- Insurance payment received on mail or electronically are always accompanied with Explanation of Benefits.
- Payments from patients are received on mail and at the time of office visits.
Payment Posting Activity
Before posting insurance payment to the patient's financial account, the office personnel needs to perform and document the following actions:
1. Compare EOB with original insurance claim and review it carefully. All services reported on the claim form should be represented on EOB. Look for changes in CPT coding by insurance company (example: determine if a services is down-coded). The goal is to identify charges that can be appealed or rebilled for payment.
2. Investigate all denied services, determine the reason for the denied service and appeal them accordingly.
3. Pay attention if payers are requesting additional information that appears on EOB. The goal is to get paid from insurance company as soon possible. Each carrier has a time limit on claim rectification or correction.
4. Look for other billing errors that should be corrected such as coding errors, claim contains an error, payment errors, over and under payment.
The information that appears on the EOB should be posted on the computer or patient ledger card. An error on the posting process may cause patient's account balance to be incorrect.
Tracking Claim Status
Tracking EOBs by carrier will help monitor similar payments for similar procedures and diagnoses.
A tracking system of accounts receivable (such as insurance payment history form, contractual adjustments and write-offs should be in place) plus carrier denial management should be maintained for monitoring reimbursement trends and patterns.
Contractual Adjustment
After carefully reviewing EOB, the insurance payment should be posted on patient financial accounting record. On the patient account balance record, the office must account the difference between charge submitted on the claim and approved amount contractually. always specify the identity in the patient record the type of adjusted made (such as Medicare, Medicaid, HMO or PPO reduction). For example the provider actual fee is $890 for a procedure and the provider signed with a PPO that has a contractual reimbursement of only $740, for the same procedure, the contractual adjustment would be $150.
Specific identification of contractual adjustments by payer alerts a practice to which insurance program are reducing charges the most. If the practice is writing-off a large amount for a specific plan, the office should investigate and assess whether it make sense to continue to with the specific insurance plan. Specifically identifying contractual adjustments and other write-offs is necessary to allow for analysis of trends and to more easily identify problems.
Withhold Adjustments
A withhold is an amount withheld form physician's reimbursement that may or may not be reimbursed depending on the managed care plan's criteria for reimbursement. For example, the provider actual charge for a procedure is $995 and the provider signed to managed care contract that will only reimburse $845 for the same procedure, the managed care plan will approved $845 for payment and may subtract another 10% as a withhold adjustment. So the practice receives $760.50 instead of $845. The $84.50 withheld should be accounted separately in office computer or manually using withhold adjustment sheet (see my illustration above). At the end of the year, the office should review how much was withheld by each managed care plan and then appeal for reimbursement of the withhold. If the managed care plan will not reimburse the withhold, the office should have a representative of the plan to explain the plan's withhold policy, usually done by the office manager.
Filing the EOBs
After the EOB are posted, they should be filed with the respective copies of the insurance claim forms either in the patient's clinical file or in separate business file set up for each patient. Some offices find it more efficient to maintain the EOBs in notebooks referenced by the insurance company. It is very important for the office to keep the insurance claim forms and related EOBs together so that it can easily audit in patient's account history when such a need arises. Plus, a copy of EOBs should be organized in a way that will allow the office manager or billing supervisor to review them for consistency in payment on a periodic basis.
Filing the EOBs
After the EOB are posted, they should be filed with the respective copies of the insurance claim forms either in the patient's clinical file or in separate business file set up for each patient. Some offices find it more efficient to maintain the EOBs in notebooks referenced by the insurance company. It is very important for the office to keep the insurance claim forms and related EOBs together so that it can easily audit in patient's account history when such a need arises. Plus, a copy of EOBs should be organized in a way that will allow the office manager or billing supervisor to review them for consistency in payment on a periodic basis.
After claim submission, follow-up is necessary to make sure that the patient insurance company has made a correct payment and patient account was reconciled. Managing patient accounts and receiving proper reimbursement for rendered services requires payers reimbursement understanding. Interpreting Explanation of Benefits (EOBs), posting payments, managing accounts receivable and handling patient difficult accounts. These "back office functions of insurance processing challenge even the most experience providers and office staff.
The success of most back office functions relies on the front desk staff collection of patient registration and insurance information, verification of benefits, accurate coding and billing. It is very important to properly collect patient information when they visit the office or admitted to the hospital.
The amount a physician or patient is reimbursed for services depends on the patient's coverage or benefits. Insurer often pay 80% of reasonable charges and patient paying 20% and possible more to satisfy the physician's charge.
Managed Care Plans
Usually patient pay fix copayments of $10 to $25, with the remainder adjudicated (or decision) by the insurance company. In almost cases, deductible is required to be met for carrier to start payments. The physician is able to collect charges above the "approved amount", or termed as "balance billing".
The reasonable charge or allowed amount for services vary from payer to payer, depending on the payer policy.
Example of Payment illustration of Medicare and Commercial Payer:
Medicare
Because Medicare reimburses on the basis of Medicare Physician Fee Schedule (MPFS), charges and limits on charged are fixed.
Participating Physician (PAR) who accepts assignments and agree to accept MPFS amounts, plus deductibles and copayments as payment in full.
Nonparticipating Physician (NonPAR) MPFS-allowed amounts are set at an amount 5% lower than those provided to PAR. If the NonPAR does not accept assignment on a claim , the total charge is limited to 115% of the Medicare's participating allowed amount.
Fee schedules for PAR and NonPAR including limiting charge are published annually and are available from local carrier. If fee schedule is not obtained by the office yet, contact the Medicare carrier.
Patients covered by Medicare are responsible to meet an annual outpatient deductible (eg.$150). after which Medicare pays 80% of the allowed fee schedule amount, and beneficiary are responsible for the 20% remainder. Providers must contractually adjust or write-off any amount above the approved charge. No balance billing above the approved charge is permitted, but limiting charge is good for balance billing the patient.
Commercial Payer
1. Dr. Mike charges $300 for a procedure rendered to patient. The patient's insurance company allows $287 and pays 80% of the approved amount, or $229.60. Dr. Mike did not signed a contract with this insurance company. The patient has met his deductible and also responsible for the difference between physician actual charge and approved amount of insurance company. Payment calculations would be as follows:
Dr. Mike actual charge: $300
Insurance allowable amount: $287
Insurance payment: $229.60 (80% of $287)
Patient coinsurance: $ 57.40 (20% of $287)
Balance billing: $ 13.00 (300 - 287 = 13)
Patient payment total responsibility: $ 70.40 (57.40 + 13 = 70.40)
Dr. Mike is obligated to collect the full amount of $300 charge ($229.60 + $70.40 = $300.00)
2. Dr. Norman charges $80 for a service. He does have a discount contract with the insurance company requiring that he accept "reasonable charges". The patient has not met her $260 annual deductible. The payer allows $75 for the service and reimburses on the 80/20 percent basis. Payment calculations would be as follows:
Dr. Norman's charge: $80
Insurance payment: $ 0
Applied to deductible: $75
Contractual allowance: $ 5
Because the patient has not met her deductible and Dr. Norman is contracted to accept "reasonable charges" as his full payment, the patient owes $75 and Dr. Norman must "write off" $5.
3. Using example #2, if patient had met her deductible, payment would be as follows:
Dr. Norman's charge: $80
Insurance approved amount: $75
Insurance payment: $60 (80% of $75)
Patient coinsurance: $15 (20% of $75)
Patient payment total responsibility $15
Contractual adjustment: $ 5 (Dr. Normans' write off)
4. Dr. Carl rendered a service of $150 to a patient. Dr. Carl has signed and agreed a contract with the insurance company with a discounted rate of 10% for this particular service. The patient insurance policy states that $150 is reimbursed on 80/20 basis. The patient has met his deductible. Payment calculations would be as follows:
Dr. Carl's charge: $150 (150 x 10% = 15)
Insurance approved amount: $135 (150 - 15 = 135)
Insurance payment: $108 (80% of 135)
Patient coinsurance: $ 27 (20% of 135)
Patient payment total responsibility $27
Contractual adjustment: $15 (Dr. Carl's write off)
5. Dr. Medina charges $400 for a specific procedure performed on her office. The fee schedule with the insurance company for this procedure is $220. The patient's co-payment for this visits are $25. Payment calculations would be as follows:
Dr. Medina's charge: $400
Insurance allowed amount: $220
Insurance payment: $200
Patient payment: $ 25
Contractual adjustment: $175 (200+25=225 then 225-400= -175)
Alert: Beware of insurance companies that pay discounted amount without a contractual agreement authorizing the reduced payments. These "silent PPOs" should be challenged
and reported to the state insurance commissioner.
Managed Care Plans
Usually patient pay fix copayments of $10 to $25, with the remainder adjudicated (or decision) by the insurance company. In almost cases, deductible is required to be met for carrier to start payments. The physician is able to collect charges above the "approved amount", or termed as "balance billing".
The reasonable charge or allowed amount for services vary from payer to payer, depending on the payer policy.
Example of Payment illustration of Medicare and Commercial Payer:
Medicare
Because Medicare reimburses on the basis of Medicare Physician Fee Schedule (MPFS), charges and limits on charged are fixed.
Participating Physician (PAR) who accepts assignments and agree to accept MPFS amounts, plus deductibles and copayments as payment in full.
Nonparticipating Physician (NonPAR) MPFS-allowed amounts are set at an amount 5% lower than those provided to PAR. If the NonPAR does not accept assignment on a claim , the total charge is limited to 115% of the Medicare's participating allowed amount.
Fee schedules for PAR and NonPAR including limiting charge are published annually and are available from local carrier. If fee schedule is not obtained by the office yet, contact the Medicare carrier.
Patients covered by Medicare are responsible to meet an annual outpatient deductible (eg.$150). after which Medicare pays 80% of the allowed fee schedule amount, and beneficiary are responsible for the 20% remainder. Providers must contractually adjust or write-off any amount above the approved charge. No balance billing above the approved charge is permitted, but limiting charge is good for balance billing the patient.
Commercial Payer
1. Dr. Mike charges $300 for a procedure rendered to patient. The patient's insurance company allows $287 and pays 80% of the approved amount, or $229.60. Dr. Mike did not signed a contract with this insurance company. The patient has met his deductible and also responsible for the difference between physician actual charge and approved amount of insurance company. Payment calculations would be as follows:
Dr. Mike actual charge: $300
Insurance allowable amount: $287
Insurance payment: $229.60 (80% of $287)
Patient coinsurance: $ 57.40 (20% of $287)
Balance billing: $ 13.00 (300 - 287 = 13)
Patient payment total responsibility: $ 70.40 (57.40 + 13 = 70.40)
Dr. Mike is obligated to collect the full amount of $300 charge ($229.60 + $70.40 = $300.00)
2. Dr. Norman charges $80 for a service. He does have a discount contract with the insurance company requiring that he accept "reasonable charges". The patient has not met her $260 annual deductible. The payer allows $75 for the service and reimburses on the 80/20 percent basis. Payment calculations would be as follows:
Dr. Norman's charge: $80
Insurance payment: $ 0
Applied to deductible: $75
Contractual allowance: $ 5
Because the patient has not met her deductible and Dr. Norman is contracted to accept "reasonable charges" as his full payment, the patient owes $75 and Dr. Norman must "write off" $5.
3. Using example #2, if patient had met her deductible, payment would be as follows:
Dr. Norman's charge: $80
Insurance approved amount: $75
Insurance payment: $60 (80% of $75)
Patient coinsurance: $15 (20% of $75)
Patient payment total responsibility $15
Contractual adjustment: $ 5 (Dr. Normans' write off)
4. Dr. Carl rendered a service of $150 to a patient. Dr. Carl has signed and agreed a contract with the insurance company with a discounted rate of 10% for this particular service. The patient insurance policy states that $150 is reimbursed on 80/20 basis. The patient has met his deductible. Payment calculations would be as follows:
Dr. Carl's charge: $150 (150 x 10% = 15)
Insurance approved amount: $135 (150 - 15 = 135)
Insurance payment: $108 (80% of 135)
Patient coinsurance: $ 27 (20% of 135)
Patient payment total responsibility $27
Contractual adjustment: $15 (Dr. Carl's write off)
5. Dr. Medina charges $400 for a specific procedure performed on her office. The fee schedule with the insurance company for this procedure is $220. The patient's co-payment for this visits are $25. Payment calculations would be as follows:
Dr. Medina's charge: $400
Insurance allowed amount: $220
Insurance payment: $200
Patient payment: $ 25
Contractual adjustment: $175 (200+25=225 then 225-400= -175)
Alert: Beware of insurance companies that pay discounted amount without a contractual agreement authorizing the reduced payments. These "silent PPOs" should be challenged
and reported to the state insurance commissioner.
