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What Is Healthcare Revenue Cycle Management?
As the industry continues to transition from fee-for-service to value-based care reimbursement, healthcare revenue cycle management must adapt accordingly.
While hospitals, small practices, and larger healthcare systems are known for saving lives and treating patients, every healthcare organization needs to develop successful processes and policies for staying financially healthy. That is where healthcare revenue cycle management comes in.
Healthcare revenue cycle management is the financial process facilities use to manage the administrative and clinical functions associated with claims processing, payment, and revenue generation. The process consists of identifying, managing, and collecting patient service revenue.
The financial process is crucial to ensuring healthcare organizations stay in operation to treat patients. Facilities use healthcare revenue cycle management to collect profits and subsequently keep up with expenses.
THE BASICS OF HEALTHCARE REVENUE CYCLE MANAGEMENT
Healthcare revenue cycle management begins when a patient makes an appointment to seek medical services. The process ends when organizations have collected all claims and patient payments. However, the life of a patient’s account is not as straightforward as it seems.
To start, when a patient arranges an appointment, administrative staff must handle the scheduling, insurance eligibility verification, and patient account establishment.
Pre-registration is key to optimizing revenue cycle management processes. Employees create a patient account that details medical histories and insurance coverages during this step.
“From the hospital’s perspective, our ability to enter the correct insurance, verify accurate demographics for the patient, and collect the patient’s financial responsibility at the front end all reduces rework throughout the revenue cycle and ultimately reduces potential denials,” Sue Plank, director of patient access at Goshen Health, told RevCycleIntelligence.
After a patient visit is complete, the healthcare provider must create a claims submission and complete charge capture duties.
The provider or coder identifies the ICD-10 code that corresponds with the treatment, determining how much reimbursement the entity will receive from the patient’s health plan. Selecting the most appropriate code for services can help prevent claim denials.
The charge capture process documents the services into billable fees.
After a claim is created, the practice sends the claim to the private or government payer for reimbursement. But the revenue cycle management does not end there for healthcare systems. Organizations still need to oversee back-end office tasks associated with claims reimbursements, including payment posting, statement processing, payment collections, and claim denials.
Once an insurance company evaluates the claim, healthcare organizations typically receive reimbursement for their services, depending on the patient’s coverage and payer contracts. In some cases, claims can be denied for various reasons, such as improper coding, missing items in the patient chart, or incomplete patient accounts.
For anything that insurance does not cover, healthcare organizations must notify and collect payments from the patient.
Healthcare revenue cycle management aims to develop a process that helps organizations receive payment in full for services as quickly as possible.
However, bills and claims in revenue cycle management are usually processed over a long period of time. Oftentimes, claims go back and forth between payers and providers for months until both parties resolve all issues. During remittance processing, the payer will either approve the claim and pay the provider or deny the claim.
Revenue cycle management may also be a lengthy process as patients do not always have the funds to pay medical bills immediately.
HOW TO SUCCEED AT HEALTHCARE REVENUE CYCLE MANAGEMENT
In simple terms, healthcare organizations must stay in the black and maintain profitability to see success with revenue cycle management. Facilities can employ several strategies to maximize the revenue cycle and ensure timely payments.
Prioritizing patient access and front-end optimization is critical for revenue cycle management success. Front-end tasks help move claims along, and errors that occur in this stage can disrupt claims reimbursement. Tasks like verifying insurance eligibility are particularly important to ensure facilities receive reimbursement from health plans.
Errors in front-end tasks, such as eligibility verification, registration, and authorization, remain some of the top reasons for claim denials, especially for COVID-19 inpatient services, according to data from Hayes Management.
Some health systems have gone digital to help streamline front-end workflows, which also proved beneficial during the COVID-19 pandemic.
“Engaging digitally with our patients for patient intake has allowed us to offer contactless registration to our patients, which is safer for the patient and our colleagues,” Plank said. “It allows them to verify their demographics, take a photo of their insurance card and photo ID, as well as read and sign their consent digitally, all at a time that is convenient to the patient.”
Healthcare organizations must also effectively manage claim denials and develop procedures to resolve claim reimbursement issues quickly. From improper ICD-10 coding to a missing signature on a patient’s charts, claims can easily be denied based on technical or clinical problems.
Claim denial rates have been steadily rising, with hospitals seeing a 23 percent increase in claim denials from 2016 to 2020.
Organizations can help avoid claim denials by training staff on coding and billing processes, educating patients about medical costs, and investing in software that automates coding and insurance verification. Healthcare organizations should also regularly track claims and investigate causes of denials.
As healthcare providers face an economic crisis due to the pandemic, outsourcing revenue cycle management to a third party may help organizations balance finances and patient care.
However, providers should keep their best interests in mind, as outsourcing revenue cycle management has led to higher claim denial rates for some hospitals.
Many providers also use data analytics to run successful healthcare revenue cycle management programs. With more payments being tied to value-based care models, healthcare organizations must report on numerous measures for quality care, patient satisfaction, and healthcare costs in order to receive full reimbursement rates from payers. Data analytics have also helped health systems advance care coordination and value-based care.
Healthcare organizations can leverage data analytics to help manage large volumes of information and inform employees of revenue cycle management goals, especially through dashboards and alerts. Analytics can also help predict claim results by tracking the claim lifecycle.
CHALLENGES OF HEALTHCARE REVENUE CYCLE MANAGEMENT
With ever-changing healthcare regulations, it can be difficult for organizations to maintain stable revenue cycle management policies.
Collecting payments from patients at or before point-of-service is a top revenue cycle management challenge for healthcare organizations.
Collecting payments before a patient leaves the office can save time and effort, but it may be easier said than done. InstaMed data from 2020 revealed that patient collection takes more than a month for 74 percent of healthcare providers.
Many patients cannot pay medical bills upfront due to high deductibles and financial struggles. Healthcare organizations must find a balance between successfully collecting payments on time and avoiding driving patients away.
The COVID-19 pandemic has pushed providers toward new patient collection strategies. For example, some providers have increased patient payment options or adjusted bad debt placement timing. Other providers have also allowed patients to extend payment terms or delay payments.
Coding and charge capture are also revenue cycle management challenges. Coding errors by staff members may lead to claims reimbursement issues.
Healthcare organizations should invest in regular employee education programs that promote proper coding techniques, comprehensive chart documentation, and financial policy reminders. These training sessions have been linked to better return on investment, such as lowering turnover rates and reducing medical errors.
Prior authorization processes also pose a challenge for providers regarding revenue cycle management. When providers face prior authorization requirements, they and their patients must wait for the health plan to authorize a service before receiving or providing treatment.
The surprise billing rule under the No Surprises Act has presented a challenge for revenue cycle management leaders as well. The policy protects patients from surprise billing by preventing out-of-network providers from billing patients for more than their in-network cost-sharing amount. The policy also prevents balance billing.
The policy, which went into effect January 1, 2022, means providers may have to adjust their revenue cycle workflows in order to achieve compliance.
HOW TECHNOLOGY HELPS DRIVE HEALTHCARE REVENUE CYCLE MANAGEMENT
Health IT and EHR systems have helped streamline and refine healthcare revenue cycle management strategies. Many organizations use technology to track claims throughout their lifecycles, collect payments, and address claim denials. Ultimately, these technologies facilitate a steady stream of revenue.
During the COVID-19 pandemic, 75 percent of hospitals and health systems across the country deployed revenue cycle management technology.
Technology and automation have also come in handy as revenue cycle management operations have shifted to remote work.
Many providers have benefitted from automating common issues with healthcare revenue cycle management, such as payer-provider communications, recommending appropriate ICD-10 codes, monitoring medical billing processes, and even scheduling patient appointments.
Providers have also started leveraging artificial intelligence (AI) to help facilitate revenue cycle management processes. Artificial intelligence is equipped to monitor heaps of data and can help point providers to certain indications, such as why a claim was denied.
“Whether it’s matching a patient with the right provider, estimating out-of-pocket costs, or coding the claim, those are things that have long lists of variables associated with them, and AI is pretty uniquely good at evaluating those variables and coming up with an ever-improving success rate of getting to the right outcome against any of those process steps,” Joe Polaris, senior vice president of product and technology at R1 RCM, a revenue cycle management vendor, told RevCycleIntelligence.
Artificial intelligence and automation also have the potential to help providers with prior authorization requirements.
Healthcare revenue cycle management continues to evolve and keep pace with rapid changes to the healthcare ecosystem, such as value-based care, new technology development, and a global pandemic. Healthcare professionals should always be aware of their revenue cycle status in order to provide appropriate care to patients and receive proper reimbursement for services.
This article was originally published on June 14, 2016.
