Introduction

An essential component to the survival of a hospital or private clinic, physician reimbursement has moved toward fee-schedule-based reimbursement or value-based payment, supported by the determination of relative values of services. In order to be reimbursed, a physician must personally examine his/her patient and frequently review the patient’s progress while adding supporting documentation to the patient’s file.

Who Pays

Regarding payment for a physician’s services, either the patient or an insurance company will cover the costs. A patient has the option of self-pay, although this method of reimbursement is uncommon. Normally, a patient co-pays fees with his/her insurance company. The most prevalent insurance company with 38 percent prevalence, Medicare, provides federal funding for patients over the age of sixty-five for select conditions. Tricare, with 10 percent prevalence, provides funds for military personnel and their families. Medicaid, with only a 3 percent prevalence, assists more low-income patients. Finally, Workman’s Compensation provides coverage for patients who come to a clinic due to illnesses acquired on a job site (for example, asbestosis).

Insurance Types

Indemnity, now an unusual type of coverage, simply covers a percentage of fees paid. For example, if a physician charges $10,000 for radiation treatment, an insurance company might set the usual customary and reasonable (UCR) fee for that service as $800 and pay 80 percent of that ($640 in this case). The patient then has to pay 20 percent of the UCR, or $160.

Health maintenance organization (HMO) insurance companies pay a set fee (per member per month). For a radiation oncologist, the per member per month fee usually ranges around $1 to $2. The provider carries a great risk when dealing with HMO insurance types, as he/she carries the risk of any cost burden related to complex therapy.

Finally, preferred provider organizations (PPO) pay 100–150 percent (120–130 percent average) of Medicare. For example, if Medicare pays $10,000 for a service, a PPO will pay $15,000 if the company’s fee schedule happens to be 150 percent. PPOs are common in the field of reimbursement.

Reasonable Charges

Medicare traditionally pays 80 percent of a “reasonable charge.” A “reasonable charge,” or usual and customary fee, is based on the lowest of the following three factors: the actual charge on the claim, the physician’s customary charge, which is the lowest fee including the median or 50 percent of the claims submitted, and finally, the prevailing fee, which is the lowest fee including 75 percent of the customary charges (Gosfield 95–96).

Resource-Based Relative Value

In 1994, the Social Security Act required a change in payment, and in 1999, the Balance Budget Act introduced the Resource-Based Relative Value Scale (RBRVS), developed by Harvard University. The RBRVS established procedure payment by focusing on three things: the work of the physician, expenses of practice, and liability insurance. In order to use the scale, one must assign a relative value unit to each procedure performed by a physician. One must then add the physician work (PW) value to the practice expense (PE) value and the liability cost (LC) value and then multiply this total sum by the Geographic Practice Cost Index (GPCI). Finally, one must multiply this number by an established conversion factor (CF), which also accounts for geographical factors. The CF is a matter of major and constant debate in Washington. In 2006, for example, the CF went down 5 percent. Lobbyists are constantly trying to influence the extent and timing of CF changes on Capitol Hill.

Hospital Billing vs. Freestanding Practice Billing

When billing Medicare patients, hospitals are paid under part A of the Hospital Outpatient Prospective Payment System (HOPPS). Hospitals typically bill for technical components of delivered radiation therapy services because such services for in-hospital patients are included in a diagnostic-related group (DRG). Physicians who work in hospitals as independent contractors must bill their professional fees separately from the hospital and are reimbursed under part B for those fees. In contrast, all outpatient Medicare services provided in a freestanding clinic are paid under part B, which covers professional and technical fees in a sum of both called global fees.

Managed Care Contract

Managed care contracts, a method of controlling Medicare pay-outs, help establish referral patient pools and conditions in which an approved referral is required before an expensive procedure can be performed. Managed care contracts also guide claims processing, thus ensuring that terms are paid. Utilization and peer reviews are also essential components to managed care contracts, and termination clauses, or “out clauses,” and enrollment fees are also established under this method.

Fraud and Abuse

Many forms of fraud and abuse occur in the field of medical reimbursement. “Upcoding” happens when a procedure is performed by a physician but made more complex on paper in order to ensure that more money will be received. “Unbundling” is when two or three descriptions or codes are used to identify a procedure when in reality, the procedure could be more accurately described by one term or code. Medical necessity is important to consider when dealing with fraud and abuse because some elective or cosmetic procedures, which are not a medical necessity, are not covered under insurance.

“Routine waiver of coinsurance” occurs when a provider accepts the amount paid by the insurance company as full payment and illegally refuses to charge the patient for their co-pay. Another form of fraud, a “kickback,” is when a provider unlawfully receives money for referring a patient. Finally, some physicians participate in “self-referral,” where they refer patients for extra procedures at their own practices or for other procedures outside their normal scope of practice to facilities in which they have an ownership interest (for example, lab tests or x-rays at a private diagnostic facility). Penalties for the aforementioned fraud include exclusion from Medicare and all of its services, monetary penalties, and/or forced refunds.

Billing Procedures

Billing and Reimbursement is based on Current Procedural Terminology CPT), which uses five-digit modifiers and is cited in the American Medical Association book. These Evaluation and Management Codes (E&M) are based on five levels of complexity and three main criteria: history, physical exam, and decision-making or counseling.

Another form of coding, the International Classification of Diseases version 10 (ICD-10), utilizes five-digit codes and originates from the World Health Organization. For a claim to be accepted by insurance companies, the ICD-10 code must be matched to the appropriate CPT code. It is extremely important to hire coding personnel who accurately submit claims, and oversight by physicians is mandatory to make sure claims are being sent accurately and timely.

Collections

In order to collect payment from patients and insurance companies, physicians can bill either daily or weekly. The physician should then follow up with insurance companies to see how much of the bill was covered and how much the patient needs to pay. A statement should then be sent monthly to the patient, who has the option to pay his/her bill with a credit card. If the patient is able to pay but refuses to, a collection agency should be contacted. For the price of 20–40 percent of the collected fee, the agency will call the patient’s home multiple times a day and send notices until the patient is forced to pay. An aging report can be used to keep track of accounts receivable. Within the report, accounts are ordered by the period outstanding: less than thirty days (preferable status), 30–60 days, 90–120 days, and over 120 days. Accounts within the “over 120 days” category need to be vigorously collected in order to avoid losing money.