Chapter 11: Revenue Cycle Back-End Processes - Claims Production and Revenue Collection

Accounts receivable (AR)

The amounts owed to a facility by patients or insurance companies who receive services but whose payments will be made at a later date.

Accrual accounting

Method of accounting where an accounts receivable amount is recorded when services are provided to a patient.

Adjudication

The determination of the reimbursement amount based on the beneficiary's insurance plan benefits.

Cash accounting

Method of accounting where all amounts are recorded when the cash or funds are exchanged.

Contractual allowance

The difference between the actual charge and allowable charge.

Days in accounts receivable

The result of dividing the ending accounts receivable balance for a given period by the average revenue per day.

Explanation of Benefits (EOB)

Report sent from a healthcare insurer to the policyholder that describes the healthcare service, its cost, applicable cost-sharing, and the amount the healthcare insurer will cover.

Medicare Administrative Contractor (MAC)

Contracting authority to administer Medicare Part A and Part B as required by section 911 of the Medicare Modernization Act of 2003. MACs process and manage Part A and Part B claims.

Medicare Summary Notice (MSN)

A statement that describes services rendered, payment covered, and benefits limits and denials for Medicare beneficiaries.

Remittance advice (RA)

Report sent by a third-party payer that outlines claim rejections, denials, and payments to the facility; sent via electronic data interchange.

Scrubber

Internal claim auditing system used to ensure that claims are complete and accurate before submission to third-party payers.

Why are auditing systems used during the claims production process?

To ensure that claims are error free prior to submission to the insurance company.

What are the four outcomes of adjudication?

Payment, suspend, reject, or deny.

Which adjudication outcome requires the provider to appeal if they disagree with the insurance company's claim determination?

Denial.

What is the government name for companies that process healthcare claims on behalf of Medicare?

Medicare administrative contractor (MAC).

What is a scrubber? When is it utilized in the revenue cycle process?

A scrubber is an internal claim auditing system used to ensure that claims are complete and accurate before submission to third-party payers. They prevent facilities from sending incomplete and inaccurate claims to the payer and flags them for correction.

What electronic format do most facilities use to submit claims to insurance companies?

The 8371 electronic format.

Compare accrual and cash accounting. Why is accrual accounting the better method for healthcare?

Accrual accounting is when an AR amount is recorded when services are provided to a patient which is placeholder used to account for the fact that the effort to provide the services was expensed, but the payment is expected later. It allows the provider to apply the concept called "the matching principle" by accounting for the expense to provide the services and the reimbursement earned in the same period. Cash accounting is when all amounts are recorded when the cash or funds are exchanged and is not the preferred accounting method because there is often a significant delay between the date that services are provided and when the payment is received.

Which entry performs adjudication--the facility, the provider, or the insurance company?

It is based on the beneficiary's insurance plans benefits and the payer (the insurance company) adjudicates the claims.

What actions do providers take when a claim or line item is rejected?

The providers may correct the claim or line item and submit it for re-adjudication.

Provide an example of why a claim would be suspended during the adjudication process.

They may be suspended if they have claim attachments which can assist claims examiners in understanding specific services received by an individual and in determining a payment.

Describe the relationship between the following EOB data elements: charge, allowable charge, and contractual allowance.

Charge is the actual charge the providers submitted to the insurance for the healthcare service. It is the price of the service or supply. Allowable charge is the amount that the payer has agreed to reimburse for the service provided to the beneficiary. The allowable charge is determined during the contact negotiation between the payer and provider. It is divided into two portions: the benefit payment for which the payer is responsible and the cost-sharing amount (coinsurance and copayments) for which the beneficiary is responsible. Contractual allowance is the difference between the charge and the allowable charge. It is the result of the contract negotiations process. When the provider agrees to accept the allowable charge, the difference between the charge and the allowable charge becomes an adjustment in the provider's financial accounting system.

Fill in the blank. The ___ is the sum of the benefit payment and the cost-sharing amount.

Explanation of benefits (EOB).

The RA indicates line items and claims that are denied. What happens to denied claims.

They are submitted to the denials management team for evaluation and the appeals process if warranted.

What is the best practice for collection of a patient's cost-sharing amount?

It is best practice for providers to collect estimated cost-sharing amounts prior to treatment, but often the estimates are not accurate due to the assumption made about the status of the patient's deductible amount of out-of-pocket maximum.