Medical billing: a modern definition

When asked about the purpose of medical billing, most people answer that it exists for doctors to be paid. But doctors are routinely paid in some countries that don’t have medical billing. So conventional wisdom says that if getting paid was the only reason for medical billing, then it should be relatively easy to eliminate it and even save billions (see Dr. Ezekiel Emanuel’s article in the New York Times on November 12 from 2011). Although medical billing makes doctors pay, its role is much broader. This short article tries to better define the role that medical billing plays in our society.

Three Basic Questions About Health Care

First, physicians have the legal capacity to offer whatever medical therapy they choose. It can be helpful, harmful, or just plain useless. As Dr. Doug Cassel noted, “A doctor can treat your pancreatic cancer with organic turmeric, order weekly MRIs for headaches, perform twenty plastic surgery procedures at a time, or give you Propofol for sleep.” How can we know if doctors provide quality care or if they are acting outside of our expectations?

Next, documenting and reading each individual patient encounter in all its details would exceed our resources due to tens of thousands of diseases, diagnostic studies and treatments, and countless individual variations. How can we document each encounter accurately, specifically, and concise enough and still allow quick identification of its accuracy and pay scale?

Third, covering the entire population with the same plan would be wasteful (or insufficient) as different population segments require different coverage. How can we insure a variety of coverage for different people?

What is the role of medical billing today?

In finance, the efficient market hypothesis states that financial markets are “informationally efficient,” which means that prices reflect all the information available to market participants. A market efficiency mechanism collects and delivers all relevant information to market participants.

Medical billing is an efficiency mechanism of the health market that

1. ensures the quality of treatment,
2. treatment documents,
3. kidneys in doctors out of control, and
4. offers alternative patients.

Instead of writing payment protocols for every possible patient encounter, we have coded diagnoses and treatments. These two sets of codes together with a mapping system of the codes to the payment program allow us to test whether the appropriate tests and therapy are performed for a given problem. In addition, the code sets and mapping system are digitized, allowing rapid processing of large amounts of data.

This mapping system easily identifies physicians who are practicing outside of your expectations. Medicare and insurance companies verify the adequacy of treatment for problems using this mapping system, often called billing rules.

In addition, ICD codes for diagnosis and CPT codes for treatments represent DNA from medical records. For many medical problems, a doctor needs to know little more than what is included in the billing record. To quote Dr. Doug Cassel, “virtually all of the benefits that … can come from electronic medical records, including treatment evaluation and demographics, are contained in billing records, which have been electronic for years” .

Lastly, one insurance plan never fits everyone. A young person has very different medical needs than a middle-aged family with three children or an elderly diabetic. So insurance plans differ in coverage and costs. Some insurance plans cover elective surgery at a higher cost, while others exclude such coverage. Each person chooses to spend their money on health care differently, and medical billing is the tool we use to differentiate between plans and levels of care. Making doctors pay is a secondary or even tertiary aspect of medical billing. It is the only mechanism that ensures that patients can receive the care they want.