The Healthcare Financial Management Association (HFMA) defines Revenue Cycle Management (RCM) as all administrative and clinical functions that contribute to the capture, management, and collection of patient service revenue. Revenue cycle management (RCM) is the financial process related to a patient’s clinical encounter.
According to HFMA, a basic role of RCM is to measure how well a healthcare organization maximizes the amount of patient revenue billed and how quickly it collects that revenue. While RCM primarily focuses on processing claims, payment, and revenue generation, it also includes patient services since care management directly impacts reimbursement.
With decreasing reimbursements and as more patients are paying increasingly higher deductibles, it’s important to have an effective RCM strategy to increase reimbursements.
In today’s economic environment, it’s critical that administrators and revenue cycle managers implement best practices to effectively manage the revenue cycle to optimize efficiency and increase reimbursement. The following are essential functions for the effective implementation of the RCM strategy.
Effective Implementation Of The RCM Strategy
Charge Capture and Coding
To improve charge capture, staff should clearly communicate suspense times to the departments and state it in their policies and procedures. Suspense times are strict timelines placed on clinical departments to enter compliant, audited, and correct charges for services rendered.
It is important to remember that each day that charges are not entered and falling out of ‘suspense’ can cause negative effects on your days in accounts receivable outstanding as well as cash flow. Systematic reviews of the chargemaster are essential to ensure that hospitals are capturing all revenue correctly and that they are not leaving dollars on the table.
Timely Filing
Many healthcare organizations fail to file initial claims or respond to a claims appeal, in a timely manner due to inefficient or unmonitored processes, resulting in missed filing deadlines for either the initial timely filing deadline or the appeal timely filing deadline.
Medicare allows the initial claims to be submitted within one year of the date of service, but many commercial payers now require claims to be submitted within 90 days. Additionally, Medicare allows only 120 days to respond and appeal a claim denial, while many commercial payers may require anywhere from 90 days up to one year based upon your specific state and payer guidelines.
Therefore, it is important to have processes in place to not only submit claims in a timely manner but also continually monitor claims on hold to ensure timely filing deadlines are not missed.
Billing and Collections
Depending on billing methods, organizations should expect to receive payment in as little as 15 days (government payers). If insurance payments are averaging a turnaround time of longer than 30 days from the time claims are sent out until payment is received, the business office needs to develop a process for claim follow-up.
A formal process to follow up on the status of claims has been shown to decrease the number of days claims are outstanding. Billers are expected to know what each payer allows and rejects on their claims. Rejections result from an edit not capturing an error on the outbound claim which gets sent back immediately from the payers without any entry into their processing system.
Billers should work these claims, as a best practice, while focusing on the cause for the rejection to prevent that rejection from occurring in the future. Doing so may help to increase the efficiency of the revenue cycle through the decrease in total claim denials.
Denial Management
Monitoring, tracking, and reporting of denials are essential functions of a successful denials management program. Identifying trends and root causes of denials are critical steps in the implementation of an effective RCM strategy. To effectively prevent denials, practices should monitor KPI and communicate the denials to departments, and report by:
- Payer and type, reason, and department
- Percentage of the revenue submitted
- Denials as a percent of gross revenue
Best practice denial management strategies can result in a reduction in accounts receivable (AR), an increase in cash, an increase in clean claim rates, a decrease in denials volume, and a lower cost to collect rate. Denial management programs should include:
- Clearly defined policies and procedures regarding the identification, tracking, and reporting of denials
- Reporting tools and analytics to monitor denials information as outlined above
- An interdisciplinary team of revenue cycle and clinical leaders who have ownership over processes impacted by denials
- Ongoing meetings with the interdisciplinary team to discuss denial trends and issues and develop work plans to identify root causes for process improvement
- Education and training for staff that focuses on standardized processes to mitigate denials risk
- Reporting management team regarding denials analytics, process improvement initiatives, and education and training plans
Common RCM Key Performance Indicators
For practice, performance improvement, particularly for the revenue cycle, is dependent upon ongoing monitoring of KPI along with effective management that includes department accountability. You cannot accurately understand and track revenue cycle KPI without continually updated reporting and benchmarking outlining current performance levels.
For example, if the organization’s goal is to reduce days in accounts receivable by 10% by next year, the organization should have a dashboard or scorecard that shows the current days in accounts receivable as well as historical values so it can determine if current efforts have been effective.
Common revenue cycle Key Performance Indicators are as follows:
- Patient Access: Point of service collections to net patient service revenue; Insurance verification rate
- Pre-Billing & Claims: Discharged not final billed (DNFB) days; Discharged not submitted to payer (DNSP) days, Clean claim rate
- Account Resolution: Gross days in Accounts Receivable (AR); Net days in Accounts Receivable (AR); Insurance AR aged > 90 days from discharge date; Insurance AR aged > 180 days from discharge date; Denial Write-Offs as a percent of Net Patient Revenue
- Financial Management: Bad debt as a percent of net patient revenue; Days cash on hand; Cash to net revenue (percent)
Revenue Cycle Management (RCM) is the backbone for any healthcare organization, ensuring financial sustainability in long run. Implementing the above process will require skilled staff who got expertise in medical billing, coding, and other RCM functions.
If you don’t’ have such skilled staff then think about outsourcing your RCM or medical billing functions. In collaboration with your current staff Medical Billers and Coders (MBC) can help you in implementing an effective RCM strategy that ultimately helps to increase reimbursements.
To know more about our revenue cycle services, contact us at info@medicalbillersandcoders.com / 888-357-3226.
FAQs
1. What is Revenue Cycle Management (RCM)?
RCM is the process of managing the financial aspects of a patient’s clinical encounter, including claims, payments, and revenue collection. It helps healthcare organizations maximize revenue and ensure efficient operations.
2. How does timely filing impact RCM?
Timely filing is critical to avoid missed deadlines, which can result in claim denials. Having processes in place to submit claims and appeals within specified timeframes ensures quicker reimbursements.
3. What is the role of charge capture in RCM?
Charge capture ensures that all services provided are correctly recorded and billed. Delays in entering charges can negatively affect accounts receivable and cash flow.
4. How can denial management improve RCM?
Effective denial management tracks and addresses the root causes of denials, leading to fewer claim rejections and quicker reimbursement. It helps identify trends and implement corrective actions to improve future claims.
5. Why are Key Performance Indicators (KPIs) important in RCM?
KPIs provide insight into the efficiency of the revenue cycle by measuring important metrics, such as accounts receivable days and claim denial rates. Monitoring KPIs helps improve processes and optimize financial outcomes.
