
Name the four types of ambulatory
payment classifications.
Slide 6
Chapter 17
Lesson 17.1
Slide 7
Patient Service
Representative Qualifications
Knowledge and competence in:
ICD-9-CM diagnostic codes
CPT and HCPCS procedure codes
CMS-1500 insurance claim form
Uniform Bill (UB-92) insurance claim form
Explanation of benefits and remittance advice
document
Medical terminology
Major health insurance programs
Managed care plans
Insurance claim submission
Denied and delinquent claims
Slide 8
Patient Service
Representative
Slide 9
ICD-9-CM Inpatient Coding
Slide 10
Medicolegal
Confidentiality Issues
Documents
May not be released unless a patient
has signed an authorization form.
Verbal communication
New employees may have to sign a
confidentiality statement.
Slide 11
Medicolegal Confidentiality
Issues (contd.)
Computer security
Use of passwords
Policies for email and faxes
Downloading of data from one department to
another
Length of time documents may be retained on
hard drive
Procedures for deletion of confidential
information
Closing out when leaving a workstation or desk
Slide 12
Appropriateness
Evaluation
Protocol
Slide 13
Admitting Procedures for
Major Insurance Programs
Private insurance
Managed care
Emergency inpatient admission
Nonemergency inpatient admission
Admission to a participating hospital
Admission to a nonparticipating
hospital
Slide 14
Admitting Procedures for
Major Insurance Programs
(contd.)
Medicaid
Medicare
TRICARE and CHAMPVA
Workers compensation
Slide 15
Preadmission Testing
Preadmission testing (PAT) includes:
Diagnostic studies
Laboratory tests
Chest x-ray
Electrocardiography
Slide 16
Medicare 72-Hour Rule
Also called 3-day payment window
rule
If patient receives diagnostic tests
and hospital outpatient services
within 72 hours of admission to
hospital, all such tests and services
are combined with inpatient
services.
Preadmission services become part
of the DRG payment to hospital and
may not be billed separately.
Slide 17
Exceptions to the 72-Hour
Rule
Services provided by home health
agencies, hospice, nursing facilities,
and ambulance services
Physicians professional portion of a
diagnostic service
Preadmission testing at an
independent laboratory when the
laboratory has no formal agreement
with the health care facility
Slide 18
Utilization Review
Department conducts an
admission and concurrent review
and prepares a discharge plan on
all cases.
Utilization review (UR) companies
exist for self-insured employers,
third-party administrators, and
insurance companies.
Slide 19
Quality Improvement
Organization (QIO)
Admission review
Readmission review
Procedure review
Day outlier review
Cost outlier review
DRG validation
Transfer review
Slide 20
Chapter 17
Lesson 17.2
Slide 21
Coding Hospital
Procedures
Outpatient hospital insurance claims
use Current Procedural Terminology
(CPT) and International Classification of
Diseases, Ninth Revision, Clinical
Modification (ICD-9-CM), Volumes 1
and 2
Inpatient hospital insurance claims use
ICD-9-CM, Volumes 1 and 2, for
diagnoses and Volume 3 for procedures
Slide 22
Inpatient - Principal
Diagnosis
Principal diagnosis: condition
assigned a code representing the
diagnosis established after study
that is chiefly responsible for
patient admission
Diagnostic code sequence in
correct order is very important in
billing of hospital inpatient cases.
Slide 23
Rules for Coding Inpatient
Diagnoses
Some differences exist between coding
diagnoses for inpatient and outpatient cases.
Codes for signs and symptoms of ICD-9-CM
are not reported as principal diagnoses.
When two or more conditions are principal
diagnosis, either condition may be sequenced
first.
When a symptom is followed by a contrasting
comparative diagnosis, sequence symptom
code first.
Slide 24
Principal Diagnoses
Subject to 100% Review
Arteriosclerosis heart disease
(ASHD)
Diabetes mellitus without
complications
Right or left bundle branch block
Coronary atherosclerosis
Slide 25
ICD-9-CM Volume 3
Procedures
Used for inpatient hospital billing
Tabular list divided into chapters that
relate to operations or procedures for
various body system.
Alphabetic index is arranged by
procedure and not anatomic site.
Alphabetic index used to locate
procedure referred to as main term.
Slide 26
Coding Outpatient
Procedures
Use up-to-date Current Procedural
Terminology (CPT).
Use HCPCS to obtain medical procedural
codes for Medicare and some non-
Medicare patients on outpatient hospital
insurance claims that are not in CPT code
book.
Use modifiers as noted in CPT/HCPCS
guidelines.
Slide 27
Inpatient Billing Process
Slide 28
Charge Description Master
Services and procedures are
checked off and coded internally
Data includes
Procedure code
Charge
Revenue code
Slide 29
Reimbursement Methods
Ambulatory payment classifications
Bed leasing
Capitation or percentage of revenue
Case rate
Diagnosis-related groups
Differential by day in hospital
Differential by service type
Slide 30
(contd.)
Fee schedule
Flat rate
Per diem
Periodic interim payments (PIPs)
and cash advances
Withhold
Managed care stop loss outliers
Slide 31
(contd.)
Charges
Discounts in the form of sliding
scale
Sliding scales for discounts and
per diems
Slide 32
Elements of the
Reimbursement Process
Electronic data interchange
Allows computer to help in scrubbing bill
Hard copy billing
Used for insurance companies that are not
capable of receiving electronic claims
Receiving payment
After receipt of payment, patient sent net
bill listing any owed deductible,
coinsurance amount, and charges not
covered
Slide 33
Chapter 17
Lesson 17.3
Slide 34
Outpatient Insurance Claims
Emergency department visits
Elective surgeries
Only outpatient services provided by the
hospital should be submitted by the
hospital unless the hospital is billing for
physicians.
Using the hospital for surgical or medical
consultations that could be done in a
physicians office should be avoided.
Slide 35
Billing Errors and
Problems
Incorrect name on form
Wrong subscriber, patient name
listed in error
Covered days vs. non-covered
days
Duplicate statements
Double billing
Phantom charges
Slide 36
Uniform Bill (UB-04)
Used since 1982 for inpatient and outpatient
hospital claims
Updated in 2007
Considered as a summary document supported
by an itemized bill
Printed in red ink on white paper
Dates of service and monetary amounts entered
without spaces or decimal points
Dates of birth are entered using two sets of two-
digit numbers for the month and day, four-digit
number for the year
Slide 37
Uniform Bill (UB-04) Form
Slide 38
Diagnosis-Related
Groups System
Patient classification method that
categorizes patients who are medically
related with respect to diagnosis and
treatment and statistically similar in
length of stay
Used to classify and measure past
cases and to classify current cases to
determine payment
25 basic major diagnostic categories
Slide 39
Seven Variables
Responsible for DRG
Classifications
Principal diagnosis
Secondary diagnosis (up to eight)
Surgical procedures (up to six)
Comorbidity and complications
Age and sex
Discharge status
Trim points
Slide 40
Sample Case History
Slide 41
Cost Outliers
Clinical outliers include:
Unique combinations of diagnoses and
surgeries causing high costs
Long length of stay (day outliers)
Low-volume DRGs
Inliers include:
Death
Leaving against medical advice (AMA)
Admitted and discharged on same day
Slide 42
DRG Common Terms
DRG creep
Downcoding
Comorbidity
Most-resource-intensive
Slide 43
DRGs and the
Physicians Office
When calling the hospital to admit
a patient, give all of the diagnoses
authorized by the physician.
Ask the physician to review the
treatment or procedure in question
when a hospital representative
calls with questions.
Get to know hospital personnel on
a first-name basis.
Slide 44
Ambulatory Payment
Classification System
Developed as outpatient
classification systems by Health
System International
Based on patient classification
rather than disease classifications
More than 500 APCs are continually
being modified; updated and
released twice a year in the Federal
Register
Slide 45
APC Applications
Ambulatory surgical procedures
Chemotherapy
Clinic visits
Diagnostic services and diagnostic tests
Emergency department visits
Implants
Outpatient services furnished to nursing
facility patients not packaged into
nursing facility consolidated billing
Slide 46
APC Applications (contd.)
Partial hospitalization services for
community mental health centers (CMHCs)
Preventive services (colorectal cancer
screening)
Radiology including radiation therapy
Services for patients who have exhausted
Part A benefits
Services to hospice patient for treatment of
a non-terminal illness
Surgical pathology
Slide 47
Hospital Outpatient
Prospective Payment System
Procedure code is primary axis of
classification, not the diagnostic code.
Reimbursement methodology based on
median costs of services and facility cost to
determine charge ratios and copayment
amounts.
Adjustment for area wage differences based
on the hospital wage index currently used
for inpatient services.
OPPS may be updated annually.
Slide 48
Types of APCs
Surgical procedure APCs
Significant procedure APCs
Medical APCs
Ancillary APCs
Slide 49

Chapter 17

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Copyright 2008, 2006, 2004 by Saunders an imprint of Elsevier Inc. All rights reserved.

Define common terms related to hospital

Explain the basic flow of an inpatient

State the general guidelines for

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