This may be more information than you want to know, but this is my understanding of how medical billing works. I have been involved in medical billing for about 40 years and have seen it evolve with time and the advent of computers. I have taken yearly billing courses for the last ten years given by national practice management and billing instructors.
Instead of writing out the long names of procedures/operations and the corresponding diagnosis, Medicare and insurance companies have developed a numerical coding system that is especially useful in the computer age.
Medicare Current Procedural Terminology Codes (CPT codes)
In medicine the majority of billing is based on Medicare Current Procedural Terminology Codes (CPT codes). These codes describe the operation or procedure performed. For example a carpal tunnel release is CPT code 64721. If the carpal tunnel is done with an endoscopic procedure (a scope method) the CPT code is different and listed as 29848.
In medicine, the diagnosis (name of the disease or medical problem) is listed in code by the International Classification of Diseases, Ninth Revision (ICD-9 codes). For example the ICD-9 code for carpal tunnel syndrome is 354.0. Rheumatoid arthritis is CPT 714.0 and osteoarthritis is CPT 715.0 to delineate types of arthritis.
ICD-9 Code Must Match
When an operation is performed, it is listed on the insurance form as a CPT code (for example carpal tunnel syndrome is CPT code 64721). For that operation a corresponding diagnosis code (ICD-9 code) must be listed on the insurance form. If the CPT code and the ICD-9 code do not match then the insurance payment will be rejected.
There are only certain diagnosis codes (ICD-9 codes) that are approved to be used with an operation code (CPT code). For example you can’t bill a CPT operation code for carpal tunnel syndrome with an ICD-9 diagnosis code for gall bladder disease.
Also with a CPT code there are certain things that are automatically included in that operation that cannot be billed for separately. For example in a carpal tunnel release operation you cannot bill for identifying anatomical structures, injecting anesthetic, culturing the wound, removing lining from the tendons, or suturing the wounds. These things are included in operative procedure. These are included in the global package of the operation. There are books and internet sites (Medicare edits) that delineate those things included routinely in an operation and those procedures that are not routinely included in the operation. Some doctors have tried to bill Medicare and private insurers for procedures that are included in the global payment of an operation either by mistake or on purpose to make more money from a surgery session. This practice is called “bundling.”
Medicare lists a payment amount for every CPT code. This is the basis for which other insurance companies develop their payment schedules. Many times, private insurance companies (BCBS, Aetna, etc) and worker’s compensation will pay a percentage higher than medicare (like 110% or 130% of medicare). Doctors enter into contracts with the insurance companies (in their network) and they agree that they will accept the private insurance company’s schedule of payment and usually go by most of Medicare’s rules of payment. If doctors do not have a contract with an insurance company then they can’t see the insurance company’s patients or see them at “out of network” pricing.
Making Sure Patients are not Under-Reimbursed by Medicare
Medicare will adjust its payment schedule during the year and the doctors will not know it unless they happen to see a publication or check the payment list of thousands of procedures. These changes are usually within a hundred dollars or so but important to note. If the Medicare computers record the doctor’s practice as accepting less than the published amount, then Medicare may pay the doctor the lesser amount into the future. Therefore, practice management courses recommend that doctors charge 150-200% above what they think the Medicare rate is at the time. Medicare will only pay the current Medicare rate no matter what the doctor charges and the doctor does not receive more than he should. This applies to private insurers as well. They will only pay the doctor the contracted amount regardless of what the doctor charges.
When a surgical procedure is followed by another surgical procedure at the same surgical setting, the most expensive surgical procedure is listed first and other procedures are listed to follow in descending order according to the expense of the procedure. By Medicare rules the first most expensive procedure is expected to be paid at 100%, the second procedure is discounted to 50% as are the other procedures that follow. In years past, Medicare and some insurance contracts paid the first procedure at 100%, the second at 50% and those following at 25%. According to practice management courses, in billing, the physician should list all the procedures in descending order of expense and charge the full amount for each procedure and let the insurance companies apply their discount to the secondary procedures.
Out of Network Procedures
Some doctors are not on insurance plans and are out of network. These doctors sometimes will have the patient pay the doctor his charge and then let the patient bill the insurance company for reimbursement. The insurance company will usually have an “out of network rate”. Insurance companies encourage their covered patients to use “in network” physicians and hospitals for their elective surgery. If a patient chooses to go outside the network, the insurance company payments are often adjusted for the cost to the insurance company. Of course, in accidents and emergency situations, the patient can find himself in an “out of network” situation beyond his control and the insurance company often makes allowances for that situation.
To obtain more detailed information about conditions of the hand, wrist, forearm and elbow, visit our Patient Education page.
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Please Note: The medical information contained on this website is provided to increase your knowledge and understanding of hand and upper extremity problems or conditions. This information should not be interpreted as the Van Wyk Hand Center’s recommendation for a specific medical or surgical treatment plan.