Often references to the healthcare revenue cycle can be vague or over-broad, and as a result this critical element of an organization’s success can be oversimplified or misunderstood. The Healthcare Financial Management Association (HFMA) defines healthcare revenue cycle management as “all administrative and clinical functions that contribute to the capture, management, and collection of patient service revenue.” It is so much more than billing and patient collections – the process actually starts the moment a patient calls to schedule an appointment. Get a glossary of common terms associated with the revenue cycle here.
Basic Stages of the Revenue Cycle
Pre-Registration is key to optimizing the healthcare revenue cycle management (RCM) process. During this step the patient account is created to detail medical histories and insurance coverages. This provides the framework for creating and billing claims. Insurance eligibility verification is also done at this step, which is necessary for determining whether the practice will be reimbursed by private or government payers, or whether the patient will be self-pay. Mistakes or inefficiencies at this stage can have a detrimental impact on the financial health of an organization, and can lead to failure to receive payment for services rendered.
This is also the point where a dialogue should be opened with the patient about their responsibility. Out-of-pocket costs are continuing to rise, and it is more important than ever for patients to understand when payment is due and what portion of the bill they will be responsible for. This is the time to set expectations and discuss the organization’s financial policy, and to provide an estimate if possible.
The next step in the RCM process is at time of service. While this may seem to be a more clinical step in the patient experience, it is also an important financial one. Not only should every patient be asked for their co-pay in full, it is also a second opportunity to confirm those important pre-registration details, verify insurance coverages have not changed, and discuss financial responsibility. The probability of collecting payment in full decreases by as much as 50% once the patient leaves the office, so this stage is a crucial one for recovering payment for services rendered.
Claims submission documents services into billable fees. Once the patient has been seen the provider or coder must identify the nature of the treatments received and assign the proper ICD-10 code, which signifies how much the organization is to be reimbursed for treatment.
Once the claim is created and has been sent to either private or government payers for reimbursement, the organization’s back-office is still responsible for payment posting, statement processing, and handling claim denials. After the payer evaluates the claim they typically reimburse for services based on their contracts with the healthcare organization and the patient’s coverage. However, claims can be denied for many reasons, so this stage can be quite lengthy until appeals are filed and claims are properly resubmitted.
Early-follow up with the patient regarding their balance should happen immediately upon determination of responsibility. The cost of collections only increases over time, and the longer the interval between communications with the patient, the less likely it is that they will make payment in full. According to the American Hospital Association, “The best performers start all collection follow up earlier, and by phone as opposed to written. Nearly 75% of best performers start collection follow up in less than 30 days from discharge, and 50% of the best performers start follow up by phone in less than 20 days from service.”
While every healthcare organization has a different billing procedure, any balances that are not paid by the patient after a determined period of time are generally written off as bad debt and sent to medical debt collections.
Agility Wins the Race
The goal for all healthcare organizations should be to develop a revenue cycle management process that recovers payment in full as quickly as possible. Unfortunately, healthcare is constantly changing to maintaining financial stability is challenging. As the industry changes the RCM process must be nimble enough to change will it to ensure maximum recovery. With the recent shift from fee-for-service to value-based payment models, the most successful strategies have been those that bring more of the back-end tasks to the front-end, handling more the of the patient responsibility pieces as easy as pre-registration, and keeping patients involved in the process from scheduling through final payment.
Written by Ali Bechtel, Digital Marketing Manager
This information is not intended to be legal advice and may not be used as legal advice. Legal advice must be tailored to the specific circumstances of each case. Every effort has been made to assure this information is up-to-date as of the date of publication. It is not intended to be a full and exhaustive explanation of the law in any area, nor should it be used to replace the advice of your own legal counsel.Tags: FAQ, healthcare revenue cycle, healthcare revenue cycle management