Medicare Compliance & Reimbursement

Question: Our Medicare beneficiaries often mistake the explanation of benefits (EOB) for a bill and call our office in a panic. Do you have any advice on how to explain what an EOB is and why patients shouldn’t be concerned when they receive one?

Idaho Subscriber

Answer: This is a common problem that many practices face. Although patients often mistake an EOB for a bill, an EOB is actually not a bill.

Insurance companies send EOBs to patients two to three weeks after their initial appointment. “EOBs are insurers’ way of explaining their reimbursement, based on the CPT® codes and ICD-10 codes submitted,” explains Catherine Brink, BS, CMM, CPC, president of Healthcare Resource Management in Spring Lake, New Jersey. “EOBs usually list the service provided was approved or not approved, the amount a provider charged, the amount approved by the insurer, the amount paid by the insurer, the amount you may be billed, then a code that indicates how the claim was paid, denied, or partially paid based on the patient’s policy. This is explained in detail on the EOB.”

“Most patients do not understand EOBs or the definition of the acronym ‘explanation of benefits,’ which means what the insurer will pay based on your particular policy,” Brink adds.

Example: Brink offers up this scenario — a participating provider charges $200 for a service. Medicare’s approved amount for this service is $160. Medicare pays 80 percent of $160 — $128. The 20 percent difference, $32, is the patient’s responsibility to pay. If the patient has a Medigap insurance plan, then that $32 is usually paid by the insurer depending on the insurance plan. The $40 difference from what the par provider charged, and the Medicare approved amount must be written off by the par provider since it is part of the par contract with Medicare.

Billers and coders must understand this and adjudicate the remittance advice, which is sent to the provider, correctly. The patient needs to understand the EOB since they are responsible for the 20 percent.