Ch. 05

Course 5: Medical Billing Insurance Claims Process

The medical billing insurance claims process starts when a healthcare provider treats a patient and sends a bill of services provided to a designated payer, which is usually a health insurance company. The payer then evaluates the claim based on a number of factors, determining which, if any, services it will reimburse.

Let’s briefly review the steps of the medical billing procedure leading up to the transmission of an insurance claim. When a patient receives services from a licensed provider, these services are recorded and assigned appropriate codes by the medical coder. ICD codes are used for diagnoses, while CPT codes are used for various treatments. The summary of services, communicated through these code sets, make up the bill. Patient demographic data and insurance information are added to the bill, and the claim is ready to be processed.

Processing Claims

A number of technical protocols and industry standards must be met for insurance claims to be delivered expediently and accurately between medical practice and payer.

Medical billing specialists typically use software to record patient data, prepare claims, and submit them to the appropriate party, but there isn’t a universal software application that all healthcare providers and insurance companies use. Even so, insurance claims software use a set of standards, mandated as by the HIPAA Transactions and Code Set Rule (TCS). Adopted in 2003, the TCS is defined by the Accredited Standards Committee (ACS X12), which is a body tasked with standardizing electronic information exchanges in the healthcare industry.

There are two different methods used to deliver insurance claims to the payer: manually (on paper) and electronically. The majority of healthcare providers and insurance companies prefer electronic claim systems. They are faster, more accurate, and are cheaper to process (electronic systems save around $3 per claim). But because paper claims have not yet been completely removed from the insurance claims process, it is important for the medical biller and coder to be well versed with both electronic and hardcopy claims.

Filing Electronic Claims

Certain technologies have been introduced into the system in order to expedite claim processing and increase accuracy.

Software

Some healthcare providers use software to electronically enter information into CMS-1500 and UB-04 documents. Using “fill and print” software eliminates the possibility for unreadable information. This software may also include certain types of “scrubbing,” or tools that check for errors in the documents. While these tools do decrease the amount of errors made in filling out claim forms, they are not always 100 percent accurate, so medical billers should remain diligent when filling out forms using software.

Optical Character Recognition (OCR)

OCR equipment scans official documents, electronically isolating and recording information provided in the different fields, and transferring (or auto-filling) that information into other documents when necessary. While OCR technology helps make hardcopy claim processing much more efficient, human oversight is still needed to ensure accuracy. For instance, if the OCR miscalculates a simple digit in a medical code, that error must be flagged and manually corrected by a medical billing specialist.

Note that when OCR equipment is not available, it is possible for a medical billing specialist to manually convert CMS-1500 and UB-04 documents into digital form using conversion tools called “crosswalks” (note that the same term applies for tools used to convert ICD-9-CM codes to ICD-10-CM). You can find crosswalk references from a number of different sources.

Filing Manual Claims

Paper claims must be printed out, completed by hand, and physically mailed to payers. The healthcare industry uses two forms to submit claims manually. Since processing paper claims requires more manual interaction with forms and data, the opportunity for human error increases compared to electronic claims. Documents can be printed improperly, and handwritten codes can be incorrect or illegible. The forms can also be mailed to the wrong address, with insufficient postage, or disrupted by logistical complications with the delivery services. These errors are costly for the healthcare provider, often resulting in form resubmission (a time-consuming process) and payment delays.

Generally, healthcare professionals like family physicians use form CMS-1500, while hospitals and other “facility” providers use the UB-04 form.

CMS-1500

The CMS-1500 is the universal claim form used by non-institutional healthcare providers (private practices, etc.) to bill Medicare for Part B covered services and some Medicaid-covered services, and is accepted by most health insurance providers. The CMS-1500 is maintained by the National Uniform Claim Committee (NUCC), and was previously updated to include National Provider Identifiers (NPIs), or unique numbers required by the Health Insurance Portability and Accountability Act (HIPAA).

Form CMS-1500 contains all the basic information needed to submit an accurate claim. This includes fields for the patient’s demographic information, insurance information, and boxes in which to provide medical codes and corresponding dates of service. Certain boxes are used exclusively for Medicare and/or Medicaid. It is important to note that different payers may provide different instructions on how to complete certain item numbers. The medical biller and coder should be familiar with specific payer requirements before filling out the form.

UB-04

Form UB-04, also maintained by the NUCC, is very similar to the CMS-1500, but it is used by institutional healthcare providers, such as hospitals. Like the CMS-1500, the UB-04 is used in lieu of electronic claims when the facility meets any number of exceptions granted by the ASCA. It is the responsibility of the facility to self-assess whether these designated exceptions apply to their operation, granting usage of manual claims. Also similar to the CMS-1500, certain payers may not require all fields, or data elements, to be completed.

The role of clearinghouses

Once a file is created using these standards, it is usually sent off to a clearinghouse. The clearinghouse is a third-party operation that primarily acts as a middleman between healthcare providers and insurance carriers.

Think of the clearinghouse as a central hub, or a single location where all claims are sent to be sorted and directed onward to all the various insurance carriers. Typically, clearinghouses use internal software to receive claims from healthcare providers, scrub them for errors, format them correctly in accordance with HIPAA and insurance standards, and send them to the appropriate parties. Clearinghouses generally keep medical practices in the loop during this process by providing reports on the status of claims.

This third party is necessary because healthcare providers typically have to send high quantities of insurance claims each day to a variety of different insurance providers. Each of these insurance providers may have their own submission standards. If a medical practice’s billing staff was solely responsible for transmitting insurance claims under both insurance and HIPAA requirements, the potential for error would increase dramatically, not to mention the time required for formatting each claim to specific insurance carrier.

When choosing a clearinghouse, a healthcare provider should consider two main factors:

  • Does the clearinghouse have the capability to work with the insurance providers the practice works with most often?
  • Can the clearinghouse accommodate claims transmissions from the insurance provider’s practice management software?

Confirming these questions ensures that all transmissions run smoothly.

Wrapping Up Course 5

Healthcare providers prepare insurance claims using information provided in the patient’s bill. Occasionally, the claim is prepared manually and sent by mail. In most cases, the claim is sent electronically (having either been prepared using claim software or scanned from a hard copy) to a clearinghouse. The clearinghouse checks the claim for errors, formats it according to HIPAA and insurance guidelines, then transmits it to the appropriate payer, while also sending a report back to the healthcare provider.

After the claim has been evaluated, the insurer must provide both the patient and healthcare provider with an Explanation of Benefits (EOB). The EOB breaks down the adjudication process, showing the dates of service, procedures and charges, patient financial responsibility, and the amount paid to the healthcare provider. At this point, the health insurer sends payment to the healthcare provider, usually in the form of an electronic fund transfer.

The insurance claims process can be complex. Fortunately, there are tools to help complete insurance claims on a day-to-day basis. Medical billing professionals who are familiar with these tools and all documents (both paper and electronic), industry standards, individual insurance company regulations, clearinghouse procedures, and the adjudication process will be prepared to succeed.

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