A practice that has interactions with the patient must now under HIPAA send most billing claims for services via electronic means. Prior to actually performing service and billing a patient, the care provider may use software to check the eligibility of the patient for the intended services with the patient's insurance company. This process uses the same standards and technologies as an electronic claims transmission with small changes to the transmission format, this format is known specifically as X12-270 Health Care Eligibility & Benefit Inquiry transaction . A response to an eligibility request is returned by the payer through a direct electronic connection or more commonly their website. It is called an X12-271 "Health Care Eligibility & Benefit Response" transaction. Most practice management/EMR software will automate this transmission, making them hidden from the user.
This first transaction for a claim for services is known technically as X12-837 or ANSI-837, and it contains a large amount of data regarding the provider interaction as well as reference information about the practice and the patient. Following that submission, the payer will respond with an X12-997, simply acknowledging that the claim's submission was received and that it was accepted for further processing. When the claim(s) are actually adjudicated by the payer, the payer will ultimately respond with a X12-835 transaction, which shows the line-items of the claim that will be paid or denied; if paid, the amount; and if denied, the reason.
Due to limited technology, many payers (especially states' Medicaid) still adjudicate claims manually; this results in significant delays — up to 48 hours or even weeks to issue 835 responses to properly submitted 837 transactions. In many cases this manual processing subverts the entire point of Congress in mandating a standardized electronic billing process. These delays can also present catastrophic problems to the availability of healthcare for those patients with difficult payers — such as happened in California with the state Medicaid program referred to as "Medi-cal
In order to be clear on the payment of a medical billing claim, the health care provider or medical biller must have complete knowledge of different insurance plans that insurance companies are offering, and the laws and regulations that preside over them. Large insurance companies can have up to 15 different plans contracted with one provider. When providers agree to accept an insurance company’s plan, the contractual agreement includes many details including fee schedules which dictate what the insurance company will pay the provider for covered procedures and other rules such as timely filing guidelines.
Providers typically charge more for services than what has been negotiated by the doctor and the insurance company, so the expected payment from the insurance company for services is reduced. The amount that is paid by the insurance is known as an allowable amount. For example, although a psychiatrist may charge $80.00 for a medication management session, the insurance may only allow $50.00, so a $30 reduction would be assessed. This is called a "provider write off" or "contractual adjustment." After payment has been made a provider will typically receive an Explanation of Benefits (EOB) or Electronic Remittance Advice (ERA) along with the payment from the insurance company that outlines these transactions.
The insurance payment is further reduced if the patient has a copay, deductible, or a coinsurance. If the patient in the previous example had a $5.00 copay, the doctor would be paid $45 by the insurance. The doctor is then responsible for collecting the out-of-pocket expense from the patient. If the patient had a $500.00 deductible, the contracted amount of $50 would not be paid by the insurance company. Instead, this amount would be the patient's responsibility to pay, and subsequent charges would also be the patient's responsibility, until his expenses totaled $500. At that point, the deductible is met, and the insurance would issue payment for future services.
A coinsurance is a percentage of the allowed amount that the patient must pay. It is most often applied to surgical and/or diagnostic procedures. Using the above example, a coinsurance of 20% would have the patient owing $10 and the insurance company owing $40.
In Medicare the physician can either be 'Participating' in which he will receive 80% of the allowable Medicare fee and 20% will be sent to the patient or can be 'Nonparticipating' in which the physician will receive 80% of the fee, and may bill patients for 15% or more on the scheduled amount.
For example the regular fee for a particular service is $100, while Medicare's fee structure is $70. Therefore the physician will get $56, and the patient will pay $14. Similarly Medicaid has its own set of policies which are slightly more complex than Medicare.
Steps have been taken in recent years to make the billing process clearer for patients. The Healthcare Financial Management Association (HFMA) unveiled a "Patient-Friendly Billing" project to help healthcare providers create more informative and simpler bills for patients. Additionally, as the Consumer-Driven Health movement gains momentum, payers and providers are exploring new ways to integrate patients into billing process in a clearer, more straightforward manner.
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