Adjudication: The payer’s act of processing a claim submitted for reimbursement.

Adjustment: An amount which is uncollectible by the practice, from either the patient or the insurance company, due to contractual or legal obligations to accept a lower amount as payment in full — and is therefore “written off.” (See Assignment)

Ambulatory Payment Classification (APC): The outpatient prospective payment system (‘OPPS’) for outpatient services made effective August 1, 2000.

Appeal: A request for review and reconsideration of a denied claim.

APR DRG: All Patient Refined Diagnosis Related Group; an illness severity adjusted & risk of mortality DRG system designed by 3M Health Information Systems.

Assignment / Assignment of Benefits: Process whereby the patient and provider request insurance reimbursement be made directly to the provider. For commercial claims and plans where the provider has no contractual agreement with that plan, the patient is responsible for the full actual charge. If the provider has a contract with the plan (i.e., participation agreement with Blue Shield or Medicare), the approved amount is accepted as full payment.

Audit: The act of comparing a physician’s or other provider’s medical documentation against the billing records and claims submitted to verify accuracy and appropriateness. Audits may be conducted by a variety of third party payers, or internally by the entity as part of compliance activities. Balance Bill: The difference between the actual charge and an insurance carrier approved amount. Some situations of assignment (i.e., Medicare, participating Blue Shield, CHAMPUS Select, etc.) require the balance bill be adjusted as a “write-off.” Balance billing the patient is to collect this amount from him/her, which may be permitted for some insurance plans or by a physician who is non-participating in that patient’s plan.

Case Mix Index (CMI): The average DRG weight for all of a hospitals’ Medicare volume. It is calculated by summing the DRG weights for all Medicare discharges and dividing by the number of discharges. (Source: CMS) Charge Description Master (CDM): A hospital specific computer file which includes all procedures, services, supplies or drugs billed on a UB-92 or electronic equivalent.

Cost to Charge Ratio (CCR): methodology to calculate averages of hospital-specific charge and cost data; under new FY 07 CMS rule 10 hospital cost center groupings will be used to calculate CCRs.

Concurrent Review: A screening assessment of hospital admissions at the time they occur performed often by utilization review or case management departments to ensure appropriateness of ongoing admission and medical record information.

Coordination of benefits: Two or more insurance carriers’ determination of payable amounts so that total reimbursement does not exceed either the actual charge or the primary payer’s allowable.

Co-payment / Co-pay: The patient’s financial responsibility can also be a flat per-visit amount designated as co-payment. This is more common in managed care plans.

Date of Service (DOS): The date a particular service was performed. The DOS on a claim should always reflect the date services were actually rendered, as documented in the medical record.

Deductible: The portion of allowable charges for covered services each benefit year for which a patient is responsible before benefits begin.

Deficit Reduction Act of 2005 (DRA): law passed in December 2005, signed into law in February 2006, includes provisions under section 5001 ‘Hospital Quality Improvement’, which reduces payments to hospitals in cases (for example) when a patient acquires an infection or suffers an “adverse event” during a hospital stay.

Diagnosis-Related Group (DRG): The payment mechanism for Medicare Part A (hospital). The patient classification method used by Medicare and most other payers to calculate reimbursement for inpatient hospital care according to the diagnoses and predicted length of stay.

Edits / Prepayment Edits: Electronic or manual prepayment “screens” or parameters which are used to review a claim during initial processing for conflicts. All services exceeding these parameters must be reviewed for medical necessity.

Fee for Service (FFS): The full rate of charge for a private patient without any type of insurance arrangement or discounted prospective health plan.

Fee Schedule: List of allowable / approved amounts per procedure code produced by some insuring entities.

Follow-Up Days (FUD): A certain length of time is usually considered an integral component of care for a surgical service. The number of days is specified in the Medicare fee schedule, which some private payers adopt; other insurers may assign differing lengths of time as “included” in payment for the surgery; also called the global period or global surgical package.

Global Fee: The single fee reimbursed for all services, supplies, and ancillary procedures related to a specific procedure; most often affecting surgical services.

Global Per Diem: A reimbursement mechanism used by a provider to include all costs of care for a day, fixed regardless of case type.

Informal review: A first level appeal made by a patient or provider on the Medicare Carrier’s initial decision of a claim. The informal review is performed by the Medicare carrier who handled the claim. There is a six-month time limit from the date of claim processing for filing a request for informal review.

Intermediary: An insurance organization which contracts with the federal government to administer government plans for billings by hospitals, skilled nursing facilities, and home health agencies paid through the hospital insurance program.

Length of Stay (LOS): The number of days that a covered person stayed in an inpatient facility (may also be referred to as average length of stay).

Medicare Modernization Act of 2003 (MMA): Full title is Medicare Prescription Drug, Improvement, and Modernization Act of 2003. Broad legislative changes to the Medicare program include the Medicare Prescription Drug Benefit; becomes effective January 1, 2006. Prescription Drug benefits will be available for Medicare Part A, B or both (A&B) beneficiaries.

Medicare as Secondary Payer (MSP): Situations, defined in federal law, in which Medicare payment may be made only after another source of medical benefits has either paid or denied payment for medical items and/or services. (See also Employer Group Health Plan and Large Group Health Plan.)

Medicare Part A: Medicare Part A is also called hospital insurance and covers facility charges.

Medicare Part B: Medicare Part B is also called supplemental medical insurance. Medicare Part B can cover physician services; outpatient hospital care; and other health services and supplies which are not covered by Part A.

Medigap policy: Private health insurance designed to supplement Medicare by paying for some of the “gaps” in medical services not covered by Medicare and some of the patient’s co-payments or deductible. MS-DRG: Medicare Severity Diagnosis Related Group: effective in fiscal year 2007 745 new categories(for discharges after October 1, 2007). CMS believes the shift to ‘severity adjusted ‘ reimbursement for inpatient hospital services will be more equitable for care delivered.

Non-Covered Services: Services which are not included in an insurance benefit plan or not covered for some other reason — experimental or cosmetic procedures are often non-covered. These services are usually the financial responsibility of the patient.

Out-of-pocket Expense: That portion of the medical bill which is paid directly by the patient above what is reimbursed by an insurance plan; may reflect deductible, co-pay or coinsurance, and/or non-covered services.

Present on Admission (POA): defined as those primary and secondary diagnosis(es) which occur at the time of a physician order for an inpatient hospital admission, and / or diagnosed after the admission; conditions developed or identified at the time of an outpatient encounter (i.e. Emergency department visit) are considered as “present on admission”. Effective date of use by hospitals is November 15, 2006.

Place of Service (POS): CMS has designated a series of two-digit indicators of the place of service by type. The place of service may affect reimbursement of certain procedures.

Pre-certification: Some payers require that the provider obtain authorization prior to performing certain procedures or admitting a patient to the hospital, or within a specified timeframe afterwards if necessitated by an emergency. An authorization number is assigned. Pre-certification or preauthorization may also be required for referrals to specialists or for other types of care, depending on the policies of a particular plan.

Prospective Audit: The act of auditing patient records in comparison to the proposed billing and coding in advance of submission of the claim. For internal monitoring, this method of audit is preferable, as no knowledge of false claim payments may be derived for these services.

Recovery Audit Contractor (RAC): contracted entities (external to CMS) whose focus and responsibility is on; (1) identifying Medicare underpayments and overpayments; and (2) recouping Medicare overpayments.

Retrospective Audit (Post-payment Audit): This type of audit indicates the review of paid claims. This is the method most likely performed by a payer investigating the possibility of overpayments. It is not recommended for internal auditing and monitoring purposes, as any findings of incorrect payments should legally be reported to the payer and a refund made.

Revenue Code: Necessary on hospital UB-92 claim forms; identify specific department or ancillary service for accurate billing and cost accounting.

Third party administrator (TPA): An entity which has contracted to provide timely, accurate processing of claims and often manages the claims database, which are not the actual payer providing benefits to these patients.

UB-04: CMS approved new hospital billing form to replace UB-92; effective date March 1, 2007.


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