Billing and Coding

Summary / Explanation

Coding Applications

Procedural coding—Current Procedural Terminology: Current Procedural Terminology (CPT) codes are 5-digit codes used to categorize treatments and procedures provided in outpatient settings, such as a doctor's office, urgent care clinic, or other facilities outside of the hospital.[1][2] CPT codes are equivalent to Category I Healthcare Common Procedure Coding System (HCPCS) codes. Within Category I CPT codes, a widely used subset exists, which is known as evaluation and management (E&M) codes. E&M codes enable payers to reimburse providers using a fee-for-service model.[3] E&M codes categorize encounters into 5 levels based on 3 main components—history of present illness, physical examination, and clinical decision-making. In addition, these codes categorize encounters into 4 additional components—time spent on the encounter, counseling provided to the patient, coordination of care, and the nature of the patient's presenting problem.[4]

Modifiers: Modifiers are 2 characters added to the end of a code to indicate a specific alteration or circumstance without changing the coded diagnosis, treatment, or procedure. For example, they can specify which side a procedure was performed on or if multiple providers were involved in a service. Another example is describing specific details of a diagnosis, such as indicating which side a patient has knee pain. Multiple modifiers can be added to a single code.[4][5]

Upcoding and downcoding:

• Upcoding: This occurs when a provider submits a CPT code to a payer, which results in higher reimbursement than warranted for the actual service provided or documented. Upcoding can lead to legal charges and fines.[4][6]

• Downcoding: This is the opposite of upcoding, and it occurs when a provider submits a CPT code that results in lower reimbursement than the service provided. This is a common issue among new providers and can lead to financial losses for facilities.

Bundling and unbundling:

• Bundling: Bundling of charges is when a single CPT code is used for billing for 2 or more services performed at the same time. Typically, the more significant service is coded for, as it will have a greater reimbursement. For example, during a major surgery involving multiple needle injections, only the major surgery is coded, not the multiple needle injections.  

• Unbundling: Unbundling is the opposite of bundling. Unbundling is when 2 services that should be coded under a single CPT code are coded separately, as it will amount to a larger comprehensive reimbursement. Unbundling results in overbilling and, if frequent enough, can lead to fraud investigations.[5]

Diagnostic coding—International Classification of Diseases, Clinical Modification: The International Classification of Diseases, Clinical Modification (ICD-CM) is used to code symptoms and diseases in all healthcare settings. ICD-CM codes are used to describe conditions ranging from simple bruises to complex cancers. Within these codes, many modifiers can be coded that can specify details such as the duration of symptoms, the affected side of the body, the frequency of occurrences, the presence of complications, and more.[7][8][9]

Healthcare Common Procedure Coding System (Category II): HCPCS (Category II) codes are used by Medicare, Medicaid, and other insurance payers to bill for procedures and supplies not included in Category 1 CPT codes. Examples include dressings, walkers, pacemakers, medications, and ambulance rides. Although these codes are not required, if used, they allow payers to reimburse using a performance improvement model.[4][10][11]

Billing and Collections

Itemized statements: An itemized statement is a document provided by a healthcare facility that lists items and services provided with the associated codes.[12]

Aging of accounts: Aging of accounts is an overview of how long outstanding balances from insurance claims and patients have remained unpaid.

Collecting payments: These include copay, prepay, co-insurance, and self-pay.

• Copayments: Copays are a fixed amount a patient may pay for a service, which is collected at the time of the appointment.[5]

• Prepayments: Prepays are payments made ahead of time or in advance for single or multiple appointments or services.[5]

• Self-payments: Self-pays are payments made by patients without insurance. These are costs that the patient pays from their own funds.

• Co-insurance: This is the amount a patient pays for services after meeting their deductible. The patient usually owes a percentage of the total cost of a service directly, and the insurance will cover the rest.

Preplanned payment options and credit arrangements: Several methods exist for patients to pay for their care directly to their provider. Patients may set up a payment plan to pay for services over time or establish a credit arrangement to pay back borrowed money. These arrangements are typically discussed before the services are provided.

Collection agencies: Collection agencies are responsible for collecting overdue medical debt. Sometimes, medical bills can be too expensive to pay all at once, or the patient's insurance coverage may not cover all the costs. In such cases where hospitals or providers enlist debt collectors, patients should contact the provider or hospital.

Account collection rules: Government agencies such as the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) enforce various laws and acts that establish rules for debt collectors and individuals who owe money. These regulations are crucial as they safeguard patients from abuse and harassment by debt collectors. For instance, debt collectors are prohibited from contacting individuals multiple times a day or during odd hours.[13][14][15]