CRCR Claims Processing and Reimbursement 2 — Questions and Answers
Question 1: What is a remittance advice and how is it used in revenue cycle?
- A document used to schedule patient appointments
- A document from the payer that explains how a claim was adjudicated including payments adjustments and denials (Correct answer)
- A patient's insurance card that lists covered services
- A form used to request additional clinical documentation
Correct answer: A document from the payer that explains how a claim was adjudicated including payments adjustments and denials
The remittance advice details how each submitted claim was processed enabling accurate payment posting and denial identification.
A remittance advice also called an Explanation of Payment is sent by payers to providers to explain claim adjudication decisions. Electronically this is the ANSI X12 835 transaction. The RA includes billed amount, allowed amount, contractual adjustment, patient responsibility, and any denial reason codes. Revenue cycle staff use the RA to post payments accurately and identify denials requiring action.
Question 2: Under Medicare's Inpatient Prospective Payment System, what drives the payment amount for an inpatient admission?
- The total number of days the patient was hospitalized
- The Diagnosis-Related Group assigned to the admission based on diagnoses and procedures (Correct answer)
- The total billed charges submitted by the hospital
- The number of physicians who treated the patient
Correct answer: The Diagnosis-Related Group assigned to the admission based on diagnoses and procedures
DRGs are payment classifications that group inpatient admissions with similar clinical characteristics into a single payment amount.
Medicare's Inpatient Prospective Payment System pays hospitals a predetermined amount based on the Diagnosis-Related Group assigned to each admission. The DRG is determined by the principal diagnosis, secondary diagnoses, procedures performed, patient age, and discharge status. All costs for the admission are covered by the single DRG payment with limited exceptions for outlier cases.
Question 3: What is a contractual adjustment in healthcare billing?
- An error correction on a submitted claim
- The difference between the provider's billed charge and the payer's contracted allowed amount which is written off (Correct answer)
- A payment the patient owes after insurance has paid
- A penalty applied when a claim is submitted late
Correct answer: The difference between the provider's billed charge and the payer's contracted allowed amount which is written off
Contractual adjustments reduce the billed charge to the agreed-upon allowed amount per the provider's contract with the payer.
A contractual adjustment is the difference between a provider's billed charge and the payer's contracted allowed amount. When a provider is in-network they agree to accept the contracted rate as payment in full and must write off the balance above that rate. These adjustments are not collectible from the patient and must be tracked separately from bad debt write-offs.
Question 4: What does balance billing mean and when is it prohibited?
- Billing the patient for the remaining balance after their deductible
- Billing a patient for amounts above the contracted rate which is prohibited in-network under most contracts and federal surprise billing laws (Correct answer)
- Sending multiple bills to the same patient for the same service
- Billing both the primary and secondary insurance simultaneously
Correct answer: Billing a patient for amounts above the contracted rate which is prohibited in-network under most contracts and federal surprise billing laws
Balance billing charges patients the difference between the provider's billed charge and the payer's allowed amount which in-network providers are contractually prohibited from doing.
Balance billing is the practice of billing a patient for the difference between the provider's billed charge and the amount paid by the insurer beyond the patient's defined cost-sharing. In-network providers are prohibited from balance billing by their payer contracts. The No Surprises Act further restricts balance billing by out-of-network providers in emergency situations and certain non-emergency contexts.
Question 5: What is the purpose of a clearinghouse in electronic claims submission?
- To process patient payments and deposit them into the provider's bank account
- To translate and validate claims before forwarding them to payers reducing rejection rates (Correct answer)
- To assign diagnosis codes to inpatient admissions
- To verify patient insurance eligibility on behalf of payers
Correct answer: To translate and validate claims before forwarding them to payers reducing rejection rates
Clearinghouses act as intermediaries between providers and payers translating claims into payer-specific formats and catching errors before submission.
An electronic claims clearinghouse receives claims from providers in a standard format, validates them against front-end edits for missing or invalid data, translates them into payer-specific formats if required, and forwards them to the appropriate payers. Clearinghouses significantly reduce claim rejection rates by catching common errors before the claim reaches the payer.
Question 6: What is the significance of the allowed amount in health insurance reimbursement?
- The total billed charges submitted by the provider
- The maximum amount the insurer will pay for a specific service based on the contracted rate or fee schedule (Correct answer)
- The amount the patient owes after insurance pays
- The amount the provider charges non-insured patients
Correct answer: The maximum amount the insurer will pay for a specific service based on the contracted rate or fee schedule
The allowed amount is the fee schedule or contracted rate that determines how the payer calculates its payment and the patient's cost-sharing.
The allowed amount is the maximum amount an insurer will consider for reimbursement for a covered service based on the provider's contracted rate or a fee schedule. The allowed amount determines both the insurer's payment and the patient's cost-sharing. Charges above the allowed amount are written off as contractual adjustments by in-network providers.
CRCR Claims Processing and Reimbursement 2
What is a remittance advice and how is it used in revenue cycle?