Reimbursement

HTH 1304, Health Information Technology and Systems 1

Course Learning Outcomes for Unit IV Upon completion of this unit, students should be able to:

6. Outline the functions of the American Health Information Management Association (AHIMA). 6.1 Discuss how AHIMA’s work groups support reimbursement and billing.

7. Investigate policies that comply with the changing regulations among payment systems for health

care services. 7.1 Explain the types of health insurance plans. 7.2 Differentiate between various health care reimbursement methodologies. 7.3 Outline government-sponsored health insurance plans.

Course/Unit Learning Outcomes

Learning Activity

6.1 Unit Lesson Chapter 6 Unit IV Homework

7.1 Unit Lesson Chapter 6 Unit IV Homework

7.2 Unit Lesson Chapter 6 Unit IV Homework

7.3 Unit Lesson Chapter 6 Unit IV Homework

Required Unit Resources Chapter 6: Financial Management

Unit Lesson At some point in the average American’s lifetime, he or she will seek some type of medical service. If you think about it, from your birth (which is a medical procedure) until your age today, more than likely you have been to a clinic or hospital for an observation, procedure, or surgery. If you have not, then you have been pretty healthy, or you are probably more powerful than a locomotive and able to leap tall buildings in a single bound. For those who have received care from a health care provider, you may remember the reimbursement that took place as compensation for the service. As a society, we have come a long way from how we pay for our medical services. There was a time in which medical services were bartered for with numerous items such as crops, cattle, and jewelry. With the introduction of health insurance, the reimbursement field has greatly evolved and grown in participation from all directions. As the number of people becoming insured has increased since the inception of health insurance contracts, the number of payers has increased as well. There will always be individuals who decide not to purchase a health insurance plan and will, in a sense, self-pay for their services, in which case they would be their own payer. A payer is the entity that is primarily responsible for reimbursement, or payment, for a health care service (Davis & Davis & LaCour, 2017). On the flip side, many people decide to sign up with a private third- party payer who reimburses health care providers for the services provided to the individual. The private third party, in most cases, is an insurance company who assumes a portion of the health care costs of a population

UNIT IV STUDY GUIDE

Reimbursement and Billing

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of people in exchange for a premium payment from the consumer or the insured. There may be other costs that the insured agrees to pay such as copayments, co-insurance, and/or deductibles. Some of your bigger names in the private health insurance industry are Humana, Unitedhealth, Aetna, Cigna, and the Kaiser Foundation. Individuals can purchase their insurance plans directly from the insurance company, or, if they are a part of a group plan provided by an employer, which is more common, the employer will pay a portion of the employee’s health insurance premium. In today’s health insurance market, there are many different insurance plans with options that consumers can tailor to themselves or their families. These different insurance plans can be categorized into two types: indemnity plans and managed care plans. Indemnity plans were much more common in the past, but, as time has progressed, this insurance model has shown that it may not be the most effective way to manage health care costs. An indemnity insurance policy is a pretty simple concept. An insurer, or payer, agrees to pay all or some of the insured’s health care costs for covered services. The insured agrees upfront on a list of covered medical services provided by the insurer. On top of a premium that is paid to the insurer, the insured may also be responsible for paying a deductible before the payer reimburses the covered service. These deductibles can fluctuate in cost and frequency. While there are other characteristics that distinguish indemnity insurance plans from managed care plans, indemnity plans are often clear cut policies where the insured is aware of what services will be covered and what they will have to pay out of their own pockets for the care. As health care costs continue to rise, insurance companies will continue to see a need to better control these costs, and this leads the way for the inception of managed care health insurance plans. Managed care insurance plans refer to health insurance policies where the insurer, or payer, and the health care provider have a contractual agreement with the goal of reducing health care costs (Davis & LaCour, 2017). Since managed care plans are contracts between the insurance company and the health care provider, the person being insured is called a subscriber, and those covered under the subscriber’s policy are known as dependents. Like with deductible and co-insurance fees in indemnity plans, there may be other costs that subscribers under managed care plans have to incur. One example of this would be what is called a copay, which is the amount the patient must pay at the time of the encounter. Managed care organizations have decision-making power over the services that the subscriber and/or dependents can undergo, which cuts down on wasteful procedures, thus reducing costs. Costs are also controlled by restricting the amount of options that a patient has. This can be explained through the utilization of insurance plan networks, which refers to the health care providers that have agreements with the insurance companies. Usually, it is cheaper for the patient to stay within the network of providers versus going outside of the network. In some managed care plans, the patient can go outside the network, but these plans are usually more expensive as it gives the patient more flexibility and the insurer less control. Another way that managed care organizations try to control costs is by the use of preventative care. Preventative care entails more routine health care services and differs with gender and with age. The thought is that if patients go to the doctor more often for screenings and observations, they are less likely to have major problems as they grow older. Services such as mammograms for women and prostate exams for men are two good examples of preventative care services. If patients are undergoing these procedures regularly, the probability that diseases and illnesses are caught in their early stages rises, and this can minimize health care costs on the back end. There are three primary types of managed care organizations/plans that offer health insurance to subscribers: health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point of service (POS) plans. Each one of these is distinctly different in how they operate, what providers they allow patients to see, and how much the plans cost to the insured. In addition to them being different from each other, there are also categories within each managed care type that further differentiates the types of plans a subscriber and their dependents can receive. Health maintenance organizations (HMOs) are one type of managed care, and they typically own or have employer control of the health care provider. The HMO’s networks of health care providers are typically used for all services, and it is rare that an HMO pays for services provided to the patient outside of the network (Davis & LaCour, 2017). Preferred provider organizations (PPOs) also control the delivery of health care to its subscribers but with a little more flexibility than HMOs. Because of this flexibly, PPO plans are usually more expensive than HMO plans. Subscribers to PPOs are allowed to see health care providers outside of the organization’s network with proper approval. This approval will come from a primary care physician (PCP) who coordinates the routine care of patients as well as makes any referrals to doctors or specialists outside of the organization’s

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network. Once the PCP refers the patient to a provider outside of the network, the PPO plan will reimburse as an indemnity plan would with a specified service and cost and a deductible. Point of service (POS) plans are flexible like PPO plans but still contain some characteristics of an HMO plan. POS plans are a mixture of the two as they have an in-network PCP, but subscribers are also able to go out of network providers for services. Once a medical service has been performed and coded, the reimbursement process begins. There are multiple ways in which this can happen with the most common methods being fee for service, discounted fee for service, prospective payment, and capitation. The first two reimbursement methodologies mentioned here are pretty straightforward. Fee for service means just what it is says; after a service is rendered, a predetermined amount is paid to the health care provider. This simple reimbursement method was used in the bartering of items as was mentioned earlier, but it is more common now to see providers compensated with money. Discounted fee for service is similar to fee for service, but in this method, the insurer and the provider agree on a payment that is less than what the provider would normally charge for said service. The incentive for the provider would be the volume of patients that the insurer adds to the provider’s business (Davis & LaCour, 2017). Prospective payment and capitation are much different from the fee for service methods that were discussed. Briefly, prospective payment is a reimbursement method where the cost for the service is not the determining factor. There are multiple factors that go into determining what the insurer will pay such as the diagnoses, services or procedures, and setting, such as inpatient or outpatient. Research is done on the historical cost of a given medical service, and the provider is compensated accordingly. For example, if research determines that a gastric bypass surgery on average costs $1,000, then that is what the insurer will pay the provider for a patient undergoing that same procedure. If that patient, for some reason, spends an extra two days in the hospital, which brings the total cost of this procedure to $1,500, the provider is still only compensated with the predetermined amount of $1,000. On the flip side, if the patient’s surgery only amounted to $500 worth of resources being used, then $1,000 is still awarded to the health care provider. Many entities use this type of reimbursement method, with one of the more common ones being Medicare. Capitation is the only one of these reimbursement methods that is not based on services rendered. For this type of reimbursement, an insurer pays a provider a flat amount based on a set number of patients. For example, an HMO assigns 10 insurance plan subscribers to a single PCP for a time period. The insurer agrees to pay the PCP $1000 for all 10 patients during that time. If none of the 10 patients sees the physician in that time period, he or she will still receive the $1,000. On the contrary, if all 10 patients are seen by the physician and that real cost turns out to be $2,000, the physician will still receive $1,000. Depending on the situation, this can be a gift and a curse to both entities involved. Private payers are not the only insurers in modern health care. The United States government is also a health insurance payer with its Medicaid, Medicare, and TRICARE programs, to name a few. These programs are government sponsored and are known as entitlement programs as you can qualify for them through various avenues. The Medicaid program is a state-funded health insurance program covering low-income individuals and families. The Centers for Medicaid and Medicare Services (CMS) is tasked with administering the Medicaid program as well as the Medicare program. The Medicare program is a federal funding entitlement program that covers our elderly population and those receiving Social Security benefits. Medicare is a very and important program as it represents over half of the income of some health care providers. This program is vital for the livelihood of many health care providers across the country, which makes it a very popular topic of discussion. We are approaching an interesting time as a population known as Baby Boomers is approaching Medicare age, and this will greatly impact the Medicare program (Centers for Medicare & Medicaid Services, n.d.). TRICARE is another government sponsored program administered by the Department of Defense to provide health benefits to members of the armed forces and their families. This program also provides health insurance benefits to veterans who have retired from the military. There are many different types of TRICARE plans, and who can qualify for these benefits can depend on a variety of factors. It is important to note that, unlike Medicare and Medicaid, TRICARE is not an insurance program but rather a benefit. Factors such as years of service and location determine the benefits given to the service member and his or her family.

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In the last unit, you learned about medical coding systems and how important it is for those codes to be accurate and available to be safely shared with other stakeholders. One of the stakeholders that would use that coded data is the reimbursement department of a health care provider. They would use the data coded by a medical coder to bill the payer for the services and/or procedures that were performed. These two entities rely heavily on each other to ensure that the coding and billing of medical services is accurate and will not result in rejected or delayed insurance claims. One pioneer in the initiative to create a better coding-reimbursement relationship is the American Health Information Management Association (AHIMA). One of the ways in which AHIMA is fostering a more efficient billing and coding atmosphere is through its clinical documentation improvement (CDI) program. The goal of AHIMA’s CDI initiative is to improve the clinical documentation by applying standards that would ensure accurate medical coding for the purposes of reporting, disease tracking, and reimbursement (AHIMA, n.d.). CDI programs impact the health care revenue cycle and are something that all health care providers should consider implementing to accompany other continuous improvement initiatives. Accurate documentation not only promotes better communication between the coding and reimbursement departments, but it also improves the overall delivery of patient care by creating more efficient processes and more timely services.

References American Health Information Management Association. (n.d.). Clinical documentation improvement:

Overview. http://www.ahima.org/topics/cdi Centers for Medicare & Medicaid Services. (n.d.). National health expenditure projections 2016-2025.

https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends- andReports/NationalHealthExpendData/Downloads/proj2016.pdf

Davis, N., & LaCour, M. (2017). Foundations of health information management (4th ed.). Elsevier.

Learning Activities (Nongraded) Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit them. If you have questions, contact your instructor for further guidance and information.

• Chapter 6: Competency Milestone and Critical Thinking Questions, pp. 226–228