Third-party payers review submitted claims to determine whether services are covered by the patient's health insurance plan (e.g. alternative medicine, including experimental procedures and treatments, acupuncture, and chiropractic services (except when manipulation of the spine is medically necessary to fix subluxation of the spine. A subluxation is when one or more bones of the spine move out of position) and for coordination of benefits to determine which payer is responsible for reimbursement (e.g., services provided to patient treated for work-related injury are reimbursed by the employer's worker's compensation payer). Once the payer has completed the claims adjudication (decision-making process), the claim is denied or approves for payment. The provider receives an electronic remittance advice (remit), and the patients receives explanation of benefits (EOB). (Some payers send providers an EOB instead of remittance advice). The ERA and EOB contains information about denied services, reimbursed services and patients responsibility for payment (like co-insurance).
The Electronic Remittance Advise (ERA) typically the following items:
1. Third-party payer's name and contract number.
2. Electronic Data Interchange (EDI) information, including EDI exchange number, date and time remittance advice was generated, and EDI receive identifier.
3. Provider's name and mailing address.
4. Adjustments applied to the submitted claim (e.g., reduced payment, partial payment, zero-payment and so on).
5. Amount and date of payment.
6. Patient's reference name, number and health insurance contact number, claim date, internal control number, paid status (e.g., primary, secondary, supplemental), claim total, and amount paid.
7. Date and place of service, procedure and service code, units, charge(s), provider identification number, allowable charges, deductible an d coinsurance amounts, amount paid, and reasons (to explain payment amount).
The Explanation of Benefits (EOB) typically includes the following items:
1. Third-party payer's name, mailing address and telephone number.
2. Date the EOB was generated, payer's identification number, contract number, and benefit plan.
3. Patient's name and mailing address.
4. Details of services reported on claim, including claim number, name of provider, date of service, amount charge, amount not covered by plan, amount allowed by plan, copayment and/or deductible amounts (that are the responsibility of the patient), amount paid under plan's benefits and any remark codes (e.g. reason for denied claim).
5. Benefit plan payment summary information, including provider's name and amount paid under plan's benefit.
6. Summary information about plan deductible and out-of-pocket amounts (paid by patient)
7. Statement (at the bottom or top) that says THIS IS NOT A BILL.
Remittance Advice Reconciliation
When the remittance advice and payment are received, retrieved the claim(s) are reviewed and post payments to patients accounts. Be sure to post the date payment received, amount of payment, processing date, and any applicable transmittal notice number. Claims containing errors are moved to the closed claims file. (Single-payment notices are attached to paper claims before filing in closed claims file. Batched remittance advice are placed in batched remittance advice file).
Appeals Process
An appeal is documented as a letter signed by the provider explaining why a claim should be reconsidered for payment. If applicable include copies of medical record documentation. Be sure the patient has signed a released-of-information authorization.
Important NOTES:
1. Medicare appeals are now called redeterminations or reconsiderations, as per BIPA-mandated changes.
2. When questioning the payer about the remittance advice that includes multiple patients, circle the pertinent patient information. DO NOT USE HIGHLIGHTER, because payer scanning equipment does not recognize highlighted information.
3. If the medical record does not support medical necessity, discuss the case with the office manager and provider.
Appealing Denied Claims
A remittance advice may indicate that payment was denied for a reason other than a processing error. The reasons for denials may include the following.
1. Procedure or service not medically necessary: The payer has determined that the procedure performed or service rendered was not medically necessary based on the information submitted on the claim. To respond, first review the original source document (e.g., patient record) for the claim to determine whether significant diagnosis codes or other important information have been clearly documented or may have been overlooked.
Next, write an appeal letter to the payer providing the reasons the treatment is medically necessary.
2. Pre-existing condition: The payer has denied this claim based on the wording of the pre-existing condition clause in the patient's insurance policy. A pre-existing condition is any medical condition that was diagnosed and/or treated within specific period of time immediately preceding the enrollee's effective date of coverage. The wording associated with these clauses varies from policy to policy (e.g., length of time pre-existing condition clause applies). It is possible for an insurance company to cancel a policy or at least denied payment on a claim. If the patient failed to disclosed pre-existing conditions. Respond to this type of denial by determining whether the condition associated with treatment for which the claim was submitted was indeed pre-existing. If it is determined that an incorrect diagnosis code was submitted on an original claim, for example, correct the claim and resubmit it for reconsideration of payment.
3. Non-covered benefit: The claim was denied based on a list developed by the insurance company that includes a description of items covered by the policy as well as those excluded. Excluded items may include procedures such as cosmetic surgery. Respond to this type of denial by determining whether the treatment submitted on a claim for payment is indeed excluded from coverage. If it is determined that an incorrect procedure code was submitted, for example, correct the claim and resubmit it for reconsideration of payment along with a copy of medical record documentation to support the code change.
4. Termination of coverage: The payer has denied this claim because the patient is no longer covered by the insurance policy. Respond to this type of denial by contacting the patient to determine appropriate coverage, and submit the claim accordingly. For example, a patient may have changed jobs and may no longer be covered by his former employer's health insurance plan. The office may need to obtain correct insurance payer information and submit a claim accordingly. This type of denial reinforces the need to interview patients current address, telephone number, employment, and insurance coverage each time they come to the office for treatment.
5. Failure to obtain preauthorization: Many health plans require patients to call a toll-free number located on the insurance card to obtain prior authorization for particular treatments. Problems can arise during an emergency situation when there is a lack of communication between provider and health plan (payer), because treatment cannot be delayed while awaiting preauthorization. Although such a claim is usually paid, payment might be less and/or penalties may apply because preauthorization was not obtained. If failure to obtain preauthorization was due to a medical emergency, it is possible to have penalties waived. Respond to this situation by requesting a retrospective review of a claim, and be sure to submit an information explaining special circumstances that might not be evident from review of the patient's chart.
Example: The patient was admitted to the labor and delivery unit for an emergency cesarean section. The patient's EOB contained a $200 penalty notice (patient's responsibility) and a reduced payment to the provider (surgeon). The remittance advice stated that preathorization for the surgical procedure was not obtained. The provider appealed the claim, explaining the circumstances of emergency surgery, and the payer waived the $200 penalty and reimbursed the provider at the regular rate.
6. Out-of-network provider used: The payer has denied payment because treatment was provided outside the provider network. Respond to this denial by writing a letter of appeal explaining why the patient sought treatment from outside the provider network (e.g., medical emergency when patient was out of town). Payment received could be reduced and penalties could also apply.
7. Lower level of care could have been provided: This type of denial applies when (a) care rendered on an inpatient basis is normally provided on an outpatient basis, (b) outpatient surgery could have been performed in a provider's office, or (c) skilled nursing care could have been performed by a home health agency. Respond to this type of denial by writinga letter of appeal explaining why the higher level of care was required. Be prepared to forward copies of the patient's chart for review by the insurance payer.
The Electronic Remittance Advise (ERA) typically the following items:
1. Third-party payer's name and contract number.
2. Electronic Data Interchange (EDI) information, including EDI exchange number, date and time remittance advice was generated, and EDI receive identifier.
3. Provider's name and mailing address.
4. Adjustments applied to the submitted claim (e.g., reduced payment, partial payment, zero-payment and so on).
5. Amount and date of payment.
6. Patient's reference name, number and health insurance contact number, claim date, internal control number, paid status (e.g., primary, secondary, supplemental), claim total, and amount paid.
7. Date and place of service, procedure and service code, units, charge(s), provider identification number, allowable charges, deductible an d coinsurance amounts, amount paid, and reasons (to explain payment amount).
The Explanation of Benefits (EOB) typically includes the following items:
1. Third-party payer's name, mailing address and telephone number.
2. Date the EOB was generated, payer's identification number, contract number, and benefit plan.
3. Patient's name and mailing address.
4. Details of services reported on claim, including claim number, name of provider, date of service, amount charge, amount not covered by plan, amount allowed by plan, copayment and/or deductible amounts (that are the responsibility of the patient), amount paid under plan's benefits and any remark codes (e.g. reason for denied claim).
5. Benefit plan payment summary information, including provider's name and amount paid under plan's benefit.
6. Summary information about plan deductible and out-of-pocket amounts (paid by patient)
7. Statement (at the bottom or top) that says THIS IS NOT A BILL.
Remittance Advice Reconciliation
When the remittance advice and payment are received, retrieved the claim(s) are reviewed and post payments to patients accounts. Be sure to post the date payment received, amount of payment, processing date, and any applicable transmittal notice number. Claims containing errors are moved to the closed claims file. (Single-payment notices are attached to paper claims before filing in closed claims file. Batched remittance advice are placed in batched remittance advice file).
Appeals Process
An appeal is documented as a letter signed by the provider explaining why a claim should be reconsidered for payment. If applicable include copies of medical record documentation. Be sure the patient has signed a released-of-information authorization.
Important NOTES:
1. Medicare appeals are now called redeterminations or reconsiderations, as per BIPA-mandated changes.
2. When questioning the payer about the remittance advice that includes multiple patients, circle the pertinent patient information. DO NOT USE HIGHLIGHTER, because payer scanning equipment does not recognize highlighted information.
3. If the medical record does not support medical necessity, discuss the case with the office manager and provider.
Appealing Denied Claims
A remittance advice may indicate that payment was denied for a reason other than a processing error. The reasons for denials may include the following.
1. Procedure or service not medically necessary: The payer has determined that the procedure performed or service rendered was not medically necessary based on the information submitted on the claim. To respond, first review the original source document (e.g., patient record) for the claim to determine whether significant diagnosis codes or other important information have been clearly documented or may have been overlooked.
Next, write an appeal letter to the payer providing the reasons the treatment is medically necessary.
2. Pre-existing condition: The payer has denied this claim based on the wording of the pre-existing condition clause in the patient's insurance policy. A pre-existing condition is any medical condition that was diagnosed and/or treated within specific period of time immediately preceding the enrollee's effective date of coverage. The wording associated with these clauses varies from policy to policy (e.g., length of time pre-existing condition clause applies). It is possible for an insurance company to cancel a policy or at least denied payment on a claim. If the patient failed to disclosed pre-existing conditions. Respond to this type of denial by determining whether the condition associated with treatment for which the claim was submitted was indeed pre-existing. If it is determined that an incorrect diagnosis code was submitted on an original claim, for example, correct the claim and resubmit it for reconsideration of payment.
3. Non-covered benefit: The claim was denied based on a list developed by the insurance company that includes a description of items covered by the policy as well as those excluded. Excluded items may include procedures such as cosmetic surgery. Respond to this type of denial by determining whether the treatment submitted on a claim for payment is indeed excluded from coverage. If it is determined that an incorrect procedure code was submitted, for example, correct the claim and resubmit it for reconsideration of payment along with a copy of medical record documentation to support the code change.
4. Termination of coverage: The payer has denied this claim because the patient is no longer covered by the insurance policy. Respond to this type of denial by contacting the patient to determine appropriate coverage, and submit the claim accordingly. For example, a patient may have changed jobs and may no longer be covered by his former employer's health insurance plan. The office may need to obtain correct insurance payer information and submit a claim accordingly. This type of denial reinforces the need to interview patients current address, telephone number, employment, and insurance coverage each time they come to the office for treatment.
5. Failure to obtain preauthorization: Many health plans require patients to call a toll-free number located on the insurance card to obtain prior authorization for particular treatments. Problems can arise during an emergency situation when there is a lack of communication between provider and health plan (payer), because treatment cannot be delayed while awaiting preauthorization. Although such a claim is usually paid, payment might be less and/or penalties may apply because preauthorization was not obtained. If failure to obtain preauthorization was due to a medical emergency, it is possible to have penalties waived. Respond to this situation by requesting a retrospective review of a claim, and be sure to submit an information explaining special circumstances that might not be evident from review of the patient's chart.
Example: The patient was admitted to the labor and delivery unit for an emergency cesarean section. The patient's EOB contained a $200 penalty notice (patient's responsibility) and a reduced payment to the provider (surgeon). The remittance advice stated that preathorization for the surgical procedure was not obtained. The provider appealed the claim, explaining the circumstances of emergency surgery, and the payer waived the $200 penalty and reimbursed the provider at the regular rate.
6. Out-of-network provider used: The payer has denied payment because treatment was provided outside the provider network. Respond to this denial by writing a letter of appeal explaining why the patient sought treatment from outside the provider network (e.g., medical emergency when patient was out of town). Payment received could be reduced and penalties could also apply.
7. Lower level of care could have been provided: This type of denial applies when (a) care rendered on an inpatient basis is normally provided on an outpatient basis, (b) outpatient surgery could have been performed in a provider's office, or (c) skilled nursing care could have been performed by a home health agency. Respond to this type of denial by writinga letter of appeal explaining why the higher level of care was required. Be prepared to forward copies of the patient's chart for review by the insurance payer.
