By Ken Jones
Copyright @ 2016 Claritee Group, LLC
Purpose and Audience
The purpose of this document is to provide an overview of the events and associated data elements that occur in a healthcare professional service setting. The document is intended for healthcare analysts and anyone who has an interest in this topic. It is by no means exhaustive but should provide a good launching pad for further reading and discovery.
Basic Concepts
“Space is big. You just won’t believe how vastly, hugely, mind-bogglingly big it is. I mean, you may think it’s a long way down the road to the chemist’s, but that’s just peanuts to space.”
? Douglas Adams, The Hitchhiker’s Guide to the Galaxy
The Healthcare Industry is big. It is the second largest industry in the United States and growing rapidly as a proportion of GDP. Let’s examine the players in the Industry before we discuss process. Consider the three P’s; Patients, Providers and Payers.
- Patients are the consumers of a service.
- Providers provide the service.
- Payers pay for the service.
Sounds simple enough, but it isn’t. The business of Healthcare is complicated and data “heavy”. Let’s consider a simple office visit to a family doctor. Along the way we will introduce some of the industry terminology (i.e. the jargon) and discuss the key events and associated data.
Events and Data
A person does not feel well and decides to see their family doctor. The person is the Patient and the family doctor is the Provider. The first point of contact is usually through an appointment. Doctors are busy and usually you cannot see them the day you decide you want to see them. There are exceptions to this situation. In the case of an emergency, the patient may decide to go to an Emergency Room (ER) at a hospital or to an Urgent Care Facility. The ER and Urgent Care are examples of a Provider Specialty. The Family Practice is also an example of a Provider Specialty. For our example, let’s assume the patient can wait until an appointment can be scheduled and that they are a new patient to the provider. The provider has never seen this person before.
Throughout this document we will build a list of data that are generated through the process as we describe it. We will look at the data captured from the perspective of the Provider. So far we have the following.
| Event | Entity | Description |
| Appointment Event | Patient | A minimal set of information will be captured during the appointment process. Name, address, phone number and other basic demographics information will be captured by the Provider. They will also ask about Insurance, we will cover that in an upcoming event. |
| Appointment Event | Location | Some practices have multiple locations where they offer their services. |
| Appointment Event | Provider | In a multi-provider practice, a single provider will be selected to see the patient. The selection of the provider will generally depend on the availability of the providers at the location the patient can visit. |
| Appointment Event | Time | The appointment will be scheduled at a point in time. |
| Appointment Event | Reason | While setting up the appointment, the patient is asked for the reason for the visit. |
For some reason the Patient cannot make the appointment and decides to cancel the appointment. From the perspective of the Provider, new information has been generated around the Appointment Event. This information will be the reason for the cancellation.
| Event | Entity | Description |
| Appointment Event | Cancel Reason | The reason the appointment was cancelled. |
| Appointment Event | Time | The date the appointment was cancelled. |
The Patient changes their mind and schedules a new appointment. This time the Patient actually makes the appointment. This is simply a new event. There are two appointments from the perspective of the Provider; one that was cancelled and one that was completed.
A new event occurs when the Patient arrives at the Provider. The new event is an Encounter. The Encounter is the clinical event where the Patient and the Provider meet and a set of activities occur. A service is rendered to the Patient by the Provider.
Prior to the Patient actually meeting the Provider there is typically a fairly large amount of data collected by the Provider about the Patient. In the case of a new patient encounter, there will be a number of paper documents that are filled out by the Patient and given to the Provider. The data collected can be divided into two broad categories; Clinical and Insurance/Financial. The Clinical data will include a history of disease/illness for the Patient and their family. The Insurance/Financial data will identify who will be paying for the service. This is where we first meet the Payer in the process although the Payer does not participate in the process until later.
| Event | Entity | Description |
| Encounter Event | Patient | Patient and family history of disease/illness is captured along with Payer information for the Patient. |
| Encounter Event | Location | The location where the encounter takes place will be recorded. |
| Encounter Event | Provider | The provider that renders the service will be recorded. |
| Encounter Event | Time | The date of the encounter, often called the Service Date will be recorded. |
During the encounter a set of new information will be captured. The Provider will often capture some Vital Signs. Height, Weight and Blood Pressure are often measured at each encounter. The Provider will perform and deliver a Diagnosis. The Provider may also perform some kind of Procedure, although in the case of an Office Visit (an example of a Procedure), subsequent procedures may be scheduled in the future. The Provider may also prescribe medication. This is called a Prescription. The Provider may also order some other tests that are performed in a Laboratory. This is called a Lab.
| Event | Entity | Description |
| Encounter Event | Diagnosis | In general there may be more than one diagnosis. Most providers limit the number to a maximum of four diagnoses. |
| Encounter Event | Procedure | In general there may be more than one procedure performed during an encounter. It is important to understand that there is no maximum but practically speaking it would be unusual go have more than five procedures performed during an encounter. |
| Encounter Event | Vital Signs | Zero or more vital signs can be captured in an encounter. This will depend on the practices of the Provider. |
| Encounter Event | Prescriptions | Zero or more prescriptions might be written in an encounter. This will depend on the clinical situation. |
| Encounter Event | Labs | Zero or more Labs might be ordered in an encounter. The Labs will be performed by another entity but the results will be recorded by the Provider. |
After the encounter the billing and payment processing will occur. In fact, some payment processing may already have occurred prior to the encounter. The Patient (or their Guarantor) might have made a co-payment (copay). This is our first introduction to the complexities of medical billing. Many different entities may be involved in paying for the service rendered by the Provider to the Patient.
A Guarantor is the person who is financially responsible for paying for the service. A Guarantor may be the Patient but in many cases the Guarantor and the Patient will be different people. The Patient is not the Guarantor if the Patient is dependent on the Guarantor. A child or spouse is the most common example of a dependent. The child is the Patient and one of the parents/guardians is the Guarantor. For the remainder of this document, we will treat the Patient and Guarantor as the same person for simplicity of writing.
A Patient will either have medical insurance or not. Patients without medical insurance are called self-pays. In the case of a self-pay, that Person is responsible wholly for the payment of the service. Patients with medical insurance are not responsible wholly for the payment of the service. There is a sharing of responsibility for the payment of the service. A Patient may have one or more Insurers. A Patient may be a Medicare Patient and have a commercial supplementary Insurer as well. An Insurer becomes a Payer when they make a payment.
At this point we need to provide some background about Payers since they are integral to the billing and payment processes. There are two different types of payers; Government and Commercial. The Federal Government is a Payer through a number of programs most notably Medicare, Medicaid and Children’s Health Insurance Program. The Government Entity responsible for these programs is the Center for Medicare and Medicaid (CMS at www.cms.gov). There are many commercial payers. These are for-profit entities that offer a wide range of Health Insurance products to the marketplace. Like all marketplaces there are large and small players. Some of the large entities are Aetna, Anthem, Blue Cross and Horizon. Commercial payers tend to be regionalized in the US so the largest commercial payers in California are probably not the same as the largest commercial payers in New York. Medicare is the 800lb Gorilla in terms of payers except that it is bound by laws of course. It is not a law unto itself. Medicare does by virtue of its size become the benchmark for commercial payers in many areas including reimbursements (payments) to Providers. Commercial Payers use the Medicare fee schedule as a guide and move up or down when Medicare moves up or down.
From the perspective of a Patient, they may have no Primary Insurer and are therefore self-pay. They may have a Primary Payer and zero or more Secondary Payers (named Secondary, Tertiary, and Quaternary). The process of billing to Payer(s) begins with the Primary Payer. A bill is generated for the encounter. The bill is also called a Claim. The bill may have one or more billing lines (one line per Procedure). The bill is submitted by paper or through an electronic clearing house and generates new information.
The Provider who renders the service to the Patient is called the Rendering Provider. In some cases the Provider that is listed on the bill is different from the Rendering Provider. The Provider on the bill is called the Billing Provider.
| Event | Entity | Description |
| Billing Event | Provider | The Billing Provider can be different from the Rendering Provider. |
| Billing Event | Payer | The Primary Payer is associated with the bill. We call this the Original Payer. |
| Billing Event | Time | The original billing date is the date the bill was generated. |
| Billing Event | Measures | Every procedure (billing line) will have a Charged Amount |
If a copay is made at the time of the encounter then a Payment Event has occurred
| Event | Entity | Description |
| Payment Event | Payer | In this case the payer is the Patient. |
| Payment Event | Time | The payment date is the date the copay was made. |
| Payment Event | Measures | A Payment Amount is stored for the bill. |
The Original Payer will process the bill request and in most cases will make a payment to the Provider. The payment made will usually not equal the Charged Amount. The Charged Amount is a standard fee determined by the Provider. However, the Payer contracts to pay a certain amount (Contracted Amount) that is lower than the Provider standard fee. The difference between these two numbers is known as the Contractual Adjustment.
| Event | Entity | Description |
| Payment Event | Payer | In this case the payer is the Original Payer (Primary Payer) |
| Payment Event | Time | The payment date is the date the payment/adjustment was made. |
| Payment Event | Measures | A Payment Amount is stored for the bill. A Contractual Adjustment is also stored for the bill. |
Payers can also deny a claim. There are a number of reasons why a claim is denied. We will not discuss the topic of Denials in great detail in this document. However, when a claim is denied a denial reason is provided. This is typically a cryptic code. These codes are associated with a meaningful description. A denial is an example of a Non-Contractual Adjustment.
| Event | Entity | Description |
| Payment Event | Payer | In this case the payer is the Original Payer (Primary Payer) |
| Payment Event | Time | The payment date is the date the adjustment was made. |
| Payment Event | Denial Reason | The reason the claim was denied. |
| Payment Event | Measures | A Non-Contractual Adjustment is stored for the bill. |
If the Patient has a secondary Payer the Provider will send a bill to this Payer. The Payer will be responsible for only any remaining amount between the Charged Amount and the total Payments made to date. The secondary Payer will also have a contracted amount and will usually make both a Payment and a Contractual Adjustment. This process can repeat for subsequent Payers but in general most people do not have more than two Payers (Primary and Secondary).
The Provider may bill the Patient (Guarantor) for any outstanding amount. This is known as Patient Responsibility. There are rules that determine if this is possible and this will be based on the Payers associated with the Patient. Those rules often restrict the Provider from asking the Patient to pay anything more than their copay.
A measure we have not defined yet is the Outstanding Amount. As soon as the service is rendered to the Patient by the Provider there is an Outstanding Amount (A/R Amount). The responsibility for this Outstanding Amount changes over time and amount changes as payments and adjustments are applied.
Outstanding Amount = Charged Amount – (Total Payments + Total Adjustments)
Total Payments = Sum of all payments from all sources
Total Adjustments = Total Contractual Adjustments + Total Non-Contractual Adjustments
When the Outstanding Amount = 0 the bill/claim is considered closed (or satisfied). If Outstanding Amount > 0 then the bill/claim is considered open and a Debit Balance. If Outstanding Amount < 0 then the bill/claim is considered open and a Credit Balance. In the case of a Credit Balance, the Provider owes money to someone. This is due to an overpayment by one of the Payers. This is common and a refund is issued to the appropriate payer. In some cases a mistake by a Payer results in many overpayments. The Payer will “take back” the amount by withholding payment on subsequent (different) claims. This can cause lots of work by the Provider to get their bills updated to accurately reflect the Outstanding Amount at the bill line level.
| Event | Entity | Description |
| Payment Event | Measures | Outstanding Amount is calculated from the inception of the bill. |
| Payment Event | Measures | Credit Balance Amount is any negative Outstanding Amount. |
| Payment Event | Measures | Debit Balance Amount is any positive Outstanding Amount. |
| Payment Event | Measures | Refund Amount is a payment made back to a Payer by the Provider due to an overpayment. |
After some period of time a bill that is a Debit Balance will be written off as Bad Debt and passed to a Collections Agency. The Collections Agency will pursue payments on behalf of the Provider and will often receive a percentage of the collected amount as compensation for their effort.
| Event | Entity | Description |
| Bad Debt Event | Measures | Outstanding Amount is moved to Bad Debt Amount. |
Specialists
Primary Care Provider (PCP) is an alias for Family Practice or Family Doctor. This is the Provider that most people will begin with if they are in need of health care. In some cases, the Primary Care Provider will refer the Patient to a specialist. There are many Provider specialties. Some familiar examples are Cardiology, Dermatology and Obstetrics and Gynecology. A complete list is provided at https://www.abms.org/who_we_help/physicians/specialties.aspx. Pediatrics is a special case of Primary Care and Specialties for children.
From the perspective of the specialist Provider a new piece of information captured is the Referring Provider. The Referring Provider is the provider who referred the patient to the Provider. The Referring Provider may be associated with an entity external to the Special Provider or from the same entity (external versus internal). This information is often captured at the Appointment Event but is also recorded at the Encounter and Billing Events.
| Event | Entity | Description |
| Appointment Event | Referring Provider | The Provider referring the Patient to the Specialist is recorded. This information is very useful for the Specialist and is used to identify sources of Patients. |
Professional Billing versus Hospital Billing
A Patient may need to see a Provider at a Hospital. There are two separate and distinct services being offered to the Patient. The Professional Service offered by the Provider who may not be an employee of the Hospital and the Facility Service offered by the Hospital.
From the perspective of the Provider, they will be paid for their Professional Service. The billing and payment processes will occur just as they would have for a visit at the Provider location. The Hospital will perform its own billing process for Facility Service. Hospital Billing is a very different process.
Productivity
Provider organizations come in many shapes and sizes. A range exists from the single Family Doctor to a large multi-specialty Provider with hundreds of individual providers. Provider organizations may be stand-alone / privately owned or owned by a large Health System. A Health System is a network of Hospitals and Providers operated by a single legal entity. Regardless of the structure, when there is more than one Provider, business leadership will be interested in measuring the productivity of the Providers.
CMS publishes a set of measures for a large set of procedures. The measures are really cost related measures for procedures and are broken into three components; Physician Work, Practice Expense and Malpractice Expense. These measures are used as a basis for what Medicare pays Providers. There are a set of national numbers and then a geographical multiplier for each measure is applied to determine the so called GPCI (Geographic Practice Cost Indices) modified values. The idea is that Providers in New York City will have different cost structures compared to those in Fort Wayne, Indiana.
| Event | Entity | Description |
| Billing Event | Measures | WRVU for Physician Work |
| Billing Event | Measures | PERVU for Practice Expense |
| Billing Event | Measures | MPRVU for Malpractice Expense |
| Billing Event | Measures | TotalRVU for the sum of the three components |
From an analytical perspective, most of our clients use the national values for productivity analysis. They usually only consider the WRVU as that is a measure of physician work.
Diagnoses
We have mentioned Diagnosis as a significant component of the Clinical part of the encounter. There exists a classification system for Diagnoses. The classification system is called “International Statistical Classification of Diseases and Related Health Problems”. It is simply referred to as ICD. A good reference for this is http://en.wikipedia.org/wiki/ICD. The key thing to understand from a data perspective is that there is a set of codes and descriptions that are standard throughout the US.
Procedures
Like Diagnosis, Procedure is a significant component of the Clinical part of the encounter. The classification system for Procedures is “Current Procedural Terminology”. A good reference for this is http://en.wikipedia.org/wiki/Current_Procedural_Terminology. From a data perspective there is set of codes and descriptions that are standard throughout the US.