How is billed amount calculated in medical billing?

Medical billing and coding form an integral part of the healthcare system. While this article mainly  focuses on medical billing, it is also important to introduce medical coding to delve deeper into medical  billing as both the terms are closely intertwined categorically. In the United States, while Medical billing  and coding provide useful insights of overall health statistics, including the spread of the disease or  effectiveness of a medical procedure at the country level, its primary function is to help facilitate the  reimbursement process.  

A patient’s visit to a doctor may seem a simple process involving a two-person interaction, but on the  contrary, it’s a part of a large complex process which involves information exchange and payment  system between three parties: patient, healthcare provider (doctors, hospitals, emergency rooms, etc),  and the insurance company. Accuracy of medical billing is the process that ensures that healthcare  providers are paid correctly.  

What is Medical Coding?  

Medical billing comprises of sending invoices on a form known as CMS 1500 (previously known as HCFA  1500) to insurance companies. This form includes details of diagnosis and procedure codes, also known  as medical codes.  

On a broader classification, there are two types of medical coding: International Classification of Disease  (ICD) and Current Procedure Terminology. The ICD relates to patients’ medical condition or injury, and  CPT corresponds to procedure or services provided by the healthcare provider. These codes function as  a universal language for the entire healthcare industry, including insurance companies.  

In the United States, ICD-9-CM is the primary code set standard that was being used for the longest times and is  being succeeded by ICM-10-CM standard announced by WHO and would be further succeeded by ICD 11 in 2022. These codes are further divided into ‘chapters’, which are based on the type of injury or  illness. Therefore, it is very important for the medical coder to keep track of upgradations and  modifications in coding standards as they are officially announced. 

Process of Medical Billing  

Medical billing involves a lot of intricacies. It is the medical biller’s responsibility to arrange and  negotiate payment between the three parties. Medical billing ensures that the healthcare providers are  paid by the payer and patients, in tantamount to the services provided.  

The process of medical billing involves collecting all the required information about the patient,  including diagnosis and procedure performed, and compiling it into an invoice or a bill. This bill is known  as a claim. Furthermore, the accuracy of the claim form also lies with the correct interpretation of the  insurance policy purchased by the patient as well as accurate coding of procedures and diagnosis.  

The medical Billing process typically must follow guidelines laid out by the Health Insurance Portability  and Accountability Act (HIPAA), which ensures to maintain the privacy of the patient’s medical  information, along with keeping a check on any fraudulent activities in medical reporting practices and  quantum of punishment for such activities. 

The majority of claims files today are sent electronically, making it a faster, efficient, convenient, and  cost-effective process. The system also reduces the chances of human errors significantly. With the ICD  and CPT codes provided in the claim, the insurance company is acknowledged about all the necessary  information required by the payer related to the diagnosis and services rendered, to fully evaluate the  procedure and decide on what amount can be reimbursed (subject to adjudication) to the healthcare  provider. In case, if there is some information missing or an error in the form, it’s rejected and sent back  to the biller. The biller can make necessary corrections and resubmit the claim. It is also important to  note that the accepted claim does not guarantee that the insurance company will pay the entire amount  in the bill. A claim is denied if the insurance agency refuses to pay for the service rendered by the  patient. Denials occur when the diagnosis or the procedure performed or in case of pre-existing medical  conditions that are not covered under the insurance policy. Another major reason for claim denials is  because of inaccurate medical billing.  

Once the insurance company’s adjudication is completed, they send the evaluation report to the  healthcare provider. This report has details of the amount they are willing to pay against which  procedure and the explanations, in case of any deductions. Once the payer has agreed to pay the  provider for a portion of the services on the claim, the remaining amount is passed on to the patient.  Once this report is received, a statement is prepared for the patient. The statement contains co payment requirements of the procedures rendered by the healthcare provider.  

All of these processes are highly intricate and complex and require a profound knowledge of the  complete process, insurance policies, as well as standard protocols set by the government. Managing  and handling this process requires dedicated time and effort, which is highly demanding from a health  professional. In such a situation, most of the medical professionals opt. for outsourcing these services  from a well known medical billing company. Hiring an employee can be an option, but is mostly avoided  by medical professionals. An employee being a responsibility, costs much more, and is less reliable to  trust for such an involute process.