What Are Bundling and Unbundling in Medical Coding?

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bundling and unbundling in medical billing

Medical coders assign 5-digit codes to each service or procedure that a medical practice provides to a patient. Those codes are used in billings. Insurance companies and the administrators of government programs (like Medicare and Medicaid) rely on the codes as a standardized description of the services and procedures for which the medical practice seeks payment.

The rules that govern the assignment of codes can be complex. That complexity becomes clear when procedures that have separate codes are performed together. Should they be billed as a single procedure or as two procedures? The question is one that coders must answer by relying on the rules that govern coding.

Whether procedures are performed separately or together might or might not determine the correct billing code. The choice to “bundle” or “unbundle” procedures affects the accuracy of medical bills. Making an incorrect choice is, in fact, one of the most common causes of billing errors.

Understanding CPT Codes

Medical billers work with (or share the duties of) medical coders. A coder assigns Current Procedural Terminology (CPT) codes to medical services and procedures. A basic CPT code is a five-digit code that describes the precise procedure or service that doctors provide to their patients. The codes were developed and are maintained by the American Medical Association (AMA).

Insurance companies and government agencies have agreed to pay a certain fee for each covered service or procedure identified by a CPT code. Using the correct CPT code is therefore essential to obtaining the correct payment for services and procedures. The AMA’s CPT codes are incorporated into the Healthcare Common Procedure Coding System (HCPCS) codes required for Medicare and Medicaid billing.

Medical billing coders review medical records, determine the service or procedure that the patient received, identify the CPT code that describes that service or procedure, and add the CPT code to the billing. Selecting the correct CPT code is vital to accurate billing. That can be a difficult task, as the AMA has created thousands of CPT codes. 

Similar codes may be available to describe the same service or procedure, depending on a number of factors. A code may depend on the length of time it took to perform the service (such as an office visit). Other factors that affect code selection include the complexity of a procedure and whether a service was provided in person or by telehealth.

One of the key factors that applies to some multiple medical procedures is whether the procedures are customarily provided at the same time and whether they were provided to the billed patient at the same or different times. That factor is expressed in billing rules that govern bundling and unbundling of services.

Bundling in Medical Billings

Bundling refers to the use of a single CPT code to describe two separate procedures that were performed at the same time. Bundling rules typically require a healthcare provider to use the code for the more significant procedure when a minor procedure is performed at the same time. 

As an obvious example, one CPT code describes the insertion of a needle into a vein. That code is used when the insertion is not part of another medical procedure. When a needle is inserted as part of a more complex procedure, only the CPT code for the more complex procedure should be used.

Diagnostic nasal endoscopies are another example. It is expected that a doctor will cauterize a nosebleed if the nosebleed is occurring during a nasal endoscopy. The CPT code should be used for the nasal endoscopy without adding a second CPT code that describes the cauterization of a nosebleed. However, if a doctor performs a nasal endoscopy and the patient returns later in the day with a nosebleed, it would be appropriate to bill for cauterizing the nosebleed since that procedure did not occur while the endoscopy was being performed. The coder would then add a modifier to the CPT code to make clear that the cauterization was a “distinct service.”

In some cases, there are three CPT codes to consider: two that describe each of two separate procedures and a third that describes the two procedures when they are performed together. The rationale for the third code is that it takes less total time to perform procedures together than to perform them at separate times. When the third code exists, it is the correct code when the procedures are performed together.

Coders should bundle services when CPT coding rules require them to do so. When services should not be bundled, however, a medical practice will lose revenue when a coder bundles them in error.

Unbundling in Medical Billings

Unbundling is the opposite of bundling. When two procedures should be bundled in a single CPT code, coders who bill the two procedures separately using two CPT codes are unbundling the procedures. Unbundling also occurs when a coder charges for two services when the code for the major service assumes that the minor service is also provided. Since two charges will result in a larger bill than a single comprehensive charge, unbundling results in overbilling.

Inflated billing may be caused by a coder who does not understand the CPT coding system or by a coder who was careless. When unbundling is a frequent billing error, the medical provider may have instructed the coder to unbundle as a way to increase revenue. Repeated unbundling can be a red flag for fraud investigators.

When a party needs to prove that a medical bill was reasonable to obtain reimbursement for the bill in litigation, unbundling can be evidence that the bill is excessive. Unbundled charges will generally need to be bundled to produce a reasonable bill.

Medical billing experts search for instances of unbundling in medical billings. By comparing medical records to medical billings, a medical billing expert can determine whether separately coded procedures were performed at the same time. A careful comparison can uncover unbundling errors that result in inflated billing. 

Medical billing experts also help lawyers by identifying unreasonable and fraudulent billings. Unbundling is one of many issues that a medical billing expert might discover after a careful screening of medical bills.