Diagnoses and procedures must be correctly linked on health care claims because payers analyze this connection to determine the medical necessity of the charges. Correct claims also comply with all applicable regulations and requirements. Codes should be appropriate and documented as well as compliant with each payer’s rules.
The Medicare National Correct Coding Initiative (CCI) edits are computerized screenings designed to deny claims that do not comply with Medicare’s rules on claims for more than one procedure performed on the same patient (Medicare beneficiary), on the same date of service, by the same performing provider. The three types of edits are: (a) column 1/column 2 pair codes, in which the first column’s code includes any codes in the second column, which should not be billed separately; (b) mutually exclusive edits, which list code pairs that will not both be paid for the same date of service; and (c) modifier indicators, which note whether the appropriate use of a CPT modifier will allow the claim to bypass the edit.
Claims are rejected or downcoded because of (a) medical necessity errors, (b) coding errors, and (c) errors related to billing.
Major strategies to ensure compliant billing are to (a) carefully define bundled codes and know global periods, (b) benchmark the practice’s E/M codes with national averages, (c) keep up to date through ongoing coding and billing education, (d) be clear on professional courtesy and discounts to uninsured/low-income patients, (e) maintain compliant job reference aids and documentation templates, and (f) audit the billing process.
Payer audits are routine external audits that are conducted to ensure practice compliance with coding and billing regulations. Prospective internal audits help the practice reduce the possibility that coding compliance errors will cause claims to be rejected or downcoded. Retrospective internal audits are used to analyze feedback from payers, identify problems, and address problems with additional training and better communication. E/M codes, because they are so frequently used, are an ongoing audit focus. Practices should conduct internal audits of their E/M claims using audit tools based on the joint CMS/AMA Documentation Guidelines for Evaluation and Management Services. This audit process highlights possible problems with the practice’s interpretation of the guidelines or documentation approach.
Physicians set their fee schedules in relation to the fees that other providers charge for similar services.
Fee structures for providers’ services are either charge-based or resource-based. Charge-based structures, such as UCR (usual, customary, and reasonable), are based on the fees that many providers have charged for similar services. Relative value scales (RVS) account for the relative difficulty of procedures by comparing the skill involved in each of a group of procedures. An RVS is charge-based if the charges that are attached to the relative values are based on historical fees. Resource-based relative value scales (RBRVS), such as the Medicare Physician Fee Schedule (MPFS), are built by comparing three cost factors: (a) how difficult it is for the provider to do the procedure, (b) how much office overhead the procedure involves, and (c) the relative risk that the procedure presents to the patient and the provider. Both charge-based and resourcebased fee structures are affected by the geographical area in which the service is provided.
The following steps are used to calculate RBRVS payments under the MPFS: (a) determine the procedure code for the service; (b) use the MPFS to find the three RVUs—work, practice expense, and malpractice—for the procedure; (c) use the Medicare GPCI list to find the three geographic practice cost indices (also for work, practice expense, and malpractice); (d) multiply each RVU by its GPCI to calculate the adjusted value; (e) add the three adjusted totals, and multiply the sum by the annual conversion factor to determine the payment.
Most payers use one of three provider payment methods: allowed charges, contracted fee schedules, or capitation. When a maximum allowed charge is set by a payer for each service, a provider does not receive the difference from the payer if the provider’s usual fee is greater. If the provider participates in the patient’s plan, the difference is written off; if the provider does not participate, the plan’s rules on balance billing determine whether the patient is responsible for the amount. Under a contracted fee schedule, the allowed charge for each service is all that the payer or the patient pays; no additional charges can be collected. Under capitation, the health care plan sets a capitation rate that pays for all contracted services to enrolled members for a given period.
Payments to participating providers are limited to the allowed charge. Some part of that amount is paid by the payer and some part by the patient according to the coinsurance provisions of the plan. Nonparticipating providers in most private plans (but not government-sponsored plans) can collect their usual fees, even when they are higher than the allowed charges, by receiving the specified part of an allowed charge from the payer and the rest of the allowed charge, plus the balance due resulting from a lower allowed charge and a higher usual charge, from the patient.
