PAYMENT BASICS AND CONTRACTUAL TERMS
Payors pay providers according to a contract that they both have signed; in absence of a contract reimbursement is based on 100% of billed charges
With rising healthcare costs, payors are constantly seeking payment methods, to encourage providers to reduce healthcare expenses Providers constantly seek payment methods, which cover their costs of service and allow them to treat patients according to what’s medically necessary.
In general, payors use the following four bases to calculate provider payments
Charges
Costs
Flat rate
Capitation
CHARGES:
Payments are based on what a provider charges. This is the historic payment method and not commonly used today as there’s no incentive for the physician to cut costs (the more a physician charges, the more he is paid).
COSTS:
Payments are based on what costs a provider has incurred in treating a patient. Still used today, but slowly being phased out because here is not enough incentive for a provider to cut costs (a physician could be fiscally irresponsible and have high costs). Payment methods used are ‘UCR’ and ‘PIP’.
USUAL, CUSTOMARY, OR REASONABLE (UCR):
Providers paid according to the provider’s usual fee, the customary fee of other providers in the area, and the reasonable fee for the service.
PERIODIC INTERIM PAYMENT (PIP):
Provider paid a fixed amount on a regular basis according to costs. This is usually used with facility providers. Final reconciliation of underpayment/overpayment are made at the end of the contract.
FLAT RATE:
Fixed provider payments per episode of care regardless of intensity of services or length of services; however provider is not paid unless service is rendered. Whereas Case rate is a single fee for a specified procedure or course of treatment that is inclusive of all medical services.
CAPITATION:
Fixed payments paid to a provider periodically for each patient assigned to the provider. The provider is paid regardless of whether the patient is ever seen. The most common arrangement is Per Member Per Month (PMPM).
Specified amount paid periodically to health provider for a group of specified health services, regardless of quantity rendered.
MOTHER BABY CLAUSE:
A contractual clause that defines the maternity case rate. Normally his clause will define type of delivery, management of multiple births, management of accommodation level other than nursery for the baby, and length of stay for mother and baby.
BUNDLED PHYSICIAN RATES:
Bundled physician rates (Global Payment) is the payment received by the provider, which includes the technical and professional component i.e, it includes both the human component and the technical component.
EXPLANATION OF BENEFITS:
The time frame that payor gives to the provider to submit the claims and get reimbursed. Timely filing limit starts from date of service in case of outpatient claims and from date of discharge in case of inpatient claims.
TIMELY FILING LIMIT: The time frame that payor gives to the provider to submit the claims and get reimbursed. Timely filing limit starts from date of service in case of outpatient claims and from date of discharge in case of inpatient claims.
APPEALS TIMELY FILING LIMIT: The time frame that the insurance company gives to the provider to submit the claims and get reimbursed after the claim has been denied. Appeals limit starts from the date of denial
BILL HOLD:
Timeframe established by hospitals as reasonable amount of time that would be necessary to have a claim ready to be billed. Within this timeframe the following key billing functions must be performed; insurance assignment, insurance verification, charge capturing/posting, utilization review and medical records coding
DISCHARGED NOT FINAL BILLED: Discharged Not Final Billed report used by providers to track accounts from discharged patients that haven’t been billed due to a particular reason such as medical records coding, insurance verification, utilization review.
APPROVED AMOUNT:
A reimbursement method in which a payor only pays a fixed amount per service; however, providers cannot seek patient contributions for charges that exceed approved amounts. Approved Amount = Insurance Payment + Patient Responsibility = Total Charges - Contractual Adjustment.
CONTRACTUAL ADJUSTMENT:
The difference between total/actual charges and the amount of money approved by the insurance company (third-party payor). The payment amount is established based on the agreements between provider and payor allowing for discounts and/or reduced rates. Contractual Adjustment is also called ‘Contractual Allowance’, ‘Provider’s Write-off’, or ‘Provider’s Discount
WRITE-OFF: For the claims or charges, which were denied. These claims or charges need to be written Despite all the efforts provider was not able to realize cash from insurance company off as the denial is due to providers fault/mistake
OUT OF POCKET EXPENSES/COSTS:
Portion of health services/health costs that must be paid for by the plan member, including deductibles, co-payments, and co-insurance.
Out of pocket expenses also refer to the payment of services not covered by or approved for reimbursement by the health plan.
DEDUCTIBLE APPROVED AMOUNT:
Claim denied for no authorization and insurance does not provide retro-authorization. Claim can be appealed with medical records showing medical necessity. Insurance can either apply benefit penalty or appeal can be denied. Maximum of three appeals can be sent after which the claim or charge needs to be written off as it was providers fault not to obtain authorization.
CONTRACTUAL ADJUSTMENT: The difference between total/actual charges and the amount of money approved by the insurance company (third-party payor). The payment amount is established based on the agreements between provider and payor allowing for discounts and/or reduced rates. Contractual Adjustment is also called ‘Contractual Allowance’, ‘Provider’s Write-off’, or ‘Provider’s Discount’.
PROMPT PAYMENT DISCOUNT
A contractual clause that states a discount for cases paid within “X” amount of time from the initial billing date. Usually it is 15 days from initial billing date. The discount can be a fixed % of all billed charges or a fixed % of a particular room & board type
With rising healthcare costs, payors are constantly seeking payment methods, to encourage providers to reduce healthcare expenses Providers constantly seek payment methods, which cover their costs of service and allow them to treat patients according to what’s medically necessary.
In general, payors use the following four bases to calculate provider payments
Charges
Costs
Flat rate
Capitation
CHARGES:
Payments are based on what a provider charges. This is the historic payment method and not commonly used today as there’s no incentive for the physician to cut costs (the more a physician charges, the more he is paid).
COSTS:
Payments are based on what costs a provider has incurred in treating a patient. Still used today, but slowly being phased out because here is not enough incentive for a provider to cut costs (a physician could be fiscally irresponsible and have high costs). Payment methods used are ‘UCR’ and ‘PIP’.
USUAL, CUSTOMARY, OR REASONABLE (UCR):
Providers paid according to the provider’s usual fee, the customary fee of other providers in the area, and the reasonable fee for the service.
PERIODIC INTERIM PAYMENT (PIP):
Provider paid a fixed amount on a regular basis according to costs. This is usually used with facility providers. Final reconciliation of underpayment/overpayment are made at the end of the contract.
FLAT RATE:
Fixed provider payments per episode of care regardless of intensity of services or length of services; however provider is not paid unless service is rendered. Whereas Case rate is a single fee for a specified procedure or course of treatment that is inclusive of all medical services.
CAPITATION:
Fixed payments paid to a provider periodically for each patient assigned to the provider. The provider is paid regardless of whether the patient is ever seen. The most common arrangement is Per Member Per Month (PMPM).
Specified amount paid periodically to health provider for a group of specified health services, regardless of quantity rendered.
MOTHER BABY CLAUSE:
A contractual clause that defines the maternity case rate. Normally his clause will define type of delivery, management of multiple births, management of accommodation level other than nursery for the baby, and length of stay for mother and baby.
BUNDLED PHYSICIAN RATES:
Bundled physician rates (Global Payment) is the payment received by the provider, which includes the technical and professional component i.e, it includes both the human component and the technical component.
EXPLANATION OF BENEFITS:
The time frame that payor gives to the provider to submit the claims and get reimbursed. Timely filing limit starts from date of service in case of outpatient claims and from date of discharge in case of inpatient claims.
TIMELY FILING LIMIT: The time frame that payor gives to the provider to submit the claims and get reimbursed. Timely filing limit starts from date of service in case of outpatient claims and from date of discharge in case of inpatient claims.
APPEALS TIMELY FILING LIMIT: The time frame that the insurance company gives to the provider to submit the claims and get reimbursed after the claim has been denied. Appeals limit starts from the date of denial
BILL HOLD:
Timeframe established by hospitals as reasonable amount of time that would be necessary to have a claim ready to be billed. Within this timeframe the following key billing functions must be performed; insurance assignment, insurance verification, charge capturing/posting, utilization review and medical records coding
DISCHARGED NOT FINAL BILLED: Discharged Not Final Billed report used by providers to track accounts from discharged patients that haven’t been billed due to a particular reason such as medical records coding, insurance verification, utilization review.
APPROVED AMOUNT:
A reimbursement method in which a payor only pays a fixed amount per service; however, providers cannot seek patient contributions for charges that exceed approved amounts. Approved Amount = Insurance Payment + Patient Responsibility = Total Charges - Contractual Adjustment.
CONTRACTUAL ADJUSTMENT:
The difference between total/actual charges and the amount of money approved by the insurance company (third-party payor). The payment amount is established based on the agreements between provider and payor allowing for discounts and/or reduced rates. Contractual Adjustment is also called ‘Contractual Allowance’, ‘Provider’s Write-off’, or ‘Provider’s Discount
WRITE-OFF: For the claims or charges, which were denied. These claims or charges need to be written Despite all the efforts provider was not able to realize cash from insurance company off as the denial is due to providers fault/mistake
OUT OF POCKET EXPENSES/COSTS:
Portion of health services/health costs that must be paid for by the plan member, including deductibles, co-payments, and co-insurance.
Out of pocket expenses also refer to the payment of services not covered by or approved for reimbursement by the health plan.
DEDUCTIBLE APPROVED AMOUNT:
Claim denied for no authorization and insurance does not provide retro-authorization. Claim can be appealed with medical records showing medical necessity. Insurance can either apply benefit penalty or appeal can be denied. Maximum of three appeals can be sent after which the claim or charge needs to be written off as it was providers fault not to obtain authorization.
CONTRACTUAL ADJUSTMENT: The difference between total/actual charges and the amount of money approved by the insurance company (third-party payor). The payment amount is established based on the agreements between provider and payor allowing for discounts and/or reduced rates. Contractual Adjustment is also called ‘Contractual Allowance’, ‘Provider’s Write-off’, or ‘Provider’s Discount’.
PROMPT PAYMENT DISCOUNT
A contractual clause that states a discount for cases paid within “X” amount of time from the initial billing date. Usually it is 15 days from initial billing date. The discount can be a fixed % of all billed charges or a fixed % of a particular room & board type
posted by MADHU at
July 16, 2008
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