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Understanding Medical Insurance Billing

Medical billing is complex due to the vast array of medical procedures performed on a daily basis. The American Medical Association (AMA) and the Centers for Medicare and Medicaid Services (CMS) have developed a coding system to try to simplify the process.

  1. HCFA 1500 Form

    • Short for "Health Care Finance Administration," the HCFA 1500 is the standard form used for billing physician services for the government and private insurance sectors. It contains 33 fields that summarize all the information needed for a carrier to process a health insurance claim.

    ICD-9-CM Codes

    • Short for "International Classification of Diseases, Clinical Modification," these three to five digit codes are used to classify diseases by diagnosis. For example, mental/nervous diseases fall in the 290-319 ICD-9-CM range, with 296.3 being used to classify Major Depression, recurrent episode.

      ICD-9-CM has been proposed by the U.S. Department of Health and Human Services to be replaced with ICD-10-CM by 2013.

    Place of Service

    • The Place of Service code (POS) lets the carrier know where the services were rendered. There are currently 81 POS codes, with 18 reserved for future use. The most common places of service are an office setting (POS 11), inpatient hospital (POS 21), outpatient hospital (POS 22), emergency room (POS 23) and ambulatory surgical center (POS 24).

    CPT Codes

    • Short for "Current Procedure Terminology,", these five-digit codes are used to summarize the procedure performed by a physician. There are hundreds of these codes, with the first digit identifying the range of procedures the code falls into. For example, the 80000 range is for laboratory and pathology procedures; CPT Code 81001 is the code billed for a urinalysis.

      The CPT Code is the primary key to reimbursement and many rules govern their payment. For example, some codes are considered inclusive to others, and billing them separately may constitute what's known as "unbundling." Some CPT Codes are considered secondary procedures to others and are only reimbursed at 50 percent of the normal allowed amount.

    Modifiers

    • As the name suggests, modifiers can alter the reimbursement methodology for a CPT Code and gives each one more billing options. For example, a surgical procedure billed with a modifier 80 means that the charge is for a physician assistant surgeon. Although it can vary by carrier, typically physician assistant surgeons are reimbursed at 20 percent of the surgeon's allowed amount.

    HCPCS Codes

    • Short for "Healthcare Common Procedure Coding System,", these five digit codes are alphanumeric, beginning with one letter and followed by four numerical digits. They are used to bill for medical services, supplies and equipment. For example, HCPCS A4215 is used to bill for a Needle, sterile, any size, each one.

    Errors

    • Any error in the coding of a claim can cause a delay in payment as the carrier will investigate any discrepancies thoroughly before payment is issued.

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