Medical Assistant Exam: Administrative Procedures - Office Policies and Procedures

The office policy manual usually describes general information about the medical practice and the expectation of its employees. It may include areas of appropriate dress and behavior, wages, benefits, insurance, vacation time offered, and any other information important to the employees.
A procedure policy manual is mostly concerned with the details of how to perform procedures in the office. The procedure manual may describe the proper protocol for handling volatile chemicals or may describe what instruments each physician requires for certain procedures. Administrative guidelines, such as how to handle emergency calls or how to handle supplies and inventory, may also be covered in the manual.
The advantage of written manuals is that an employee knows what is expected to meet the requirements of the job satisfactorily.

Financial Practices
Managing many of the business details of the medical practice is one of the medical assistant’s responsibilities.

Bookkeeping Functions
The medical assistant may be required to perform some or all of the bookkeeper’s responsibilities. These tasks may include:
- recording charges, payments, and adjustments made to patient accounts
- maintaining the business checkbook (much like a personal checkbook)
- processing payroll
- gathering necessary data for use by the practice’s accountant
An outside accounting service is usually hired as the practice accountant. Accountants are responsible for the design and management of the financial systems that bookkeepers use. An accountant’s responsibility is to prepare monthly financial statements and tax returns at the end of the year, and to perform other financial services that would help manage the medical office as efficiently as possible. Bookkeeping functions may be performed through the use of computer software programs or performed manually, using systems set up by the accountant in charge of the practice.

TIPS FOR ACCURATE BOOKKEEPING
- The medical assistant’s bookkeeping should accurate and legible.
- Carefully forming numbers and lining up columns ensures accuracy.
- Bookkeeping tasks should be performed at a quiet time when attention will not be diverted to other issues in the office.
- Using dark blue or black ink will ensure that the numbers will be able to be easily read even over time.
- All math should be checked carefully, with the placement of the decimal points carefully checked!
- Bookkeeping should be done on a daily basis.

Manual Bookkeeping Forms
The pegboard system, also referred to as the 'write-it-once' or the 'one-write' system, is a manual bookkeeping system used in many offices. It consists of a day sheet, ledger cards, encounter forms, and receipts.
The pegboard has raised pegs protruding from one side of the frame that allow for easy placement of the forms. The day sheet is the basic form that is placed on the pegboard and is used to record all transaction that are posted each day.
Posting is the process of recording transactions into a bookkeeping system. Multiple no-carbon-required (NCR) forms can be placed on top of the day sheet, allowing any information entered on the top sheet to be transferred to the lower sheets easily and clearly. Writing information just once helps prevent errors.
Ledger cards, one per patient, are used to record patient transactions such as charges and payments and to keep track of the balance a patient owes. Notations can be made to signify if the claim was sent to the patient’s insurance carrier.
An encounter form, also referred to as a charge slip or superbill, is an itemized account of the patient’s visit, listing the procedures, diagnosis, and charges for the visit. The encounter form can serve as a patient appointment card because it has an area designed to include the date and time of the next appointment. Encounter forms are usually triple layered and can be customized for individual medical offices. The top white sheet is kept in the patient’s record as documentation of the itemized services provided for the visit. The yellow middle sheet is sometimes used to submit insurance claims, and the bottom pink sheet is given to the patient as documentation of the visit services. A receipt acknowledges payment from a patient without itemizing any charges.
On a day sheet, charges are entered under the debit column and payments are entered under the credit column. The adjustment column is used to record entries such as insurance write-offs, overpayments from patients, or patient discounts or write-offs.

Petty Cash
Petty cash is money kept and used in the medical office to pay for unexpected minor expenses, such as postage due. The amount of petty cash kept in the office depends on the individual needs of each office. Small bills are kept and can be used to make change for patients, if necessary. When other minor expenses are paid using the petty cash fund, a voucher or petty cash log is filled out listing the date, the amount and reason for the expenditure, and the initials of the person taking the money. The medical assistant should balance the petty cash drawer daily. Larger bills can be exchanged for smaller bills when the medical assistant makes the bank deposit. When the petty cash funds are getting low, a check to replace the used funds can be requested.

Coding Systems
The medical office must provide a procedural code and a diagnostic code for every service provided to the patient when submitting insurance claims in order to receive reimbursement. The two main types of coding systems used to code insurance claims are current Procedural Terminology (CPT) and International Classification of Diseases, Clinical Modifications (ICD-CM).

Current Procedural Terminology
Current Procedural Terminology—developed by the American Medical Association (AMA) in 1966—is a list of terms and codes used to identify and report medical procedures and services. Written procedures are translated into a numeric code that accurately describes the procedure in uniform language. This coded information is communicated to healthcare providers and insurance carriers and is also used to collect data used for developing guidelines for medical care review. The CPT book of codes was revised for the fourth time to keep the procedural codes current, and the present issue of the book is referred to as CPT-4.

The CPT-4 edition is divided into six sections, using five digit codes to identify all medical procedures and services provided to patients receiving care in medical offices, hospitals, nursing facilities, and home care. Each section is then arranged in smaller subsections, subheadings, categories, and subcategories to provide detailed descriptions. An index section is found at the end of the book, listing every procedure and service in alphabetical order for easy reference.

- Evaluation and Management (E/M). Code numbers include: 99201 through 99499.

E/M codes describe physician services based on place of service, such as office (outpatient) or hospital (inpatient); type of service, such as office visit, consult, or hospital admission; and patient status, such as new or established patient. E/M codes are also divided by patient history, physical examination, and the complexity of the decision-making process.

- Anesthesia. Code numbers include: 00100 through 01999.

This section contains all codes needed for any type of anesthesia used in any procedure.

- Surgery. Code numbers include: 10021 through 69990.

Surgical codes are divided by body system and are very descriptive and specific.

- Radiology, Nuclear Medicine, and Diagnostic Ultrasound. Code numbers include: 70010 through 79999.

These codes are very descriptive and use detailed information when coding the procedure.

- Pathology and Laboratory. Code numbers include: 80047 through 89356.

Every test and combination of test procedures can be found in this section of the CPT manual.

- Medicine. Code numbers include: 90281 through 99607.

This section includes detailed codes adjusted for each procedure. This is a large section including codes for chemotherapy, immunization, and various types of injections.

Modifiers are two-digit numbers used in coding to indicate specific circumstances about the procedure or service. Modifiers can indicate, for instance, that a bilateral procedure (-50), such as a bilateral inguinal hernia repair (herniorraphy) was performed.

International Classification of Diseases, Clinical Modifications
An ICD-CM code is a standardized method used to classify diseases, conditions, symptoms, signs, and abnormal findings. Every possible health condition can be coded to translate the condition into numbers for more accurate recording and reporting. The ICD-9-CM edition will soon be replaced with ICD-10, the new revised edition. ICD-10 was set to be implemented in the United States as of October 2013; however, in April of 2012, the Department of Health and Human Services (HHS) released plans to delay the implementation of ICD-10 for one year in order to give providers more time to prepare for the necessary changes needed in their systems for the successful operation of ICD-10. The new release schedule is October 2014.
Once implemented, the ICD-10 edition will be the required coding book for reporting diagnoses used for all outpatient procedures and physician services that are performed in ambulatory care facilities and for all outpatient hospital services.
Although the ICD coding manual has been updated every year, the publishing of the new edition, ICD-10, was delayed due to substantial changes being made in this edition. ICD-9 had the ability to accurately tract and analyze various areas in health care, but due to the advancement in medical knowledge and technology, it had limitations such as outdated terminology and insufficient detailed classifications. The World Health Organization (WHO), the organization responsible for publishing ICD, recognized the need for a system that would be expandable, flexible, easy to update, and be able to collect, contain, and analyze more detailed health information. ICD-10 was developed to meet these requirements by providing greater specificity that would allow better collection of data concerning primary care risk factors, ambulatory care services, complications following surgery, and behavioral and mental disorders. There will be approximately 68,000 ICD-10 codes compared to the 14,000 ICD-9 codes. ICD-10 is designed as a one-step coding process by incorporating the V codes (Factors Influencing Health Status) and E codes (External Causes of Injury and Poisoning), directly into the coding list. The coder will be able to find an accurate code for a diagnosis without having to search through a variety of sections, reducing coding time, coding errors, and claim rejections.
To provide expandability, flexibility, and easy updating, ICD-10 codes will have up to seven alphanumeric characters per diagnosis as needed, with the sixth and seventh characters providing greater specificity needed for recording information from detailed documentation. The first character will be a letter, the second character a number, and the remaining characters either a letter or number. ICD-9 was limited to a maximum of five numeric digits, limiting expansion and updating. All the letters of the alphabet, except 'U,' will be used for coding existing diagnoses. The letter 'U' will be used to code unnamed conditions or diseases of uncertain origin. ICD-10 will also address areas for documenting and tracking information on poisonings, injuries, threats to public health, and medical errors. The ICD-10 book will have an alphabetical and tabular listing of diseases and conditions similar to the ICD-9 book.
The research data collected by ICD-10 will be readily accessible to all health care professionals, not only to provide better communication between providers and facilities, but to provide quality care to patients by using up-to-date medical resources and research data. Educating and training office personnel and students in health care fields to use ICD-10 has already begun in order to meet the implementation date. It is imperative that the health care professionals in the United States be prepared to use the new ICD-10 edition since it will be the international standard for tracking and analyzing health data.

The ICD-9 system is published in three volumes.
- Volume I is a tabular list, listing all diagnoses in numerical order.
- Volume II is the alphabetic volume listing all disease and conditions in alphabetical order.
- Volume III contains numeric and alphabetic sections used for coding surgical procedures on inpatient hospital claims.

Supplementary health factor codes (V codes), found in Volume II, include classification of factors that influence the health status of a patient. They identify reasons for healthcare other than diseases or injuries. V codes would be used when a patient comes to the medical office for his or her annual physical (V70.0) or for a rubella screening test (V73.3).
External cause codes (E codes), also found in Volume II, classify external causes of poisoning and injuries, and identify medications. E codes are used to provide additional information and cannot be used alone. If a patient experienced a closed fracture of the ankle when he fell into a hole, for instance, the main code for this condition would be for the fractured ankle (824.8) and an E code would be added to describe the cause of the fracture. For example, E883 states the patient fell into a hole.
Morphology codes (M codes) are five-digit codes used mainly for cancer registries. The first four digits indicate the specific histological term and the last digit indicates if the tumor is benign or malignant.

An Example of ICD-9 Coding
Diabetes mellitus has the main ICD code 250.0. A box appears above the condition stating that a fifth code is necessary for accurate coding. For instance, for a patient with non-insulin-dependent diabetes, the fifth digit would be 0.

Preparing a Claim Form
The first step in coding the diagnosis is to look up the condition or disease alphabetically in Volume II. The diseases and conditions are arranged by main terms consisting of at least three digits.
Main terms are then subdivided into subterms and can even be divided further into categories and subcategories. The intent of the coding system is to define each disease or condition specifically.
Once the alphabetic code is determined, the code number is now looked up in Volume I, the tabular list of numbers. After carefully reviewing the information in the tabular section, the medical assistant can decide which ICD code to use for the patient’s diagnosis or condition.
Conventions are general guidelines that help the coder determine the most specific ICD diagnostic code. Symbols, abbreviations, punctuation marks, and formatting are used to direct the coder in the right direction. A list of conventions can be found in the introduction section of the ICD-9-CM manual.

Importance of Specificity in Coding
ICD-9-CM codes need to be coded at the highest level of specificity (five-digits, if needed) and CPT codes need to reflect the correct level of service. Improperly coded claims may result in a lower payment for the physician if a code indicates a diagnosis or service that is lower in complexity than actually delivered. ICD-9-CM codes missing a fourth or fifth code when needed may lead to the claim being rejected. Rejected claims slow, or even prevent, payment to the physician.

Third-Party Billing
A third party is someone other than the patient who is responsible for paying the patient’s medical expenses or for a portion of the expenses. Insurance carriers are often considered third-party payers because they have entered into a contract with the patient to provide reimbursement for medical expenses that meet certain criteria.
A photocopy of both sides of the patient’s insurance card should be made and kept in the patient’s medical record. Some medical offices use a point-of-service (POS) device, which allows direct communication with the insurance carrier to verify the status of a patient’s insurance coverage. The device is similar to a credit card machine whereby an individual swipes the card through the machine.
Many insurance carriers impose a waiting period on new subscribers. A waiting period is a specified period of time that must pass before the insurance coverage begins; the delay in coverage is usually due to a preexisting condition, such as diabetes or pregnancy.

Types of Insurance Plans
There are several types of health insurance coverage available in the United States; some insurance carriers offer more than one—or all—types of coverage.
A capitated plan is a form of managed care designed to provide healthcare to members for a fixed monthly cost. The capitated plan works with providers who accept a set dollar amount per patient regardless of the number of visits made to the medical office.
Major medical insurance, as its name implies, offers coverage for the most serious medical expenses or catastrophic illness. Major medical insurance usually covers inpatient and outpatient expenses after a deductible, which the patient pays out-of-pocket, is met. This type of insurance usually pays higher benefits and has a higher maximum limit on the benefits allowed.

Managed care is a general term used to indicate lower-cost healthcare coverage. Managed care plans use a variety of techniques to keep costs down, such as eliminating unnecessary medical and surgical procedures, sharing more of the healthcare costs with beneficiaries, and offering economic incentives to providers and patients to select less costly forms of treatment. A health maintenance organization (HMO) is a type of managed care system that offers comprehensive healthcare to an enrolled group for a fixed amount of money. The patient selects a primary care physician (PCP) from a list of providers who are under contract with the HMO. Different types of HMOs include:
- Independent practice association (IPA): a group of physicians in private practice who join together to treat members at a discounted fee or on a capitation basis. Patients enrolled in this type of plan must select a physician from the IPA in order to have their healthcare covered.
- Preferred provider organization (PPO): a managed care plan consisting of a group of physicians who agree to a predetermined pay scale for provided services. Patients are responsible for deductibles and coinsurance payments. Out-of-pocket expenses are less if the patient is treated by a physician in the PPO network.
- Point-of-service (POS) plan: an HMO plan that allows the member to choose a physician from a list of physicians who have previously agreed to the discounted payment schedule. POS plans have no deductibles and small co-pays that vary depending on the type of medical treatment received. Referrals are generally necessary from the primary care physician for specialty care other than an annual gynecological exam and pediatric well-child visits. Because of the lower cost for healthcare, POS plans are popular with employers who offer healthcare benefits to their employees.

Sources or Providers of Medical Insurance
Private companies and government entities are the two main sources of health insurance coverage in the United States.
Private, or commercial, insurance companies provide individuals or groups (usually companies or associations) with healthcare coverage. Premiums are paid—by individuals, employers, or both—in exchange for various levels of coverage. The coverage offered by private companies can range across all the types of insurance previously discussed. Blue Cross Blue Shield is an example of a private insurance carrier.
Government insurance plans, including Medicare, Medicaid, Tricare, and CHAMPVA, are government-run plans that are funded by tax revenues and, in some cases, individual premiums. Coverage in these various programs can include characteristics of the types of coverage previously discussed.

Medicare, a health insurance program under Social Security, Title XVIII, was started in 1965 for individuals who are age 65 or older, or individuals who are under age 65 but are disabled and unable to work. There are four parts to the Medicare program.
- Part A. Medicare Part A is hospital insurance and is provided at no cost to individuals who have worked and paid Social Security taxes for at least ten years. This plan covers most medically necessary hospital care, skilled nursing facility care, home care, and hospice care. There is a yearly deductible that needs to be met before Medicare will reimburse expenses.
- Part B. Medicare Part B is medical insurance for which an individual must pay a monthly premium. Medicare Part B covers most medically necessary physician services, preventative care, hospital outpatient services, durable medical equipment, laboratory testing, X-rays, mental-health care, and some types of home healthcare and ambulance services.
- Part C. Medicare Part C allows private insurance companies to offer the same benefits that are offered by Medicare. This type of plan is referred to as a Medicare Advantage plan or a Medicare private health plan. It can be offered by HMOs, providing the same benefits but using different rules, and may have different costs and coverage.
- Part D. Medicare Part D provides outpatient prescription drug coverage and is available only through private insurance companies that have a contract with the government. Medicare Part D is optional and can be purchased as stand-alone insurance or in a benefit packet for individuals opting for Medicare Part C.

Medicaid, or Title XVIX, is an insurance program providing healthcare to individuals, regardless of age, whose income is insufficient to meet medical expenses. Medicaid is funded by the states and the federal government.
TRICARE, formally known as the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS), is a healthcare program designed and managed by the Department of Defense that provides civilian healthcare to military personnel and their families. TRICARE offers three types of programs.
- TRICARE Standard. TRICARE Standard allows beneficiaries to use any civilian healthcare provider. There is an annual deductible and coinsurance to be paid out-of-pocket.
- TRICARE Extra. TRICARE Extra functions as a PPO, allowing the beneficiary to use a civilian healthcare provider listed in the provider’s network. The discounted coinsurance is the only fee the beneficiary pays for this type of plan.
- TRICARE Prime. TRICARE Prime is a type of HMO that requires the beneficiary to choose a primary care physician and obtain referrals and authorizations when requesting specialty care. A small copayment is required for each visit. Military retirees and their families are charged an annual enrollment fee, which is waived for active duty military and their families.

Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA) is a health benefit program for veterans with 100% service-related disabilities and their family members. CHAMPVA shares the cost of the healthcare with the beneficiaries of the plan. Spouses or widow(ers), and children of a permanently disabled veteran or a veteran who died while on active duty are also eligible. The beneficiary of this plan cannot be eligible for TRICARE. CHAMPVA allows the beneficiary to select a physician and pays on a fee-for-service basis. There are deductibles and co-pays for this coverage.
Workers’ compensation is a type of insurance that provides an employee who has been injured or disabled in a job-related incident with coverage for medical expenses. Most state laws mandate that employers with a certain number of employees purchase workers’ compensation insurance for their employees.

RESPONSIBILITY FOR INSURANCE KNOWLEDGE
Who is responsible for knowing the ins and outs of each patient’s type of healthcare insurance plan, the patient or the medical assistant? Although the medical assistant has some knowledge of healthcare plans, the patient should be encouraged to take responsibility for understanding the provisions of his or her insurance plan. Incorrectly scheduled yearly exams or treatments and procedures, for instance, may not be covered under a patient’s insurance plan. The medical assistant should always take the time to verify the status of the patient’s insurance coverage and the insurer’s referral requirements and scheduling requirements for specific exams, as well as check whether precertification is required. By calling the insurance carrier or instructing patients to do so prior to scheduling referrals or procedures, nonpayment or other problems with reimbursement by the insurance carrier can be avoided.

Processing Claims
Processing claim forms accurately is essential in order to receive financial reimbursement for services rendered in the medical office. Most insurance carriers encourage the submission of claims electronically. There are common guidelines to follow when completing insurance claims either manually or by computer.

Claim Forms
The medical assistant should be familiar with three standardized claim forms used to report medical services to insurance carriers. The National Uniform Claims Committee (NUCC) is a voluntary organization that was developed to institute changes in the claim forms used in the reimbursement process. The goal was to provide standardization needed to process and send insurance claims. Two basic forms are used for insurance processing.
- Centers for Medicare and Medicaid Services (CMS 1500) is a standardized form used in the medical office to submit insurance claims. Previously known as the Health Care Financing Administration (HCFA 1500), the CMS 1500 is required for government programs such as Medicare and Medicaid, but may be used for most types of insurance claims.
- The Uniform Bill 04 (UB-04) is the standard insurance claim form used by institutions. The UB-04 form may be used for completing claims covering services such as inpatient admissions, outpatient procedures, psychiatric and alcohol clinics, and nursing facilities.

Manual and Electronic Preparation of Claims
The process of preparing manual or electronic insurance claims starts when the patient schedules an appointment. The medical assistant uses the patient registration form to gather demographic information required for the insurance claim form.
Information concerning the services rendered during a patient’s visit and the related diagnosis is then entered on the claim, using the correct CPT and ICD codes. This information is obtained from the physician who includes it on an encounter form at the time of service.
The medical assistant enters the information either into a computer program or on the paper claim form and sends it to the insurance carrier. The majority of medical offices submit claims electronically because the turn-around time is quicker for reimbursements, and it is easier to trace claims if there is a problem receiving reimbursement. In fact, some insurance carriers require that claims be sent electronically. Only clean claims—that is, claims containing no errors—are accepted by the insurance carrier; dirty claims (those containing errors) will be rejected and not be paid. A rejected claim will cause a delay in reimbursement.

PRIVACY AND SECURITY OF PATIENT INFORMATION
The Health Insurance Portability and Accountability Act of 1996 is a law administered by the U.S. Department of Health and Human Services and enforced by the Office for Civil Rights, which governs the rules and procedures that provide for the privacy and security of a patient’s protected health information (PHI) (any information about the provision of healthcare, healthcare status, or payment for healthcare than can be linked to a particular person). An important part of the registration process is asking the patient to sign a consent form giving the medical office permission to release the necessary information to the insurance carrier in order to process the insurance claim. When the insurance claim is completed, a note is entered on the insurance claim form stating that the patient’s signature is on file, giving permission to release information to the insurance carrier to process the claim.

Tracing Claims
A claims register, also referred to as an insurance log, is a method of keeping track of claims submitted to an insurance carrier. A claims register keeps track of information such as:
- date the original claim was submitted
- name of the primary insurance carrier
- name of the patient
- amount billed to the insurance carrier
- amount paid by the insurance carrier
- date claim sent to secondary insurance carrier
- name of secondary insurance carrier
- amount billed to secondary insurance carrier
- amount paid by secondary insurance carrier
- follow-up

A claims register can be customized to track the information needed by the individual medical office.

Sequence of Filing Primary or Secondary
Primary insurance coverage is usually provided through the insurance carrier in which an individual is enrolled. Secondary insurance coverage, usually provided as a result of being a dependent on someone else’s insurance plan, applies only after the primary insurance plan has exhausted the amount of coverage provided.
Insurance carriers use primary and secondary insurance plans to coordinate benefits, allowing the maximum of 100 percent to be paid on any claim. Coordination of benefits (COB) is used by insurance carriers to avoid duplication of payments for the same service or procedure.
Even with a primary and a secondary insurance, 100% of the bill may not be covered, and some plans will require that the patient to pay the remainder or a portion of the bill. Each insurance plan has specific rules for reimbursement amounts. When both parents of a minor child have insurance coverage, the birthday rule is a method used to determine the primary insurance carrier. The birthday rule states that the parent whose birthday falls first in the year is the primary insurance carrier for the child.

Reconciling Payments
Although the claims register is helpful to keep track of the insurance claims sent to the insurance carriers, the remittance advice sent by the insurance carrier to the physician’s offices summarizes all the benefits paid to the provider for the claims submitted. The remittance advice itemizes:
- charges sent to insurance carrier for a specific date of service
- amount allowed by insurance carrier
- any disallowed amount such as prearranged agreements with the physician in HMO insurance plans or capitated plans
- patient’s portion, such as co-pay, co-insurance, or deductibles, if any
- amount of payment sent to the physician
An explanation of benefits (EOB) is a report sent to the patient from his or her insurance carrier itemizing the benefits paid for services provided on a specific date. Assignment of benefits is a method used by the insurance carrier to determine to whom the payment will be sent. If a patient accepts assignment, the payment will be sent to the physician’s office, and the patient will receive an EOB itemizing the payment made to the physician on his or her behalf. If the patient does not accept assignment, the payment will be sent to the beneficiary, usually the patient. The medical office then bills the patient for the amount due for the services provided.

Inquiry and Appeal Process
Even with the careful collection of patient data, detailed completion of insurance claims, and proper coding, claims may not be received or may be rejected by the insurance carrier. The claims register is helpful to identify claims that are not processed in a timely manner.
Electronic claims may be paid within a week or two, while paper claims take longer to process. Each insurance carrier has a statute of limitations for payment consideration. If the medical assistant does not submit the claim within the specified time period, the insurance carrier will not honor the claim and no reimbursement will be made for that date of service. The patient cannot be billed for the charges due, and the medical office will have to write off the amount owed to the office.
If payment is denied on a submitted claim, the medical office may appeal the decision of the insurance company. The remittance advice lists a code justifying the denial, which may help in determining the problem. Many times the denial is caused by a violation of the terms of the insurance policy—for example, a yearly physical that was done too early in an annual cycle. Sometimes, a simple administrative error—such as an inaccurately recorded policy number—may be the cause.

Applying Managed Care Policies
The medical assistant is responsible for being aware of the policies of managed care health plans and should be able to apply the required policies. If referral from the primary care physician to a specialist is required, the medical assistant should facilitate the referral process for the patient.
Also, when a primary care physician refers a patient to a specialist, many insurance carriers require that the patient obtain precertification, or preauthorization, to obtain approval for the appointment. If the treatment or procedure is approved, a preauthorization number will be given as documentation that the procedure was approved. The patient must bring the preauthorization number and the completed form listing the approved treatment or procedure to his or her appointment.
Because each insurance carrier has its own policy, the medical assistant should keep a log or file listing requirements for obtaining referrals and preauthorizations from frequently used insurance carriers.

Fee Schedules
Fees, insurance coverage, and required patient payments should be discussed when a new patient calls to make an appointment. Having a clear understanding of financial responsibility can help avoid any misunderstandings in the patient-physician relationship, and many offices provide brochures discussing the financial policies of the medical facility. One of the most important steps in billing is finding out who is the guarantor, or the person responsible for paying the medical bill.

Usual, customary, and reasonable (UCR) rates are terms sometimes used in developing a fee schedule.
- The usual fee represents the average fee a physician charges for a service or procedure.
- The customary fee is the average fee charged by a provider in a specific geographical area for a specific service or procedure.
- The reasonable fee is the fee charged for an exceptionally difficult or complex procedure requiring more time and effort on the part of a provider.
Relative value studies create a unit value for every medical procedure in order to develop a fair and accurate fee schedule. Malpractice expenses, medical practice expenses, and the effort needed by the provider to perform each procedure are taken into consideration when developing a fair and accurate fee schedule.
Resource-based relative value scale (RBRVS) is a formula used to calculate reimbursement amounts for various procedures based on resources involved in providing services rather than on fees charged by providers in the past. Every procedure, service, and medication is given a CPT code based on the amount of time, effort, and physical and technical skill needed to perform each procedure. The RBRVS formula is adjusted for geographical areas, and an amount is calculated for payment of each procedure.
Diagnostically related groups (DRGs) are used in a hospital inpatient prospective payment system (IPPS). DRGs are divided into 467 illness categories, and each illness is given an ICD code. Reimbursement is based on the assumption that all patients in the same DRG category will experience the same symptoms and need the same care. In an effort to control healthcare spending, an average of the expenses incurred by the patients in a specific DRG is determined, and the inpatient facility is then reimbursed the average expense, not the actual cost of the hospitalization.
Contracted fees apply to managed care organizations in which a provider participating in an HMO agrees to provide his or her services for a fixed payment. When the HMO member visits the physician, the claim form is sent to the HMO, and reimbursement is made to the physician at the agreed-upon amount.

Payment arrangements: Because not all patients have medical insurance, and medical insurance may not cover all expenses incurred during treatment, some patients may have difficulty paying their bills. Medical practices offer various options to help patients in these circumstances.
- Payment plans: If fewer than four payments are necessary, no formal document is required; if more than four payments are necessary, a formal loan arrangement between the office and the patient may be agreed upon.
- Pre-planned monthly payments may be accepted for prenatal care and the delivery of a baby.
- Credit card payments allow the patient to pay the physician and then manage the expense through his or her credit card company.
- Special agreements: Many physicians will agree to adjust a fee or past-due balance for a patient with limited income or for an established patient who is having a difficult time financially.

Accounting and Banking Procedures
The medical assistant may be responsible for handling some of the accounting and banking procedures performed in the medical office.

Accounts Receivable
The term accounts receivable refers to the amount of money owed to the medical offices for services provided. Most patients have some type of health insurance that covers a portion of an office visit. The patient may pay a co-pay at the time of service, while the remainder of the amount due is submitted to the insurance carrier for reimbursement. The amount owed on the patient account is part of accounts receivable until it is paid. Accounts receivable are tracked either with a computer program or with the manual pegboard system.

Billing Procedures
Adequate cash flow in the medical office depends on up-to-date billing practices and policies of the medical office. It is important to collect payments promptly, because the more time that has elapsed since the date of service provided, the more difficult it may be to collect payment from a patient. Billing procedures include preparing an itemized statement of all current patient charges, co-pays or payments made at the time of service, payments made by the insurance carrier, and the balance remaining for the patient to pay.
Billing statements should be sent to patients at regular intervals so that patients may budget appropriately. Many offices use a once-a-month billing system. Cycle billing, which allows the office to divide the accounts into sections and then bill each section every so many days, can allow patients to receive bills on a monthly basis, but spreads out the work involved in billing over a longer time period.
Aging of accounts identifies the length of time an account has been overdue and begins from the time the first billing statement is sent to the patient. If the bill is not paid within 30 days, it is referred to as 30 days old; if not paid within 60 days, it is considered 60 days old; and so forth. Some offices may choose to send the overdue bill to a collection agency; however, the medical office should advise the patient first of its intention to do so.

Accounts Payable
Accounts payable are the bills or amounts of money owed to others for services or supplies purchased with credit. The medical office has financial responsibilities just like any other business: supplies, maintenance of equipment, utility and telephone bills, payroll, and various types of insurance payments. The medical assistant may be responsible for managing the accounts payable. Some elements in tracking accounts payable are:
- Purchase orders: numbered forms to be completed for all ordered supplies; they help to keep track of items purchased, to prevent unauthorized purchasing of items, and to provide a system for payment of items received.
- Packing slips: detailed lists that come with delivered packages of the items shipped; they do not contain a bill or invoice. The packing slip should be compared to the original purchase order to be sure all items listed on the packing slip match the list on the original purchase order and have been included in the delivered package.
- Invoices, or bills: A record of the charges for items or services delivered, which implies a request for payment. The invoice arrives shortly after the package arrives. When a check for the invoice is sent, the date, check number, and the amount paid should be recorded on the invoice before it is filed, making it easy to verify payment information if needed.

Banking Procedures
Banking procedures that the medical assistant may perform include receiving checks from patients and preparing deposit slips, preparing checks against accounts payable for the physician or another authorized person, to sign, and balancing the checkbook.

Receiving Checks
Patients use different types of checks when paying for services. These include:
- Personal check: Personal checks are the most frequently used type of check in the medical office, as most patients use personal checks to pay all their expenses.
- Money order: A money order is purchased for a specific amount. It is a guarantee that the amount shown on the check is available for use. Patients who do not want to send cash and do not have a checking account often use money orders for payments.
- Traveler’s check: A traveler’s check may be purchased in different denominations such as $10, $20, and $50. A signature is needed when the checks are purchased and when used. Although not too commonly used for payments to the medical office, they may be accepted.
- Cashier’s check: A cashier’s check is a bank’s own check. It is prepared by the bank after receiving payment from the purchaser. Cashier’s checks are guaranteed for the amount written.
- Certified check: A certified check is the patient’s personal check that the bank has cleared or 'certified.' A certified check guarantees that sufficient funds are available and cannot be withdrawn for any other use.

Preparing the Deposit Slip
Deposit slips should be prepared and deposited into the bank daily. Checks received from patients should be endorsed immediately. An endorsement is a signature used to legally transfer a check to the bank in exchange for cash. A stamp marked 'Pay to the order of,' listing the name of the bank where the deposit will be made, followed by the physician’s name, is the safest type of endorsement.
At the end of the business day, the cash and checks received are entered in the appropriate columns of the deposit slip, along with the date at the top. The deposit slip should be tallied carefully and double-checked for accuracy. Many offices use deposit slips that are duplicate so that a copy may be given to the bank and a copy may be kept for documentation of the deposit date and amount.

Guidelines for Check Writing
If the practice uses a computerized accounting system, checks should be prepared and printed on the computer; otherwise, write legibly, and follow these guidelines.
- Enter the correct date on the appropriate line.
- Be sure the numeric and written amounts match.
- Start writing the amount to be paid on the far left of the line provided. Draw a line after the written amount to cross out the unused portion of the line; this practice will prevent any unauthorized additions.
- Be sure to enter the correct name of the payee, using correct spelling.
- Be sure the check is signed before placing it in the envelope for mailing.
- Complete the check register, which is the record of all checks written, marking in the date, the check number, the name of the payee, and the amount of the check. If the practice uses a one-write system, the information will transfer automatically to the register pages. Subtract the amount of the check from the balance amount in the checkbook.

Employee Payroll
The employee payroll can be prepared on a computer or on a manual pegboard system. If prepared manually, a separate card or page is prepared for each employee. Government regulations require the completion of certain documents and periodic reporting of earned income for each employee. These records must be kept for a minimum of four years. Information that is required includes:
- Social Security number of the employee
- gross amount of paycheck
- number of withholdings allowances claimed
- deductions for social security
- deductions for Medicare taxes, as well as state and federal taxes
- deductions for state disability insurance and state unemployment tax, where applicable

New employees must complete an Employee’s Withholding Allowance Certificate (W-4), listing the number of withholding allowances claimed. Employees must complete a new form each time changes occur in their allowances, such as a marriage or a change in the number of dependants. More money will be taken out for taxes when the number of withholding claims is lower.
Employers are required to withhold income tax from the employee’s earnings for payment to the IRS; the amount withheld is based on the number of claims the employee reports on his or her W-4. Employers must also withhold money from the employees’ earnings for Federal Insurance Contribution Act (FICA) payments, which employers must match in an equal amount. Once paid to the government, the money is held in a trust fund and provides for the employee’s Medicare coverage, retirement income, disability insurance, and benefits for survivors.