Revenue Cycle: Is Your Process Healthy? The Numbers May be Misleading!
- August 23, 2017
Revenue cycle (RC) operations are dynamic with many different components impacted by variables within practice operations. Given the diminishing margins in healthcare, proper attendance to the RC processes is essential. Whether the practice is in a heavily managed payer environment, remains mainly fee-for-service, or is an elective, i.e., cash-only business, the revenue cycle system is crucial. Indeed, revenue is the lifeblood of any healthcare entity.
Stunningly, some institutions continue to under-invest or place on the back burner the significance of revenue cycle management and its accompanying components. Healthcare margins are tighter than many service-oriented businesses and, probably, hampered by more extensive regulation than for typical companies.
With that in mind, accurate billing and revenue management, from A to Z, is more vital for a physician enterprise than for your local convenience store. The process begins at check-in with proper registration and patient intake. It follows the patient in his visit and continues long after the patient has checked out and scheduled his next visit. Nothing is ever as simple as it seems. The front desk and the check-in process impact the revenue cycle when staff collects (or doesn’t collect) copays and deductibles. In reviewing the operations of a medical practice in an attempt to identify the ills, sometimes the answer, while complicated, is right under your nose, yet remains illusory.
Let’s look at a couple of key metrics. While some practices measure their RC, metrics can be “gamed” by staff. For instance, a sound net collection rate (e.g., what the operation can legitimately expect to collect) should range from between 95–100%. However, this net rate can be artificially improved by adjusting the AR that the practice otherwise could’ve collected. For instance, in Figure 1, below, we see a practice that charged $100, had $20 contractually adjusted off (leaving $80 outstanding), and then collected $80. Their net collections are 100%:
However, what if Suzy simply adjusts money off that should otherwise be chased/appealed? What if our contractual adjustments for the measured period were actually $5? Then our net collection rate is decidedly worse.
What about Days in AR measurements? As noted in Figure 3, we have pretty good Days in AR at 22.8.
Arguably, collecting your money within 23 days is respectable. But, let’s say that Suzy has been deleting off AR because she gets bonuses for great (read “low”) Days in AR, and no one is checking behind her. In the example below, we see that Suzy was able to make $75K in AR vanish. When we true that up, we note that the actual Days in AR are closer to 36.5 (while not bad, still not 22.8).
A sound RC is built and strengthened from solid staff training and protocols. Defining for what staff are accountable (especially Suzy) and measuring/monitoring the output will deliver the results that management seeks.
Coker’s revenue cycle management work entails all pieces in the process of a medical practice, including, but not limited to, proper utilization and deployment of RC information technology-related systems, review of patient check-in procedures, denials management, validating and verifying accurate payments are received and posted, and examining fee schedules for anomalies. At clients’ behest, we’ve studied components or complete systems, depending on the need.
If you are curious about how your revenue cycle compares with your peers or have concerns about cash flow, contractual allowances, etc., Coker can provide an analysis to determine the cause(s) of your RC conundrum. We will offer suggestions to remedy those issues and demonstrate the quantifiable results of deploying the changes we suggest.
Max Reiboldt, CPA