MEDICAL BILLING

In the United States of America, when a Patient goes to a Doctor for a service, the patient does not pay
for the service provided by the doctor. Almost all citizens have insurance, and it is the job of the
insurance companies to pay the bills to the Doctor. The patient gives his insurance details to the Doctor.

The Submission of bills to insurance companies for a service performed by a doctor on the patient is
called, “Medical Billing”.

In Medical Billing, Four Parties are involved

The Patient

The Physician

The Insurance Company

The Billing Office

PATIENT:

The person who undergoes treatment under the Physician is the patient. Almost every person in US has
Insurance to cover his health care expenses. These patients pay monthly premiums to Insurance
companies, to be eligible for their coverage.

PHYSICIAN:

The Physician is a Doctor of Medicine. Physicians are the Health care providers to the Patients. All
physicians must be legally authorized to practice by the state in which they perform procedures or
services.

INSURANCE COMPANY:

Insurance Companies give payment to Physicians for service provided by him to the Patient.

The various companies in US include - Medicare, Medicaid, Aetna, Blue Cross Blue Shield, United Health
Care, and Physician Health Service etc.

Patient Name:

If the patient has written his name as “Douglas Howley”, here the first name is Douglas and last name is
Howley.

If the patient's name is like, “Howley, Douglas” we have to change it to the following format, ie., first
name is Douglas, last name is Howley.

Social Security Number (SSN):

The Government of US provides a citizenship number called Social Security Number (Except for persons
below 18 years). SSN is always a nine-digit number. This is unique.
Primary Care Physician (PCP):

PCP stands for Primary Care Physician. PCP is a family doctor or the doctor who is visited by the patient
for the first time for any kind of health problems.

The Primary Care Physician diagnoses the patient condition and gives the necessary treatment. If the
patient condition needs special attention then he refers the patient to a specialist

Authorization Number:

The Authorization number, assigned by the insurance company, to examine a patient for a particular
illness, which requires frequent visits.

Insurance Company:

Insurance companies act as the payer. Payers can be classified into

1) Government Insurance - Medicare & Medicaid

2) Private Insurance – BCBS, Aetna, UHC, Humana .. some of the insurance

The Patient has a contract with an Insurance company to cover health care for himself and also for his
family members. The policy covers all the medical expenses and Physicians fees, including hospital
stays and lab services.

A person can have more than one Insurance.

Primary Insurance - Pays the major portion of the medical expenses

Secondary Insurance - Pays the balance amount specified by Primary insurance

Tertiary Insurance - Pays the balance amount specified by Secondary insurance, if any

Diagnosis:
Symptoms of the disease of the patient are called Diagnosis. Diagnosis is numeric or alpha numeric.
Diagnosis is always in the form of three digits followed by two decimals. Eg: v25.09

Referring Doctor:

Patients come to the doctor with various health problems. The doctor diagnoses the patient’s condition
and gives necessary treatment. If the patient’s condition needs special attention, then he refers the
patient to a specialist.

Specialists are physicians who practice on a particular specialty (Eg: Dentist). The initial doctor is termed
as Referring Doctor and the Specialist is termed as Service Doctor.

Procedure:
The treatment given to symptoms is called procedure. The Current Procedural Terminology (CPT) was
published by American Medical Association (AMA). The Procedure is a five-digit code. The first few
letters/numbers of each code signify the type of medical service.
CPT Codes:
Anesthesiology codes – 00100 to 01999, 99100 to 99140

Surgery codes – 10040 to 69990

Orthopedic codes – 2

Obstetrics / Gynaegology codes – 5

Ophthalmology codes – 6

Radiology codes – 70010 to 79999

Pathology and Laboratory codes – 80048 to 89399

Medicine Codes – 90281 to 99199

Evaluation & Management (E&M) codes - 99201 to 99499

9920* (1,2,3,4,5)– OV initial

9921* (1,2,3,4,5)– OV follow-up

9922* (1,2,3)– Hospital visit initial

9923* (1,2,3)– Hospital visit follow-up

9924* (1,2,3,4,5)– OV consulting

9925* (1,2,3,4,5)– Hospital visit consulting

9926* (1,2,3,4,5)– Hospital consulting follow-up

99238/239 – Hospital Discharge

9935* (4,5,6,7) – Prolonged service (additional code used with E&M code)

99291/99292 – Critical care

Supplies and Durable Medical Equipment (DME) codes – A

Drug codes – J

Office Visit (POS-11)

9920* (1,2,3,4,5) – Office visit initial

9921* (1,2,3,4,5) – Office visit f/u

9924* (1,2,3,4,5) – Office consultation

9938* (1 to 7) - Physical exam new patient

 99381 (under 1 year of age)

99382 (1-4 years of age)

99383 (5-11 years of age)

99384 (12-17 years of age)

99385 (18-39 years of age)

99386 (40-64 years of age)

99387 (65+ years of age)

9939* (1 to 7) - Physical exam established patient

93000 - EKG (Electro Cardiogram)

99000 - Specimen handling

90782 - Injection Admin

90471,90472 - Vaccination Admin

9935* (4,5,6,7)- Prolonged services

99236 - Admit & Discharge on same day

Hospital Visit In Patient (POS – 21)

9922* (1,2,3) - Hospital visit initial (admission)

9923* (1,2,3) - Hospital visit follow-up

99238 / 99239 - Hospital discharge

9925* (1,2,3,4,5)- Hospital consultation initial

9926* (1,2,3) - Hospital consultation follow-up

99291 - Critical care (30-74 Min)

99292 - Critical care (additional 30 Min)

Hospital Visit Out Patient (POS – 22)

9921* (8,9)/99220-Hospital observation care

99217 - Hospital observation Discharge

Home Visit (POS – 12)
9934* (1,2,3,4,5) - Home Visit Initial

99347 to 99350 - Home visit follow up

Nursing Visits: (POS-31,32,33)

9930* (4,5,6) - Nursing home initial

9931* (7,8,9) - Nursing follow-up

99315/99316 - Nursing (rest) home discharge

9932 (1,2,3) - Rest home new patient

9933 (1,2,3) - Rest home follow-up

Type of Service:

The kind of treatment or service provided to the patient is called Type of Service. Patient can undergo
various kinds of treatment like surgeries, consultation etc., For Insurance companies to identify the type of
service provided to a patient, a type of service code is formed. These type of service codes are two-digits
numbers, which are assigned by the insurance companies in order to identify the type of service provided
to their members.

Place of Service:
The place where the treatment is rendered to the patient is called Place of Service (POS). Patient goes
for treatment to various place like Doctor's office, Hospital etc.,

Insurance companies have formatted a place of service code to identify the place where health care is
provided to a patient.

Place of Service code:

11- Office Visit

12- Home Visit

21-Inpatient Hospital

22-Outpatient Hospital

23-Emergency Care

24-Surgical centre

31-Skilled Nursing Facility

32-Nursing Facility

33-Custodial Care Facility

Office Visit – 11:

Location where the patient receives care for illness or injury, at the Doctor Office.

Home Visit – 12:

Location where the patient receives care at a private residence.

Inpatient Hospital – 21:

Location where the supervision of Physicians occurs, to patient admitted for a variety of Medical
conditions (both Surgical and Non surgical).

Outpatient Hospital – 22:

A portion of the hospital that provides services to sick or injured persons who do not require
hospitalization.

Emergency Care – 23:

A portion of the hospital where emergency diagnosis and treatment of illness or injury is provided.

Surgical Centre – 24:

Location where Surgical and Diagnostic services are provided.

Skilled Nursing Facility – 31:

A nursing home or skilled nursing facility may be necessary if someone needs round-the-clock nursing
care, or might wander away without supervision, or needs help with meals, bathing, personal care,
medications, and moving around, needs more help than the current caregiver can possibly give, or
cannot live alone. These places supply 24-hour services and supervision, including medical care and
some physical, speech, and occupational therapy, to people living there. They might also offer other
services such as social activities and transportation. As a rule, the rooms are for one or two people.

Nursing Facility – 32:

A facility which primarily provides to residents skilled nursing care and related services for the
rehabilitation of injured, disabled or sick persons.

Custodial care – 33:

A facility which provides room, board and other personal assistance service.

Modifiers:
Modifiers alter the meaning of a CPT code, but do not change its definition. i.e. they give additional
information about the service to the insurance company for the purpose of payment. Modifiers are two-
digits numeric, two-digit alphabetic or alphanumeric.

Modifiers have to be applied when multiple procedures are done on the same day, or on a specific region
of body.
Modifiers are used to indicate

A service or procedure has both a professional and technical component.

A service or procedure was performed by more than one physician.

A service or procedure was provided more than once.

Only part of a service was performed.

An adjunctive service was performed.

A bilateral procedure was performed.

Unusual events occurred.

CPT Modifiers-Example:
Modifier-21 – Prolonged Evaluation and Management Services

Modifier-22 – Unusual Procedural Services

Modifier-23 – Unusual Anesthesia

Modifier-24 – Unrelated Evaluation and Management Service by the Same Physician during a Post-operative period.

Modifier-25 - Significant, separately identifiable Evaluation and Management service by the same physician on the
day of a procedure.

Modifier-26 – Professional Component

Modifier–27 - Multiple outpatient hospital Evaluation and Management encounters on the same date.

Modifier-32 – Mandated Services

Modifier-47 – Anesthesia by Surgeon

Modifier-50 – Bilateral Procedure

Modifier-51 – Multiple Procedures

Modifier-52 – Reduced Services

Modifier-53 – Discontinued Procedure

Modifier-54 – Surgical Care only

Modifier-55 – Postoperative Management only

Modifier-56 – Preoperative Management only

Modifier-57 – Decision for Surgery

Modifier-58 – Staged or Related Procedure or Service by the Same Physician during the Post-operative period.
Modifier-59 – Distinct Procedural Service

Modifier-60 – Altered Surgical Field

Modifier-62 – Two Surgeons

Modifier-66 – Surgical Team

Modifier-73 – Discontinued Out-patient Hospital/Ambulatory Surgery Center (ASC)

Procedure prior to the Administration of Anesthesia

Modifier-74 - Discontinued Out-patient Hospital/Ambulatory Surgery Center (ASC)

Procedure after Administration of Anesthesia

Modifier-76 - Repeat procedure by same Physician.

Modifier-77 - Repeat procedure by another Physician.

Modifier-78 - Return to the Operating Room for a Related Procedure during the Post-operative period

Modifier-79 - Unrelated Procedure or Service by the Same Physician during the Post- operative period

Modifier-80 - Assistant Surgeon

Modifier-81 – Minimum Assistant Surgeon

Modifier-82 – Assistant Surgeon (when qualified resident surgeon not available)

Modifier-90 – Reference (outside) Laboratory

Modifier-91 – Repeat Clinical Diagnostic Laboratory Test

Modifier-99 - Multiple Modifiers

HCPCS (Health Care Common Procedure Coding System) Modifiers:

Modifiers should, or in some cases must, be used to identify circumstances that alter or enhance the
description of a service or supply.

E1 – Upper left, eyelid

E2 – Lower left, eyelid

E3 – Upper right, eyelid

E4 – Lower right, eyelid

GX- Procedure not covered by Medicare

NR- New when rented (use the 'NR' modifier when DME [Durable Medical Equipment] which was new at
the time of rental is subsequently purchased)
NU- New equipment
QB – Physician providing service in an rural HPSA (Health Professional Shortage Area)

QU – Physician providing service in an urban HPSA (Health Professional Shortage Area)

QX – CRNA (Certified Registered Nurse Anesthetist) service, with medical direction by a physician

QY – Medical direction of one CRNA by an Anesthesiologist

TC –Technical Component

Authorization:
Authorization is issued by the Insurance Company. Before rendering some particular procedures /
services, an Insurance Company should give an Authorization Certificate for it. Otherwise, the Insurance
Company denies the claims, saying, "No Authorization" when we send a claim to it. The Authorization
form contains,

Authorization number

Doctor's Name

Authorization start date

Authorization end date

Number of visits

Procedure code

ID Format for Major Carriers:

Medicare - 9 Numeric + Alpha

Rail Road Medicare – Alpha+ 9 Numeric
BCBS – 3 Alpha + 9 Numeric
Humana – Starts with “H” (depends upon the plan)
Cigna – Starts with “U” (depends upon the plan)
UHC – Starts with “8” or “9”(depends upon the plan)
Medicaid – 10 digit for Florida (depends upon the state)
Aetna PPO – Starts with “W”
 Medicare Eligibility

Medicare is health insurance for people age 65 or older, under 65 with certain disabilities, and any age
with End-Stage Renal Disease (ESRD). ESRD is permanent kidney failure requiring dialysis or a kidney
transplant. The different parts of Medicare help cover specific services if you meet certain conditions.

Programs of Medicare

• Part A – Hospital coverage

• Part B – Professional services

• Part C – Part A + Part B

• Part D – Prescription drug coverage

Medicare Part B
Medicare Part A (Medical Insurance)
(Hospital Insurance)
• Helps cover inpatient care in hospitals • Helps cover doctor services and
(includes critical access hospitals, outpatient care.
inpatient rehabilitation facilities, and • Helps cover some preventive services
long-term care hospitals). to help maintain a person’s health and
to keep certain illnesses from getting
• Helps cover skilled nursing facility (not worse.
custodial or long-term care), hospice,
and home health care services.
• Generally pays 80% of the Medicare-
approved amount for covered services
Medicare Part D
Medicare Part C (Prescription Drug Coverage)
(Medicare Advantage Plans)
• A way to get Medicare benefits through • Run by private companies approved by
private companies approved by and Medicare, which can either be Medicare
under contract with Medicare. Advantage Plans or separate Medicare
Prescription Drug Plans.
• Includes Part A, Part B, and usually • Helps cover the cost of prescription
other benefits Medicare doesn’t cover. drugs.
Most plans also provide prescription
drug coverage.
• Each plan can vary in cost and drugs
covered.
 What Is Part A (Hospital Insurance)?

Part A helps cover:

• Inpatient care in hospitals (such as critical access hospitals, inpatient rehabilitation facilities,
and long-term care hospitals)
• Inpatient care in a skilled nursing facility (not custodial or long term care)

• Hospice care services

• Home health care services

• Inpatient care in a Religious Nonmedical Health Care Institution

You usually don't pay a monthly premium for Part A coverage if you or your spouse paid Medicare taxes
while working. This is called "premium-free Part A."

If you aren't eligible for premium-free Part A, you may be able to buy Part A if you meet one of these
conditions:

• You're 65 or older, you're entitled to (or enrolling in) Part B, and you meet the citizenship or
residency requirements.
• You're under 65, disabled, and your premium-free Part A coverage ended because you
returned to work.

What Is Part B (Medical Insurance)?

• Part B helps cover medically-necessary services like doctors' services, outpatient care, home
health services, and other medical services. Part B also covers some preventive services.
Check your Medicare card to find out if you have Part B.

How Much Does Part B Cost?

• You pay the Part B premium each month. Most people will pay the standard premium amount
(link to current amount?. However, if your modified adjusted gross income as reported on your
IRS tax return from 2 years ago is above a certain amount, you may pay more.

Services Part B Covers

There are two kinds of Part B-covered services:

• Medically-necessary services — Services or supplies that are needed to

diagnose or treat your medical condition and that meet accepted standards of
medical practice.

• Preventive services — Health care to prevent illness or detect it at an early

stage, when treatment is most likely to work best (for examples see Medicare &
You Handbook ).
 Medicare Advantage (Part C)
Medicare Advantage Plans, sometimes called "Part C" or "MA Plans," are health
plans offered by private companies approved by Medicare. If you join a Medicare
Advantage Plan, the plan provides all your Part A (Hospital Insurance) and Part B
(Medical Insurance) coverage.

Different Types of Medicare Advantage Plans (Part C)

 Health Maintenance Organization (HMO) Plans
 Preferred Provider Organization (PPO) Plans

 Private Fee-for-Service (PFFS) Plans

 Medical Savings Account (MSA) Plans

 Special Needs Plans (SNP)

Medicare Prescription Drug Coverage (Part D)

Medicare prescription drug coverage (Part D) is available to everyone with Medicare. To get Medicare
drug coverage, you must join a Medicare drug plan. Plans vary in cost and drugs covered.

Two types of plans offer Medicare prescription drug coverage:

1. Medicare Prescription Drug Plans. These plans (sometimes called "PDPs") add drug coverage
to Original Medicare, some Medicare Cost Plans, some Medicare Private Fee-for-Service (PFFS)
Plans, and Medicare Medical Savings Account (MSA) Plans.
2. Medicare Advantage Plans (like an HMO or PPO) are other Medicare health plans that offer
Medicare prescription drug coverage. You get all of your Part A and Part B coverage, and
prescription drug coverage (Part D), through these plans. Medicare Advantage Plans with
prescription drug coverage are sometimes called "MA-PDs."

Medicare Secondary Payer

• Medicare Secondary Payer (MSP) is the term used by Medicare when Medicare is not
responsible for paying first. (The private insurance industry generally talks about "Coordination
of Benefits" when assigning responsibility for first and second payment.)

• The term "Medicare Secondary Payer" is sometimes confused with Medicare supplement. A
Medicare supplement (Medigap) policy is a private health insurance policy designed specifically
to fill in some of the "gaps" in Medicare's coverage when Medicare is the primary payer. Medicare
supplement policies typically pay for expenses that Medicare does not pay because of deductible
or coinsurance amounts or other limits under the Medicare program.
Medicare ID# Suffix
Here’s what the letters behind the Medicare number mean:

A = Retired worker over 65 or disabled worker

B = Wife (over 65) of retired or disabled worker
B1 = Husband of retired or disabled worker
B6 = divorced wife
B9 = divorced second wife
C = child of retired or deceased worker; numbers after (Child (including a disabled child or a
student). Suffixes Assigned by age, i.e.:)

C denote order of children claiming benefit

D = widow
M = has Part B Medicare only, no SSA benefit
Prefix A - Retired railroad worker
H = Retired Worked on a Pension
WA = railroad retirement

Advance Beneficiary Notice (ABN)

An ABN is a written notice from Medicare (standard government form CMS-R-131), given to you before
receiving certain items or services, notifying you:

 Medicare may deny payment for that specific procedure or treatment.

 You will be personally responsible for full payment if Medicare denies payment.
An ABN gives you the opportunity to accept or refuse the items or services and protects you from
unexpected financial liability in cases where Medicare denies payment. It also offers you the right to
appeal Medicare's decision.

Assignment of Benefit (AOB)

Assignment of Benefit is a simple term that can have very drastic consequences. Assignment means to
take something and give it to someone else.

“Assignment” on the claim form. Block 27 (Assignment) of the CMS 1500.

SON - Signature On File—(Box: 12 & 13 for Medigap benefits)

CMS - Centers for Medicare and Medicaid Services (CMS)

HCFA - Health Care Financing Administration (HCFA)

HIPAA - Health Insurance Portability and Accountability Act.

PIP - Personal Injury Protection

COBRA- Consolidated Omnibus Budget Reconciliation

CHAMPUS - Civilian Health and Medical Program of the Uniformed Services

COBRA- Consolidated Omnibus Budget Reconciliation

Title X of the Act provided that a qualifying employer will not be permitted to take a tax
deduction for its health insurance costs unless its health insurance plan allows employees
of the employer and the employee's immediate family members who had been covered by
a health care plan to maintain their coverage if a "qualifying event" causes them to lose
coverage. However, the legislation was subsequently amended to instead impose an
excise tax upon an employer whose health plan fails to satisfy the applicable rules.

CHAMPUS - Civilian Health and Medical Program of the Uniformed Services

• To be eligible for CHAMPVA, the beneficiary cannot be eligible for TRICARE. CHAMPVA
provides coverage to the spouse or widow(er) and to the children of a veteran who:

• is rated permanently and totally disabled due to a service-connected disability, or

• was rated permanently and totally disabled due to a service-connected condition at the
time of death, or

• died of a service-connected disability, or

• died on active duty and the dependents are not otherwise eligible for DoD TRICARE
benefits.

WC Patients
• Employer’s in U.S. have worker’s compensation insurance for their employees. This
coverage is there to protect the employee should he/she get injured on the job.

• An example would be a factory worker that breaks his legs while operating heavy
machinery. In this case, the employee is entitled to receive physician’s care under his
worker’s compensation insurance.

• This does not meant that the employee does not have health insurance, this coverage is
only in the event of injury on the job.
Specific Requirements for WC Patients:

• Date of accident

• Place of accident

• How the accident occurred

• Claims are always sent on paper, and require a copy of the rendering providers’ notes.

MODIFIERS

Procedure codes may be modified under certain circumstances to more accurately represent the service
or item rendered. For this purpose, modifiers are used to add information or change the description of
service in order to improve accuracy or specificity. The documentation of the service provided must
support the use of the modifier. There are two levels of modifiers, one for each level of HCPCS codes.
This manual contains a partial list of the most commonly used codes. Please refer to your CPT and
HCPCS Coding Manuals for the complete list.

⇒ Level I (CPT) Modifiers

Level I modifiers are two numeric digits. They are updated annually by the American Medical Association
(AMA). The explanations that follow some modifiers, while close to the AMA’s explanations, are the
carrier’s explanations, not those of the AMA.

⇒ Level II (CMS) Modifiers

Level II modifiers are two digits (AA through VP). They are recognized nationally and are updated
annually by CMS.

Professional Component and Technical Component

PROFESSIONAL COMPONENTS:

The Professional Components means, the portion of the total service provided by the physician. The
professional component is used to report the physician's service only.

Eg: Evaluation and Management.

TECHNICAL COMPONENTS:

The Technical Components means, the portion of the total service provided by the facility. This includes
the cost of technologist's service, specific equipment and room charges.

Eg: Radiation Therapy.

 Global Surgery

• The payment for certain surgical procedures include payment for certain other services in the pre-
operative and post operative period furnished by the same physician who performs the surgery.
This method of pricing is called Global surgery package.

• Pre-operative period: It is the time period after which a physician takes decision for the surgery
until the actual surgical procedure. Normally this pre-operative period starts with the day before
the day of surgery for major procedures and the day of surgery for minor procedures

• Post Operative period: For most of the surgical procedures, there will be a time frame (say like
90 days) within which care provided in this time frame by the same physician who performed the
surgery is not separately reimbursable. This time frame is called post operative period. Please
note that care provided in the post operative period by the same physician who performed the
surgery is separately reimbursable when the services are not related to the actual surgery. In
such situations, a claim has to be billed with appropriate modifier

Global Period: It is the combination of Pre-operative period and post operative period.

• 57 – This modifier is appended to the E & M visit when a decision for surgery is taken by the
physician. Below is an example.

“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.

• 56 – Preoperative management only: If the patient's primary care physician provides only the
preoperative evaluation for the heart valve replacement (33410), then he would report his service
using CPT code 33410 by appending modifier 56.

• 55 – Post operative management only: If the postoperative care is provided by a surgeon other
than the surgeon who provided the intra-operative care for the heart valve replacement (33410),
then this surgeon has to report the same CPT code (33410) with modifier 55 appended to it.

• 54 – Surgical care only: A 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.

• 78 – Return to the operating room for a related procedure during post operative period: A
patient has undergone a bypass surgery (33510). During that evening, the patient is observed
that he is bleeding at the site where the surgery occurred. Hence the patient was returned to the
operating room to rectify the bleeding at the surgical site (35820). Since, Controlling of bleeding
at the surgical site is related to the bypass surgery, modifier 78 is appended to 35820.

• 24 – Unrelated E&M services during the post operative 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.

• 79 – Unrelated procedure/service by the same physician during the post operative period:
A patient has undergone total knee replacement (27447), which has 90 day follow up period.
Within this 90-day follow up period, he is treated for fracture in the wrist (25620). The wrist
fracture is not related to the total knee replacement surgery. Hence, the wrist fracture reduction
25620 is appended with modifier 79 to denote this as an unrelated procedure during his
postoperative period

EOB (Explanation Of Benefits)

EOB is a form included with a check, from the Insurance Company, which explains the payments and the
denials. Explanation of Benefits clearly indicates the Physician's name and Patient's details of payments
or denials.

In EOB we note the following terms:

Billed - Amount charged for the procedure by Dr

Allowed Amount - Amount allowed by insurance company for procedure

Copay - Constant amount to be paid to Doctor for each visit

Coins - Variable amount assigns by insurance Company

Deductibles - Amount fixed by insurance company.

Amount Approved - Amount paid by insurance company.

Ineligible - Difference between charge and allowed amount

How to calculate:

Allowed Amount = Amount + Patient Responsibility

Patient Responsibilities are Copay, Coins and Deductible.

Ineligible = Charge – Allowed Amounts

REFUNDS:
The process of resending excess payments received from insurance companies and patient is called
Refund. The insurance companies also identify the excess payments made by them and request a refund
from the physician.
Offset:
When an Insurance company had paid excess amount or payment made in error in the previous EOB to
the provider or the billing office it will adjust that excess amount or the amount paid in error in the next
EOB they sent (by reducing the exceeded amount). Thus the process of adjusting the excess amount
paid by the insurance to the provider in their next EOB is called “OFFSET”.

Offset is retracting any overpay made on an old claim on some other claim.

With Hold:
Withhold is retracting the payment for any overpay made on an old claim.

WU – IRS(Internal revenue service)withhold

WO – Overpayment recovery

Patient Responsibility:

1.Copay: The constant amount fixed by the insurance to be paid to the doctor for each visit.

2.Coins: Some percentage of covered medical expenses, ie., variable amount fixed by the insurance
company.

3.Deductible: The Insurance Company fixes a standard amount to be paid by patients at the
commencement of each year. It deducts a certain amount each time the patient visits the doctor until
the fixed amount is fully recovered.

4.Selfpay: Treatment is provided for all patients, whether they have coverage or not and if the patient
does not having insurance coverage, he is responsible for the charges incurred for the treatment.
This type of patient is categorized as “Self pay”.

5.If insurance has denied as coverage terminated: Patient provides his coverage information to
hospitals and physicians. If the coverage details are not valid, ie., the patient's date of service is not
covered within the insurance coverage period, then the patient is fully responsible for the entire
treatment.

6.If insurance denied as additional information is required from patient:

If the claim is denied, as more information is required from patient, then the patient is responsible to
ensure that all necessary information is provided to his/her insurance.

7.If insurance said as maximum benefit already paid:

If insurance company denied the claim as maximum benefit already paid, then the patient is
responsible for the entire treatment.

8.No show: If the patient missed his appointment, it is called No Show. The patient is entirely
responsible for his No Show
ICN – Internal Control Number (13 Digits)
The ICN reveals information about a claim when viewing the Remittance Advice (RA):

• The first two digits of the ICN that appears on the RA show the type of claim or claim adjustment.
(State wise the first two digit of ICN may differs)

• The next two digits of the ICN will show the two-digit year the claim was received or the
adjustment was initiated.

• The next three digits of the ICN are the Julian date (days of the year sequenced 1-365) that the
claim was received or the adjustment was initiated.

• The remaining digits are a number assigned to each claim received on the Julian date, in
sequential, numeric order for electronic claims and by claim type. The numbers are non-
sequential for paper claims.

Example: ICN: 1109125000040 represents an EMC (electronic) claim from an AZ provider (11), received
in the year 2009 (09), on the 125th day of the year (125), that was assigned a sequential number of
000040 (fourth claim).

HPSA – Health Professional Shortage Area

• Health professional shortage area (HPSA) is a geographic area, population group, or medical
facility that has been designated by the Secretary of the Department of Health and Human
Services as having a shortage of health professionals. There are HPSAs for primary health care
(shortage of primary health care clinicians), dental health (shortage of dental health
professionals), and mental health (shortage of mental health professionals). HPSAs are assigned
a numerical score based on the level of need.

• When it is determined that any given area has a shortage of health professionals, a Health
Professional Shortage Area (HPSA) incentive program is established. These areas can be
defined in terms of entire counties, groups of adjacent counties, minor civil divisions, or census
tracts, as designated by the Department or Secretary of Health and Human Services. On a
quarterly basis, Medicare will pay providers practicing in these select areas an incentive. This
incentive, a 10% increase in reimbursement of allowed services, is only applicable when and
where a shortage is declared.
 In-Network and Out of Network Provider
A provider who has a contractual agreement with a insurance company is referred as a participating
provider or in-network provider.

A provider who does not have a contractual agreement with a insurance company is referred as a non-
participating or out of network provider

What is a contractual agreement?

A contractual agreement with an insurance company makes a provider bound to their rules and
regulations. By signing a contract, the provider agrees to accept the allowance made on a claim as
payment in full for the service rendered to their patients. He also agrees to obey the guidelines set forth
by the insurance company while billing a claim. He may bill the patient for co-insurance, co-pays &
deductibles if any.

Patient should not be billed for non-covered charges (Contractual discount, i.e. W/O)

Benefits of becoming a Participating provider

Patient Volume: When a provider becomes participating with an insurance, his name is added into their
website so that patients can able to find him. This way he gets more patients thru referral

LOCUM TENENS
Payment under Locum Tenens Arrangements

Physicians may retain substitute physicians to take over their professional practices when the regular
physicians are absent for reasons such as illness, pregnancy, vacation or continuing medical education,
and for the regular physician to bill and receive payment for the substitute physician’s services as though
he performed them himself. The substitute physician generally has no practice of his own and moves from
area to area as needed. The regular physician generally pays the substitute physician a fixed per diem
amount, with the substitute physician having the status of an independent contractor rather than of an
employee. These substitute physicians are generally called “locum tenens” physicians.

Q6 Modifier Payment under Locum Tenens Arrangement

The regular physician identifies the services as substitute physician services meeting the requirements of
this section by entering the HCPCS Q6 modifier (services furnished by a locum tenens physician)

Clinical Laboratory Improvement Amendments (CLIA)

The Centers for Medicare & Medicaid Services (CMS) regulates all laboratory testing (except research)
performed on humans in the U.S. through the Clinical Laboratory Improvement Amendments (CLIA). In
total, CLIA covers approximately 200,000 laboratory entities.
An HMO (Health Maintenance Organization) is a health plan that is also involved in how your health care
is delivered. Managed care refers to health plans coordinating your health care with you and the providers
those participate in the health plan. HMOs are the most common type of managed care.

A Medicare HMO is an HMO that has contracted with the federal government under the Medicare
Advantage program (formerly called Medicare+ Choice) to provide health benefits to persons eligible for
Medicare that choose to enroll in the HMO, instead of receiving their
benefits and care through the traditional fee for service Medicare program.

How does a Medicare HMO work?

Medicare HMOs (Health Maintenance Organizations) must offer all Medicare Part A (hospital insurance)
and Part B (medical insurance) benefits. They can also offer Medicare Part D benefits (outpatient
prescription drug coverage). Some HMOs offer additional benefits such as vision and dental care.

PPO – Point of service

It is the combination of Both HMO & PPO plan.

EPO – Exclusive provider organization.

 Members can see any participating physician in our network, any time.
 Members have the freedom to visit any in-network specialist without a referral.

 During an emergency or urgent care situation, a member also may receive approval to use out-of-
network services

Difference between HMO & PPO plan

HMO- At the time patient enrolled in this policy insurance request patient to select PCP in their available
network.

PPO- Patient no needs PCP in this plan.

HMO – Before the patient seen a specialist, he should have referral from the PCP

PPO – No need referral but for certain services like MRI we need to get Prior authorization in advance.

HMO – You must choose doctors, hospitals, and other providers in the HMO network.

PPO - You can choose doctors, hospitals, and other providers from the PPO network or from out-of-
network. If you choose an out-of-network provider, you most likely will pay more.
HMO – Open access" HMOs do not use gatekeepers - there is no requirement to obtain a referral before
seeing a specialist. The beneficiary cost sharing (e.g., co-payment or coinsurance) may be higher for
specialist care, however.

HMO, PPO, POS, EPO- Patient generally have to pay co-pay for PCP visit, office visit, specialist visit,
emergency room, & inpatient hospital copy.

Denials Managements

When Insurance companies reject a claims for some reason, that response is called Denial. Every
Insurance has its own codes for the notification of denials.

Common Denials:

Denied Claims:

Claims sent to the insurance company which have been processed but not paid due to a reason, are
called denied claims.

The following are some of the reasons for denial:

Patient's coverage expired

Patient has pre-existing condition

Incorrect place of service

Inclusive procedure

No prior authorization

Referral required

Exclusive procedure

Incorrect Type of Service

Incorrect provider number

Incorrect patient, subscriber relationship

Additional documents required

Procedure codes not related to patient condition

Referral number incorrect or invalid

Incorrect modifier
Claim exceeded filing limit

Diagnosis Code Mismatch with Procedure:

If the above denial is received from the Insurance Company, first we have to check with the superbill for
better diagnosis, then we ask Doctor office for better Diagnosis through a ticket or request for submission
of medical notes.

Coverage Terminated:

This means that the insurance coverage was not in effect at the time that the service was provided. If
any service is denied due to coverage reason, first we have to check if there is any other insurance
existing or not. If there is no insurance, then send the bill to the patient and also ask Doctor office for valid
insurance details through a ticket.

Time Limit Exceeds for Submission:

All insurances have a time limit to receive claims. Time limit for some insurance

Medicare – One Year that DOS

Medicaid – One Year

UHC – 90 Days

Cigna – 90 Days

Aetna – 120 Days

BCBS – 180 Days

If insurance is denied because of exceeding of time limit, send an appeal with proof of submission.

Duplicate Claim / Services: (Duplicate – Claim has been paid already.)

It means that claim was already processed(Paid or denied). Please Check the patient history and related
documents. If not received then ask to carrier for original status for this claim

Patient can't be identified:

If insurance has denied saying, “patient can't be identified”, then first check the insurance ID with the
insurance card copy and resubmit it with the correct ID.

If Medicare then check the eligibility details because Medicare Part B inactive then we received the
same denial from Medicare

No Authorization:
 If insurance has denied saying” No Authorization” first check the authorization sheet, if no
authorization is available request the doctor for authorization details.

If authorization is available then call the carrier and reprocess the claim with this auth# details
otherwise verify with Dr. Office for auth details

Additional information is required from patient:

If insurance has denied saying “Additional information is required from patient” then we bill the patient for
his service.

Non-Covered Services:

Please verify the denial reason thru calling for exactly why this service non covered also confirm with this
is related to patient or provider.. If patient then bill to patient. Eg: Cosmetic Surgery is a non-covered
service. Otherwise check with Dr.Office for further course of action

Bundled Procedures:

Resubmit the claim with appropriate modifiers

Medical Necessity Denials:

Medical necessity denials (also known as denial of services that are not reasonable and necessary or
medically unnecessary services) refer to a denial of payment for services that are determined by carriers
to unnecessary or unreasonable to treat or diagnose the patient's problem. Looking for a match between
the diagnosis and procedure codes submitted, gives the picture of the Medical Necessity Denials.

There are three types,

The Diagnosis does not match with the procedure.

Too many services in a short period of time.

Level of service (Medical necessity reduction).

Establishing medical necessity is the first step in carrier reimbursement. Physicians need to justify the
care provided, by presenting appropriate facts.

Patient's Coverage terminated:

Patients provide their coverage information to the hospitals and physicians. If the coverage detail is not
valid, ie., the patient's date of service is not covered within the insurance coverage period then the patient
is fully responsible for the entire treatment.

Eg. A claim is billed with DOS 01/01/2000, but the patient coverage with the insurance company ends on
12/31/1999.

In the above example the patient is not eligible for DOS 01/01/2000, since the patient does not have
coverage with the carrier, it is important for us to check whether the patient has any other coverage, and if
we receive another coverage details of the patient then the claim is filed to that insurance. If the patient
does not have any other coverage, then the patient is billed for the service.
Other Insurance Involvement:

Some claims are denied stating we need to send the claim to the patient's other insurance. Patient would
have only provided one of his/her insurance details to the physicians for facilities, but actually the
information provided by the patient may be his/her secondary coverage, hence the claim is denied stating
that the patient has another coverage or an other insurance involvement.

In this instance we need to contact the patient and find out his/her other insurance details and then file the
claim to that insurance company. An Insurance verification should be done before filing the claims in
order to avoid these types of denials.

Denials “Steps” to be taken:

If a service is denied due to coverage reasons, check if there is any other insurance or not. If there is no
other insurance then bill the patient and also ask Doctor Office for valid insurance details through OP.

If Medicare says “covered by another payer” then submit claim to the patient's secondary insurance
(treating the secondary ins as primary) or ask the Doctor's Office for Patient's primary carrier details.

If insurance denies as “auth visits exceeded” - verify the number of visits with total visits authorized. If
insurance is correct inform Dr Office,

If insurance denies as “one visit allowed per day” then check Billing Doctor ID. If both are same, then
inform to Doctor Office. If office informs us to change DOS then we have to resubmit with that DOS.

If insurance denies as “Pre-existing condition” and confirm with carrier for this information is require
from patient or provider. If patient then bill the patient or provider then send form to provider for signature

If Medicare said as “covered by another payer or enrolled in HMO” then check the MCR eligibility
details and get the correct HMO details and file the same

If insurance denied as service included in Global/Primary/Surgery procedures then update correct

modifier and resubmit the same to carrier

Dx does not match with procedures – Check the charge sheet and verify the Dx. If both DX are same
then ask to Dr. Office for better Dx

If Medicare denied as Lack of information needed for adjudication, find the reason for denial and
resubmit with necessary information.

Routine exam are not covered: We have submitted the claim with V code as primary DX. So verify DX
and resubmit the claim with correct

If insurance denied as Need supporting documents to process the claim, we have to resubmit the
claim with medical notes.

If insurance denied as Time limit exceeded, then check the patient history and if Dr.Office problem then
ask to Dr.Office for further course of action for this claims otherwise send appeal with proof of original
submission

If Medicaid denied as POS/TOS invalid. Submit with appropriate codes.

Common Medicare Denials:

a) Services not covered as patient is enrolled in Hospice

b) Claim covered by this payer/contractor

c) Claim denied because this care may be covered by another payer per Co-ordination of

Benefits (COB).

d) Claim denied, as patient cannot be identified as our insured.

CLIA Denials

• Payment adjusted due to billing or submission error (125)

• Missing/incomplete/invalid CLIA certification number (120)

Reason for denial

• Claim contains incomplete/or invalid CLIA certification number

How to resolve and avoid future denials

• Resubmit the claim using the appropriate CLIA number in Item 23 of the CMS 1500 claim form or in
Loop 2300 or 2400, REF/X4, 02 for electronic claims

• Updates to the waived test under CLIA are published in the Medicare Advisory

• A complete list of tests granted waived status under CLIA is attached to CR 5913 at

What is prior authorization?

Prior authorization (also known as prior approval or pre-authorization) is a requirement of the insurance
company (third party payer) that a provider (usually a doctor) justify the need for the medication before it
will be paid for by the third party.

What does this mean?

The insurance company will not pay for a medication until certain predefined criteria are met. The criteria
varies by medication and these criteria are not the same for every company. In fact each company can
make its own set of rules and guidelines.

According to the Cigna website (as of 8/31/2008): "Prior-authorization guidelines are determined on a
drug-by-drug basis and may be based on FDA and manufacturer guidelines, medical literature, safety,
appropriate use and benefit design."

What is the purpose?

It is primarily a cost containment measure implemented by the insurance company. They could require
prior authorizations for a variety of reasons. Such as:

1. They feel there is a similar medication which could be used but costs less.
2. The drug is being used outside of its approved indications.
3. It is being dosed outside recommended guidelines (usually above the maximum approved dose).
4. Other medications should have been use first according to standard guidelines found in the medical
literature.
5. It has serious safety issues for some people.
6. Any reason the insurance company wants to implement.

What happens next?

Anyone involved can contact the insurance company to initiate the prior authorization request but in
general, the insurance company wants to hear from the doctor. Often times the insurance company will
ask questions only the doctor can answer. Some companies will accept phone requests for prior
authorizations while others prefer a fax form to be filled out by the doctor. As a result you should ask your
doctor to initiate the prior authorization request.

Some doctors will not attempt to get a prior authorization from your insurance company as they feel it is
too time consuming and will take them away from providing medical care for their patients. In such a case
you can initiate a request by contacting the insurance company yourself. Usually the phone number you
need to call is on your insurance card.

If authorization is obtained you will then be able to purchase the prescription at your regular copay for this
class of medications. If prior authorization is not successful, you have the choice of paying the full cash
price for the prescription and possibly getting reimbursed by the insurance company later if it is approved
or ask the doctor to change the medication.

How to Avoid the Prior Authorization Process

If the above process does not appeal to you, you are not alone. Many patients, doctors and pharmacists
find this to be very frustrating. To avoid dealing with a prior authorization, check with your insurance
company before going to the doctor's office. Obtain a list of "preferred medications" from your company in
advance of your appointment. Bring it with you to your visit and ask your doctor to prescribe something
from this list. He/She will be happy you have the list with you to make drug selection easier. If you must
have a medication that requires prior authorizations then ask your doctor to initiate the request process
before you go to the pharmacy. Sometimes the whole process will take several days, other times it takes
just a few minutes.

CO-Ordination of Benefits
The Coordination of Benefits (COB) Contractor consolidates the activities that support the collection,
management, and reporting of other insurance coverage for Medicare beneficiaries. The purposes of the
COB program are to identify the health benefits available to a Medicare beneficiary and to coordinate the
payment process to prevent mistaken payment of Medicare benefits. The COB Contractor does not
process claims, nor does it handle any mistaken payment recoveries or claims specific inquiries. The
Medicare intermediaries and carriers are responsible for processing claims submitted for primary or
secondary payment. To resolve your questions regarding whomto contact,

The Pre-Existing Condition Exclusion

A pre-existing condition can affect your health insurance coverage. If you are applying for insurance,
some health insurance companies may accept you conditionally by providing a pre-existing condition
exclusion period.

Although the health plan has accepted you and you are paying your monthly premiums, you may not have
coverage for any care or services related to your pre-existing condition. Depending on the policy and your
state’s insurance regulations, this exclusion period can range from six to 18 months.

For example: Lori S. is a 48 year old woman who works as a freelance writer. She has high blood
pressure that is well controlled on two medications. She recently decided to purchase her own health
insurance that included drug coverage. The only affordable health plan she could find had a 12-month
exclusion period for her high blood pressure. For the first 12months of her policy, all of her claims
(including doctor visits and medications) related to her high blood pressure were
denied. However, within that first year of coverage, she also got the flu and a urinary tract infection – both
of which were completely covered because they were not pre-existing conditions.