Understanding the reimbursement process

Nurse Practitioner, May 2000 by Rapsilver, Lynn M, Anderson, Elizabeth H

ABSTRACT

Nurse practitioners must be fiscally responsible to obtain reimbursement for services provided. A thorough knowledge of the reimbursement process is required to accomplish this goal. This article explores the reimbursement process, generation of revenue, and personal productivity determination for nurse practitioners. Parameters for billing using the resource-based relative value scale, the Evaluation and Management Documentation Guidelines, the International Classification of Disease, and the Physicians' Current Procedural Terminology code book are explained.

In 1965, Congress amended the Social Security Act to establish Medicaid and Medicare. Medicaid, financed by matching federal and state grant monies, reimburses for care provided to the medically indigent. Through Social Security taxes, Medicare reimburses health care needs of individuals over age 65, those with end-stage renal disease, and the disabled.1 Medicare is divided into Part A, which insures hospital expenses, and Part B, which reimburses physician services, medical supplies, and procedures. Initially, Medicare reimbursed on a fee-forservice basis or the monetary value a practice placed on a service provided. Using this fee-for-service method, Medicare reimbursed all services for which it was billed. With escalating health care costs, in 1988, the Health Care Financing Administration (HCFA), the agency that administers Medicare and Medicaid, and the American Medical Association (AMA) created the resource-based relative value scale (RBRVS) system based on data compiled by Hsaio et al.2

The formula for computing the RBRVS is complex but integral to thirdparty reimbursement (see Table 1). Several factors are central to the RBRVS: The relative value unit is a measurement based on provider productivity, malpractice insurance, and cost of overhead, staff, equipment, and supplies; the geographic practice cost indices are a prorated v glue reflecting practice costs in various parts of the country; the conversion factor of $34.731 S for 1999; and the payment rate to the limited licensed practitioner or the physician, nurse practitioner (NP), or physician assistant?

The conversion factor for 2000 reflects the practice's 1999 increase in Medicare recipients, aging of patients in the practice, appropriateness of care, regional access to care, new technology purchased, and the 1999 national inflation rate. Other third-party payers and physician practices use the RBRVS system to establish fees for procedures and services. Managed care companies annually set fees through contractual agreements with providers based on the RBRVS. Medicare also uses the RBRVS to reimburse providers based on an annually updated fee schedule through a regional Medicare intermediary carrier.4

In 1994, the HCFA and AMA collaborated to develop the Evaluation and Management Documentation Guidelines. These guidelines define various levels of work effort through a work relative value unit (RVU). The guidelines include seven measurement components used to accurately and consistently express provider and patient encounters: history, examination, medical decision making, counseling, coordination of care, nature of presenting problem, and the time involved in providing cares The essential components to any billable encounter are the history, physical examination, and medical decision making.

Nurse Practitioner Reimbursement

Since the creation of the NP role, reimbursement has been slow and tortuous.6 In the early 1990s, reimbursement was limited to NPs working in rural and medically underserved areas.' Sections 4511 and 4512 of the Balanced Budget Act of 1997 removed the restriction of geographic location or practice setting for direct NP reimbursement.e NPs providing Part B services may now obtain direct reimbursement through two methods.

Using the first method, the NP receives either 80% of the actual charge or a fee set by the practice, or 85% of the Medicare physician fee schedule. However, Medicare will reimburse at the lowest charge. For example, if an NP bills $120 for services and Medicare allows $100, the NP is reimbursed $85, which is 85% of the Medicare allowable. If an NP bills $80 for a service and Medicare allows $100, then the NP is reimbursed $80, which is 80% of the actual allowed charge.

Using the second method, reimbursement is at 100% of the physician rate, provided that "incident to" criteria are met. The term "incident to" describes services provided by an NP when a physician is actually on the premises and accessible for consultation.9 The physician's presence may be validated through documentation on the medical record, the practice appointment schedule, or patient contact. The NP bills Medicare using a unique provider identification number (UPIN) obtained through the local Medicare carrier.10 The NP must become paneled or credentialed through an application process by the payer to obtain direct reimbursement. The HCFA is exploring the concept of a national provider number for all provider levels, which would be accepted nationwide.