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Practice management knowledge hub

Is your practice running as efficiently as possible? Discover tips and insights that can help streamline your practice management.

Healthcare
reimbursement &
changing rules

The healthcare reimbursement system is an extremely complex framework of obtaining payment for services. One of the most problematic issues is that the “rules” governing healthcare reimbursement change frequently, with government payers sometimes changing on a day-to-day basis.

Health insurance payers have a variety of healthcare reimbursement plans, and carry contracts with individual practices and health systems (contracts that are periodically renegotiated, which is just one source of change within the system). This means that there can be one price for services that occur within a health care system that’s contracted with a payer and another price for services that occur outside that system.

In addition, the price for the service is not the “retail” price that the provider charges for it. Payers have a “maximum allowed payment” for every CPT code, which is the beginning point (not the end point) of determining what they will pay. The payer then adjusts the maximum allowed payment with “claim edits,” which they use to disqualify payment for some services, and “payment rules,” which usually reduce payments for some services. The American Medical Association (AMA) describes how payments are affected by these two rules:

Examples include the application of a “claim edit” that eliminates payment for the administration of a vaccine when the physician bills for the vaccine itself or a “payment rule” that reduces the payment when the physician performs more than on procedure during the same visit. The payer then pays the physician the difference between this payer-calculated “total allowed amount” for the medical services and procedures and the amount owned by the patient.1

That’s confusing enough. But the phrase “the amount owed by the patient” refers to yet another level of complexity in the healthcare reimbursement system, regarding the determination of which party is responsible for what portion of the amount charged for a service. How much is the responsibility of the patient? How much is the responsibility of the insurer? This can come down to the particular plan for which the individual, or the company the individual works for, has contracted with the payer.

This complexity can make it very difficult for practices to understand payer rules, keep up with changes to those rules, and stay ahead in the fast-moving healthcare reimbursement world. This is an area in which a cloud-based medical billing system, which can be updated continually and simultaneously for all practices, provides a tremendous advantage.

1 Standardization of the Claims Process: Administrative Simplification White Paper, American Medical Association Practice Management Center, June 22, 2009

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