Intro
The healthcare revenue cycle is the flow of money through a hospital. Revenue cycle management is the process of finding, gathering, and managing that flow of revenue from patients and payers to ensure monetary stability and success. On this page, we will unpack what revenue cycle management is, identify potential pitfalls, list some revenue cycle management steps a hospital can take, and finally examine the software revenue cycle management solutions Avelead offers that can help a healthcare organization thrive.
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What is a Revenue Cycle?
A healthcare organization is like a complex organism with a life-purpose of diagnosing, treating, and caring for patients. And just like the patients it treats, a healthy hospital has many interrelated parts, systems, and limbs working together successfully. If those parts are not working well, the healthcare organization can become sick.
The revenue cycle is the flow, management, collection, and capture of all revenue.
In this metaphor, revenue flow is the blood, giving life and allowing a hospital to continue to beat and operate. It is also an indicator of potential problems within the hospital. More properly, the revenue cycle is the processes centered around the financials in all departments from administrative to clinical. Managing your entire revenue cycle is critically important both to ensure your healthcare organization’s continued operation, and also to help uncover and reveal potential problems within your hospital.
What is Revenue Cycle Management?
Revenue cycle management is tracking, supervising, and controlling all aspects of a hospital’s revenue cycle. All hospitals have a revenue cycle. It’s your decision whether or not to manage it well. Not managing your revenue cycle would be akin to not taking care of your body. You may think everything is alright, but you are most likely leaking cash and mismanaging time. If left unaddressed too long, mismanagement of your revenue cycle will have catastrophic implications for a hospital.
There is no grey area. Either you are managing your revenue cycle, or you are mismanaging it.
It’s essential to get ahead of the problem as soon as you can. Revenue cycle challenges will only grow if left alone. There is no grey area. Either you are managing your revenue cycle, or you are mismanaging it. Hospitals need to identify some healthcare revenue cycle management steps to take if they want to take back control of their revenue cycle. Later on, we will list seven steps we recommend, but first, let’s examine some potential revenue cycle problems.
Potential Revenue Problems
Intersystem errors
Go ahead and recall that metaphor of a hospital as a living organism. Just like the body has many systems, including vascular, nervous, and digestive, a hospital is composed of many departments and systems from labs, to billing, to clinical, that all have different and overlapping functions. For a body to function, those systems need to work together well. Discrepancies, errors, and miscommunication between those systems can and will cost a hospital time and money.
Missed and delayed charges
Charging is not a simple process. Insurance contracts need to be sorted out, deductibles calculated, treatments accounted for, and various mountains of paperwork filed. Any combination of factors can lead to missing and delayed charges resulting in revenue loss. One of the most significant contributors to revenue loss is discrepancies between clinical and billing. If charges are not being accounted for at the physician level, a hospital is losing money. Building an effective, clinically based charging system is crucial for any hospital looking to take control of revenue cycle management.
Record issues
The last couple of decades have seen a rapid evolution in healthcare record-keeping. In the early 2000s, paper records were still the status-quo for most hospital systems. With technological developments and legislation pushed by successive administrations, however, more hospitals are converting to EMRs and EHRs every year. While ultimately a good thing, a clumsy implementation can result in major revenue leakage. Missing records and incomplete EHRs lead to missed charges, lost treatments, and leaked revenue, often in the millions every year. Additionally, with layers of rules and regulations around client record privacy rights, failure to comply comes with a hefty penalty.
Chargemaster issues
The chargemaster is not always a particularly nimble tool. It can be a convoluted and chaotic place, and a lack of transparency is a challenge that every healthcare organization faces. Failure to understand or pull data leads to outdated charging information and eventually loss of revenue. For healthcare organizations looking to take some steps towards effective revenue cycle management, digging into the chargemaster is a great place to start.
Insurance contract discrepancies
A significant part of healthcare revenue cycle is handling insurance providers. Each contract formed between a client, a hospital, and an insurance provider is different. Keeping track of all these contracts is extraordinarily difficult. Failure to manage insurance contracts means both leaking revenue and also not having the transparency to negotiate future insurance rates in a beneficial manner.
Banking deposit and record inaccuracies
A patient rarely pays out-of-pocket for all of their medical expenses. Instead, contracts with insurance providers create a complicated healthcare payer network. Those contracts alone can be a problem for revenue cycle management, as noted above, but even the successful payments from insurance providers can lead to revenue leakage too. Insurance companies deposit money directly into a healthcare organization’s bank account. They then will send a record of that deposit to the organization’s medical billing office. The problem is that the deposit doesn’t always match the record, and balancing the discrepancy takes time and money.
Federal and state compliance penalties
Compliance with state and federal regulations is a must for healthcare systems. These regulations range from HIPAA, to SOC I & II, as well as new executive pushes like the recent Price Transparency Mandate. Managing your revenue cycle goes beyond merely keeping track of the cash flow in your hospital, but also includes doing external due diligence. A smart CFO will keep track of regulations and mandates, reading and riding the ebb and flow of governmental forces and legislation that affect a healthcare organization.
Revenue Cycle Management Steps
In this next section, we’ll lay out seven steps that a healthcare network can undertake to gain control of their revenue cycle. It’s important to note that no two healthcare organizations are the same, and each one has its own needs, requirements, and problems. While we believe that the practice of these seven steps can help any hospital in the country, for expertise tailored specifically to your healthcare organization, schedule a demo with our Avelead revenue cycle specialists below:
1. Patient Registration: Collect initial information about the patient.
Patient records are the starting point for accurate charging. Collecting that data begins with registration. Your registration forms should ask for the name of the patient, demographic info, medical history, and insurance and payment information. Having a sound registration system saves the client time, allows for an easier patient experience, and gives them the opportunity to cover out-of-pocket expenses ahead of time. This is beneficial from the hospital’s perspective, too, as paying ahead of time increases the likelihood that they will recoup money on time.
2. Charge Capture: Ensure that patients are billed for medical services received.
After a patient has completed their visit, finished their registration, and taken home their treatment, the hospital moves on to step two, charge capture. Charge capture is a major opportunity for a healthcare organization to locate leaking revenue. Missing charges can cost a hospital millions in lost revenue every year. Accurately documenting medical services and communicating them to the billing office is a critically important part of revenue cycle management and allows for quicker payer collection.
3. Chargemaster Coding: Properly code diagnoses and procedures.
All treatments, physicians, and medical services have to exist as codes in the chargemaster. A hospital should regularly dig into the chargemaster to check for errors, bad coding, or obsolete patient data. A well-managed healthcare organization will organize their chargemaster, making it easy to update all information across the system. If a chargemaster is not updated, it makes medical billing and calculating insurance payments almost impossible.
4. Insurance Claims: Submit claims of billable fees to insurance companies.
Dealing with insurance providers is a significant piece of revenue cycle management. A hospital needs to start this process by submitting claims of billable fees to an insurance provider. Every insurance claim is an opportunity for revenue leakage, so being on top of submission of billable fees is of paramount importance. This can only occur if the service has been entered into the chargemaster. Submitting claims is only the first step in the actual collection of revenue.
5. Remittance Processing: Analyze insurance and patient payments for errors.
For various reasons ranging from clinical documentation error, to insurance mistakes, original payment is often miscalculated. That’s why it’s crucial to have an A/R (accounts receivable) team to follow up with both insurers and patients to determine if that payment should be approved or rejected. Most rejected payments actually derive their errors from the patient registration forms, so following up on that data and filing the correct 835s and 837s will allow a healthcare organization to recoup revenue.
To read more about how to address this issue within your healthcare organization click on this link.
6. Collecting Insurance Payouts: Gather insurance payments and going over them to guarantee transparency for future negotiations.
After remittance, hospitals can formally collect insurance payments. This complex process needs to be double-checked as issues related to underpayments, claims denial, and banking deposit errors can cause revenue leakage. If a healthcare system is unhappy with their reimbursement, they can seek to adjust rates during the next round of insurance negotiations.
7. Patient Payments: Determine patient balances to bill and collect payments.
This last step is monitoring all outstanding accounts. Pursuing late-payment has to be a priority for any hospital. As high-deductible plans are more and more becoming the norm, the responsibility for payments is now, more than ever, on the patients. This has implications for how a hospital thinks about pricing, especially with the new price transparency mandate. Hospitals need to be careful about how they pursue late payments. Good denial management can increase the likelihood of on-time reimbursement. Too aggressive an approach, on the other hand, may hurt their ability to reconcile late payments at all.
Software Solutions
Revenue cycle management is a complex task. We hope that we’ve answered some of your questions. The good news for healthcare organizations is that they don’t need to fly alone. Third-party revenue cycle leaders can offer the software solution you need to your hospital’s most pressing needs.
The good news for healthcare organizations is that they don’t need to fly alone.
Revenue cycle management isn’t something that a healthcare organization has to do by themselves. If your hospital is leaking revenue, consider third-party conversion software. There are many consulting partners, revenue cycle experts, and healthcare software development companies that specialize in partnering with healthcare systems to focus on revenue cycle management. To see some of Avelead’s revenue cycle solutions, scroll to the bottom of the page, or click on this link.
Frequently Asked Questions
How can better revenue cycle management help my hospital?
The immediate consequence of better revenue cycle management is an increased bottom line due to discovered revenue, but there are many other positive implications as well. A side-effect of better revenue cycle management is a more efficient workflow and interdepartmental software system communication. This is because, to ensure proper revenue flow, a healthcare organization will need to address intersystem discrepancy and miscommunication. This goes beyond software too: managing your revenue cycle will make your healthcare organization run more smoothly on all levels.
Why are workflows so important when we’re talking about the revenue cycle?
Workflows are a crucially important tool in the world of revenue cycle management. Managing revenue is all about tracking the stream of revenue in your organization from department to department. Building and improving workflows is essential through every step of the way. In fact, from one perspective, revenue cycle management is just the process of building various workflows to ensure revenue flowing smoothly.
How important are physicians in revenue cycle management?
Health systems today are trending towards a clinically driven revenue cycle EHR (electronic health record) model. This means that clinicians themselves are the central link in the revenue cycle chain. So much so, that revenue reconciliation accuracy is dependent on clinicians’ documentation. However, current reconciliation charge attempts are manual, time-consuming, and often inaccurate, if they even exist at all. This costs hospitals across the United States billions of dollars every single year while taking up valuable time that clinicians could be spending with the patients.
What role do EHRs have in the revenue cycle?
EHRs can be a valuable tool in the fight for revenue reconciliation. EHR implementations can be difficult, but they are worth it. They allow for better patient care with a more comprehensive diagnosis and treatment than paper-records or EMRs, along with better integration with the clinical department and the billing department. This allows for faster and more accurate billing, increasing a hospital system’s chance of successfully catching billing errors ahead of time.
How can third-party software integrate with my revenue cycle?
Third-party partners like Avelead have spent years working on effective revenue cycle management. Their first-hand knowledge of the healthcare world has allowed them to develop tools that not only seamlessly integrate with your hospitals, but also will enable the organization to integrate with itself better too. From billing experts to EHR implementation specialists, these third-party developers understand how a hospital thinks and operates. Their software can provide a wide array of revenue cycle management solutions to your most pressing problems. Think of it as medicine for a sick patient. The medicine is “third-party,” but it helps heal a patient by addressing various ailments within the body.
Avelead Solutions
For years, Avelead has been leading the revenue reconciliation field. First, with expert consultations, and then with carefully crafted tools, Avelead has helped hundreds of hospitals take control of their revenue cycle management and increase their financial performance. Check out some of our offerings, and if any look like they might help your hospital thrive, go ahead and schedule a demo below.
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