Revenue Cycle Management in Healthcare Explained

Summary

Dr. Eric Bricker of Healthcare Z explains the complexities of Revenue Cycle Management (RCM) in healthcare, a $29 billion industry growing at 133% annually. RCM involves the intricate process of billing and collecting payments from various healthcare providers. It starts from patient pre-registration, through medical service provision, coding, claim submission, and remittance processing, to patient collections. The industry is fragmented with inconsistent service quality and a persistent issue of delays and denials from insurance carriers. The success of RCM is measured by the accounts receivable days, which can significantly impact a hospital's cash flow.

Takeaways

• 🧑‍⚕️ Revenue Cycle Management (RCM) is essential for healthcare providers to get bills paid and is a complex, $29 billion industry growing at over 133% per year.
• 💼 The healthcare industry's massive size of $4.5 trillion requires a significant amount of RCM to manage the $229 billion needed to process payments.
• 🔄 Contrary to its name, the revenue cycle is more of a linear process rather than a cyclical one, starting with pre-registration and ending with patient collection.
• 📝 The process includes stages like registration, charge capture, coding, claim submission, remittance processing, and follow-up on denials or delays.
• 🏥 Utilization review is a critical part of the process, especially for inpatient stays, where insurance companies approve the duration of the stay and further extensions if necessary.
• 🔢 Coding is crucial for accurate billing and reimbursement, with ICD-10 diagnosis codes, CPT codes, and HCPCS codes being applied to ensure proper payment.
• 📚 Clinical Documentation Integrity (CDI) focuses on maximizing codes for documentation to ensure that the hospital is reimbursed appropriately without upcoding.
• 🏢 Claim submission is done through clearinghouses like Change Healthcare, which then forwards claims to various payers, including Medicare, commercial insurance, and Medicaid.
• 💳 Remittance processing involves managing payments from insurers, which can include discounts, deductibles, and the responsibility of collecting from patients.
• 📉 Fragmentation in the RCM market leads to inconsistent service quality, with many firms offering varying levels of expertise and outcomes.
• 💹 Measuring the success of RCM is done through Accounts Receivable (AR) days, which indicates the time it takes for a healthcare provider to collect unpaid bills, with a range of 30 to 70 days.

Q & A

What is Revenue Cycle Management (RCM) in healthcare?

Revenue Cycle Management (RCM) in healthcare refers to the process of ensuring that healthcare providers, such as hospitals, doctors, and therapists, receive payment for the services they provide. It involves managing the billing and collection of payments from patients and insurance companies.

Why is RCM considered a growth industry?

RCM is a growth industry because it is growing at over 133% per year, driven by the increasing costs of healthcare. As the total healthcare industry is $4.5 trillion, and it costs $229 billion to manage the billing for this amount, the need for effective RCM continues to grow.

What are the main steps in the revenue cycle process as described in the script?

The main steps in the revenue cycle process include pre-registration, registration, charge capture, medical record documentation, coding, claim submission, remittance processing, follow-up on denials and delays (FUP), and patient collection.

What is the significance of the difference between pre-registration and registration in the revenue cycle?

Pre-registration and registration are significant because they account for changes in patient insurance status. Pre-registration is when basic information is gathered, while registration is when the patient shows up for service. Changes in insurance coverage can occur between these two steps, affecting billing and payment.

What is charge capture in the context of healthcare revenue cycle management?

Charge capture is the process during which healthcare providers document the services provided to a patient. This includes scanning in equipment, supplies, and recording physician orders, which are then used for billing purposes.

Can you explain the role of coding in the revenue cycle?

Coding is the process where medical records departments apply ICD-10 diagnosis codes, CPT codes, and other relevant codes to the patient's medical record. This is crucial for accurate billing and reimbursement from insurance companies.

What is Clinical Documentation Integrity (CDI) and why is it important?

Clinical Documentation Integrity (CDI) is the process of ensuring that the medical codes accurately reflect the clinical services provided. It is important because it helps healthcare providers maximize reimbursement while avoiding upcoding, which is the practice of billing for services not actually provided.

How are claims typically submitted in the revenue cycle?

Claims are usually submitted through a clearinghouse, such as Change Healthcare, which then forwards the claims to various insurance payers, including traditional Medicare, Medicare Advantage plans, commercial insurance, and Medicaid.

What is remittance processing and why is it complex?

Remittance processing is the handling of payments and explanations of benefits from insurance companies. It is complex because it involves reconciling payments with billed charges, managing patient deductibles, and understanding the terms of payment from various payers.

Why is the revenue cycle management market described as fragmented?

The revenue cycle management market is fragmented because there are many firms offering RCM services, indicating low barriers to entry and a wide range of service quality. This variability can lead to inconsistent outcomes and performance in managing healthcare billing.

How is the success of revenue cycle management measured?

The success of revenue cycle management is measured by the accounts receivable days, which indicates the average number of days it takes for a healthcare provider to collect payments on their outstanding bills. A lower accounts receivable days figure indicates better cash flow and more efficient revenue cycle management.