Follow the money: The strange and complex world of revenue cycle management

Dear medical staff leader and medical staff professional,

The revenue cycle is a mysterious and complex process that seems disconnected from the primary purpose of healthcare, yet, it is a critical part. Why? Because the more physicians can optimize their financial returns, the more they can reinvest back into their practices to improve quality of care over time. The following are the key steps through the revenue cycle that illustrate why documentation is so relevant to financial performance.

Step 1: Registration. This seemingly simple step is a challenge due to the high incidence of human error in data entry. Financial information cannot be legally obtained from emergency patients if it will delay a medical screening exam, and patients do not always provide accurate or reliable information. In addition, given the large volume of data registration personnel are required to process, errors are inevitable.

Step 2: Providing service. The challenge here has less to do with the quality of the service than how to document it. Physicians are often bombarded with a patient’s medical history, some of which may not be relevant to the issue at hand. Unfortunately, the documentation requirements that exist to optimize payment seem disconnected from major clinical issues, and physicians often inadvertently neglect to document:

• Review of systems
• Family and social history
• Past medical history
• Co-morbid conditions that may double or even triple the financial value of the service rendered

Template tools (T-sheets) and electronic documentation systems help busy clinicians to include information that may result in significantly higher reimbursement.

Step 3: Medical record coding. To generate a bill for services provided, myriad clinical information must first be translated into codes based on who provided the service and in what clinical setting. Under the Health Insurance Portability and Accountability Act (HIPAA), if a physician provides a cognitive or diagnostic service, it must be “translated” into a code using the International Classification of Diseases 9th Revision-Clinical Modification (ICD-9-CM). Procedures are similarly coded using the Current Procedure Terminology (CPT) code that is maintained by the American Medical Association.

Step 4: Charge Entry. Whether the revenue cycle is performed by hand, or electronically, data is fed into a “charge master” that lists all of the services, supplies, and drugs the organization bills for and translates a final “charge” that may include:

• Charge code
• Item description
• Department number
• Charge/price
• Revenue code (mandated by CMS)
• ICD-9-CM or CPT code

Step 5: Billing/claims preparation. If a service is provided outside of a healthcare organization, a CMS-1500 form is used to submit claims to Medicare and other third-party payers. If a service is provided within a healthcare organization, a Uniform Billing Form 92 (UB-92) is used instead . Claims are either sent directly to a third-party payer or submitted to a “clearing house” where they are sorted, batched, and then sent to the appropriate payer.

Step 6: Claims Editing. To ensure accuracy and prevent unnecessary payment denials, healthcare organizations increasingly use claims editing software to scan for possible errors in claims submissions. The software electronically scans for discrepancies that may involve:

• Patient identification
• Insurance documentation
• Diagnoses and procedures performed

To assist organizations, CMS has instituted the National Correct Coding Initiative (NCCI) to increase the submissions of “clean” claims and reduce the incidence of fraud.

Step 7: Payment. For physicians, receiving the check is the easy part. For physicians in private practice, mastering the revenue cycle is essential to your survival. For physicians employed by healthcare organizations, it is an opportunity to work with management toward optimizing financial performance in a way that will benefit everyone. Either way, understanding the revenue cycle will enhance physician and organizational performance, as well as ultimately benefit the patients that we serve.

All the best,
Jon Burroughs, MD, MBA, CMSL
Senior Consultant,
The Greeley Company