NHA Medical Billing & Coding (CBCS) — All Questions

The electronic equivalent of the paper CMS-1500 professional claim is the:

• a.835 remittance transaction
• b.837I transaction
• c.270 eligibility inquiry
• d.837P transaction✓

The 837P is the HIPAA standard electronic transaction for professional claims, corresponding to the paper CMS-1500. The 837I is the institutional version corresponding to the UB-04, and the 835 is the electronic remittance advice. Using the correct transaction format is required for electronic data interchange with payers.

Prior authorization (precertification) is:

• a.A patient's written consent to treatment
• b.Approval obtained from the payer before a service to confirm it will be covered✓
• c.Payment made before a service
• d.The final step after a claim is paid

Prior authorization is the payer's advance approval that a planned service or item is medically necessary and covered, often required for imaging, surgeries, and certain drugs. Failing to obtain required authorization commonly leads to denial. It is separate from, and does not guarantee, final payment.

Verifying a patient's insurance eligibility before the visit helps to:

• a.Increase the provider's fee schedule
• b.Confirm active coverage and benefits, reducing the risk of denials✓
• c.Eliminate the need for coding
• d.Change the patient's diagnosis

Eligibility verification confirms that the patient has active coverage, identifies the plan's benefits, and reveals copay, deductible, and authorization requirements before services are rendered. Doing this upfront prevents avoidable denials and helps collect patient responsibility. The HIPAA 270/271 transactions support electronic eligibility inquiries and responses.

The 'place of service' code on a professional claim indicates:

• a.The patient's home address
• b.The provider's specialty
• c.The amount the payer will reimburse
• d.The setting where the service was provided, such as office, hospital, or telehealth✓

The place of service code tells the payer where the service occurred, such as an office, inpatient hospital, emergency department, or the patient's home. It affects reimbursement because payment can vary by setting. An incorrect place of service code can cause denials or incorrect payment.

Which item is generally required for a clean professional claim?

• a.Valid diagnosis and procedure codes with supporting patient and insurance information✓
• b.A photograph of the patient
• c.The provider's personal bank account number
• d.The patient's employer performance review

A clean claim requires accurate patient demographics, insurance information, provider identifiers, and valid diagnosis and procedure codes that support medical necessity. Missing or mismatched data is a leading cause of rejections. Verifying these elements before submission maximizes first-pass acceptance.

An appeal of a denied claim is:

• a.A formal request asking the payer to reconsider its decision, often with supporting documentation✓
• b.A way to increase the fee schedule
• c.A request to change the patient's diagnosis
• d.An automatic payment reversal

An appeal is the provider's formal challenge to a payer's adverse determination, typically supported by medical records, corrected coding, or a letter of medical necessity. Payers set deadlines and levels for appeals that must be followed. A well-documented appeal can overturn denials for services that were actually covered.

The term 'assignment of benefits' means that the patient:

• a.Assigns their deductible to another patient
• b.Transfers the claim to a collection agency
• c.Authorizes the insurance payment to go directly to the provider✓
• d.Waives all coverage

Assignment of benefits is the patient's authorization directing the insurer to pay the provider directly rather than reimbursing the patient. It is commonly documented at registration and referenced on the claim. Without it, payment may be sent to the patient, complicating collection.

When Medicare is the secondary payer (MSP), it means that:

• a.Medicare always pays first
• b.Another insurer is responsible for paying before Medicare✓
• c.The claim cannot be submitted electronically
• d.The patient has no other coverage

Medicare Secondary Payer rules apply when another payer, such as an employer group health plan or a liability insurer, has primary responsibility. In those cases the primary payer is billed first, and Medicare may then consider the remaining balance. Correctly identifying the primary payer prevents improper billing to Medicare.

A superbill (encounter form) is used to:

• a.Capture the diagnoses, procedures, and charges from a patient encounter for claim creation✓
• b.Serve as the patient's insurance card
• c.Record the payer's remittance
• d.Authorize a surgery

A superbill documents the services provided during a visit, including diagnosis and procedure codes and charges, and serves as the source document for generating the claim. Accurate superbills reduce coding errors and support timely billing. Many practices now generate this information electronically within the practice management system.

Which of the following would most likely cause a claim to be rejected at the clearinghouse before reaching the payer?

• a.Accurate patient demographics
• b.An invalid or missing subscriber identification number✓
• c.A correctly matched diagnosis and procedure
• d.A valid, active NPI

Clearinghouses perform front-end edits and will reject claims with missing or invalid data such as an incorrect subscriber ID, invalid NPI, or format errors before the claim reaches the payer. These rejections can be corrected and resubmitted quickly. Catching errors at this stage is faster than resolving a payer denial.

A clearinghouse in the billing workflow functions to:

• a.Set the patient's copayment amounts
• b.Provide medical treatment
• c.Receive claims from providers, check and format them, then route them to the appropriate payers✓
• d.Assign diagnosis codes to encounters

A clearinghouse is an intermediary that accepts electronic claims from providers, scrubs and standardizes them into the required format, and forwards them to the correct payers. It also returns rejection reports so errors can be fixed quickly. Using a clearinghouse streamlines electronic submission to many payers at once.

On the CMS-1500 claim, diagnosis codes are linked to each service line by:

• a.Using diagnosis pointers that connect each procedure to the diagnosis that justifies it✓
• b.Writing them in the remittance advice
• c.Placing them only on the UB-04
• d.Listing the codes in random order

The CMS-1500 uses diagnosis pointers to associate each billed procedure line with the specific diagnosis that supports its medical necessity. Proper linkage demonstrates why each service was needed and helps prevent medical-necessity denials. Mispointed or missing links are a common cause of claim rejections.

The 'allowed amount' on a claim is:

• a.The amount written off as bad debt
• b.The provider's full billed charge
• c.The patient's annual deductible
• d.The maximum amount a payer will pay for a covered service under the contract or fee schedule✓

The allowed amount is the contracted or fee-schedule maximum the payer recognizes as payment for a covered service. It is often lower than the provider's billed charge, and the difference for a participating provider is a contractual write-off. Patient responsibility, such as coinsurance, is calculated from the allowed amount, not the billed charge.CMS

A patient has a $1,500 medical bill, an allowed amount of $1,000, has already met the deductible, and has a 20% coinsurance. How much is the patient's coinsurance responsibility?

• a.$1,000, the full allowed amount
• b.$300, which is 20% of the billed charge
• c.$500, the difference between billed and allowed
• d.$200, which is 20% of the $1,000 allowed amount✓

Coinsurance is calculated on the allowed amount, not the provider's billed charge, so 20% of $1,000 equals $200. The $500 difference between the $1,500 charge and the $1,000 allowed amount is a contractual adjustment for a participating provider. The payer would pay the remaining $800 of the allowed amount.

A patient with a $500 remaining deductible receives a service with an allowed amount of $800 and 20% coinsurance after the deductible. What is the total patient responsibility?

• a.$800
• b.$500
• c.$560✓
• d.$160

The patient first pays the $500 deductible, leaving $300 of the allowed amount subject to coinsurance. Twenty percent of that $300 is $60, so total patient responsibility is $500 plus $60, which equals $560. The payer would pay the remaining $240.

A copayment (copay) is best described as:

• a.The amount the patient must pay before insurance begins to pay
• b.A fixed dollar amount the patient pays for a covered service, such as an office visit✓
• c.The provider's contractual write-off
• d.A percentage of the allowed amount paid by the patient

A copay is a set flat fee the patient pays at the time of service, such as $30 for an office visit, regardless of the total charge. It differs from coinsurance, which is a percentage, and from the deductible, which must be met before the plan pays. Copays are typically collected at check-in.

A deductible is:

• a.The maximum the plan will ever pay
• b.A percentage of every bill paid by the plan
• c.The provider's billed charge
• d.The amount a patient must pay out of pocket each benefit period before the plan begins to pay✓

The deductible is the fixed amount the insured must pay for covered services each benefit period before the insurer starts sharing costs. After the deductible is met, the patient typically owes only copays or coinsurance up to the out-of-pocket maximum. Verifying the remaining deductible helps the practice collect the correct amount.

The Resource-Based Relative Value Scale (RBRVS) determines physician payment based on:

• a.The hospital's total operating budget
• b.Relative value units reflecting physician work, practice expense, and malpractice cost, adjusted geographically✓
• c.The patient's income level
• d.A flat fee for every service regardless of complexity

RBRVS assigns each service relative value units for physician work, practice expense, and professional liability, which are adjusted by geographic indices and multiplied by a conversion factor to set payment. This system underlies the Medicare Physician Fee Schedule. It ties reimbursement to the resources required rather than to historical charges.

In the Medicare Physician Fee Schedule, the payment for a service is calculated by:

• a.Multiplying the total relative value units by a conversion factor (after geographic adjustment)✓
• b.Multiplying the billed charge by the deductible
• c.Dividing the allowed amount by the number of diagnoses
• d.Adding the copay to the coinsurance

Medicare payment equals the sum of geographically adjusted relative value units multiplied by a national conversion factor expressed in dollars. The conversion factor translates the relative values into an actual payment amount. Understanding this formula clarifies why identical services can pay differently across regions.

Diagnosis-Related Groups (DRGs) are used mainly to determine reimbursement for:

• a.Inpatient hospital stays, by grouping cases with similar clinical characteristics and resource use✓
• b.Outpatient laboratory tests
• c.Physician office visits
• d.Retail prescription drugs

DRGs classify inpatient admissions into groups that are expected to consume similar hospital resources, and each group carries a fixed payment weight. This prospective payment method pays a set amount per admission rather than per service. It creates an incentive for efficient inpatient care.

Ambulatory Payment Classifications (APCs) are the basis for Medicare payment in the:

• a.Retail pharmacy benefit
• b.Physician fee schedule
• c.Hospital outpatient prospective payment system✓
• d.Inpatient DRG system

APCs group outpatient hospital services that are clinically similar and require comparable resources, assigning a payment rate to each group under the outpatient prospective payment system. Multiple APCs can apply to a single outpatient visit. This is the outpatient facility counterpart to the inpatient DRG system.

Under a capitation payment arrangement, a provider is paid:

• a.A separate fee for each individual service rendered
• b.Only when the patient meets the deductible
• c.Based on the hospital's DRG weight
• d.A fixed amount per enrolled member per month regardless of the number of services used✓

Capitation pays the provider a set amount per member per month (PMPM) to cover contracted services for each enrolled patient, whether or not the patient seeks care. This shifts financial risk to the provider and rewards efficient, preventive care. It contrasts with fee-for-service, which pays per service delivered.

In a fee-for-service reimbursement model, the provider is paid:

• a.A fixed percentage of the hospital budget
• b.Only a bundled amount for an episode of care
• c.For each individual service or procedure provided✓
• d.A single monthly amount per patient

Fee-for-service reimburses providers separately for each covered service or procedure billed. It can encourage higher service volume because payment rises with the number of services. It contrasts with capitation and bundled or value-based models that pay a set amount for a defined population or episode.

A patient's total 'out-of-pocket maximum' represents:

• a.The most a patient will have to pay for covered services in a benefit period before the plan pays 100%✓
• b.The amount the provider writes off
• c.The plan's monthly premium
• d.The amount the payer pays the provider

The out-of-pocket maximum caps the total deductible, copays, and coinsurance a patient pays in a benefit period; once reached, the plan pays 100% of covered services. Premiums generally do not count toward this maximum. Knowing the patient's remaining out-of-pocket helps set accurate expectations for patient responsibility.

A provider bills $2,000 for a service. The payer's allowed amount is $1,200, and the provider is a participating (in-network) provider. What is the contractual adjustment (write-off)?

• a.$800✓
• b.$400
• c.$2,000
• d.$1,200

A participating provider agrees to accept the payer's allowed amount as payment in full, so the difference between the $2,000 billed charge and the $1,200 allowed amount, which is $800, is written off. The patient cannot be balance-billed for that contractual adjustment. Only the deductible, copay, or coinsurance based on the $1,200 allowed amount may be collected from the patient.

Balance billing occurs when a provider bills the patient for:

• a.The difference between the provider's charge and the payer's allowed amount✓
• b.The full amount that insurance already paid
• c.Only the copayment
• d.The provider's contractual write-off

Balance billing is charging the patient the gap between the provider's full charge and the payer's allowed amount. For participating providers this practice is generally prohibited by contract, and certain federal and state protections limit surprise balance billing. The patient may still owe legitimate cost-sharing such as deductibles and coinsurance.

The 'aging' of accounts receivable in a medical practice refers to:

• a.The age of the patients being treated
• b.The retention period for medical records
• c.Categorizing outstanding balances by how long they have been unpaid, such as 30, 60, or 90 days✓
• d.How long a provider has been in practice

An accounts receivable aging report sorts unpaid balances into time buckets, such as current, 31 to 60 days, and over 90 days, to reveal collection performance. Older balances are less likely to be collected, so timely follow-up is essential. Monitoring the aging report guides collection priorities and cash-flow management.

When posting an insurance payment from a remittance advice, the biller should:

• a.Ignore the adjustment codes
• b.Post the billed charge as the payment
• c.Bill the contractual adjustment to the patient
• d.Record the payment, any contractual adjustment, and the remaining patient responsibility accurately✓

Accurate payment posting records the amount paid, applies contractual adjustments per the payer agreement, and moves the correct remaining balance to patient responsibility or secondary insurance. Errors in posting distort the accounts receivable and can cause improper patient billing. The remittance advice reason codes guide how each amount is applied.

A patient statement sent for collections should clearly show:

• a.The services, charges, insurance payments and adjustments, and the remaining amount the patient owes✓
• b.The payer's internal notes
• c.The diagnosis codes without any charges
• d.The provider's home address only

An effective patient statement itemizes the dates of service, charges, amounts paid by insurance, adjustments, and the current balance due from the patient. Clear statements reduce confusion and support timely payment. Federal debt-collection and consumer-protection rules govern how outstanding balances may be pursued.

A patient owes a $40 copay and has 20% coinsurance on an allowed amount of $250 after the copay does not apply to coinsurance. If the deductible is already met, what does the payer pay on the $250 allowed amount (coinsurance portion only)?

• a.$200, which is 80% of the $250 allowed amount✓
• b.$50, which is the coinsurance owed by the patient
• c.$250, the full allowed amount
• d.$40, the copay

When the deductible is met and coinsurance is 20%, the patient pays 20% of the allowed amount and the payer pays the remaining 80%. Eighty percent of $250 is $200, which is the payer's share of the coinsurance calculation. The $50 balance is the patient's coinsurance responsibility.

The HIPAA Privacy Rule primarily protects:

• a.Only electronic billing software
• b.A provider's business financial records only
• c.The design of insurance ID cards
• d.The privacy of individually identifiable health information (protected health information)✓

The HIPAA Privacy Rule sets national standards protecting individuals' protected health information (PHI) held or transmitted by covered entities and their business associates. It limits how PHI may be used and disclosed and grants patients rights over their information. Billing staff must safeguard PHI and disclose only the minimum necessary.HIPAA

The HIPAA 'minimum necessary' standard requires that covered entities:

• a.Never share information even for treatment
• b.Disclose all available patient information on every request
• c.Limit the use and disclosure of PHI to the least amount needed to accomplish the intended purpose✓
• d.Encrypt only paper records

The minimum necessary standard directs that when using or disclosing PHI, or requesting it, covered entities limit the information to what is reasonably needed for the specific purpose. It does not apply to disclosures for treatment or those authorized by the patient. Applying it in billing means sharing only the data a payer needs to adjudicate a claim.HIPAA

The HIPAA Security Rule specifically addresses the protection of:

• a.The provider's marketing materials
• b.Electronic protected health information through administrative, physical, and technical safeguards✓
• c.Paper records stored in a basement only
• d.Employee salary information

The HIPAA Security Rule establishes standards for safeguarding electronic protected health information (ePHI), requiring administrative, physical, and technical safeguards such as access controls, encryption where appropriate, and audit controls. It complements the Privacy Rule, which covers PHI in all forms. Billing systems that store ePHI must meet these safeguards.HIPAA

A 'business associate' under HIPAA is:

• a.Any employee of the covered entity
• b.A patient's family member
• c.A competing medical practice
• d.A person or entity that performs functions involving PHI on behalf of a covered entity, such as a billing company✓

A business associate is an outside person or organization that creates, receives, maintains, or transmits PHI to perform services for a covered entity, such as a third-party billing service or clearinghouse. HIPAA requires a written business associate agreement defining safeguards. Business associates are directly liable for certain HIPAA obligations.HIPAA

Under HIPAA, a patient generally has the right to:

• a.Demand that the provider delete all records permanently
• b.Prevent all billing to their insurance
• c.Set the provider's fee schedule
• d.Access and request a copy of their own medical records✓

HIPAA grants individuals the right to access and obtain copies of their protected health information held in a designated record set, subject to limited exceptions. Patients may also request amendments and an accounting of certain disclosures. Providers must respond within the timeframes the rule specifies.HIPAA

The HIPAA transactions and code sets standards were established to:

• a.Replace the need for medical records
• b.Standardize the electronic exchange of health care data, such as claims, using uniform formats and code sets✓
• c.Set physician salaries
• d.Determine which drugs are covered

HIPAA's transactions and code sets standards require covered entities to use uniform electronic formats, such as the 837 claim and 835 remittance, and standard code sets like ICD-10-CM, CPT, and HCPCS. Standardization streamlines electronic data interchange between providers and payers. It reduces the administrative burden of differing payer formats.HIPAA

The federal False Claims Act imposes liability primarily on those who:

• a.Charge a patient a copayment
• b.Submit any claim that is later denied
• c.Knowingly submit, or cause to be submitted, false or fraudulent claims for payment to the government✓
• d.Use an outdated fax machine

The False Claims Act creates liability for knowingly presenting false or fraudulent claims to federal programs such as Medicare and Medicaid, including billing for services not rendered or upcoding. 'Knowingly' includes acting with reckless disregard or deliberate ignorance, not just actual knowledge. Penalties can include substantial fines and multiplied damages.False Claims Act

A 'qui tam' provision under the False Claims Act allows:

• a.A private individual (a whistleblower) to file suit on behalf of the government and potentially share in any recovery✓
• b.Patients to change their diagnosis
• c.Payers to set fee schedules
• d.Providers to appeal any denial

The qui tam provision lets a private person, often an employee who discovers fraud, bring a lawsuit on the government's behalf and receive a portion of amounts recovered. This encourages insiders to report false claims. The law also protects such whistleblowers from retaliation.False Claims Act

The federal Anti-Kickback Statute prohibits:

• a.Knowingly offering, paying, soliciting, or receiving anything of value to induce referrals of federal health program business✓
• b.Accepting Medicare assignment
• c.Providing free educational pamphlets to patients
• d.Billing a patient's secondary insurance

The Anti-Kickback Statute makes it a crime to knowingly and willfully exchange, or offer to exchange, remuneration to induce or reward referrals of items or services payable by a federal health care program. Violations can bring criminal, civil, and administrative penalties. Certain safe harbors protect specified legitimate business arrangements.Anti-Kickback Statute

The physician self-referral law (the Stark Law) generally prohibits a physician from:

• a.Referring any patient to a specialist
• b.Billing Medicare for office visits
• c.Accepting insurance
• d.Referring Medicare patients for certain designated health services to an entity with which the physician has a financial relationship, unless an exception applies✓

The Stark Law bars physicians from referring Medicare patients for specific designated health services to entities in which the physician or an immediate family member has a financial interest, absent a qualifying exception. Unlike the Anti-Kickback Statute, Stark is a strict-liability civil law that does not require intent. Claims resulting from prohibited referrals are not payable.CMS

The Office of Inspector General (OIG) of the Department of Health and Human Services is primarily responsible for:

• a.Setting physician office hours
• b.Selling insurance policies
• c.Detecting and preventing fraud, waste, and abuse in federal health care programs✓
• d.Assigning CPT codes

The OIG protects the integrity of HHS programs, including Medicare and Medicaid, by investigating fraud and abuse, conducting audits, and issuing compliance guidance. It maintains a list of individuals and entities excluded from federal health programs. Providers check this exclusion list to avoid employing or contracting with excluded parties.CMS

An Advance Beneficiary Notice of Noncoverage (ABN) is given to a Medicare patient to:

• a.Collect the copay in advance for all visits
• b.Inform the patient in advance that Medicare may not pay for a service so the patient can decide whether to accept financial responsibility✓
• c.Guarantee that Medicare will pay
• d.Serve as the patient's insurance card

An ABN notifies a Medicare beneficiary before a service is provided that Medicare is likely to deny payment, allowing the patient to choose whether to receive the service and accept liability. Without a properly executed ABN, the provider generally cannot bill the patient for the denied amount. It must be given in advance and clearly explain the reason coverage may be denied.CMS

The National Provider Identifier (NPI) is required under HIPAA to:

• a.Determine patient copayments
• b.Uniquely identify covered health care providers in standard transactions✓
• c.Track patient diagnoses
• d.Set the Medicare conversion factor

The NPI is a unique ten-digit identifier assigned to covered health care providers and required on HIPAA standard transactions such as claims. It standardizes provider identification across payers, replacing legacy identifiers. Accurate NPI reporting is essential to avoid claim rejections.

Accurate and complete medical record documentation is important for billing because:

• a.It determines the patient's premium
• b.It replaces the need for coding
• c.It sets the provider's tax rate
• d.It supports the codes billed and demonstrates the medical necessity of services✓

Documentation in the medical record must support every code reported and justify that services were medically necessary; the principle is that if it was not documented, it was not done. Insufficient documentation is a leading cause of denials and audit findings. Coders should assign codes based only on what the record supports.

If a billing staff member accesses a patient's record out of curiosity, with no job-related reason, this is:

• a.Required by the minimum necessary rule
• b.Always permitted because the staff works there
• c.An impermissible use of PHI that violates HIPAA✓
• d.Allowed if the patient is famous

Accessing PHI without a legitimate work-related purpose, sometimes called snooping, is an impermissible use that violates the HIPAA Privacy Rule and the minimum necessary standard. Covered entities must limit access to what each role requires and may discipline violators. Such breaches can trigger penalties for both the individual and the organization.HIPAA

A compliance program in a medical practice is designed to:

• a.Prevent and detect violations of law and promote ethical, accurate billing practices✓
• b.Increase the number of claims denied
• c.Eliminate the need for documentation
• d.Set higher charges than competitors

An effective compliance program establishes policies, training, auditing, and reporting mechanisms to help a practice follow coding, billing, and privacy laws and catch problems early. The OIG has published guidance outlining key elements of such programs. A strong compliance culture reduces the risk of fraud, abuse, and penalties.

A breach of unsecured protected health information under HIPAA generally requires the covered entity to:

• a.Ignore it if fewer than 100 records are involved
• b.Charge the affected patients a fee
• c.Immediately delete all patient records
• d.Notify affected individuals, and in some cases HHS and the media, within required timeframes✓

The HIPAA Breach Notification Rule requires covered entities to notify affected individuals, and depending on the breach's size, HHS and sometimes the media, within specified timeframes after discovering a breach of unsecured PHI. Business associates must notify the covered entity of breaches. Timely, proper notification is a legal obligation, not optional.HIPAA

Medical record retention requirements are generally set by:

• a.The patient's preference alone
• b.The number of pages in the record
• c.The provider's mood
• d.Federal and state laws and payer requirements, which specify minimum retention periods✓

How long medical and billing records must be kept is governed by a combination of federal rules, state laws, and payer contracts, with retention periods that vary by record type and jurisdiction. Practices should follow the most stringent applicable requirement. Proper retention supports audits, appeals, and legal defense.

Obtaining a patient's signed authorization is generally required before a provider may:

• a.Share information with another treating provider for care
• b.Disclose PHI for purposes not otherwise permitted, such as many marketing uses✓
• c.Report a communicable disease as required by law
• d.Submit a claim to the patient's insurer for treatment

HIPAA permits certain uses and disclosures of PHI without authorization, including for treatment, payment, and health care operations, and for legally required public-health reporting. However, disclosures outside these permitted purposes, such as most marketing or the sale of PHI, require the patient's written authorization. Billing staff should know which activities need a signed authorization.

A Notice of Privacy Practices (NPP) is a document that a covered entity must:

• a.Send only to insurance companies
• b.Provide to patients describing how their PHI may be used and disclosed and their privacy rights✓
• c.Use to set the fee schedule
• d.Keep hidden from patients

HIPAA requires covered entities to give patients a Notice of Privacy Practices explaining how the practice may use and disclose PHI and outlining patients' rights regarding their information. Providers with a direct treatment relationship must make a good-faith effort to obtain acknowledgment of receipt. The notice promotes transparency about privacy practices.HIPAA