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    Revenue Cycle in Healthcare

    31 Pages | 8,281 Words
    Christie Scanlon, CMA, MBA (#115292)

    Monitoring of the revenue cycle is a critical business function for all industries. This is because if you cannot pay your bills, you cannot stay in business, in the long run at least. What’s more important than healthcare staying in business? Everything You Need to Know about Revenue Cycle in Healthcare describes revenue cycle management in hospitals. The application of Revenue Cycle Management in a healthcare setting is more complex than in any other industry. This is because the total amount charged on a bill from your typical healthcare provider does not reflect what the patient (customer) is expected to pay. Furthermore, it doesn’t even reflect what the provider expects your insurance company to pay. How final payment is calculated is far more intricate than that in the healthcare world. This book will explore the factors that make the healthcare revenue cycle so different. We will not only discuss the many reasons for the disparity between what is billed and what is reimbursed, but we will also deliberate how some of the risk of non-payment and underpayments can be mitigated.

    After reading this book, you will see why the revenue cycle in healthcare is so unique, but more importantly, you will learn how Key Performance Indicators (KPIs) can be used to monitor the healthcare revenue cycle system and drive measureable results. The book focuses on hospital revenue cycle management, but most of the concepts could apply to the entire spectrum of care, which includes other services such as outpatient surgery centers, imaging centers, and physician practices, just to name a few.

    This book is written from the perspective of the United States health system, which is regulated by entities such as Centers for Medicare & Medicaid Services (CMS) and United States Department of Health and Human Services (HHS), but yet still has its share of capitalistic characteristics and freedoms. This dualistic economic nature of American healthcare lends way to some liberties on what services are offered and to whom and how much to charge for those services, but also many more restrictions what exactly will be paid, who will pay, and how soon the money will come in.

    This book is ideal for students with a desire to work in healthcare business. Those students who already have some basic knowledge about revenue cycle systems and healthcare insurance as they pertain to hospitals will gain the most benefit.

    An Introduction to Revenue Cycle in Healthcare

    In business management circles, you often hear the saying, “Cash is King”, which refers to the importance of cash flow in the ongoing sustainability of an organization. If you cannot pay your bills, you cannot stay in business, in the long run at least. That is what revenue cycle is about. One could argue that revenue cycle is the most important component of running any business, as it assures that a business is what is referred in the tax world as a “going concern”.

    “So this is the goal: To make money by increasing net profit, while simultaneously increasing return on investment, and simultaneously increasing cash flow.” (Eliyahu M. Goldratt, “The Goal”)

    A high-level definition of the revenue cycle across industries is the process of earning revenue for goods sold and/or services rendered, by employing methods that ensure a large percentage of monies earned are converted into liquid assets as quickly as possible. I felt it necessary to include the Goldratt quote above, even though he is referring to a manufacturing firm that makes “widgits”, in contrast to a community healthcare facility, which is assigned the responsibility of caring for people. A manufacturing firm is concerned with optimizing production and general operations to maximize profits. A healthcare organization must find ways to best serve its patients, which often includes life and death scenarios. Although there are real differences here, there are also notable similarities. The most central being, they must both make enough money (profit) to keep the doors open. In the words of Sister Irene Kraus from the Daughters of Charity National Health Care System, “No margin, no mission.” In addition, communities depend on both of these types of organizations for their local economy, which includes bringing revenue into the community and job creation. Do not take business considerations out of administration of healthcare organizations. Caring for patients is the #1 priority; however, it is not enough. Careful planning and business acumen is essential to navigate the tangled web that we call the “business of healthcare”. We must be strategic and deliberate to better guarantee our healthcare facilities will remain viable and available to serve our communities.

    In a healthcare setting, revenue cycle begins when a patient receives medical care. Services rendered could be preventative, emergent, diagnostic, surgical, or medical care in any form. Patient information needed to initiate the billing process is gathered either before, during, or hopefully not long after the patient visit; sooner is always better. The revenue cycle team of a healthcare facility (hospital or clinic) must know at a minimum the patient’s address and insurance information in order to begin the billing process. With that information, the patient’s charges can then be split into two parts: 1) patient responsibility and 2) insurance responsibility. Any charges deemed to be insurance reimbursable are submitted to the patient’s insurance via the appropriate claim form. There is more information on this in the section on The Six Stages of the Revenue Cycle, but for now know that Physician Practice using one type of form and Hospitals use another. In addition, sometimes the form must be submitted electronically, and although seldom, sometimes the claim must be sent hardcopy. The remaining balance is billed to the patient. Other than upfront copays, which are usually small amounts ($10/$20/$30), most healthcare facilities do not expect patients to pay on their portion until the insurance claim is resolved, which means either paid or denied.

    Revenue Cycle Management, which includes the monitoring of revenue cycle indicators and the establishing of policies and procedures, is the responsibility of the revenue cycle team, the finance team, and the C-Suite of each healthcare facility. Although it is true that accounts receivable (AR), a key component of revenue cycle management, should be monitored in every industry, the complicated and sometimes unpredictable nature of revenue cycle in healthcare demands proactive and deliberate monitoring. After all, AR is a leading indicator of future cash flows, and more and faster cash in a healthcare facility puts it in a better financial position to expand and serve its community.

    In this book, we will discuss who the stakeholders of the healthcare revenue cycle process are. Spoiler alert: We’re all stakeholders! We will define the six stages of the revenue cycle process and delve into each. We will discuss pricing methodologies in the healthcare industry, and why pricing is different in healthcare than in any other industry. We will ponder on the concept of treating the patient as a valued customer or client of a hospital. Finally, we will review key revenue cycle indicators, recommend tips on the best way to present those indicators, and the benefits of monitoring each.

    About the Author

    Christie Scanlon, CMA, MBA

    Active since Apr 2015

    Christie's BrainMass Profile