HCIS 140 Week 5 Health Care Billing and Transactions Example

From Visit Note to Deposit: The Electronic Transactions Behind One Primary Care Claim, and What Billing and Insurance Work Costs a Health System

[Student Name]

University of Phoenix

HCIS/140: Fundamentals of Electronic Health Records

Week 5 Assignment

[Instructor Name]

[Date]

The patient, the visit and the dollar amounts are composites written for a model paper; research findings come from the sources listed.

A 52-year-old man with high blood pressure has a follow-up appointment with his primary care nurse practitioner on a Thursday. The visit takes 20 minutes. The work of getting paid for it takes several weeks and at least five electronic transactions. This paper follows that work from the day before the visit to the day the payment posts and explains what the transactions cost.

The Day Before: Eligibility

On Wednesday, the practice management system automatically sends an eligibility inquiry, the 270 transaction, to the patient's insurer through a clearinghouse. The 271 response confirms active coverage, a $30 copay for office visits and no referral requirement. Checking in advance prevents claims for patients whose coverage has lapsed and tells the front desk what to collect.

The Visit: Documentation

The nurse practitioner documents the history, blood pressure readings, medication adjustment and plan in the EHR. The level of the visit depends on the complexity of medical decision making or time, so the documentation must support the level billed.

After the Visit: Coding and Charges

The encounter is coded with an ICD-10-CM diagnosis code for essential hypertension and a CPT evaluation and management code for an established patient visit. ICD-10-CM codes describe why the patient was seen; CPT codes describe what was done. The EHR's charge capture sends the codes and charge to the billing system.

The Claim

That night, the billing system builds an electronic claim in the 837P format, the HIPAA standard for professional claims, and sends it to a clearinghouse. The clearinghouse checks it for errors, such as a missing subscriber number or an invalid code combination, and forwards it to the insurer in the required format. An acknowledgment comes back confirming receipt.

Claim Status

Ten days later, the billing system sends a 276 claim status inquiry and receives a 277 response showing the claim is in process. Many systems automate these checks so staff only see claims that need attention.

Adjudication and Remittance

The insurer adjudicates the claim, applying its contract rates and the patient's benefits. It pays the allowed amount minus the copay collected at the visit and sends an 835 electronic remittance advice explaining the payment and any adjustments, with the funds deposited electronically.

Posting

The billing system reads the 835 and posts the payment and contractual adjustment to the patient's account automatically, leaving a zero balance.

When It Goes Wrong: A Denial

The same week, a claim for a different patient who received a flu shot and had a problem-focused visit is denied because the visit code lacked a modifier showing that the visit was separate from the vaccine administration. A biller reviews the documentation, confirms the visit was separately identifiable, adds the modifier and resubmits. The fix takes 15 minutes of staff time and delays payment by three weeks. A single missing character in the claim turned a routine payment into rework, which is why accurate documentation and coding at the point of care are the cheapest way to get paid.

What Billing Work Costs

Tseng et al. (2018) used time-driven activity-based costing at one academic medical system to price the billing and insurance work behind different kinds of encounters. Processing a primary care visit took about 13 minutes and cost about $20.49; an emergency department visit about $61.54; a general inpatient stay about $124.26; and an inpatient surgical procedure about $215.10. Those costs cover work by physicians, billers and coders that adds nothing to patient care but is needed to be paid in a system with many payers and rules.

The Patient's Part of the Bill

The patient paid his $30 copay at check-in. If his plan had a deductible he had not met, he would have received a statement weeks later for the allowed amount, often the first time he learned what the visit cost. Practices increasingly estimate the patient's share before the visit using the eligibility response and collect it at check-in, which reduces bad debt and surprises. The patient statement is another transaction in the cycle, even if it travels by mail or portal rather than a HIPAA format.

Measuring the Revenue Cycle

Managers watch a few numbers: the share of claims accepted on first submission, the denial rate by reason, days in accounts receivable and the cost to collect. A practice whose first-pass acceptance rate falls, for example, knows to look for a new coding or registration problem before payments slow.

How the EHR and Automation Help

Automation lowers these costs. Real-time eligibility checks, coding prompts in the EHR that flag missing documentation, claim scrubbers that catch errors before submission and automatic posting of remittances all reduce manual work. Adoption of electronic health records, accelerated by federal incentives after 2009 (Adler-Milstein & Jha, 2017), made much of this automation possible by producing structured data that billing systems can read.

Where Staff Time Goes

The study's numbers match what the practice sees. Its two billers spend most of their days not on clean claims, which flow through automatically, but on exceptions: denials, eligibility problems, patients with two insurers and claims pended for medical records. Each exception requires reading documentation, calling a payer or correcting a code. The practice tracks denial reasons monthly, and the top three, missing modifiers, expired authorizations and registration errors, account for most rework. Training aimed at those three sources would cut more cost than any new software.

Privacy in Billing

Every transaction above carries protected health information, including diagnoses. HIPAA's administrative simplification rules standardized the transactions and code sets (Centers for Medicare and Medicaid Services, n.d.) and require that they be handled securely, and clearinghouses are covered entities themselves.

Conclusion

One 20-minute visit generated eligibility, claim, status and remittance transactions, each following a HIPAA standard, and one missing modifier on another claim showed how quickly the process becomes costly. Billing and insurance work costs from about $20 to over $200 per encounter, which is why good documentation and automation matter to every health organization.

References

Adler-Milstein, J., & Jha, A. K. (2017). HITECH Act drove large gains in hospital electronic health record adoption. Health Affairs, 36(8), 1416-1422. https://doi.org/10.1377/hlthaff.2016.1651

Centers for Medicare and Medicaid Services. (n.d.). Transactions overview. https://www.cms.gov/priorities/key-initiatives/burden-reduction/administrative-simplification/transactions

Tseng, P., Kaplan, R. S., Richman, B. D., Shah, M. A., & Schulman, K. A. (2018). Administrative costs associated with physician billing and insurance-related activities at an academic health care system. JAMA, 319(7), 691-697. https://doi.org/10.1001/jama.2017.19148