Practice Management

Professional versus facility billing: What hospitalists must know


The revenue cycle

The hospital revenue cycle has a lot of cogs in the machine, Dr. Arafiles said. “This is just one of the many nuances of our crazy system. I will go out on a limb and say it is not our job as clinicians to know all of those nuances.” The DRG assignment is dependent on how providers can describe the complexity of the patient and severity of the illness, even if it doesn’t impact professional billing, Dr. Arafiles added.

Hospitalists don’t want to think about money when providing patient care. “Our job is to provide the best care to our patients. We often utilize resources without thinking about how much they are going to cost, so that we can do what we think is necessary for our patients,” she explained. But accurate diagnosis codes can capture the complexity of the care. “Maybe we don’t take that part seriously enough. As long as I, as the provider, can accurately describe the complexity of my patient, I can justify why I spent all those resources and so many days caring for him or her.”

Dr. Charles Locke, senior physician adviser at Johns Hopkins Hospital in Baltimore

Dr. Charles Locke

Charles Locke, MD, executive medical director of care management for LifeBridge Health and assistant professor of medicine at Johns Hopkins University, Baltimore, said hospitalists typically are paid set salaries directly by the hospital, in some cases with productivity bonuses based in part on their billing and posted RVUs (relative value units). RVUs are the cornerstone of Medicare’s reimbursement formula for physician services.

“Another thing to keep in mind, one might think in 2021 that the computer systems would be sophisticated enough to link up professional and facility billing to ensure that bills for each are concordant for services provided on a given day. But it turns out they are not yet well connected,” Dr. Locke said.

“These are issues that everybody struggles with. Hospitalists need to know and order the appropriate status, inpatient versus outpatient, and whether and when to order observation services, as this will affect hospital reimbursement and, potentially, patient liability,” he explained.1 If the hospital is denied its facility claim because of improper status, that denial doesn’t necessary extend to a denial for the doctor’s professional fee. “Hospitalists need to know these are often separated. Even though their professional fee is honored, the hospital’s service charges may not be.”

Dr. Locke said knowing the history of Medicare might help hospitalists to better appreciate the distinctions. When this federal entitlement was first proposed in the 1960s as a way to help older Americans in poverty obtain needed health care, organized medicine sought to be excluded from the program. “Nonhospital services and doctors’ service fees were not included in the original Medicare proposal,” he said. Medicare Part B was created to provide insurance for doctors’ professional fees, which are still handled separately under Medicare.

Many institutions use clinical documentation for multiple purposes. “There are so many masters for this one document,” Dr. Arafiles said. The information is also used for various quality and patient safety metrics and data gathering. “Every code we choose is used in many different ways by the institution. We don’t know where all it goes. But we need to know how to describe how complex the case was, and how much work it entailed. The more we know about how to describe that, the better for the institution.”

Dr. Arafiles views the clinical note, first and foremost, as clinical communication, so that one provider can seamlessly pick up where the previous left off. “If I use language in my note that is accurate and specific, it will be useful to all who later need it.” Building on metrics such as expected versus actual 30-day readmission rates, risk-adjusted mortality, and all the ways government agencies report hospital quality, she said, “what we document has lasting impact. That’s where the facility side of billing and coding is ever more important. You can’t just think about your professional billing and RVUs.”


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