Healthcare Reimbursement, Payers, and Claims Processing
This domain tests how coded data becomes payment. Expect questions on payer types and benefit structure, prospective payment systems, fee schedule math, claim forms and identifiers, edits, and what happens when a claim is denied.
Who pays, and what the patient owes
- Medicare Part A covers inpatient hospital, skilled nursing, hospice, and some home health; Part B covers professional and outpatient services; Part C is Medicare Advantage, a private plan that must cover the same benefits; Part D covers prescription drugs. Medicaid is jointly state and federally funded and varies by state.
- Other payers: commercial, workers compensation, TRICARE, and the VA, each with its own authorization and network rules.
- Cost sharing: deductible, coinsurance, and copayment. Distinguish the billed charge, the allowed amount, the contractual write-off, and the amount actually paid.
How payment is calculated
- Inpatient hospital: the MS-DRG derives from the principal diagnosis, procedures, and complications or comorbidities, then a relative weight is multiplied by a base rate.
- Outpatient hospital: OPPS assigns Ambulatory Payment Classifications.
- Physician: the Medicare Physician Fee Schedule uses relative value units for work, practice expense, and malpractice, each adjusted by geographic indices, summed and multiplied by a conversion factor. Multiple surgical procedures pay 100 percent for the highest valued and 50 percent for the rest; bilateral procedures generally pay 150 percent. Practice expense differs by facility versus non-facility place of service.
- Edits: NCCI procedure-to-procedure pairs and medically unlikely edits; medical necessity per national and local coverage determinations.
Claims and denials
- Institutional claims use the UB-04 (837I); professional claims use the CMS-1500 (837P). Required data include patient identifiers, National Provider Identifiers, procedure codes with modifiers, diagnosis codes with pointers, place of service, units, and charges.
- Claims flow through adjudication to an electronic remittance advice carrying claim adjustment reason codes. Denials are corrected and resubmitted or appealed within the payer's deadline - Medicare redetermination is 120 days.
- Verify eligibility and coordination of benefits before the encounter, and obtain an Advance Beneficiary Notice when a service is expected to be denied as not medically necessary.
Worked example
A non-facility Medicare service has RVUs of 1.20 work, 1.00 practice expense, and 0.10 malpractice. With geographic indices of 1.000 and a conversion factor of $32.74: 2.30 total RVUs × $32.74 = $75.30 allowed. With the deductible met, Medicare pays 80 percent ($60.24) and the patient owes 20 percent coinsurance ($15.06).
Traps that cost marks
- Confusing the billed charge with the allowed amount.
- Ignoring the facility versus non-facility practice expense difference.
- Using modifier 59 to force payment of a genuinely bundled service.
- Missing timely filing deadlines or submitting an appeal instead of a corrected claim.