Introduction
Healthcare system cannot exist without financial channels that provide for its functioning. This necessitates the classification that would sort all healthcare services and create their money equivalent. The World Health Organization has a set of codes of diseases and procedures that are used by countries to calculate the cost of healthcare on their territories. Disclosing how medical coding is used and what ways of financing exist is crucial in understanding the structure of American healthcare.
The Role of Finance in the Healthcare System
Healthcare is expensive, encompassing medical analyses, diagnoses, treatment, and other services. All these activities require financial support, whether it is signing paychecks for doctors or performing a surgery. Modern hospitals are managed in a manner similar to business, where finances constitute the resources an organization has to maintain its functions (Cleverley, & Cleverley, 2017). However, since healthcare deals with illnesses, it is challenging to estimate the costs of treating patients. To facilitate the calculation, medical coding was introduced that puts diseases and procedures in an alphanumeric dimension. Subsequently, it is possible to compare different patients and bill them according to the International Classification of Diseases.
Diagnosis Codes
Diagnosis codes are sets of numbers and letters that convey what disease a patient has. “For diagnosis codes, ICD-10-CM (Clinical Modification) is utilized,” which is “the United States’ clinical modification of the ICD-10 code set created by the World Health Organization” (Cleverley, & Cleverley, 2017, p. 15). All hospitals use the ICD for billing and producing revenue. There are also codes for procedures, for instance, minor anesthesia for one hour is numbered 4520014, and it costs 151.25 dollars (Cleverley, & Cleverley, 2017). All medical services are written in the code base, thus making it possible to conduct reimbursements.
Features of Third-Party Payers
The general scheme of financing between a healthcare provider and a patient is straightforward – receivers of medical help pay to healthcare providers for treatment. However, there are also entities that can pay for someone’s patient care that are called third-party payers (What is a third-party payer in healthcare?, n.d.). Such parties involve governmental programs, like Medicare in the US, insurance companies, and employers. Hospitals sign a contract with third-party payers, administer treatment, and receive compensation from the overarching entity, not the patient. For billing, healthcare providers refer to proper coding that shows the exact amount of costs that hospitals had. Subsequently, the third party reimburses the provider according to the ICD.
Reimbursement Methods
In order to compensate for the healthcare services, a patient or a third-party payer reimburses the provider. The first method is fee for service, which bills the receiver according to the cost of the performed procedure. The second is capitation, which implies that a doctor is working with a number of patients and is paid a fixed wage regardless of the amount of services provided. The final method is bundled payments, which charge the healthcare receiver a fixed amount for one procedure each time it is performed. There can be mistakes in calculating the cost on the healthcare provider’s part. In this case, “errors in billing or coding may subsequently be subject to case-by-case refunds or even extrapolation of the error to the physician’s patient population” (Grant-Kels et al., 2016, p. 149). As a result, care receivers can use medical coding for double-checking their providers.
Conclusion
Altogether, it is evident that medical coding is an essential part of today’s healthcare financing. Due to diagnosis codes, health information professionals can classify diseases. In turn, procedure codes let healthcare providers bill the patients for the performed services. Moreover, contracts can be signed with third parties that are willing to pay for a patient’s recovery. Healthcare receivers can rely on coding to ensure that the payments the providers required were adequate and corresponded with the International Classification of Diseases.
References
Cleverley, W. O., & Cleverley, J. O. (2017). Essentials of healthcare finance. Jones & Bartlett Learning.
Grant-Kels, J. M., Kim, A., & Graff, J. (2016). Billing and up coding: What’s a doctor-patient to do?. International Journal of Women’s Dermatology, 2(4), 149-150. Web.
What is a third-party payer in healthcare? (n.d.). KMC University. 2020, Web.