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Overview of Medicare Claims Processing

by Patrick C. Alguire, MD, FACP
Director, Education and Career Development

Medicare claims are processed by non-government organizations or agencies that contract to serve as the fiscal agent between providers (hospitals, doctors, and other health care providers) and the Federal Government. These claims processors are known as "intermediaries" and "carriers." They apply Medicare coverage rules to determine the appropriateness of claims.

Medicare "intermediaries" process Part A claims (Hospital Insurance) for institutional services, including inpatient hospital claims, skilled nursing facilities, home health care agencies, and hospice services. They also process hospital outpatient claims for Part B. Examples of intermediaries include Blue Cross and Blue Shield Association, and other commercial insurance companies.

Intermediaries are responsible for:

  • Determining costs and reimbursement amounts
  • Maintaining records
  • Establishing controls
  • Safeguarding against fraud and abuse or excess use
  • Conducting reviews and audits
  • Making the payments to providers for services
  • Assisting both providers and beneficiaries as needed

Medicare carriers also handle Part B claims for services by physicians and medical suppliers. Their responsibilities include:

  • Determining charges allowed by Medicare
  • Maintaining quality of performance records
  • Assisting in fraud and abuse investigation
  • Assisting both suppliers and beneficiaries as needed
  • Making payments to physicians and suppliers for services that are covered under Part B

As of May 23, 2008, the National Provider Identifier (NPI) is required for all HIPAA Standard Transactions. The NPI is a 10-position, intelligence-free numeric identifier (10-digit number). This means that the numbers do not carry other information about healthcare providers, such as the state in which they live or their medical specialty. Your NPI can be obtained at no cost. For information about other paperwork that needs to be completed before beginning your practice, see "Completing the Important Practice Paperwork".

Peer Review Organizations (PROs) are groups of practicing health care professionals who are paid by the Federal government to do the general overview of the care provided to Medicare beneficiaries in each state, and to improve the quality of services. PROs act to educate and assist in the promotion of effective, efficient, and economical health care delivery of health services to the Medicare population they serve.

For more information on claims processing, members can download CPII's Billing and Collection Manual

Click here for more information on how Medicare can affect your Practice (Members Only)

Click here for more information on coding (Members Only)

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