Coding and Billing Basics

OVERVIEW OF PHYSICIAN CODING AND BILLING

With the increase in oversight and the continuous pressure to provide healthcare services in the most cost-efficient method, it’s necessary to thoroughly understand the current reimbursement system to maintain an active and financially healthy practice. Physician services are routinely submitted to third party payers in alpha- numerical as well as numerical codes for appropriate compensation.

This alpha numerical and numerical coding system is a translation of the information documented in the medical record. The purpose of this translation is appropriate compensation for the healthcare provider as well as data collection for analysis by the healthcare systems for all patients and their diseases. With HIPAA, documentation of the patient encounters is mandatory to justify the codes submitted to third-party payers for reimbursement. This applies not only to Medicare but to all other insurance carriers throughout the country. Therefore, documentation of the encounter with the patient is now not only important for good patient care, but also for third-party reimbursement and utilization of healthcare dollars.

General Principles of Documentation

The Golden Rules for documentation are, “If it is not documented, it did not happen and it is not billable. If it is illegible, it is not billable.” With those guidelines in mind, the general principles of documentation for patient care are as follows:

• Chief complaint 

• Relevant history 

• Physical exam findings 

• Diagnostic tests and their medical necessity

• Assessment/impression and/or diagnosis 

• Plan/recommendation for care 

• Length of visit, if counseling and/or coordination are provided 

• Date of service and the verifiable, legible identity of provider

Third-party insurers are reviewing documentation to justify payment of services, data and utilization. This does not mean that every encounter will be reviewed prior to payment. However, third-party insurance companies have the right to review chart notes prior to payment if they choose. From a clinical aspect, the physician or other healthcare provider is looking at documentation for appropriate information to continue care of the patient, as well as support for reimbursement.

The physician is responsible for selecting the diagnosis and the procedure codes based on the documentation created for the encounter. The diagnosis is the medical necessity for the procedure(s) or service(s) performed and needs to be as specific as possible. A fee is set for each current procedural terminology (CPT) code independent of what the carriers are reimbursing. The fee may be based on a percentage of Medicare, or it may be based on the cost of doing business for the practice. Many practices have an encounter form, “superbill” or route slip to communicate between the physician and the billing/coding staff about the nature of the services provided to the patient and the medical justification (diagnosis codes) forthe encounter. The U.S. Centers for Medicare and Medicaid Services (CMS) publish a physician fee schedule each year that has relative value units (RVUs) assigned to each code. The RVU is determined by the work, malpractice and overhead expense for each code. The physician fee schedule also includes a conversion factor, which is a dollar amount determined by the U.S. Congress and the CMS. This conversion factor then is multiplied by the RVU for each code to determine the financial value of each code according to Congress and the CMS. A practice may want to use a percentage of this conversion factor and the RVUs for each code as published in the Federal Register to determine the fee schedule for the practice.

The coding systems currently in use for physician services are the Healthcare Common Procedure Coding System (HCPCS), which was created by the American Medical Association (AMA), and the 

International Classification of Diseases(ICD), which was created by the World Health Organization (WHO) and modified by the U.S. Health and Human Services Department. The HCPCS system is used for services, procedures, drugs and supplies. The ICD-9-CM (International Classification of Diseases, 9th edition, Clinical Modification) codes are the diagnosis codes used to provide medical necessity for services and procedures. On October 1, 2015, a new system for diagnosis coding will be implemented: ICD-10-CM. This system will expand the number of codes available from 14,000 to >60,000. The codes will be alphanumeric and require more detailed specificity to code each patient encounter accurately.