Healthcare revenue cycle management is the process used to track revenue from patients starting before services are rendered and ending when the provider/hospital evaluates their revenue based on data analytics.
The 5 steps of revenue cycle management include information collection, building the claim, claim submission/remittance, patient collections and data analysis. The following article breaks down these steps and offers some advice within each step.
#1: Information collection
Accuracy at this step can eliminate many front-end denials (which make up 49.7% of denials) and save yourself from other denials headaches along the way. The Healthcare Financial Management Association (HFMA) advises that at least 24 hours before a patient’s scheduled service, the physician practice should verify patient demographic data; verify their insurance coverage and benefits; and notify the patient of their financial responsibility.
#2: Building the claim
After the provider sees the patient, the provider’s notes are made into billable charges for the insurance provider. Based on the health care provider’s notes, the information can get converted to codes automatically or manually. Both ways have their own benefits and flaws. The “automated” coding systems may need more babysitting than you think, especially for missing items such as ancillary services. Manual coding can easily result in errors and missing charges, too, if you’re not careful.
If you are concerned about possible missing or incorrect charges, consider reviewing your charge capture process and investigate possible pain points such as automation errors or undertrained staff.
#3: Claim submission/remittance
Before sending the 837 claim to the insurance carrier, the revenue cycle team will review the charges, CPT code and diagnosis code. They’ll ask themselves, “Does the diagnosis support the procedure performed? Are there services that need to be coded separately?” Once team members have answered those questions and followed up however necessary, the claim scrubbing process can commence.
Claim scrubbing is the quality assurance step of the entire process. Typically, it’s when a practice sends a claim to the clearinghouse to “clean” the claim before the clearinghouse submits the claim to the insurance carrier. Since claims that get paid have to be clean claims, it’s important to have correct information and codes on the claim.
Once the practice’s claims go out, they get remittances back. The insurance carrier sends the explanation of benefits to the practice to show the provider what the insurance paid or denied. Allowables, or the contracted payment amount the insurance carrier will pay for the item or service, are also determined.
Many practices don’t have enough staff to monitor all remittances, so your charge amount could be lower than the allowed amount for a specific payer, meaning you’re consistently getting underpaid. Your team may resubmit underpaid claims for additional payment, but many practices don’t have copies of their payer contracts to even begin understanding where underpayments are occurring.
Denied claims, on the other hand, are more likely to get reworked. However, the Medical Group Management Association (MGMA) estimates only 35–50% of denials are actually ever reworked, even though approximately 66% of denials are recoverable. Your practice should review processes at all points of the revenue cycle to avoid or minimize unrecoverable and recoverable denials.
The last piece of the remittance process is write-offs; both contractual and non-contractual. Contractual write-offs are normal, and somewhat unpreventable (unless you renegotiate your contracts with insurance carriers, they are unpreventable).
Non-contractual write-offs are avoidable, even if you don’t know it yet. They are generally the result of poor management at some point in the provider’s remittance process. These non-contractual write-offs can be avoided by checking in for the most common pain points such as prior auth, referrals and timely filing.
#4: Patient collections
Collecting money from patients is the most difficult part of the revenue cycle. The best time to collect from patients is up front, before service is rendered. Most practices collect a copay, but collecting some or all of the expected patient payment will drastically increase your revenue this year.
But if you only collect copayment at the time of service, you’ll want to ensure that routine patient statements go out. Your patients should get one statement every 30 days after the date of service.
On average, health care providers send 3.3 billing statements before receiving payment, according to the MGMA.
Providers can only expect to collect 50–70% of a balance after a patient visit, according to the Trends in Healthcare Payments Annual Report, 2015.
To break up the likelihood of payment even more, it’s said that within the first 90 days in accounts receivable, the collectability of accounts is 90%. Once accounts reach 90 days overdue, the chance of collecting drops to 50%. At 180 days, the chance of collecting falls to 20%. Account balances that are over a year old have about a 0% chance of collection.
If a patient’s bill exceeds 5% of their household income, the likelihood you’ll obtain payment drops quickly. From patients with high-deductible plans, providers can expect to collect about $0.18 to $0.34 on the dollar.
And once accounts are sent to collections, it’s tough to know how much you’ll actually see. Depending on the size of your practice and the contract you have with your debt collection agency, you could be working with a contingency-based contract or a fixed fee contract.
Typically large organizations deal with debt on a contingency basis; meaning the collections agency keeps a percentage of money collected. Commissions can range anywhere from 10% to 50% of the recovered amount.
Many sources cite higher commission percentages, so it’s important to check the terms of your contract and possibly find another agency if you are offering over 50% of the commission.
#5: Data analysis
In order to make changes in your revenue cycle, you’ll need to analyze each step in the process; how you collect patient information, build claims, submit claims, rework underpaid and denied claims and collect from patients.
Software solutions dedicated to up-front patient collection, denials and underpayments will always be better than a well intentioned spreadsheet. Rivet offers software solutions for eligibility + estimates, denials and underpayments.