Do You Speak Their Language?

Edition: July 2002 - Vol 10 Number 07
Article#: 1270
Author: Sheila Dunn

''So, how much did you make last year?''
Unless you're a tax accountant, that's not exactly the kind of question you'd ask a friend or business acquaintance – not without looking like an ill-mannered jerk anyway. Didn't our mothers tell us it's not polite to talk about money?

Maybe that's why you might see a physician squirm when told, ''This test costs only $3, but Medicare pays $25.'' Your accounts are uncomfortable talking about the ''M'' word or its equivalents – reimbursement, revenue, income.

But they don't have to be! The trick is to understand billing and reimbursement enough to answer your accounts' questions, but not to dwell on these issues as the sole reason for purchasing a product. And knowing how a physician is reimbursed, for such sales as diagnostic testing equipment, is essential for you to do your job.

Have you ever…
• Discussed Medicare reimbursement with a pediatrician?
• Been asked how to bill for something you sold?
• Sold a product where the account comes back to you and says, ''Nobody will pay for this?''
• Talked to a hospital materials manager about how much a product will reimburse?

If you have, read on. This article is the first of a two-part series on what you as a distributor must know to give accurate coding, billing and reimbursement information to your primary care accounts. We can't promise this lesson in reimbursement will be fun, but we can promise that understanding physician payment systems will make a difference in your success.

Lesson One: How the System Works
Every physician in America gets paid like this for a patient visit: Depending on whether the patient is new or established, and whether the patient has a simple or a complex disorder that requires a lot of time, the physician bills an insurance company for the visit. The billing clerk uses a familiar set of ''Evaluation and Management'' codes, which begin with 99xxx, to designate the level of the visit that occurred. E & M codes are everyday lingo for every doctor, office manager and billing clerk. (See Chart 1)

Chart 1
Common E & M CPT Codes for New Patients        

CPT Type of VisitTypical TimeAverage Reimbursement
99201Lowest level visit10 min$34
99202Expanded level visit20 min$62
99203Detailed, low-level medical decision making30 min$92
99204Comprehensive exam, moderate decision making45 min$131
99205Comprehensive exam, high decision making60 min$166

Common E & M CPT Codes for Established Patients        

CPT Type of VisitTypical TimeAverage Reimbursement
99211Non-physician office visit, lowest level visit5 min$20
99212Focused visit10 min$36
99213Expanded patient visit15 min$50
99214Detailed history and exam, moderate-level medical decision making40 min$79
99215Comprehensive exam, high-level decision making60 min$116

Uncle Sam knows the ''profile'' for different physician specialties. So, if a physician tries to beat the system by billing patient visits at a higher level (e.g., upcoding a 99213 patient to a 99215), the system will flag this claim and agents from the Office of Inspector General (OIG) may soon come knocking.

Upcoding can result in a surprise audit by watchdogs from the Office of Inspector General (OIG) or in a debit taken by the insurance company to recoup all overpayments to the medical facility. Most physicians have heard about colleagues who were forced to give back thousands of dollars or pay outrageous penalties for shady billing practices. This is another reason why physicians are wary of discussing reimbursement.

That's it. There are no additional payments for telephone conversations, renewing prescriptions or talking with a patient's relatives. There are no extra payments for low-ticket procedures that are considered to be part of the office visit, such as pulse oximetry, heart rate and blood pressure.

There are, however, payments in addition to an office visit for ancillary procedures that can be billed above and beyond a routine office visit. Examples of these are:
• EKGs and other diagnostic procedures, such as sigmoidoscopies and spirometry.
• Laboratory tests.

Lesson Two: Who Pays The Bill…or, The Real Villains – The Insurance Industry
Everybody loves to hate insurance companies – from the doctors who believe they don't pay enough, to patients who think they don't cover enough medical services. Insurance companies are indeed paying less – and taking longer than ever to do it. Nevertheless, they are responsible for footing the bill for most medical services provided in this country.

After the patient visit is over, depending on the coverage he or she has, an insurance company is billed. About 15 percent to 20 percent of Americans have no insurance, so these patients must pay out of pocket. Anyone over age 65, or those with some permanent disabilities, has Medicare coverage. Finally, most of us working stiffs have a managed health plan.

Private insurance is also called indemnity insurance or fee-for-service. In most cases, people with private insurance belong to preferred provider organizations (PPOs) through their employer. For physicians to participate in a PPO plan, they must sign a contract with the plan in which they agree to provide discounted care in exchange for the privilege of being ''in-network'' for beneficiaries of that PPO.

Some of the biggest medical insurance companies in the United States are Aetna U.S. Healthcare and United Healthcare. Both of these companies, as well as many smaller insurance companies, process claims for Medicare and private insurance. In fact, it's common for a large insurer such as Aetna to have several different types of insurance plans, just like airline frequent flyer programs and credit cards. Some examples:
• PPO Select (for ''poor'' people)
• PPO Gold
• PPO Platinum (for ''rich'' people….Hey, how much did you pay for that??)

Lesson Three: The Medicare Program
Regardless of which insurance company is billed or which type of insurance plan the patient has, all billing is done with the CPT system, and payments are benchmarked back to the Medicare payment system.

Medicare is the federal health insurance program for persons age 65 years and older, as well as certain disabled persons. It was enacted in 1965 and implemented in 1966 under President Lyndon Johnson. Establishing the federal government as a payer for healthcare services was a major shift in fiscal responsibility. Prior to Medicare, liability for healthcare services was the sole responsibility of the patient.

Since its enactment, Medicare has been both a reliable source of income for physicians as well as an administrative burden that has subjected them to increasing government control. Medicare now serves over 38 million Americans.

Medicare is administered by the Centers for Medicare and Medicaid Services (CMS, formerly HCFA), a division of the U.S. Department of Health and Human Services (HHS). Since Medicare is the benchmark for virtually all other billing systems, it is critical to understand how it works.

Medicare has two parts: Parts A (hospital insurance) and B (medical insurance) (See Table 1). Part A is financed primarily by payroll taxes and is premium-free for nearly all beneficiaries. A person is eligible for Medicare Part A if he/she is 65 years or older and eligible for any type of monthly Social Security benefit. When a person enrolls in Part A of Medicare, he/she is automatically enrolled in Part B unless that person declines. If the individual enrolls in Part B, he or she pays a $50 monthly premium, which is deducted automatically from monthly Social Security benefits (See Table 1).

Table 1
Medicare Coverage and Payment        

 Part APart B
CoverageCovers inpatient hospitalization, skilled nursing facilities and home health agencies.Covers Physician services, outpatient lab and X-rays. Other medical services and supplies not covered in Part A.
PaymentPayment is based on Diagnosis Related Groups, or DRGs, which are fixed payments for a particular patient diagnosis.Each year, Congress passes national fee limits for all Part B services, but local fee schedules are used by insurance carriers that administer the Part B program. Local fees paid are less than or equal to the national limit.
Administration 47 Fiscal IntermediariesOver 40 insurance carriers handle Medicare claims for certain geographic areas.

Table 2

CPT (Current Procedural Terminology) CodesDeveloped by the American Medical Association in 1966 and adopted by Medicare and most private insurers. One 5-digit code is used for each test. Laboratory codes are the 80000-89999 series.
HCPCS (HCFA Common Procedure Coding System) Level II National CodesPronounced “hick-picks,” these codes are used for new lab codes before they are published in CPT and for miscellaneous supplies (notably orthopedics) and injectible drugs. HCPCS begin with a letter followed by 4 digits.
ICD-9 (International Classification of Diseases, 9th edition) Diagnosis CodesUsed to indicate the medical necessity (disease state) for the test performed. Medicare will pay only for services directly related to a patient's illness or injury.

Unlike Part A Medicare, where hospital services and diagnostic testing are included as part of the DRG payment (hence its nickname, ''da' revenue's gone!''), testing and office visits in physicians' offices are separately paid under Medicare Part B. For Medicare Part B, the beneficiary is responsible for the first $100 of allowable charges per year. After that, Medicare pays for 80 percent of all physician-related charges; the beneficiary is responsible for the rest.

The Medicare program recently added Part C, Medicare + Choice, which consists of ''managed'' coverage, such as HMO plans. Fewer than 20 percent of seniors have opted for managed Medicare plans, but this is likely to increase if Medicare + Choice begins to cover prescription drugs.

Finally, Medicare beneficiaries may choose from one of 10 standard Medigap plans which, for a monthly premium, cover the ''gaps'' in Medicare coverage or provide additional benefits, such as limited coverage of prescription drugs, at-home recovery, foreign travel, or preventive care.

The last essential lesson about Medicare is that for ancillary services, such as lab testing, Medicare pays only the facility that performed the tests. This is why accounts with a large proportion of Medicare patients will likely perform in-office testing, such as laboratory work.

Lesson 4: Coding for Fun and Profit
To submit claims for payment to Medicare (or any other type of insurance), three types of codes are used (Table 2). These codes are found in three separate codebooks, which are available from the American Medical Association (800-621-8335) or Medicode/St. Anthony's (800-999-4600). (Note: Distributors may distribute the latter, but the GPs are terrible!)

Several hundred codes are changed on a yearly basis, so advise your accounts to plan to spend at least $150 a year for new codebooks. At the end of the CPT codebook lies the Medicare Carriers Manual, which explains when Medicare will pay for certain services, such as screening tests. If you're an insomniac, check out the Medicare Carriers Manual.

CPT codes representing procedures and tests for a particular patient are placed on a claim form. Both Medicare carriers and virtually all commercial insurers recognize and require the use of a common claim form, the HCFA form 1500 (See Table 2).

And There's More!
Yeah, we know. All this stuff is kinda mind-boggling. But it's going to help your accounts consistently get a higher proportion of paid claims for the services and tests they perform. Next month, we'll look at more, including a close-up look at Medicare payment amounts for diagnostic testing. Stay tuned!

-------- Clip and give to accounts to maximize paid claims --------

Part B Medicare Ground Rules for Claims Submission for In-Office Testing
To get your fair share from Medicare, keep in mind some common rules for submitting claims:
• Put your CLIA Identification Number in Block 23 (labeled ''Prior Authorization Number'') of HCFA Form 1500. Your CLIA certificate must match level of testing performed. For instance, if you have a CLIA ''certificate of waiver'' and you bill Medicare for a test that is classified as ''moderately complex'' under CLIA, such as a CBC, the claim will be denied. Also, if you fail to put the QW modifier after most waived tests, and you are classified under CLIA as waived, your claim will be denied.
• Medicare must ''cover'' a particular test in order to get reimbursed. Just because a test is listed in the CPT codebook doesn't mean it's payable under Medicare. In fact, most routine screening tests and tests performed in conjunction with a physical exam are NOT currently covered. Medicare does cover a few screening tests: mammography, pap smears, fecal occult blood, bone density testing, diabetes self-management and PSAs.
• If you're not billing electronically, you should be. Electronic claims are paid much faster than paper claims.
• The Medicare program requires direct billing. This means that only the entity that performed the test can bill the Medicare carrier.
• There is no co-pay or deductible for the patient to pay on laboratory services.
• A test must be medically necessary to be paid by Medicare. In other words, the ICD-9 code used to document the patient's illness must ''match'' the test performed. For instance, if you bill for a glucose test (CPT 82962) and the ICD-9 code on the claim is for fatigue/malaise, the claim will be denied. Not only must the ICD-9 code support the medical necessity for the test (in the example above, a correct ICD-9 code would be ''diabetes mellitus''), the patient chart must support the justification for the test.

Troubleshooting Bounced Claims
When Medicare denies a claim, you receive an ''Explanation of Benefits'' (EOB) notice, which explains why it was denied. For instance, a code on the EOB may indicate that the test ''was not a covered service'' (in this case, you're out of luck), or that ''the provider is not authorized to perform the procedure'' (which means your CLIA certificate isn't appropriate for the level of tests you perform). After examining the EOB, correct the problem and resubmit the claim. Don't waste time appealing services that Medicare doesn't cover or trying to get higher payments from Medicare. Remember, Congress sets Medicare national fee limits.

If you currently are responsible for Medicare billing, you need to keep current with annual changes to the program. Use the following three steps for smooth sailing with Medicare:
1. Correct and update all CPT codes yearly.
2. Review all EOBs and resubmit for payment.
3. Consistently challenge all denials and payment errors.

Dr. Sheila Dunn
leads Quality America, Inc., an Asheville, NC-based consulting firm that publishes an OSHA Safety Manual, video and newsletter. Quality America's newest products are a ''Sharps Injury Reduction Program'' video and the HELP Book, an Emergency Action Guide. Quality America products are sold through distribution. For more information, call 800-946-9956, or visit Quality America's OnLine Resource Center @