Decoding Medical Claims: an Introductory 101 Guide

Insurance payers cover a portion of patient medical expenses via reimbursement for approved claims. Main payer types include:

• Private health insurance companies like Aetna, Cigna, etc. Enrollees pay premiums and receive employer-sponsored or individual policies.
• Government payers Medicare and Medicaid. Medicare covers elderly and disabled patients. Medicaid assists low-income individuals. Both are funded by taxes.
• Workers compensation insurance covers injuries and illness related to patient employment responsibilities. Funded by employers.

Each payer uses unique guidelines and contracts with providers to determine reimbursable services, fees, documentation needs and claim specifications.

Medical billing coders translate clinical services rendered into standardized codes payers require on claims to determine approvals and payment.

Types of Codes

The main coding systems used are:

• CPT codes: Define medical services, procedures and treatments provided
• ICD codes: Capture diagnosed medical conditions and symptoms
• HCPCS codes: Identify healthcare products, equipment and supplies used

Modifiers appended to codes offer additional specifications like left or right side of body, initial vs subsequent visit etc. Accurate coding details the exact services delivered.

Claim Forms

Codes populate specific insurance claim administration forms:

• CMS 1500 form: For provider outpatient services claims
• UB-04 form: Hospital facility and inpatient services claims

Forms capture patient, provider, diagnosis, treatment and billed charge details.

Billing Workflow Stages

1. Patient Services Delivery
   The clinical team provides appropriate medical services to address patient healthcare needs during appointments and hospital visits. Services performed are documented in the electronic medical record (EMR) to support coding and claims.
2. Charge Capture
   Charged services, diagnosis details and claims data from the patient visit are extracted from the EMR into the billing system, typically automatically. Professional coder reviews and edits codes as needed to ensure accuracy before claim generation.
3. Claim Creation
   The billing system compiles all treatment services, codes, fees etc. into the final claim document for submission to payers.
4. Claim Transmission
   Completed claims are sent electronically via clearinghouses or directly to insurance payers for processing – sometimes on paper.
5. Claims Lifecycle Management
   Payers process claims checking validity, medical necessity, correcting errors etc. Claims are approved or denied/rejected. Tracking status and appealing rejections is key for practices to resolve issues and receive payments.
6. Patient Billing
   Once claims are processed by insurers, any outstanding amounts owed by patients are compiled into invoices and mailed out. Often automated through patient billing modules built into medical billing systems.
7. Payment Posting
   As payer claims reimbursements are received electronically or checks processed, payments are matched and applied to corresponding patient accounts. This completes the medical revenue cycle.

Following the full workflow from delivering patient care through applying received claim payments closes the loop on generating, reconciling and collecting payment for services through a standard set of processes and system capabilities necessary for sustainable business operations.

It is vital for practices to monitor key metrics reflecting medical claims management efficiency:

• Claim Rejection Rate – The % of submitted claims declined or denied requiring additional work to possibly reverse the decision. Target under 5%.
• Claim Denial Rate – The % of submitted claims ultimately not reimbursed by insurance upon final determination. Goal less than 3%.
• First Pass Rate – The % of claims easily reimbursed upon first submission without any rejections or appeals. Strive for over 90%.
• Days in A/R (Accounts Receivable) Cycle – The average number of days from delivering services to collecting insurer reimbursement payments. Lower is better. 60-90 days typical.

Proper staff education on sound claims practices supplemented by automation tools to streamline workflows reduces administrative waste while boosting claim acceptance rates to achieve financial and operational success.

Despite well-designed systems and processes, a number of factors can impede efficient claims processes and payments:

• Siloed Systems
  Disjointed medical software ecosystems slow sharing of patient data needed for complete billing details submission. Information gaps lead to claims rejections.
• Manual Workflows
  Many administrative tasks – submitting forms, tracking claim statuses etc. – rely on manual effort. Human errors create mistakes stalling reimbursement.
• High Claim Volumes
  The sheer volume of patient claims to process presents difficulties keeping up with demand – leading to backlogs. Critical claim tracking and denials resolution delays can impact cash flows when overwhelmed.
• Time-Consuming Research
  Insurer policies and code requirements change routinely – keeping fully informed requires ample time and focused effort. Claim rejections increase amid information gaps.
• Overloaded Staff
  Fixed billing staff numbers strain to absorb routine and exceptions workload. Overcapacity staff risks productivity declines, costly errors that slow payments.

While challenges exist, practices can leverage solutions like automation, analytics and training to smooth workflows, prevent errors, and ease volumes for improved outcomes.

Inefficiencies in claims management processes significantly impact provider organizations:

• Financial Loss
  Denials and delays in claim reimbursement directly lowers realized revenue, raises days sales outstanding and slows cash flows crucial to operating health.
• Higher Operating Costs
  Managing claims requires immense admin costs – staff, systems, vendors. Bloated claim rework and complex troubleshooting drives overhead.
• Provider Dissatisfaction
  Frustration grows when insurers frequently question or delay reimbursement for services rendered, demoralizing employed and affiliated physicians.
• Patient Dissatisfaction
  Lack of transparency around claim approval workflows reflects negatively on providers when amount billed varies from insured payment received. Erodes trust and loyalty.
• Regulatory Exposure
  Incomplete claim details submission risks audits, fines and penalties for missing mandated reporting and compliance requirements.

While intrinsic complexities exist around claim processes, focus on metrics tracking, transparency and continuous efficiencies keeps revenue cycles humming.

Digitization of manual billing tasks through automation vastly improves productivity and accuracy by:

• Automated CPT/diagnosis code extraction from unstructured clinical notes eliminates manual review effort to determine visit billing charges.
• Rules engine claim reviews flag common errors like invalid code combinations for correction prior to submission preventing rejection downstream.
• Direct EHR integration auto-populates visit and patient details into new claims avoiding redundant data entry and mistakes.
• Natural language processing of denial rationales and payer policy requirements speeds understanding leading to quicker resolutions.
• Automated workflow steps enable routing of claims issues to specialists based on type of rejection.

Today’s AI-enabled automation solutions allow rapid identification and resolution of claims issues before detrimental impact to revenue.