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Discussion wk 4 responds 1



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Third-Party Reimbursement Issues

Each coding system plays critical role in reimbursement

Your job is to optimize payment

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What entity is the largest third-party payer in the U.S.? (Medicare)

Your Responsibility

Ensure accurate coding data

Obtain correct reimbursement for services rendered

Upcoding (maximizing) is never appropriate

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What is the coder’s role? (To accurately code the services and procedures rendered so that the office is properly reimbursed)

Ethical issues will continually surface and must be handled by coders. What are some examples? (Pressure to upcode a procedure, to restate a diagnosis to obtain better payment)

Upcoding, assigning comorbidity/complications based only on laboratory values, and using nonphysician impressions or assessments without physician agreement are fraudulent.

Population Changing

Elderly fastest growing patient segment

The population over age 65 projected to reach 83.7 million by 2050*

Almost double the estimated population of 43.1 million in 2012*

Medicare primarily for elderly

* Ortman JM, Velkoff VA, Hogan H: An Aging Nation: The Older Population in the United States, www.census.gov/content/dam/Census/library/publications/2014/demo/p25-1140.pdf

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What issues do population changes create for the health care industry? (As people live longer, and as the baby boomers reach retirement, the elderly population will increase, creating greater use of health care services, and Medicare becomes an even greater component of a medical office’s revenues.)

Medicare—Getting Bigger
All the Time!

Health care will continue to expand to meet enormous future demands

Job security for coders!

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Increasing numbers of elderly people, technological advances, and improved access to health care have increased consumer use of health care services.

Basic Structure Medicare

Medicare program established in 1965

2 parts: A and B

Part A: Hospital insurance

Part B: Supplemental—non-hospital

Example: Physicians’ services and medical equipment

Part C: Medicare Advantage, health care options (Added later and formerly termed Medicare + Choice)

Part D: Prescription drugs

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The Medicare program was established in 1965 with the passage of the Social Security Act.

The program dramatically increased the government’s involvement in health care. What are the advantages and disadvantages of this? (Advantage: More elderly and disabled people have access to affordable health care. Disadvantage: Government involvement brings bureaucracy and complicated regulations.)

Those Covered

Originally established for those 65
and over

Later disabled and permanent renal disease (end-stage or transplant) added

Persons covered “beneficiaries”

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Individuals covered under Medicare are called “beneficiaries.”

Officiating Office

Department of Health and Human
Services (DHHS)

Delegated to Centers for Medicare and Medicaid Services (CMS)

CMS runs Medicare and Medicaid

CMS delegates daily operation to Medicare Administrative Contractors (MACs)

MACs usually insurance companies

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CMS was formerly HCFA, the Health Care Financing Administration.

What are the responsibilities of the CMS? (CMS operates Medicare, using Medicare Administrative Contractors, private insurance companies that handle Medicare in specific areas.)

Funding for Medicare

Social Security taxes

Equal match from government

CMS sends money to MACs

MACs handle paperwork and pay claims

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The funds to run Medicare are generated from payroll taxes paid by employers and employees.

Who collects and handles Medicare funds? (Social Security Administration collects and handles the funds, which flow through CMS to the MACs.)

Medicare Covers (Part B)

Beneficiary pays

20% of cost of service

+ annual deductible

Medicare pays

80% of covered services

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Medicare pays 80% of covered charges, and the beneficiary pays the remaining 20% (the coinsurance payment).

What else does the beneficiary pay? (Deductibles, premiums, and noncovered services).

Beneficiaries often choose to purchase additional insurance to cover out-of-pocket expenses.

QIO Program

National network of consumers, physicians, hospitals, and other caregivers

Work to improve quality, timing, and cost of care for Medicare patients

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Two types of QIOs

Beneficiary and Family Centered Care (BFCC)

Assists beneficiaries directly

Quality of care reviews

Filing complaints or appeals

Quality Innovation Network (QIN)

Organizes beneficiaries, providers, and community members for improvement initiatives

Data driven approach

Focus on safety, health quality, and care coordination

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Part A, Hospital

More than 99% of hospital claims submitted electronically

Hospitals submit paper charges on CMS-1450 (UB-04)/837i

Diagnosis codes basis for payment

MS-DRG (Medicare Severity Diagnosis Related Groups)

More on this topic in Chapter 27


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Hospitals report services for Part A by using ICD-10-CM codes and the DRG assignment.

What determines eligibility for Part A? (Beneficiaries are automatically eligible for Part A when they become eligible for Medicare.)

Part A, Covered In-Hospital Expenses


Semiprivate room

Meals and special diets in hospital

All medically necessary services


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This is a listing of services that are covered by Medicare Part A.

Medicare Part A would cover the basics of a hospital stay.

A way to look at it would be a “No Frills” stay.

Part A, Noncovered In-Hospital Expenses


Personal convenience items


Slippers, TV

Non-medically necessary items


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This is a listing of services that are not covered by Medicare Part A.

Anything that Medicare would deem not medically necessary would not be covered under Medicare Part A for a hospital stay.

Part A, Other Covered Expenses



Skilled nursing

Some personal convenience items for long-term illness or disabilities

Home health visits

Hospice care

Not automatically covered

Must meet certain criteria

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Part A can also help pay for inpatient care in a Medicare-certified skilled nursing facility if the patient’s condition requires daily skilled nursing or rehabilitation services that can be provided only in this type of facility.

Part B, Supplemental

Part B pays services and supplies not covered under Part A

Not automatic

Beneficiaries purchase

Pay monthly premiums


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Part B is not automatically provided to beneficiaries when they become eligible for Medicare.

Medicare Part B, like Blue Cross of North Dakota for example, is an insurance the individual purchases and pays monthly premiums.

Currently, Medicare Part B reimburses at a rate of 80%, which means that if the patient does not have a secondary insurance the patient will be responsible for the other 20%.

Type of Items Covered by Part B


Physicians’ services

Outpatient hospital services

Home health care

Medically necessary supplies
and equipment

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Part B helps to pay for medically necessary physician services, outpatient hospital services, home health care, and a number of other medical services and supplies that are not covered by Part A.

Coding for Medicare Part B Services

Three coding systems used to
report Part B




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What is each type of code used for? (Diagnoses, procedure, additional supplies and services, respectively)

What is Part C? (Medicare Plus Choice program: provides a set of options from which beneficiaries can choose their health care providers; some options are HMO, POS, PPO, and MSA [medical savings account])

What is Part D? (Prescription drug benefit for beneficiaries. Beginning in January 2006, beneficiaries could enroll in Part D and choose from plans that offered drug coverage.)

Health Insurance Portability and Accountability Act

Established 1996

Administrative simplification

Largest change


Electronic transactions



National Identifier Requirements (NPI)

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Federal Register

Government publishes changes in laws

Coding supervisors keep current on changes


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What is the Federal Register? (The official publication for all Presidential Documents, Rules and Regulations, Proposed Rules, and Notices.)

Coders must be aware of changes listed in the Federal Register that relate to Medicare reimbursement so that Medicare charges will be submitted correctly.

Because the government is the largest third-party payer in the nation, even small changes in rules governing reimbursement to providers can have major consequences.

Issues of Importance in
Federal Register


October contains hospital facility changes

November and December contain major outpatient facility changes and physician fee schedule

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Each year proposed changes to the various payment systems are published early.

Several months pass so that interested parties can comment and make suggestions about the proposed changes.

The final rules are published in the fall editions.

Changes are implemented the following calendar year.

Register Sample

Figure 1.3

From Federal Register, January 21, 2021, Vol 86, No. 12, Proposed Rules.

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Here is a sample page from the Federal Register.

Outpatient Resource–Based Relative Value Scale


Physician payment reform implemented in 1992

Paid physicians lowest of

1. Physician’s charge for service

2. Physician’s customary charge

3. Prevailing charge in locality

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Why was physician payment reform implemented? (To decrease Medicare expenditures, to redistribute physicians’ payments more equitably, to ensure quality health care at a reasonable rate)

OBRA 1990 required that before January 1 of each year, beginning in 1992, fee schedules that determine payment amounts for all physician services would be established.

National Fee Schedule

Replaced RBRVS

Termed Medicare Fee Schedule (MFS)

Payment 80% of MFS, after patient deductible

Used for physicians and suppliers

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All physicians are paid on the amounts of the Medicare fee schedule.

Relative Value Unit (RVU) (1 of 2)

Nationally, unit values assigned
to each CPT code

Local adjustments made:

Work and skill required

Overhead costs

Malpractice costs

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How are unit values determined? (The amount of time, effort, and technical expertise required, overhead, cost of malpractice coverage)

A Harvard University group analyzed a service, identified its separate parts, and assigned each part a relative value unit.

These parts, or components of service, are work (time, effort, and skill), overhead, and malpractice.

The sum of the units established for each component of the service equals the total RVUs of a service.

Relative Value Unit (RVU) (2 of 2)

Often referred to as fee schedule

Annually, CMS updates RVU based on national and local factors

Beneficiary Protection

Physician Payment Reform

Omnibus Budget Reconciliation Act of 1989

Maximum Actual Allowable Charge (MAAC) 1991

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What are the Geographic Practice Cost Index and the Conversion Factor? (National dollar amount that is applied to all services paid according to the Medicare Fee Schedule and geographic location.)

Geographic Practice Cost Index (GPCI) and Conversion Factor (CF)

GPCI: Geographic Practice Cost Index

Scale of cost variance of charge locations

Charge location may be entire state

CF: Conversion Factor

National dollar amount

Paid on Medicare Fee Schedule basis

Converts RVUs to dollars

Updated yearly

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Medicare Fraud and Abuse

Program established by Medicare

To decrease fraud and abuse


Intentional deception to benefit


Submitting for services not provided

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Medicare defines fraud as “the intentional deception or misrepresentation that an individual knows to be false and does not believe to be true and makes it knowing that the deception could result in some unauthorized benefit to himself/herself or to some other person.”

What are some examples of fraud? (Altering medical records, upcoding, phantom billing, double-billing for same service, etc.)

Beneficiary Signatures

Beneficiary signatures on file

Service, charges submitted without need for patient signature

Presents opportunity for fraud


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Most Medicare patients sign a standing approval, which is kept on file in the medical office.

This allows Medicare claims to be filed automatically, which makes it easy for an unscrupulous person to submit charges for services that were never provided.



Anyone who submits for Medicare services can be violator




Billing services


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Coders must validate that the service was actually provided by consulting the medical record or the physician.

Fraud Can Be

Billing for services not provided

Misrepresenting diagnosis


Unbundling services

Falsifying medical necessity

Routine waiver of copayment

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Discuss how medical professionals, especially coders, should react if they suspect fraud.

Office of the Inspector General (OIG)

Develops and releases a monthly Work Plan

Outlines monitoring of Medicare program

MACs monitor those areas identified
in plan

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Office of the Inspector General (OIG) is responsible for developing a work plan that outlines the ways in which the Medicare program is monitored to identify fraud.

Complaints of Fraud

Submitted orally or in writing to MACs or OIG

Allegations made by anyone against anyone

Allegations followed up by MACs and/or OIG

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Describe several circumstances in which coders may have to react to suspicious activities (by physician, patient, fellow coder, etc.).


Generally involves


Lack of medical necessity for services reported

Review takes place after claim submitted

May go back and do historic review
of claims

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Abuse reviews involve checking the propriety or medical necessity of services that are billed; these reviews generally occur after claims processing activity.

Fraud reviews may determine, for example, whether or not billed services were furnished.


Bribe or rebate for referring patient for any service covered by Medicare

Any personal gain = kickback

A felony

Fine or

Jail or


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What is a “safe harbor” clause? (Protects against certain types of medical services being discounted)

What are examples of what is or is not protected under the “safe harbor” clause? (Protected: An HMO contracts with a laboratory for all laboratory services and receives a discounted price; not protected: furnishing an item or service free of charge or at a reduced charge in exchange for any agreement to buy a different item or service.)

Protect Yourself

Use your common sense

Submit only truthful and accurate claims

If you are unsure about charges

Check with physician or supervisor

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Coders are one group that CMS holds responsible for submitting truthful and accurate claims.

Managed Health Care

Network health care providers that offer health care services under one organization

Group hospitals, physicians, or other providers

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What is the purpose of managed health care? (To provide cost-effective services and improve the health care services provided to enrollees by ensuring access to care)

Managed Care Organizations

Responsible for health care services
to an enrolled group or person

Coordinates various health care services

Negotiates with providers

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The organization coordinates the total health care services required by its enrollees.

Preferred Provider Organization (PPO)

Providers form network to offer health care services as group

Enrollees who seek health care outside PPO pay more

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PPO providers agree to provide services to enrollees at a discounted rate.

Enrollees pay a portion of the costs when using a PPO provider.

Out-of-pocket costs are greater when health care is obtained outside of the network.

Patients have In Plan benefits and Out of Plan benefits.

Health Maintenance Organization (HMO)

Total package health care

Out-of-pocket expenses minimal

Assigned physician acts as gatekeeper to refer patient outside organization

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A Health Maintenance Organization (HMO) is a health care delivery system that allows the enrollee access to all health care services.

Each enrollee is assigned a primary care gatekeeper who has the authority to allow the enrollee to access the services available or to authorize services outside of the HMO.

HMO can employ the physician in a staff model HMO or can contract with the physician through the individual practice association (IPA) model in which the physician provides services for a set fee.

Drawbacks of Managed Care

Organization has incentive to keep patient within organization

Services provided outside organization limited

Patient must have approval to go outside organization if services to be covered

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Managed care requires patients to stay within the organization, and if the patient chooses to go outside of the network a prior approval or authorization is needed.



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Discussion Wk 4 Responds 1

Explain the basic structure of the Medicare program.  

The reference at the bottom of your post should appear as follows:
Carol J. Buck, Saunders. Step-by-Step Medical Coding, by Carol J. Buck, Saunders