Don't Leave Your Accounts Receivable on the Table

I found these AR tips courtesy of Medical Billing Star

Don't leave your accounts receivable’s on the table ! from ango mark

Pediatrics: Sick and Well Visits on the Same Day are NOT Double Billing

The other day I read a blog post about physicians double billing. The article was posted on a blog of a reputable company  but the content was outrageous and it has driven me to a reply. First, about the article to which I am referring…

The author complained that when he took his child to the pediatrician for a well visit and an ear infection was discovered during the visit, his insurance was double billed. He claimed to have called the insurance and was told it was a legitimate practice. Regardless, the author blogged a complaint saying that the  physician was double billing in a blog post.

First, I want to take a second to talk about the technical aspects of what happened in this situation and why the physician’s billing practices are completely legitimate. Following that, I will point out the common sense perspective.

When a child sees their pediatrician for a well visit, the physician is responsible for performing and documenting a physical appropriate to the child’s age. A physical for a child generally includes various measurements (height, weight, etc.) and examinations to make sure that the child is growing and healthy. The physician will check through the child’s history, make sure that all necessary immunizations have been administered and make recommendations (or answer questions as appropriate) on nutrition, sleep , exercise, life-style, etc.  During the well visit, the physician is examining the child for physical health, mental health, and developmental health. The physician is responsible for documenting all of this and, if documented, well visits are a complete service which can and should be billed.

If the physician happens to find a problem, the physician must address that problem and a distinct sick visit begins. A sick visit also has specific requirements for the history of the present illness, review of systems, history,  examination, and medical decision making. All this must be performed (or if already performed it must be reviewed/considered in the context of the sickness) and documented. As the sick part of the visit is a distinct and separately identifiable service, it is separately billable with the modifier 25.

So, why is this practice legitimate? Because two separate services were performed. Think of it this way (here’s the common sense part). If you take your car in to the mechanic for a routine oil change, the mechanic will bill you for the oil change (a well visit). Now, what if, during that oil change, the mechanic discovers that there is a crack in the oil pan. If the mechanic repairs/replaces the oil pan to fix the problem (a sick visit) would you expect that repair for free since he/she was in there anyway? No! You would expect that the mechanic would bill for BOTH services. If you wouldn't expect a mechanic to give away free services, one cannot expect a physician to perform additional services for free.

How to Tackle an AR That is Out of Control

Let’s pretend you find that your AR is completely out of control. What do you do? What is the best and fastest way to tackle a major AR problem? I will give you a hint, it is not blindly calling insurance about outstanding claims. That method will get you nowhere fast. Here’s another hint, it is not necessarily calling on the highest dollar claims either. I know that sounds counter intuitive, but it is true. There may be better ways to get more money out of your AR faster. Although, I am not implying that high dollar claims are not worth a attention. What I am saying is you need to look before you leap!

If your AR is completely out of control you have a problem, maybe multiple problems. Blindly calling on individual claims or just looking at big dollar claims does not fix the problem or ensure clean claims in the future. You must search for a root cause. Now, understand I am not implying a blame game. I am talking about starting a large AR project with a thorough analysis of the AR and fixing root problems.

Interestingly, you will find on analysis, you can usually identify a handful of specific problems which can be easily addressed. Addressing those root causes of a huge AR will get dozens of claims paid all at the same time with a single action. Best of all, once you know the root cause, you can make sure it does not happen again in the future. Sound too good to be true? It’s not.. It’s easy! Here’s how.

The first step is to run a detailed AR report from your medical billing software with all outstanding claims equal to or greater than 15 days old (yes, we want relatively new claims too – not just old AR at the same time, don’t include claims that have no chance of even being in the insurance’s adjudication system yet… 14-15 days is about right to make sure the insurance has the claims and they are fresh enough to investigate).

This report should be run for all insurances and include full claim detail including charges, CPT/ICD9 codes, patient name, insurance name, submission dates (if possible)… as many details as you can possibly get about every claim on the AR. Your best bet, is to export the AR to Excel if your billing software can do that. If not, you are in for a more manual process, but it is still possible. I am going to write this post as though you are working on the AR in Excel.  For those that cannot export their AR to Excel, the premise is the same.. just do it manually. But above all, do this before you pick up the phone to call an insurance.

Now that your detailed AR is in Excel, make sure the spreadsheet is organized properly with columns and rows appropriately labeled so the sheet can be sorted without losing or separating information. For example, let’s say that the AR groups claims by insurance company, but does not display the insurance name in each row, like this:

Manually change the contents of the AR report, so the insurance name is listed in each row correctly corresponding with the claim and remove the grouping titles, any redundant headers, and empty rows. After you have added grouping headers to each row, you can quickly remove empty rows and extra headers by sorting the spreadsheet. Make it look like this:

Now that you have a nice clean Excel AR report where rows express the content of each column header and no information is missing in any row where a claim is listed, you can move on. If you are a complete Excel novice and all this is totally lost on you – go learn Excel. There is no more important, versatile, useful software in the entire universe. You can watch tutorials for free on YouTube. You will be glad you did!

Next, we sort, sort, sort, sort… by everything imaginable and look for patterns. I guarantee you, there are patterns. These patterns will lead to the root cause of the AR problem. So…


Sort by CPT: is there one of a few CPT codes that stand out as repeating an awful lot in comparison to other CPT codes?

Sort by insurance: is one insurance massive in comparison to the other insurances?

Sort by ICD-9: is there one of a few ICD-9 codes that stand out as repeating an awful lot in comparison to other ICD-9 codes?

Sort by rendering provider: Does one doctor have more than his/her fair share of the AR?

Sort by submission date: Is there one date (or a few dates) that have massive numbers of unpaid claims

Keep going - sort by everything you can imaging...


I am sure you are starting to see where I am going.  If you see multiple patterns, go after the higher dollar patterns first. If you find a pattern in claims that have minimal value ignore them and look for another pattern. For example, if you find an injectable that generally pays $0.42 is always rejecting… who cares? Ignore it. That kind of claim is not worth wasting the paper the AR is printed on – let alone people time.

So, let’s say the analysis finds that,  regardless of insurance company, there is one CPT code that has dozens of unpaid claims each worth about $100. Now, you call ONE insurance with a recent claim example (maybe two If you really want to double check) and ask why one of these claims was not paid. Guess what… the insurance says that don’t have the claim on file. Hummmm, what to do now? Easy, call the insurance’s EDI department with the recent claim example (submitted within the last 30 days) and find out why the claim never made it to adjudication.

With the insurance’s answer, more than likely, you just learned why ALL of the claims for that CPT weren’t paid. In this type of example, it is likely that the CPT is invalid for the year in which it was billed. Now that you know the CPT is no good, you can correct all 100 problem claims and get them all paid – based on ONE phone call rather than hours of individual calls that just waste time.

Do NOT be deceived. This is NOT the root cause of your AR problem. Yes, we just cleaned up 100 claims in one shot, but a bigger question remains. Ask who, what , when, where, why, and how to find the root cause? Why did this happen? Why did it take so long to find it? Who is responsible for rejections? What processes do we have in place to identify/prevent these problems early? How can we prevent it in the future?

So what is the root cause of this problem? Well, in this example, we called the EDI department and were told that the claim was rejected before adjudication for an invalid code. In other words, you received an EDI report rejecting that claim. Note: codes that are not valid in the year in which the services are rendered are most frequently rejected in EDI reports rather than on EOBs; however, it is possible that the claim will be adjudicated and rejected on an EOB. Either way, the root cause of the problem is that no one looked at the original rejection. Either, the EDI reports are being ignored or denials on EOBs are being overlooked. Now, you have a root cause – address it!

In a nutshell, before blindly calling on individual claims to clean up a massive AR, look for patterns. These patterns will not only allow you to clean up dozens of claims with a single call to insurance, but also help you to find the root cause of the AR problem. Basically, work smarter not harder.

Accounts Receivable at a Glance

It has been a while since we talked about medical billing so I thought it may be time to post some medical billing stuff (stuff – that is the high-tech term for it).

I was thinking today we’d talk about accounts receivable. I have found that it is for some providers to understand accounts receivable management even though accounts receivable is really easy. So, I thought I would write some interesting tips about accounts receivable (hereafter referred to as AR) and  how to know when it is good or bad.

First, let’s start with some basics. So, to begin… AR or accounts receivable is the money owed to a medical provider by insurance companies and patients. After a service is rendered to a patient, a bill is sent to the insurance requesting payment. Immediately, that outstanding bill is accounts receivable. To simply manage AR, most medical billing software produce reports that group the outstanding balances in aging buckets such as 0-30.… 31-60…. 61-90…. 90-120… and 121+  days outstanding.

Appropriately reading these groupings at a glance is very important to managing a practice financially. Here’s what you need to know for “at a glance AR reading”…

The AR that is in the 0-30 days outstanding bucket should not really be much of a concern. In general, most insurances will pay a clean claim within 30 days. Once a claim hits the 31 days outstanding mark, it is time to take notice. This doesn’t mean you need to stop everything and call the insurance on a 31 day old claim… just be aware of it and don’t let it get to 45 days without a call to the insurance. The exact timing for a call on a claim less than 45 days outstanding depends on the insurance. Different insurances process and pay at different times and claims related to liability insurance, workers compensation, and auto always seem to take forever. So, if an insurance usually pays in 14 days – definitely call at the 31 day outstanding mark but if the insurance usually takes 45 days to pay, give it a little more time before you invest resources to find out the check was mailed yesterday.

Now, as a rule, the dollar amount in each aging bucket should get smaller as the aging gets older. A happy AR may look like this:

0-30  days = $130,000    
31-60 days = $40,000  
 61-90 days = $20,000  
91-120 = $10,000
------

Total AR $200,000

The next thing you should know are some general guidelines to measure your AR’s health situation at a glance.

• The majority of your AR should be in the 0-30 days aging bucket
• The dollar amount  in the 31-60 days bucket should not exceed 20-25% of the total AR
• The dollar amount  in the 61-90 days bucket should not exceed 10-12% of the total AR
• The dollar amount  in the 90-120 and 121+ days buckets should not exceed 5-10% of the total AR
• Chances are – the 60-90 and 90-120 and 121+ days buckets will NEVER be zero (not even in your     happiest dreams). THIS IS IMPORTANT.

If your buckets from 60-121+ days AR is zero, it indicates a problem. Why, you ask… Good question!

Primary insurance claims generally take about 30-45 days to pay. Some secondary insurances still require manual claim submission following the receipt of the EOB from the primary insurance. The secondary insurance may then take another 30-45 days to pay the remaining portion of the bill. Already, waiting for that secondary payment, we are at nearly 90 days on a small portion of your claims’ balances. Then there may be a patient balance remaining that is nearly 90 days old before the first patient bill has been mailed. Generally, it is best practice to send patients 3 bills (one per month) over the course of 3 months or approximately 90 days before considering a collections company and removing the balance from active AR. That means that  your 60-121+ buckets cannot be zero. If they are, you may have a problem.

Now, as with any rule of thumb, the above hints are not the end all of AR and common sense must be applied to using these percentages. For example, liability insurances take a long time to pay. So, if your medical practice deals with a ton of auto insurance claims, your percentages in the 60 days, 91 days, and 121 days buckets will be higher. Also, if you work with IME, clinical trials, or in an academic setting, your older aged AR will be higher.

Ok, that’s enough for this post. I will follow up in the next post with some more AR tips (I have more to say).

Insurance Math: Insurance Paid vs. Insurance Allowed Amounts

I got a very good question from a reader that I thought I should add as a post since others may have the same question.

James asked “Very informative article. Truly appreciate the transparency and simplicity. You stated that hospitals write off the difference between what the insurance company actually pays and what the hospital actually charges? Wouldn't that mean that that the patient would not be billed after insurance is applied? Again, thanks for the explanation.”

James, thank you for your question. It is a very good one and the answer can be a little confusing. I hope I can be clear, but if not feel free to ask follow up questions as needed.

Insurance companies have a set amount that they will “allow” for medical services and procedures. The keyword is allow. The amount that the insurance allows is NOT always the same as the amount that the insurance will pay. The allowed amount is the total amount of money that the medical care provider can ultimately have. It is a combination of the amount the insurance will pay plus the amount for which the patient is responsible. The calculation would look like this:

Patient responsible amount + insurance payment = allowed amount

The patient must pay any difference between the allowed amount and the insurance’s payment amount. Like this:  Allowed amount – insurance payment = patient responsibility

The write off amount is the amount that exceeds the insurance company’s allowed amount. For example:

A medical care provider charges $1,000 for a service.

The insurance ‘allows’ $500

The insurance pays $250

Charge :                               $1000

Allowed amount:                   -$500

Write off:                               $500

Of the $500 that the insurance allowed, the insurance (in this hypothetical example) only pays $250, therefore, the patient is responsible to pay $250. The total of the patient payment plus the insurance payment matches the allowed amount of $500.

As you see in the example, the patient cannot be billed for the write off amount (e.g. the difference between the charge and the insurance’s allowed amount). The patient can, however, be charged for the difference between the insurance’s allowed amount and the amount that the insurance actually paid.

I hope this was clear. If you do have follow up questions, please feel free to post them and I will do my best to answer. Again, thank you for the question!

Do the Math: Insurance Dictates Hospital Costs

A USFC research team published a study about disparities in the cost of healthcare. While I do completely appreciate that prices for healthcare are out of control and vary widely, no one has yet explained why costs can vary so widely between hospitals. Accordingly, this article is intended to fill in that gap. Clearly, I cannot be certain about all of the cause,s but I want to bring attention to the fact that there is much more to hospital charges than many people understand.

As a general rule, hospitals are paid by insurance companies in one of two ways depending on the hospitals’ contract with the insurance. The first is called “per diem” (per day) and the second is DRG (diagnosis related group). Per Diem contracts are generally associated with commercial insurance companies, whereas DRG billing is how payers such as Medicare pay a hospital.

In per diem billing, or billing to commercial insurance companies, the hospital is paid a flat fee for each day that a patient is in the hospital. The amount that the insurance pays depends on the patient’s acuity – how sick a patient is and what level of treatment that patient will require. This is usually linked directly to a location in the hospital. For example, a patient in a standard hospital bed (usually called “med/surg” referring to medical / surgical) will be paid less than a sicker patient in the ICU (intensive care unit). Each acuity level has a flat payment rate for each day a patient is in the hospital.

To make sure that hospitals are not upgrading patients unnecessarily to the higher paying acuity levels, the hospital must call the insurance every day to update the insurance about the patient’s condition. If the insurance does not agree with the patient’s acuity designation based on clinical facts, the insurance will refuse payment for every day with which they do not agree. Basically, hospitals have to fight hard to get payment and expensive clinical resources (nurses in case management) have to be dedicated to a daily insurance contact for every patient.  

Here, you should start seeing a trend. First, the hospital is taking care of a patient. That costs money in salaries for the staff, equipment, etc. Next, the hospital has to pay even more money to staff a department of nurses who work to meet insurance requirements. Hmmm…I wonder why healthcare costs are high?

Then there is DRG billing, which refers to diagnosis related groups and is the form of payment used by Medicare and Medicaid primarily (though there are some commercial insurances who use it, too). Perhaps you have heard the term “perspective payment system”. If you didn’t know what that is – DRG is part of the perspective payment system. A DRG is a 3-digit code that looks like this – 123.

In DRG billing, patients are assigned to a diagnosis related group or a grouping of patients with related diagnosis. Each DRG has a value called a relative weight which is determined by the Federal Government and published in the Federal Register. This weight looks like this, for example – 0.623 – and each DRG has its own relative weight, an approximation of the resource consumption and costs associated with treating a patient belonging to that DRG.

That said, each hospital is given its own base payment rate. This is a dollar figure that is determined by Medicare/Medicaid  and is influenced by many factors such as the size of the hospital’s low income population, whether other hospitals are nearby or far away, and so on. Every hospital has its own distinct base payment rate calculated according to many, many factors. 

This is a very important fact. 

For example, a base payment rate may be $3,000. To calculate the costs and payment for the patient, the relative weight is multiplied by the base payment. Using the numbers above, that gives us 0.632 x $3,000 = $1,896, which will be paid for the entire hospitalization.

In this example (which is using completely random numbers) a patient admitted to the hospital and assigned to DRG 123 will receive a flat payment rate of $1,896 regardless of actual resource consumption. The DRG method assumes that hospitals will be cost conscious and assign resources carefully as to make the most profit for each patient. To make sure that the hospitals don’t incorrectly assign patients to DRGs that have a higher weight to secure a higher payment, Medicare performs retrospective audits that require massive hospital staff resources to accommodate. These audits are called RAC audits.

So, in DRG billing the important fact here is that EVERY hospital has a different base payment rate and hospitals in different geographic locations may also have different relative weights. So, let’s compare how this concept applies to different hospitals and see what happens with charges (the numbers are completely fake for example purposes only).

Hospital A in New York City services an appendectomy  

The relative weight may be 2.334

The hospital’s base rate is $5,333

The total payment:  $12,447,22

Hospital B in Fargo, N.D. services an appendectomy

The relative weight may be 0.876

The hospital’s base rate is $2,756

The total payment: $2,414.25

The difference between NYC and North Dakota: $10,032.97

Do you see how this translates to different payment amounts to different hospitals and accordingly different charge amounts to accommodate those payments?

Here’s another important fact. Regardless of the amount a hospital charges –the insurance allowed amount is final! If the hospital charges more than the insurance allows – the hospital must adjust (write off) the remainder. If you think about it, the charges that many people complain about really don’t matter for people with insurance, because the payment and the patient responsibility is set by the insurance company’s allowed amount – not the hospital charges.

We must consider that it is generally the insurance companies that are driving hospital charges for both insured and uninsured patients, as hospitals abide by their insurance contracts and meet insurance requirements.

One last fact to know is that this post is a gross oversimplification of hospital-insurance contracts and payment schedules. There are many more factors that can increase hospital charges such as patients with complications or major complications and outliers. Still, I feel that this oversimplification does the job of showing the reader that we need to slow down and consider how complex the system is before accusing hospitals of wrong-doing based on charge amounts. 

In a nutshell, hospital costs are largely driven by health insurance companies.

Why Do Doctor Bills Vary Widely?

Ever wonder why doctor bills vary so widely? Check out my guest post on Capture Billing's blog to learn more!

Mental Health Billing

I recently got the following question in the comments section of one of my posts. I am very glad to answer the question, but I think the answer is long enough that a full post will be better than just replying to the comment. Here’s the question:

“Could you answer two basic questions: Is medical billing different to mental health practice billing (besides CPT coding, of course)? For instance, when I go to the doctor, I pay the co-insurance, the insurance pays its part and then I get a bill at home to cover the still unpaid portion of the bill. Is this also a practice for mental health professionals? My understanding is that mental health professionals cannot send a bill later to cover the difference between their fee and the insurance rate. And does billing within mental health professionals vary (psychologists, social workers, etc.)? Your blog is the first one I've ever followed. Thank you”

First, thank you for the question. It is a very good one.

To answer your question: There are some quirks to mental health billing. As you noted, there are distinct CPT codes used in mental health. A mental health practice does not usually use regular evaluation and management codes like other healthcare providers. Also, as a general rule, mental health is a separate type of policy attached to your health insurance policy. Accordingly, mental health coverage will vary in several ways:

a.       There is often a different mailing address to which doctors mail paper claims

b.      There is often a different payer ID to which electronic claims are sent

c.       The coverage is often different from those associated with your medical policy

The last item is most significant because it can confuse patients who expect the coverage 

to be the same. Regardless of how your regular medical insurance policy works, many mental health policies require a co-insurance (as you noted). A co-insurance is a percentage of the insurance’s allowed amount for which the patient is responsible. With that foundation laid, let me answer your questions specifically.

You stated above that a mental health practice will collect co-insurance and then send a bill for a remaining balance. There are two possibilities here.

First, you must understand that it can be a challenge to collect payments from some patients after they leave the office. Even if you are a good, paying patient – so many people are not good paying customers that practices will often collect as much as they can up front to avoid problems later on. Collecting up front is more challenging when a patient has a co-insurance because the patient responsibility amount is a percentage of the allowed amount which differs by insurance, policy type, provider type, and CPT code.

With that, many mental health practices will estimate the patient responsibility. That way, they can collect a reasonable amount up front. When the insurance EOB comes to the practice it specifies the exact amounts. With that information, the practice will send the patient a bill or a refund for the difference between what the patient was responsible for paying (according to the insurance EOB) versus what the patient actually paid in the office. As long as the practice is only receiving payment up to the insurance’s allowed amount and either applying payments to other dates of service where legitimate balances exist or refunding the patient – this practice is completely legitimate.  

The other possibility is that the mental health provider is doing something called balance billing. Balance billing refers to billing a patient for the difference between the provider’s charge amount and the amount that the insurance allows (e.g. the allowed amount). The practice of billing the patient for an amount greater than the insurance’s allowed amount is illegal and a breach of the provider’s contract with the insurance contract.

If you are not sure whether you are being balance billed or whether this payment method is a legitimate estimate payment, you should look at the EOB from the insurance. Find the column on the EOB that indicates the patient responsibility. Then add up the payments you made for that same date of service, if you paid more than the insurance indicated as your responsibility, call the doctor’s office to ask why. One caution, however, if you did over pay, don’t assume something illegal is going on. It could also be a situation where the doctor’s office applied an overpayment to a different service date rather than billing you again. My advice - ask for clarification – don’t accuse.

Now for the second question: Does mental health billing vary by type of provider? Sometimes, yes. Psychiatrists are physicians and therefore get paid by the insurance at a higher rate than, for example, a Licensed Clinical Social Worker (LCSW). Both are totally competent professionals but an LCSW must have a supervising physician associated either on the claim or in the insurance’s records. An LCSW and psychiatrist will often also be allowed different amounts of payment – even for relatively the same service. 

Lastly, your insurance policy may be a reason for discrepancy in payment amounts for different provider types. A patient’s policy may have a higher or lower patient responsibility associated with provider types. This is often to encourage patients to see a particular type of provider and save the insurance money.  This is similar to how prescriptions work. You may be familiar with the fact that brand name drugs have a higher co-insurance/co-pay than generic drugs….It’s the same premise where the doctor is considered the brand name (expensive one) and the LCSW is generic (less expensive). So the insurance may require less patient out of pocket expense for seeing an LCSW, for example.

I hope I have clearly and thoroughly answered your question. Feel free to ask any follow up questions if needed and again, thank you for the question!

Denial Management (Part II)

In general, claims should be paid within 30 days of the date they were send to the insurance. Some claims will not be paid and those unpaid claims must be worked on so that the appropriate reimbursement is received. Unpaid claims are caller accounts receivable.

In order to get theses claims paid, the biller must contact the insurance to find out what happened to the claim and what steps are necessary to get payment.

There are many reasons why claims are not paid. Below you will see a spread sheet for reference of common denial reasons, the associated actions and reference locations to help in the reimbursement process. This is not an exhaustive list, but will act as a help guide as you are learning more and more about medical billing.

Remember denial follow up and following up on accounts receivable must be done constantly to make sure that the practice is getting all the reimbursement they deserve.


To help the reader get a good idea about different denial reasons, their meaning, how to correct denials, and various resources you can use to address denials, follow this link to my 
Denial Management Resource Sheet. 

or

https://docs.google.com/spreadsheet/ccc?key=0As3FvNjmAaz_dGdTUE9pRlUyQ0c5VnFNam12SHhCTnc

Managing Denials and Appeals (Part I)

Denials are claims which have been adjudicated (fancy word for processed) by the insurance but not paid. A denial usually comes to the provider in the form of an EOB. The denial can be on an entire claim (meaning all of the services billed) or a single claim line item (each individual service).

First, let’s have a refresher on line items. Sometimes when a doctor sees a patient s/he will perform multiple services. Each service is billed with a separate CPT code within the confines of the Correct Coding Initiative (CCI – more on this later).  So, for example, if the doctor examines a patient for diabetes and performs an EKG for a complaint of palpitations, the biller will bill two different CPT codes. One CPT code will indicate the examination and the other will be for the EKG. Each CPT is billed on a separate line on the claim form. Since they are on separate lines, they are referred to as line items.

It is also possible to use the same CPT on separate lines, if, for example, the same service was billed on different dates. As an example, consider a patient in the hospital. The doctor will examine the patient on 1/2/2012 and 1/3/2012. Since the dates are not consecutive, you cannot bill a date range therefore, the two dates may have the same CPT code but must be billed on separate lines. There are other examples, but for now understanding that will suffice.

So back to the main point. A denial can be for the entire claim (all claim lines) or just one claim line from a claim with multiple lines.

Some denials are legitimate due to quirks in patient’s policy or insurance guidelines. Other denials are insurance processing errors and yet others are errors by the doctors billing staff or the doctor. Regardless, it is imperative that denials be followed up on.

So what is ‘following up’? Basically, it means action! Some denials are obvious and you can correct it without much ado. Other denials are more confusing. Following up on a denial may require a phone call to the insurance to discover the nature of the problem. If the error is on the insurance side they will usually correct the error over the phone and automatically reprocess the claim.  If you find that the error is due to a billing mistake you made will have to make the corrections and resubmit a corrected claim.

Some insurance, such as Medicare, will allow an electronic resubmission of a corrected claim without you including any indication about the correction other than the correction itself. Other insurances will require that you send a paper claim with a note stating that the claim is corrected. For these carriers, if you do not indicate that the claim has been corrected, they will reject the new (corrected) claim as a duplicate.    

In some situations the practice will receive a denial on a claim that the insurance insists is valid according to their rules or the patient’s policy. You may not agree with the denial. In that case you can have a claim reviewed at a higher level through a process called an appeal. A couple of examples of claims that may require appeal are timely filing denials (claim not sent to insurance within their contractually specified claim submission time frame) or sometimes medical necessity denials (diagnosis doesn’t justify the service rendered).

Before you appeal any claim, check first that you didn’t make any errors. Don’t waste your time filing an appeal if the problem is a simple error. Generally, appeals are pretty uncommon.  For example in the event of a timely filing denial, check your records to verify that you did in fact send the claim initially within the period allotted by the insurance. If you receive a denial if for medical necessity, check if you linked the correct diagnosis to the procedure. Once you are sure that there is no billing error, you must write a letter to the insurance to request that the claim be reviewed by the appeals department.

An appeal will include a letter or appeal form, a CMS 1500 claim form and sufficient proof that you have a valid request for appeal. The proof can take the form of documentation from your doctor, or a trusted medical source and for timely filing appeal, you must send a printed copy of the electronic claim report (EDI Report) showing a clean claim submission and insurance acceptance.  Medicare has a specific form that they require you to use for appeal. The form can be downloaded from your local Medicare web site. Here is a sample Medicare appeal form. You can create your own appeal form for most other insurances. Use Medicare’s appeal form as a template / guide.

Payment Posting and How to Read an EOB / ERA

A couple of weeks after claim submission the medical practice will receive a correspondence from the insurance company to tell you their decisions as to whether the claim will be paid. This is called either an explanation of benefits (EOB) or electronic remittance advice (ERA). The difference between the two is the delivery method. An EOB comes via traditional mail and an ERA is delivered electronically. If there is a payment (money) associated with the EOB or ERA, it will either be sent as a check via traditional mail or delivered by EFT (electronic funds transfer often known as direct deposit). 

The purpose of an EOB and ERA is to explain payments and denials for the claims you previously submitted. The EOB/ERA will also tell you about the amounts, such as deductibles, coinsurances and copayments, that the patient is responsible for paying out of pocket. Finally the EOB or ERA will show you how to properly apply the payments to patient’s accounts so you can keep track of what is paid and what is outstanding.

To keep track of payments and outstanding balances the biller must enter information from the EOB into the practice’s medical billing software. This is called payment posting.  This is very important for three reasons. First the payments and accounting data entered in to the billing software will directly affect the practices overall accounting and taxes. Next, the accounting will directly affect the patients billing (patients do not like to receive medical bills that are not legitimate). Finally, payment posting will directly affect your job. Unpaid or incorrectly paid claims need follow up. It is a waste of your valuable time to call on a claim that was already paid claim in the event of an accounting error.  

Previously we discussed the “allowed amount” as it pertains to the insurances fee schedule. Just a brief refresher, the allowed amount is the amount the doctor agreed to accept as full payment when s/he signed a contract to participate with the insurance company the time of credentialing. Again you’ll recall that the insurance allowed amount is not usually the same as the amount you billed because traditionally we bill at a rate higher than insurance fee schedule as to avoid any underpayments. With that refresher done, we’ll begin.

The EOB or ERA may have information for just one patient’s claim or it may contain information regarding many patients. The EOB/ERA shows the patient’s name, the account number assigned by your medical billing software, the allowed amount, the patient responsible amounts such as copayment, deductible, and coinsurance, the payment amount, and messages from the insurance about the claims processing. Each CPT procedure code is processed separately and shown on the EOB/ERA as a separate line item.

The allowed amount is the maximum payment that you can receive on each line item. The difference between the insurance’s allowed amount and your charge amount is called the contract adjustment. The contract adjustment is a write off. It is a breach of contract and against the law to bill the patient for this difference, billing a patient for the contract adjustment is called balance billing. If you are caught balance billing you can loose your contract with the insurance or even be prosecuted for fraud.

Many times there is also a difference between the allowed amount and the payment amount, that balance is the patient’s responsibility (out of pocket). The EOB or ERA will usually give some detail about why this balance is due by the patient, such as deductible, copay, coinsurance or non-covered item or service. We will review each but first you must understand exactly how the EOBs are calculated and presented. Closely review the example and my mark ups to follow on the sample EOB from Medicare:

To follow is a sample from Aetna that we can look at item by item. Medicare’s EOB and Aetna’s are quite similar in contents (even though they look a little different). You will find that all EOBs/ERAs have the same basic information.  

In the center of the page, number 21-35 is the line by line detail. Each line is called a claim line and indicates a service rendered to the patient. The date of service is in box 21 and service code (CPT) is listed in box 23. Box 25 shows the provider’s charge and boxes 26, 27, 31, 32 and 33 show the payment and its distribution.

As I mentioned before, the doctor’s office sets its own prices for the services that they provide but if the doctor is in contract with the insurance he/she is obligated to accept the allowed amount noted by the insurance in box 26.  The allowed amount is the total payment the doctor will receive for each service.  The difference between the doctor’s charge and the insurance’s allowed amount is written off. That write off amount is called the “contract adjustment”.

That total payment (allowed amount) is divided between the insurance responsibility and the patient responsibility as shown in box 32 and 33.  The patient’s responsibility may be further divided by the reason why the patient is responsible as noted in boxes 27 (showing patient’s copay), 28 (showing non-payable services), 30 (showing deductible amounts), and box 31 (showing co-insurance). The total of these fields will equal the total patient responsibility listed in box 32.  

A deductible is a patient’s annual out-of-pocket payment before insurance will being paying. The deductible amounts vary based on policy. But a deductible can also be a sign of a problem in claim processing. If a patient’s policy doesn’t usually have a deductible but an EOB shows the patient responsible for a deductible, chances are the claim was processed out-of-network. Out-of-network processing can indicate that your claim did not have a referral, or that your practice is not the patient's chosen primary care physician (PCP) or a problem with the practice’s credentialing. This is not to say that some deductibles are not legitimate, many are... When in doubt, call the insurance and ask.

A copay is a small out of pocket amount due for each visit. It is usually paid prior to seeing the doctor. You will note on the insurance card examples in the reading insurance cards section that copays vary, not only be patient but also by provider type. Many policies will have different copays for primary care providers, specialists, prescriptions, mental health, hospital, emergency room, and urgent care. Remember that some insurance require a selection of a primary care provider prior to processing claims for the PCP. If your practice is not the PCP the patient is expected to pay the specialist copay. Some examples of specialists include surgeons, cardiologists, and neurologists.

The patient’s co-insurance is a share of the bill. It is usually a percentage of the allowed amount. For example Medicare requires a co-insurance of 20% from their patients. Here’s an example: Medicare will allow $100 for a service of that amount Medicare will pay 80% or $80 and the patient is responsible for 20% or $20. The coinsurance is usually applicable for all visits for that patient.

If there is a patient balance, the patient should receive an invoice or statement from the practice asking them to pay their portion. Usually statements are issued once per month and if the patient fails to pay the balance the outstanding amount is referred to an outside collection agency for follow up and collection. 

Finally the totals listed in box 32 (patient responsible) and 33(insurance responsible) will equal the total allowed amount as listed in box 26. The insurance payment is listed in box 35 and if there is a positive payment due, the EOB will be accompanied by a payment.

The payment listed on the EOB, would be posted in to the doctor’s office practice management system to keep track of which claims have paid and which have not been paid in addition to record the practice’s revenue.

You will notice that line item 3, CPT code 82541 is not paid by insurance. That is indicated both by the fact that the allowed amount is listed in the “not payable” field, box 28. In order to explain why this service is not paid, the insurance will include a “remark code” as indicated in box 29. That code refers to a description of the non-payment reason further down on the EOB or sometimes on a later page of the EOB.

In some cases the reason for non-payment may be due to a claim submission error by the doctor’s office or a processing error on the part of the insurance. Either way, claims that are not paid should be followed up on. In this sample the insurance states that the patient is responsible for paying for this serviced, but why? Could this be a processing error or maybe the office made a mistake with the CPT code. Although this line says that the patient is responsible, you want to avoid billing patients when it is not necessary for the sake of good relations with your patients. If this line was denied because of some error, the patient may be angry by an unwarranted bill. When in doubt, call the insurance.

Again, I will stress that it is imperative that someone follow up on unpaid claims or practice revenue will be adversely affected (and that means no money to give the biller a raise). 

If you would like to see the entire Aetna EOB and the detail about each field check out this website: How to Read an EOB

Electronic Claims

Claims sent electronically are often sent through a clearinghouse and transmitted via EDI (electronic data interchange). First, a clearinghouse is an agency that receives the claims from a lot of different doctor’s offices and distribute all of those claims to the correct insurance companies. This makes it so each doctor doesn’t have to connect electronically to every insurance, but rather the doctor connects only to one clearinghouse. The clearinghouse develops ‘connections’ with thousands of insurance companies to be able to send claims on doctor’s behalf. Two of the largest  clearinghouses are Emdeon and Relay Health but there are many others also.

The doctor’s office uses its medical billing software to create claims (medical bills to the insurance) for every patient who the doctor treats. The medical billing software also creates electronic files for those claims so you can send those claims to the clearinghouse in a common computer readable format. Each claim within the file contains information about the insurance company to which the claim will be sent, information the doctor sending the claim, and information about the patient and the patient’s condition/treatment. As you will recall from looking at the paper claim, the information is very similar in nature; however, the electronic version is hard for a human to read.

As with paper claims, the electronic claim’s address is VERY important. IF the claim doesn’t make it to the right ‘address’ for the insurance company, it cannot be paid. Every insurance has an electronic address and sometimes multiple electronic addresses depending on how they route their claims internally. While the electronic address is different in many ways, you can think of it as like an email address. The address is called a Payer ID and it is alpha-numeric. This Payer ID  tells the clearinghouse the electronic ‘mailing’ address for the insurance company. If you are curious about a Payer IDs, you can look at them on Emdeon’s web site (when you get to Emdeon's site, type Aetna in to the box titled payer name, then click the button titled view list).

The claims submitted electronically will produce two types of reports that tell you about the status of the claims you sent. These are clearinghouse reports and carrier reports. Both are referred to as EDI Reports (electronic data interchange). You can expect to receive these reports electronically within 24-72 hours after sending the claim. Although there are many different clearinghouses and many different insurance companies, the reports are basically pretty standard. These reports are VERY important.

The reports that come in reply to the claims you send will detail which claims that have been accepted sent forwarded to the insurance and which claims are rejected. If a claim is rejected it will not be sent to the insurance. The report is the only denial you will receive. If the rejection is not fixed, the claim will never be paid. In order to make sure you are collecting all the money due to the doctor’s office, you must review the reports daily, make the necessary corrections to denied claims and resubmit those corrected claims back through the clearinghouse for submission to the insurance.

The reports from electronic claims can be a little intimidating at first. They are a little tricky to read, but once you get use to them, it is really easy. To follow are a couple of example clearinghouse EDI reports for your review. In these examples, I have marked the reports to help you read them.

First is a clearinghouse rejection report. Review it carefully and notice the most important fields circled in red. There is a letter next to the field which corresponds with a description below in the legend.

This is another type of clearinghouse rejection report:

Next is an acceptance report. These claims will be forwarded to the insurance for adjudication also known as processing.

Carrier Reports are the second report you will receive. These come from the insurance company and this set of reports will only contain information about the claims that the clearinghouse accepted. Since the insurance has much more specific information about the patient and their policy, rejections from the insurance may be much more patient/policy specific. If a claim is rejected in an EDI report, this is the only rejection that you ever receive for a denied claim. Therefore the EDI reports must be reviewed daily and any errors must be corrected. After correcting the errors, the claim must resubmitted (sent to the clearinghouse again) if you wish to secure payment. Since most insurance companies EDI systems are separate from their processing / adjudication system the insurance claims department will have no record of claims that denied in the EDI reports.

So, if you ever call the insurance to ask why a claim is unpaid and they tell you that they never received it…

1. Ask the insurance to confirm their payer ID and compare it to what you have in your medical billing software. Then correct it if necessary before resubmitting the claim through the clearinghouse. Or, if the Payer ID is correct in your medical billing program…
2. Check your EDI reports to see if there is a rejection for that claim.

To avoid problems, be sure to review your EDI reports every day!

Sending Claims to Insurance

There are two ways to send medical claims to the insurance company, electronic and paper. The paper method is outdated. Very few paper claims are being processed anymore in the electronic age. However, if you have to send a paper form, sending them  is fairly simple…mail it. Still, there are problems with paper claims that make conversion to electronic claims very worthwhile. Sending a paper claim is more expensive than an electronic claim. Many do not consider the costs in their entirety. Remember that the mailing costs more than the stamp, the cost of the claim form, printer toner, the cost of the envelope and the cost of a biller’s time to prepare the claims. Unfortunately paper claims won’t go away just yet as they are still required by some smaller insurance carriers, for appeals and some corrected claims, But, try to avoid them when/if possible.

An important part of sending a paper claim is the address to which you mail it. Incorrect mailing addresses it the number one reason that claims are “not received”. Most patients’ insurance cards have a claims mailing address on the card, but just because it is there doesn’t make it right. The card may be old or the insurance changed office locations and the patient has not yet received the new insurance card. After a while you will become familiar with your practices most common insurances and their mailing address. But here are a few hints about sending paper claims to the right place.

·                       Pay close attention to the mailings, updates and letters that your insurances send to you. Most insurances will announce a change in their mailing address in advance with an effective date.

·                       Understand Medicare’s claims submission rules. Medicare and Medicaid are government programs (governed by CMS). The programs hire other agencies to process claims for them, these other agencies are called fiscal intermediaries. The contracts for a fiscal intermediary are awarded and change from time to time. With the change of fiscal intermediary the claims mailing address will also change. Watch your Medicare updates carefully. Remember, too, Medicare and Medicaid HATE paper claims and have limitations regarding who can send them. So before you bill Medicare/Medicaid on paper check to see if you are eligible.   

·                       Medicare requires that claims be sent to the Medicare fiscal intermediary responsible for the location where the services were preformed. For example, your practice has two locations one in New Jersey and one in Pennsylvania. On January 1 the patient John Doe was seen in the New Jersey office - send the claim to New Jersey Medicare because the doctor treated the patient in New Jersey. On January 2 the patient John Doe was seen in the practices Pennsylvania office – send the claim to Pennsylvania Medicare because the patient was seen in Pennsylvania. The place where the patient lives or which is the doctors “primary” office has no bearing whatsoever on claims to Medicare only where the patient was seen. A final example on this point, the patient John Doe lives in Florida and is visiting New Jersey for the week, he sees a New Jersey doctor for a head cold. The doctor will send the claim to New Jersey Medicare.

·                       Understand Blue Cross Blue Shield claim submission rules. Blue Cross has a program called the “Blue Card Program”. This entitles eligible patients claims to be submitted to the “local” Blue cross Blue Shield. The local Blue Cross is the doctor’s local Blue Cross. Blue Cross Blue Shield has offices in every state in the union your local is the state or local Blue Cross for the location where the services were rendered. The insurance card will indicate the words “Send to your local Blue Cross blue Shield Carrier” and usually have a blue suit case on the card. The local Blue Cross address is usually not the same as the in-state claims addresses although electronically they usually are the same, so call Blue Cross and ask for the Blue Card address and phone number. For example, a patient is covered under Blue Cross Blue Shield of Maine and is seen by a New York doctor, the doctor will send the claim to the Blue Card address assigned to New York Blue Cross providers.

·                       Blue Cross Blue Shield very often divides their claims by policy type and different policy types have different addresses. For example, HMO claims go to a different address than PPO claims. Pay attention to the address on the card!!!!!!!

·                       Understand an “administrator”. An administrator is a company the processes some claims for special groups within an insurance network these claims often go a different address that regular claims. A good example is Amerihealth, as of now Amerihealth PPO and HMO claims are sent to one address. There is a division of Amerihealth called Amerihealth Administrators who processes claims for small groups and unions. Amerihealth administrators, although a division of Amerihealth is a different insurance company as far as claim submission and phone calls go.  If you see the word Administrator on the insurance card, pay close attention to the mailing address and don’t assume that it is the same as the regular insurance that you are familiar with.

·                       Confirm claim submission addresses while you are checking patient’s eligibility. This small step can alleviate a lot of problems and really takes very little time.

·                       When in doubt - CALL and ask the insurance. Have the patient’s policy number and the provider tax ID or provider number ready and ask where they want claims to be sent.

Many of these same rules will also apply to electronic claims. Even though there is no envelope and no paper claim, the address to which you send the claim is VERY important. The electronic address is called a payer ID and will be discussed in length in  the next post.  

How to Complete a CMS 1500 Form

Preparing a claim for insurance billing is very easy but requires utmost accuracy. Even a minor error in this part will result in claim denial. Today most claims are billed electronically. Electronic billing consists of entering the billing information in to the practice management system and sending the claim electronically via EDI (electronic data interchange). The data that you enter in to the practice management software can also populate the CMS 1500 form. Although EDI and the paper form are different in many ways you cannot see, the basic premise is the same and best taught using the paper form.

You can break down the form in to three sections. At the top, you must enter the patient’s personal information, like name, date of birth, insurance information, etc.. At the bottom of the form you enter information about the visit to the provider including diagnosis, procedures, etc.. Last, there is information about the doctor who provided the services.

Here is an image of the CMS 1500 form used for medical billing:

CMS (The Centers for Medicare and Medicaid Services) provides a detailed, line by line explanation on how to complete the form. Rather than trying to retype all that info, I will provide you with the direct link to instructions on completing the form. Those instructions can be found at How toComplete a CMS 1500 Form. 

Types of Insurance

There are three basic types of medical insurance plans. They are Managed Care Plans, Indemnity plans and Combination Plans.  The three plans are very different in method and focus, here’s how:

Managed Care Plans	Indemnity Plans	Combined Plans
Focus on preventative care	Focus on present illness	Any combination of the managed care and Indemnity plans as written by the insurance carrier
Strict authorization/referral guidelines	Fewer requirements for service authorizations. No referrals
Limited list of physicians covered in network	Larger list of network physicians. Policies sometimes have out of network benefit coverage
No deductible	Has deductible
No coinsurance	Has co-insurance
Small out of pocket costs for the patient in the form of co-payments	Larger out of pocket expense with deductibles and coinsurances. No co-payments
Summary	Summary	Summary
More rules less expense	More expense less rules	Depends on the plan and benefits

In some situations patient's who have been injured will be covered by a “liability carrier”. This may be the auto insurance or workman’s compensation carrier.

Liability insurance does not have traditional insurance card. The information will be provided by the patient initially. The patient should give you the name and contact number for an insurance representative called the “adjustor” in addition to their id number called by the liability carrier the “claim number”. The adjustor reviews the accident details and handles the medical claim payment. When you speak to the adjustor for the first time to confirm coverage be sure to obtain the following information:

A.                The “claim number”. This number is in place of a medical insurance policy number. The liability carrier will refer to the accident and injury as a “claim”, don’t get confused.

B.                 The accident date. This information will be required on the claim form for an accident.

C.                 Documentation requirements. It is a pretty safe bet that the liability carrier will want documentation or doctor’s notes with every medical bill.

D.                Their fax number. This will help when you have to send documentation or forms and sometimes they will allow claim submission via fax too.