Component 1: Introduction to Health Care and Public Health in the U.S.

1
Component 1 Introduction to Health Care and
Public Health in the U.S.

• 1.5 Unit 5 Financing Health Care
• (Part 2)
• 1.5a Private Health Care Plans and Medical
  Billing and Coding

2
Unit 5 Objectives

• Describe healthcare financing in the US and the
  history and role of the health insurance industry
  
• Understand the payment process in healthcare and
  concepts of reimbursement, billing and coding of
  claims using appropriate code sets during the
  billing process
• Review factors responsible for escalating
  healthcare expenditures in the US
• Describe methods of cost containment

3
Section 5A Goals

• Examine total healthcare expenditures in the
  United States
• Review the growth and development of the health
  insurance industry in the US
• Describe the revenue cycle and the billing
  process including charge capture and coding in
  the cycle that ensures appropriate reimbursement
• Review the use code sets and electronic data
  interchange transactions used in the claims
  process

4
National Health Expenditures

• 2008
• Total Healthcare Expenditures (billions) 2339
• Private 1232
• Public 1107
• Federal 817
• State and Local 290
• U.S. Population in Millions 305
• GDP in Billions 14441
• National Health Exp. Share of GDP () 16.2

Adapted from Centers for Medicare and Medicaid
Services, Office of the Actuary, National
Health Statistics Group, at http//www.cms.gov/Nat
ionalHealthExpendData/ (Historical)
5
U.S. Healthcare Expenditures (2008)

• Average 7668 per person
• 16.2 GDP 2008/19 GDP by 2018
• 23 paid out of pocket
• 64 paid by private health insurance
• Private health insurance developed during last 80
  years

Adapted from Centers for Medicare and Medicaid
Services, Office of the Actuary, National
Health Statistics Group, at http//www.cms.gov/Nat
ionalHealthExpendData/ (Historical)
6
History of Healthcare Financing

• Late 19th and early 20th century
• Care provided at patients or doctors home
• Self-pay/charity payment for services
• Increasing advancement of medicine as a science
  especially in surgery and infectious disease
• AMA standardizes medical education and quality of
  care improves
• Medical care for illness moves out of the home to
  doctors office, surgical care at hospitals
• Commercial health insurance not available due to
  unpredictability of health and moral hazard

Adopted from Thomasson, M, Health Insurance in
the United States, available at
http//eh.net/encyclopedia/article/thomasson.insu
rance.health.us
7
Early Hospital Physician Health Plans

• In 1929, 1300 Dallas school teachers contract
  with Baylor Hospital for 21 days hospitalization
  for 50/month each
• Hospital service plans - steady stream of income
• Exempt from most state insurance regulations
• Later becomes Blue Cross
• Physicians fearing loss of control form own
  associations
• In 1939, California physicians form pre-paid
  healthcare services plan
• Blue Shield Association

Adapted from History of Blue Cross and Blue
Shield available at http//www.bcbs.com/about/hist
ory/
8
Employer Pre-paid Plans

• Ross-Loos Medical Group provided pre-paid care to
  Los Angeles County employees
• Believed to be first HMO in US
• Focus on quality of care including preventive
  care
• Surgeon Dr. Sidney Garfield starts pre-paid
  medical practice
• 1930s Organizes employer pre-paid plan for
  construction workers on the Los Angeles Aqueduct
  and Grand Coulee Dam and Kaiser Shipyards during
  WWII
• Fixed payment per employee per month
• Subsequently, formed Permanente Health Plan
• Open to the public
• Union support boosts growth

9
Commercial Health Insurance

• Commercial insurance carriers offer group health
  insurance
• Compete against the Blues
• Employer (group) enrollment spreads risk and
  addresses moral hazard
• Experience rating vs. community rating lower
  rates for young healthy individuals

10
Factors Influencing Development of Commercial
Health Insurance

• WWII wage controls
• Employers offer health insurance as a benefit to
  attract skilled employees
• IRS favorable tax treatment
• Employer free of payroll tax
• Employee -- no income tax
• Employer sponsored health contracts
  non-cancellable
• 1949 Unions may negotiate health insurance
  benefits as part of wages

Adopted from Thomasson, M, Health Insurance in
the United States, available at
http//eh.net/encyclopedia/article/thomasson.insu
rance.health.us
11
HMO Plans

• Health Maintenance Organization Act of 1973
• Federal grants and loans to encourage HMOs
• Required employers offering traditional health
  plans to offer HMO option
• HMO offers comprehensive, prepaid health coverage
  for hospital and physician services through
  specific health care providers
• Gave pre-paid health plans access to the employer
  based insurance market

12
Healthcare Plans Today

• 85 of the population have health care insurance
• Future challenges increasing demand and driving
  costs include
• Aging of the population
• Chronic disease
• Increased government spending

13
Billing and Coding - Definitions

• Medical billing process of submitting claims to
  insurance companies in order to receive payment
  for services rendered by a healthcare provider
• Coding process of translating the written
  diagnosis and procedures relating to a patient
  encounter into a numeric classification or code
• Code set any set of codes used to encode data
  elements, such as tables of terms, medical
  concepts, medical diagnostic codes, or medical
  procedure codes. A code set includes the codes
  and the descriptors of the codes.

Adapted from Castro, AC and Layman, E,.
Principles of Healthcare Reimbursement. Chicago,
IL American Health Information Management
Association 2006,
14
Billing and Coding Definitions

• Charge capture process of collecting all
  services, procedures, and supplies provided
  during an encounter or patient care
• Charge description master the database of prices
  for services provided used by HCOs during the
  billing process (price list)
• Electronic data interchange (EDI) the structured
  transmission of data between organizations by
  electronic means using standard transaction sets
• A transaction set an electronic model of a paper
  transaction or form

Adapted from Castro, AC and Layman, E,.
Principles of Healthcare Reimbursement. Chicago,
IL American Health Information Management
Association 2006,
15
Revenue Cycle Overview

• Appointment scheduled
• Registration Demographic and insurance info
• Services provided
• Charge capture
• Coding
• Claim submission paper or electronic
• Reimbursement received
• Final settlement with patient

Adapted from Castro, AC and Layman, E,.
Principles of Healthcare Reimbursement. Chicago,
IL American Health Information Management
Association 2006,
16
Registration

• Practice management software or hospital
  management software
• Demographic information
• Accurate patient and responsible party
  information
• Insurance information
• Confirm terms of coverage
• Determine deductibles, copayments, and
  coinsurance
• Accurate claim identification by 3rdPP

Adapted from Castro, AC and Layman, E,.
Principles of Healthcare Reimbursement. Chicago,
IL American Health Information Management
Association 2006,
17
Charge Capture

• Charge capture the process of collecting a list
  of all services, procedures, and supplies
  provided during an encounter or in the course of
  care
• Paper based forms
• Superbill, encounter form, or charge ticket
• Electronic capture
• Charge description master database used by
  healthcare facilities the price list
• Automatic and accurate

Adapted from Castro, AC and Layman, E,.
Principles of Healthcare Reimbursement. Chicago,
IL American Health Information Management
Association 2006,
18
Coding

• Clinical terminology - diagnosis and services
  converted to a standard code, for example
• Diagnosis
• Upper respiratory infection 461.9 (ICD-9-CM)
• Service, procedure or test
• New patient, office visit, level II 99202 (CPT)
• Biopsy of skin, subcutaneous tissue and/or mucous
  membrane(including simple closure), unless
  otherwise listed single lesion 11100 (CPT)
• Immune globulin 10 mg J1564 (HCPCS Level II)

19
HIPAA Code Sets

• Health Care Common Procedure Coding System
  (HCPCS) and Current Procedure Terminology (CPT)
  codes - AMA
• ICD-9-CM Volumes 1 2 (diagnosis codes) and
  ICD-9-CM Volume 3 (procedures) National Center
  for Health Statistics, CDC
• National Drug Codes (NDC) DHHS and drug
  manufacturers
• Code on Dental Procedures and Nomenclature (CDT)
  - ADA

Available at http//www.cms.gov/HCPCSReleaseCod
eSets/01_Overview.asp last accessed July 27, 2010
20
ICD-10-CM ICD-10-PCS

• Replaces ICD-9-CM Volume 1 2 and ICD-9-CM
  Volume 3
• Compliance set for October 1, 2013

21
ICD-9-CM

• Diseases of the circulatory system( 390-459)
• Ischemic heart disease (410-414) (410) Acute
  myocardial infarction (410.0) MI, acute,
  anterolateral (410.1) MRI, acute, interior,
  NOS

22
Claim Code Sets

• Physician - Inpatient and outpatient
• Diagnosis ICD-9-CM
• Procedure CPT
• Hospital Facility inpatient
• Diagnosis ICD-9-CM
• Procedure ICD-9-CM volume 3
• Hospital Facility outpatient
• Diagnosis ICD-9-CM
• Procedure HCPCS (CPT Level I and HCPCS Level
  II)

23
Claim Submission

• Claim elements
• Demographic and insurance identification
  information
• Encounter elements
• Dates
• Diagnosis
• Procedure
• Identifiers
• Paper claim or electronic transaction
• Paper physicians CMS Form 1500 or facility
  CMS Form 1450
• EDI 837 Transaction

24
Electronic claims-transactions

• Electronic data interchange (EDI)
• HIPAA privacy rules/Transactions Rule
• 837 Healthcare claims or equivalent encounter
  information
• 835 Healthcare payment and remittance advice
• 270/271 Eligibility for a health plan
• 276/277 Health claims status
• 278 Referral certification and authorization

Available at http//www.cms.gov/TransactionCodeSe
tsStands/01_Overview.aspTopOfPage, last
accessed July 27, 2010