Assignment
Exercise 1: Contractual Allowances
Physician office revenue for visit code 99214 has a full established rate of $72.00. Of 10 different payers, there are 9 different contracted rates, as follows:
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Payer
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Contracted Rate
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FHP
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$35.70
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HPHP
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58.85
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MC
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54.90
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UND
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60.40
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CCN
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70.20
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MO
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70.75
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CGN
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10.00
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PRU
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54.90
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PHCS
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50.00
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ANA
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45.00
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Rates for illustration only.
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Required
• 1. Set up a worksheet with four columns: Payer, Full Rate, Contracted Rate, and Contractual Allowance.
• 2. For each payer, enter the full rate and the contracted rate.
• 3. For each payer, compute the contractual allowance.
The first payer has been computed below:
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Full
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Contracted
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Contractual
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Payer
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Rate
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(less)
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Rate
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(equals)
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Allowance
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FHP
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$72.00
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$35.70
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$36.30
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Example 4B: Revenue Sources and Grouping Revenue
Sources of healthcare revenue are often grouped by payer. Thus, services might be grouped as follows:
• Revenue from the Medicare Program (payer = Medicare)
• Revenue from the Medicaid Program (payer = Medicaid)
• Revenue from Blue Cross Blue Shield (payer = Commercial Insurance)
or
• Revenue from Blue Cross Blue Shield (payer = Managed Care Contract)
Exercise 2: Revenue Sources and Grouping Revenue
The Metropolis Health System (MHS) has revenue sources from operations, donations, and interest income. The revenue from operations is primarily received for services. MHS groups its revenue first by cost center. Within each cost center the services revenue is then grouped by payer.
Required
• 1. Set up a worksheet with individual columns across the top for six revenue sources (payers): Medicare, Medicaid, Other Public Programs, Patients, Commercial Insurance, and Managed Care Contracts.
• 2. Certain situations concerning the Intensive Care Unit and the Laboratory are described below.Set up six vertical line items on your worksheet, numbered 1 through 6. Six situations are described below. For each of the six situations, indicate its number (1 through 6) and enter the appropriate cost center (either Intensive Care Unit or Laboratory). Then place an X in the column(s) that represents the correct revenue source(s) for the item. The six situations are as follows:
o (1) ICU stay billed to employee's insurance program.
o (2) Lab test paid for by an individual.
o (3) Pathology work performed for the state.
o (4) ICU stay billed to member's health plan.
o (5) ICU stay billed for Medicare beneficiary.
o (6) Series of allergy tests run for eligible Medicaid beneficiary.
Headings for your worksheet:
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Medicare
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Medicaid
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Other Public Programs
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Patients
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Commercial Insurance
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Managed Care Contracts
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(1)
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(2)
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(3)
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(4)
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(5)
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(6)
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Example: Revenue Sources and Grouping Revenue
Sources of healthcare revenue are often grouped by payer. Thus, services might be grouped as follows:
• Revenue from the Medicare Program (payer = Medicare)
• Revenue from the Medicaid Program (payer = Medicaid)
• Revenue from Blue Cross Blue Shield (payer = Commercial Insurance)
or
• Revenue from Blue Cross Blue Shield (payer = Managed Care Contract)
Exercise 3: Revenue Sources and Grouping Revenue
The Metropolis Health System (MHS) has revenue sources from operations, donations, and interest income. The revenue from operations is primarily received for services. MHS groups its revenue first by cost center. Within each cost center the services revenue is then grouped by payer.
Required
• 1. Set up a worksheet with individual columns across the top for six revenue sources (payers): Medicare, Medicaid, Other Public Programs, Patients, Commercial Insurance, and Managed Care Contracts.
• 2. Certain situations concerning the Intensive Care Unit and the Laboratory are described below.Set up six vertical line items on your worksheet, numbered 1 through 6. Six situations are described below. For each of the six situations, indicate its number (1 through 6) and enter the appropriate cost center (either Intensive Care Unit or Laboratory). Then place an X in the column(s) that represents the correct revenue source(s) for the item. The six situations are as follows:
o (1) ICU stay billed to employee's insurance program.
o (2) Lab test paid for by an individual.
o (3) Pathology work performed for the state.
o (4) ICU stay billed to member's health plan.
o (5) ICU stay billed for Medicare beneficiary.
o (6) Series of allergy tests run for eligible Medicaid beneficiary.
Headings for your worksheet:
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Medicare
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Medicaid
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Other Public Programs
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Patients
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Commercial Insurance
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Managed Care Contracts
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(1)
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(2)
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(3)
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(4)
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(5)
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(6)
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Example
Study the chapter text concerning grouping expenses by diagnoses and procedures. Refer to Exhibits 5-3 and 5-4 (about major diagnostic categories), Exhibit 5-5 (about DRGs and MDCs), and Table 5-1 (about procedure codes) for examples of different ways to group expenses by diagnoses and procedures.
Exercise 4:
Required
Find a listing of expenses by diagnosis or by procedure. The source of the list can be internal (within a healthcare facility of some type) or external (such as a published article, report, or survey). Comment upon whether you believe the expense grouping used is appropriate. Would you have grouped the expenses in another way?
Exhibit 5-3: Major Diagnostic Categories
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1 Nervous System
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2 Eye
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3 Ear, Nose, Mouth, and Throat
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4 Respiratory System
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5 Circulatory System
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6 Digestive System
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7 Hepatobiliary System
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8 Musculoskeletal System and Connective Tissue
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9 Skin, Subcutaneous Tissue, and Breast
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10 Endocrine, Nutritional, and Metabolic
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11 Kidney and Urinary Tract
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12 Male Reproductive System
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13 Female Reproductive System
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14 Obstetrics
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15 Newborns
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16 Immunology
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17 Oncology
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18 Infectious Diseases
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19 Mental Diseases
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20 Substance Use
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21 Injury, Poison, and Toxin
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22 Burns
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23 Other Health Services
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24 Special Drugs
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25 HIV
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26 Unassigned
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59 Outpatient
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Exhibit 5-4: Hospital Departmental Code List Based on Major Diagnostic Categories
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1 Nervous System
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2 Eye
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3 Ear, Nose, Mouth, and Throat
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4 Respiratory System
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5 Circulatory System
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6 Digestive System
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7 Hepatobiliary System
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8 Musculoskeletal System and Connective Tissue
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9 Skin, Subcutaneous Tissue, and Breast
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10 Endocrine, Nutritional, and Metabolic
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11 Kidney and Urinary Tract
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12 Male Reproductive System
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13 Female Reproductive System
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14 Obstetrics
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15 Newborns
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16 Immunology
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17 Oncology
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18 Infectious Diseases
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19 Mental Diseases
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20 Substance Use
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21 Injury, Poison, and Toxin
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22 Burns
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23 Other Health Services
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24 Special Drugs
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25 HIV
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26 Unassigned
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59 Outpatient
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Table 5-1 Example of Radiology Department Costs Classified by Procedure Code
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Procedure Code
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Procedure Description
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Department Cost
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557210
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Ribs, Unilateral
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$ 60,000
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557230
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Spine Cervical Routine
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125,000
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557280
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Pelvis
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33,000
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557320
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Limb-Shoulder
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55,000
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557360
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Limb-Wrist
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69,000
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557400
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Limb-Hip, Unilateral
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42,000
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557410
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Limb-Hip, Bilateral
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14,000
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557430
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Limb-Knee Only
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62,000
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Total
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$460,000
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