Revenue Cycle Management
Contextual information for physicians to enhance revenue cycle management
AN ALN BEST PRACTICES WHITEPAPER
There are five key parts to successfully managing your revenue cycle; “Best Practices”, suitable technology, accurate monitoring and reporting, properly trained and motivated staff and perhaps most importantly, commitment from physicians. The revenue cycle starts long before a patient is seen and continues until a claim is completely resolved. Each step in the revenue cycle must be clearly defined and easy to follow. Wide use of various tools such as templates, forms, reports, spreadsheets and components of your PM will help to provide the consistency you need for a profitable revenue cycle management.
This White Paper provides you with the “Best Practices” needed in designing a successful revenue cycle. From contracting and scheduling through charge capture, payment posting, and follow-up you will receive guidelines to achieve results well above the national averages. There are many small details that make up the revenue cycle. It is difficult to imagine a thriving revenue cycle that only addresses some of the key elements. The revenue cycle should be viewed as a continuum with care given to the entire process, not just a single step.
In order to properly administer the revenue cycle you will need to employ office technology that facilitates the “Best Practices” you adhere to. Integrated scheduling, case management, document management, online eligibility, integrated electronic data interchange (EDI), and extensive customizable reporting are all important components needed to leverage technology for a productive healthcare office.
Measurement of results is critical in the successful management of your revenue cycle. Both “real-time” reports and historical reports are needed to effectively perform root cause and trend analysis. Root cause analysis will identify areas where your practice has been profitable as well as pinpoint problem areas that may need your attention. Timely and accurate data will provide you with powerful information enabling you to make more effective decisions.
A properly trained staff is necessary to implement the processes that will lead to success. Continual monitoring and reassessment of your revenue cycle performance will promote a culture of fact based decision making. Communication of contract requirements, performance, and results will keep your practice running smoothly and position you to take advantage of valuable opportunities and avoid bad decisions. Once you are able to measure results in your practice, you will be able to motivate your staff to perform at optimum levels.
Most organizations reflect the traits and character of its leadership. A strong commitment at the ownership and management level of your practice is required to bring “Best Practices,” technology, and staff together. The overall success of your revenue cycle will be directly related to the support and dedication provided by the physicians in your practice.
Getting good contracts
Commercial payers generally offer better reimbursement but can place ambiguous barriers to successful contract compliance. When contracting with commercial carriers, seek the power of critical mass whenever possible. Large groups with a geographical commonality tend to get more attention from the payers. Local IPA’s and other associations can provide both the expertise and size needed for negotiating leverage. Even if you don’t have access to this type of resource you can still maintain a fair amount of control over the contracting process. Often carriers will negotiate certain elements of the contract with small practices even if they won’t budge on fees. Take special care to read and retain organized copies of your contracts. Knowing what you’ve agreed to will provide you the essential starting point in managing your revenue cycle. Be sure to make the contract rates available to your billing staff. Select a Practice Management System (PM) that can recall each individual contract rate during billing and payment posting.
Disseminating contract information
When a claim needs to be appealed, contract information often collides with clinical information. Having both the clinical documentation to support your side of the appeal and knowing the contract restrictions and requirements will allow you to effectively fight denials and underpayment.
Care should be given to evenly apply your rationale across the entire spectrum of CPT, HCPCS and other revenue codes. Erratic and inconsistent retail fee schedules can be an audit trigger as they give the appearance of manipulating fee schedules. Fluctuation in the fee calculation from code to code can also make subsequent analysis more difficult. It is important to recognize that the level at which you set your retail fee schedule will determine your target gross collection percentage. A grossly inflated retail fee schedule can provide a false sense of security when reviewing charges and accounts receivable reports. The level of contractual adjustments can often skew reports and focus analysis on the wrong indicators. Conventional wisdom is that higher retail fee schedules will result in higher collections. On a very marginal basis there is some truth to this concept. Be careful not to price yourself out of a market and equally careful to ensure your retail fee schedule exceeds your highest contract rate.
Knowing your contract rates by payer is essential to the proper tracking of payer performance. Be sure the Practice Management (PM) or billing software can load the various pay or contract rates. You should be able to compare the contract allowed amount in both the charge entry and payment posting modules. The advent of MSA’s, HSA’s and high deductible policies is causing a shift towards greater patient financial obligation. Being able to measure this obligation at the beginning of the revenue cycle and collecting more money up front from the patient will dramatically improve your financial results.
Collecting demographic information
When the patient arrives, give them a “print out” of the demographic and insurance information you have on file and ask them to provide updated or corrected information. You should incorporate any record releases, benefit assignments and waivers into this document so you can retain it for possible future use. Always ask to see the patient’s insurance card and compare it to any copies you have on file. Make a copy for your records. If possible, scan the insurance card and attach a copy to the patient’s record in the PM. This is an effective way for your billing department and other personnel to quickly verify they are dealing with the correct insurance company. In this era of changing benefit plans, detailed information such as ID number and group number can change even if the carrier does not. If you have not already done so, verify eligibility with the patient’s insurance carrier. On-line verification integrated with your PM can make this step seamless and effortless. Additionally, you may have to send out lab specimens or refer the patient to ancillary services in which case you need to know the correct insurance carrier. Before the patient leaves, collect all co-pays and post the payment using proper cash controls.
Scheduling for maximum results
Calculate the lost revenue to your practice using the following formula: missed (lost) appointments per month times the average revenue per appointment times twelve. As an example, a practice with only one lost appointment per week will cost the average practice $5,000 annually (4.3 X $96.90 X 12 = $5,000).
The largest area of vulnerability is hospital visits. Logging all hospital appointments through the scheduling system can have a significant positive effect on reimbursement.
The ability to limit the number of certain appointment types and payers will allow you to manage your revenue cycle for maximum return. Low revenue payers and procedures can be limited. Appointments requiring specific resources can be grouped together or spread out as conditions dictate. When limiting appointments, insist on a PM that can quickly identify the next available time slot for the appointment in question. A PM that offers advanced search criteria will allow you to find openings faster, increasing patient satisfaction and reducing labor.
Recalls and reminders
Managing cancelled and missed appointments will directly affect your total charges and reimbursement. Some practices try to manage this process by overbooking patient appointments. While this practice can reduce lost revenue from cancelled and missed appointments, it inevitably leads to lower patient satisfaction, stressed staff and increased costs related to managing your front office. Some type of reminder protocol is integral to properly managing this part of your practice. Make sure your PM can facilitate a reminder system, automated or otherwise.
Many systems can be integrated with mobile devices such as PDA’s and SmartPhones. An integrated mobile solution will enable you to have your schedule available outside of the office. Mobile systems are designed to not only eliminate lost charges, but also improve coding and decrease the lag time between treating a patient and submitting charges.
Eligibility and benefit verification
Authorizations and referrals
Coding and Clinical Documentation
In some instances the CPT or HCPCS codes require a modifier to indicate special circumstances. The proper use of modifiers will allow reimbursement for CPT and HCPCS codes that might otherwise be denied. Combinations of certain codes can also cause denials. For example, most surgical codes have underlying procedures that are an integral part of the greater procedure. This concept is called “bundling.” Billing both the greater code and the underlying code can cause the denial of a claim.
Because the codes selected will determine the reimbursement, coding should be considered one of the most important steps in managing the revenue cycle. In order to properly code, a working knowledge of ICD-9/ICD-10, CPT and HCPCS coding is essential. Additionally, the proper time to code is immediately following the delivery of care. Coding after the fact from documentation can be both costly and inefficient. Coding compliance issues pose one of the most significant risks to medical practices today.
There are numerous tools available to assist in fully documenting clinical services. Paper based templates or physician dictation can be an effective way to document office visits as well as operative reports. Electronic Health Records (EHRs) are becoming an effective option for documentation and provide an integration option to your PM that cannot be supported by paper alone.
Electronic encounter forms
Monitoring charge entry
In addition to monitoring that all claims are generated, the lag time between when a patient is seen and when a claim is generated should be measured. A big part of managing the revenue cycle is the measurement of days in A/R. If you have a significant lag in the time it takes to get claims submitted to payers, the days in A/R calculation can be misleading.
The first is a general field by field check to make sure all required fields are completed with the correct type of data. A second, more specific scrub, should be carrier specific to ensure data within specific fields is in an acceptable format. Coding scrubs can be run to check for bundled coding, cross coding errors and true CCI editing.
Clearinghouse vs. Direct Claim Submission
For most practices, a dedicated EDI staff member is not practical. The use of a clearing house can provide a practice with all of the advantages of electronic claim submission. For a small fee (usually significantly less than a dedicated staff person) the clearing house will maintain the separate payer rules and requirements allowing you to standardize claim submission amongst all payers. This also allows for a streamlined claim submission process wherein you can submit to multiple payers with a single submission.
Dealing with rejected claims
In order to promptly and accurately post payments, mail must be opened upon receipt and deposits made daily. A third party such as a bank “Lock Box” should be used to ensure proper cash handling procedures.
Comparing payments to contract allowed amounts
Tracking denial codes
Accounts Receivable Follow-up
In many cases a phone appeal can resolve the problem. Often, clarifying an issue or providing missing documentation will be enough to have the claim successfully processed. In other cases, a written appeal may be required providing additional information or mitigating circumstances. It is often necessary that the provider must supply proof of medical necessity or other clinical notes to determine if a procedure is covered under the patient’s policy. In the case of underpayments, a repetitive problem may require appealing multiple claims in one single communication with the payer.
Once statements are sent, the billing department staff needs to be available by phone to adequately explain the balance due to patients if questions arise. Make sure your billing department staff has all of the information they need to answer patient calls. Incoming calls should be answered live whenever possible and copies of the EOB’s must be accessible without delay. It is important to remember that the patient is calling because of a perceived problem. Fast, courteous and accurate information is required to keep your patients satisfied.
If payment is not received within thirty days, a second statement (reminder) should be sent. If after another thirty days there is still no payment or call from the patient, a collection letter should be sent. The collection letter should state it is an escalated attempt to collect the balance due and failure to resolve the balance due will have serious consequences. If after an additional thirty days the balance is still not paid or a payment plan arranged, a final “Ten Day” collection letter should be sent. Check with your state and local statutes to verify compliance with debt collection laws. If the balance is still not paid the account should be placed on a collection list and referred for an internal check. This check is to determine whether there is any potential liability or any extenuating circumstances.
Financial policies to address payment plans, small balance write-off and collection of patient balances are very important to a well run practice. The cost of dealing with small balances can outstrip collections from these efforts. Studies have shown that outbound patient collection calls do not have a sufficient return on investment. The best time to deal with this type of collection policy is at the beginning of the revenue cycle when the patient is present in the office. Providing all patients with a written copy of your financial policies can alleviate problems later in the revenue cycle.
Escalated collection efforts
Despite all of your best efforts, a small percentage of all balances will eventually become uncollectible. Not dealing with uncollectible claims can add cost to your practice. Leaving uncollectible balances on the Accounts Receivable gives you an unrealistic estimate of future cash flow. It also consumes valuable resources applied during A/R follow-up. If uncollectible balances cannot be referred to an outside collection agency, they should be written off as bad debt with proper documentation in the PM so that the patient is not seen again unless the balance is resolved.
Real time reporting for monitoring
The financial health of a practice can be measured with several key metrics. While the gross collection percentage has more to do with your retail fee schedule and payer contracts, the net collection percentage measures your ability to collect what is due. While the national average for net collection percentage is 94% to 95%, strict adherence to these "Best Practices" should bring net collections of 97% to 98%. Another effective measure is days in A/R. The days in A/R are calculated by taking the total A/R balance and dividing by the average daily charges generated by the practice. While days in A/R can vary by payer mix, your average should be between thirty and forty-five days. Another similar measure is the A/R turn ratio that calculates how many months of charges are tied up in A/R. A turn ratio of 1.0 to 1.5 is ideal.
Additional metrics to help monitor your practice are total visits, average visits per day, charges and receipts per visit, and the average lag time from the time services are rendered (date of service) and the time claims are submitted (date of entry). Reports that provide metrics by department, physician, resource, and CPT code are important in fine tuning your practice. Quantifying insurance denials is instrumental in managing both the payers and coding habits. Clinical reports such as a bell curve for E&M codes or the top CPT and ICD-9/ICD-10 codes will give valuable feedback to physician’s regarding how they practice medicine and identify potential compliance risks.
Putting it all together
The proper management of your revenue cycle requires the application of “Best Practices” and the continual monitoring and measuring of the entire cycle. The correct technology will enable you to gain the insight and efficiencies needed in the ever changing healthcare economy. The revenue cycle is a process that begins when you negotiate payer contracts, set fees, and schedule appointments and continues until claims are paid in full. Every single step in the cycle carries equal importance. Monitoring all phases and a commitment to continually communicating the results will allow you to achieve unparalleled success.