When asked about the purpose of medical billing, most people answer that it exists to get doctors to pay. But doctors are routinely paid in some countries that don’t have medical billing. According to conventional wisdom, 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, 2011). Although medical billing gets doctors paid, its role is much broader. This short article attempts to better define the role that medical billing plays in our society.
Three basic questions about health care
First, doctors have the legal capacity to offer any medical treatment they choose. It can be helpful, harmful, or just useless. As Dr. Doug Cassel noted, “A doctor can treat your pancreatic cancer with organic turmeric, order weekly MRIs to check for headaches, perform twenty plastic surgery procedures at a time, or give you propofol to sleep with.” How can we know if doctors are providing quality care or if they are performing outside of our expectations?
Furthermore, documenting and reading each individual patient’s encounter in all its details would be beyond our resources due to the tens of thousands of disease entities, diagnostic and treatment studies, and myriad individual variation. How can we document each encounter accurately, specifically and concisely enough and still allow rapid identification of its correctness and payment scale?
Third, covering the entire population with the same plan would be wasteful (or insufficient) since different segments of the population require different coverage. How can we secure 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”, meaning 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 a health market efficiency mechanism that
- ensures the quality of treatment,
- document processing,
- kidneys in doctors out of control, and
- offers alternative patients.
Instead of writing payment protocols for every possible patient encounter, we have codified diagnoses and treatments. These two sets of codes, along with a system for mapping the codes to the payment schedule, allow us to test whether the right tests and therapy are being given for a given problem. In addition, the code sets and the mapping system are digitized, allowing rapid processing of large amounts of data.
This mapping system easily identifies physicians who practice outside of your expectations. Medicare and insurance companies check the appropriateness of treatment for problems using this mapping system, often called billing rules.
Additionally, ICD codes for diagnoses and CPT codes for treatments represent the DNA of medical records. For many medical issues, a doctor needs to know little more than what’s on the billing record. To quote Dr. Doug Cassel, “virtually all of the benefits that…can come from electronic medical records, including treatment evaluation and demographic data, are contained in billing records, which have been electronic for years.”
Ultimately, one insurance plan will never fit everyone. A young person has very different medical needs than a middle-aged family with three children or an elderly person with diabetes. Therefore, insurance plans differ in coverage and costs. Some insurance plans cover elective surgery at a higher cost, while others exclude such coverage. Different people choose to spend their healthcare dollars differently, and medical billing is the tool we use to differentiate between plans and levels of care. Getting doctors paid is a secondary or perhaps even tertiary aspect of medical billing. It is the only mechanism that ensures that patients can get the care they want.