The revenue cycle in the health care industry is very complicated. The result is that medical professionals are often paid less than they are owed, patients are confused by their bills, and administrative costs in the industry are high. “Decoding” the revenue cycle shines light on key roadblocks and hot spots while providing some practical solutions to these problems.
At Fellow Health Partners, our motto is “Medicine is complicated. Billing Shouldn’t Be.”
Unfortunately, billing is complicated, so complicated that Madhuri Thakur of WallStreetMojo says, “The revenue cycle of the health care industry is the most complicated cycle in comparison to other industries.”
These complications are part of the disruptive power of the Healthquake™.
Thakur’s comment means that getting paid properly for medical services is more complicated than the revenue cycle in manufacturing or services. How is this possible, and what can doctors, administrators, practice managers, and billers do about it?
The Revenue Cycle sounds like it should be simple. A medical professional or facility provides a service, the patient pays it – either through their insurance or in cash – and the provider gets paid. Except it’s not that simple.
One reason is that insurance policies are minefields of exceptions, conditions, and fine print. A single mistake can slow or stop payment. A second reason it’s complicated is a lack of training or knowledge, which means that billers and front office personnel can make mistakes. A third reason is that medical bills are so complicated that millions of patients, almost 50%, don’t understand their bills.
Decoding The Revenue Cycle
To take control of the cycle…
- Understand it. How does it work?
- Break it down. Decide who should do what.
- Identify hot spots. They include: Front Desk. Underpayments. Denials. And more.
- Resolve hot spots. Use training and technology to get the most value from your process.
As the graphic above shows, the cycle seems simple. The physician or provider is “credentialed” at the beginning, which means they pass the insurance company’s muster for professional qualifications. Then, the patient registers for the service, providing insurance information at the front desk or online.
The provider’s service (diagnosis and treatment) is then coded according to a universally agreed on set of rules so it can be paid. Next, the claim is submitted to insurance (or to the patient if they have no insurance).
If the claim is paid, it’s entered as paid and the provider receives payment. If it’s “denied” by the insurance company (accounting for 20% of revenue cycle expenses), the provider must find out why and often has to struggle to get paid or might not get paid at all.
Finally, since the patient is the lynchpin of the system, they must be happy, which is challenging if they get a bill they don’t understand or didn’t expect. If they owe money, “people skills” are very important to collect all that is owed.
Break It Down
The first step in improving revenue cycle management is to recognize that some aspects can be automated or assigned to less skilled and costly employees while other aspects require a skilled personal touch. For example, complex surgeries require experienced human attention for effective billing. A routine office visit doesn’t.
Do a thorough audit of every step in the revenue cycle process to see where money is being “left on the table”. Evaluate how much it costs to collect, and focus on fixing the high-dollar, high-volume holes first.
If you don’t know how to do a thorough audit, seek professional help. Sometimes, a skilled medical billing company can help because they can identify issues and inefficiencies hiding in the system and suggest remediation.
Identify Hot Spots
When evaluating your billing system, focus on “hot spots”, places where claims go wrong, so that you can focus on fixing them first. Although there are lots of hot spots, there are 4 that pay bigger dividends when fixed.
The first is the front desk. That’s because the #1 reason for denials in 2021 was patient registration and eligibility, which accounted for one-quarter of all denials. Little errors such as a missing middle initial in a patient’s name or entering one wrong number on their insurance resulted in denials. And since 60% of denials aren’t followed up on, this leaves a hole in revenue.
A second hot spot is coding. Under-coding results in getting paid less for diagnosis or treatment. Up-coding can result in denials or even fraud charges. There are so many ways that coding can affect revenue that it pays to have experienced specialized and certified coding experts wherever possible on your team. If that’s not viable, it might pay to outsource to a specialized billing company.
A third hot spot is underpayment by the insurance company. They just send less than was billed. If it’s not caught, it can add up fast.
Lastly, accounts Receivable has an important role in keeping everyone honest. Even though this part of the cycle can cost the most, it can drive revenue and profits if executed properly in the billing cycle.
Resolve Hot Spots
Once identified, some hot spots can be resolved more easily than others.
At the front desk, make sure that training is thorough and up to date. Work with the front desk team to catch basic errors. Engage them in the process of reducing denials and reward them with perks. To keep things flowing smoothly, build in refresher and follow-up training appropriately.
When it comes to coding, hire experienced coders who specialize in your practice. It helps if your coders have their CPC certification. If they don’t have it, encourage them to certify. Perform regular coding reviews when doctors submit their codes, with special attention to “clinical documentation” from the surgeons.
Use a rules-based system with the clerical team. Document all rules by insurance payer and their policies. Match against what you have been paid. Make sure you are catching underpayments and chasing payment for denials. As much as possible, formalize these processes because, as volume increases, problems increase. Trained staff might leave, and the in-house process often can’t keep up with growth or have time to properly train new staff.
At a more advanced level, focus on an operational plan and workflow. Have the “value” match the job. Automate wherever possible. Recognize that it’s usually sub-optimal to have one biller do everything. Specialize. Use psychometric tools for recruiting, especially for those who will be doing repetitive jobs. This makes it more likely that the right person will be doing the right job for their comfort zone.
Finally, pay attention to fee schedules. Many EHRs (Electronic Health Records) can’t load complex fee schedules. One of the biggest EHR systems in the country can only load 80% of fee schedules. This means that you might not be collecting the most updated amount that you deserve.
It might seem overwhelming to do everything in-house at a high level of competence because there is so much detail to cover, so much training necessary, and so many ways things can go wrong. It’s possible to decode and manage the revenue cycle if you audit, create rules, hire, and train effectively, and stay on top of all the changes generated by insurance companies.
However, if the billing part of the Healthquake™ is causing your practice to shudder, there are lots of experts who can help at specific points in the process. There are even some excellent billing companies that might be able to help you manage revenue cycle by doing it all for you.