Medical Coding and Billing: Reimbursement Methodologies

This set of vocabulary flashcards covers key reimbursement methodologies, terms, and payment mechanisms used in medical coding and billing as described in the lecture notes.

Reimbursement methodology

The structured way a payer determines how much it will pay a provider or facility for healthcare services.

Fee-for-service

A traditional reimbursement model where each covered service is considered individually, and payment is made according to a rate assigned to the specific billed service.

Fee schedule

A list of payment rates assigned to services, procedures, or supplies, representing the maximum amount a payer allows.

Allowed amount

The maximum recognized amount on which reimbursement is based before patient responsibility is split out.

Relative Value Units (RVUs)

A system used to value professional services based on the resources typically required to provide them, most closely associated with the Medicare Physician Fee Schedule.

Work RVU

Reflects the time, technical skill, mental effort, and judgment required to perform a medical service.

Practice expense RVU

Reflects overhead costs such as staff, supplies, and equipment.

Malpractice RVU

Reflects the professional liability expense associated with providing a service.

Conversion factor

The dollar multiplier used with RVU values to calculate the physician payment amount.

Diagnosis Related Groups (DRGs)

A methodology commonly associated with inpatient hospital reimbursement where payment is a predetermined amount based on grouping variables like principal diagnosis and procedures.

MS-DRG

Stands for Medicare Severity Diagnosis Related Group.

Ambulatory Payment Classifications (APCs)

A grouping system for hospital outpatient services with similar clinical characteristics and expected resource use under the Outpatient Prospective Payment System.

Packaging

An APC concept where some secondary services are bundled into the payment for a primary service rather than generating separate reimbursement.

Status indicators

Indicators within the APC system that tell whether a service is payable, conditionally payable, packaged, or subject to special rules.

Per diem

A fixed rate paid for each covered day of care, common in inpatient, subacute, or behavioral health settings.

Case rate

A fixed payment amount for a defined episode or service package, such as a routine outpatient surgery or maternity delivery package.

Capitation

A prospective payment method where a fixed amount is paid per member per month to provide or arrange certain covered services for a population.

Professional reimbursement

Payment for the provider's personal services, judgment, and work.

Facility reimbursement

Payment for the organization's overhead, staff, supplies, equipment, and infrastructure.

Deductible

An amount the patient must pay for services before the insurance plan begins paying according to regular cost-sharing rules.

Coinsurance

A split of the allowed amount between the payer and the patient expressed as a percentage.

Copayment

A fixed patient responsibility amount for specific covered services.

Contractual adjustment

The difference between the provider's billed charge and the in-network allowed amount that is written off by contract.

Carve-out

A service, supply, drug, or implant excluded from a standard package and reimbursed separately.

Outlier payment

An additional payment triggered when an inpatient or outpatient case exceeds defined cost or complexity thresholds.

Grouper

The logic system that assigns a case or service set into a specific payment category such as a DRG or APC.

Variance review

The process of comparing actual payment against expected reimbursement to identify errors, underpayments, or contract violations.

Site-of-service differential

A reimbursement concept where the same professional service pays differently based on the setting (e.g., office versus facility) because the practice expense assumptions change.