Process Improvement Series: Revenue Cycle Management

What key indicators are you using to measure the performance of your physician network?  Revenue cycle measures should be at the top of your list, as failure to monitor this process is a serious error, and in many hospitals is leading to massive financial losses and unpleasant conversations with the Board.

Healthcare Strategy Group has performed assessments on many under-performing employed physician networks.  Almost universally, failures in revenue cycle management are a major source of poor performance. Often the financial leakage has to do with trying to manage the physician revenue cycle like the hospital revenue cycle.

In a practice, the first moment of truth is when the patient calls to schedule an appointment.  If the manager in the practice is effective, the front office staff will understand their role and key processes.  The staff will understand the importance of collecting the correct demographic information (without it, you lose the ability to verify benefits).  The staff will likewise understand the importance of asking for balances when face-to-face with the patient.

We have seen many hospitals choose to perform all billing out of the hospital system.  Very often, the IT department, familiar with the current system and not looking for more software to maintain, pushes this incredibly poor decision.  They are encouraging you to put a square peg in a round hole.  For example, one area where this causes challenges is that hospital systems are largely “account number” based, while physicians use recurring account numbers.  Hospitals submit claims on a UB82 reporting DRGs, while physician billing requires a CMS 1500 for line item reporting.  Each system is appropriate for each environment.  Trying to meld them into one system is problematic.

Another question for senior management is who do you have assigned to work revenue cycle for your physician network?  A team of experienced physician billers or your hospital team?  Hospital billers are generally not well versed in the details of collecting physician claims.  The biggest issue is the relative scale:  the average hospital claim is thousands of dollars, and the average physician claim is less than $100.  Little surprise that a hospital trained staff, or worse yet a merged staff, would focus on the big claims.  We have even seen the automatic small balance write-off feature set above the typical co-payment level for physician visits, meaning all patient out-of-pocket revenue is unbilled.  That can be a third of the practice’s revenue opportunity.

Another consideration is to incentivize your staff to help achieve performance improvement measures.  Experience has shown us that by engaging the office staff in a meaningful incentive program, revenue cycle performance can be improved significantly.  The key is to determine an appropriate level of base line performance for various revenue cycle factors, and then set stretch goals that result in real performance improvement and an increased level of cash flow.

Performance indicators that are often part of an incentive program include:

  • maximizing the office schedule for each physician
  • collection of co-pays
  • amount of total cash collections per month
  • gross and net collections as a percentage of charges
  • charge capture
  • days in accounts receivable

This type of an incentive program energizes the staff and helps boost office morale and overall performance.

Our consultants also encounter many problems with the management of processes in the billing function. Bills are not generated quickly, as measured by the lag between service date and submission to the payer.  Adjustments are not booked correctly.  Denied claims are not questioned.  Follow-up with the patients is a low priority.  Technology is helping with many issues, including electronic eligibility and benefit verification, and the production of monitoring reports that help identify insurer “error”.  But if the practice processes are not aligned with the billing system, you will not gain maximum advantage from these system improvements.

HSG has experts in the area of physician revenue cycle management.

Having consultants who have achieved Superior Rating by MGMA’s Best Practices, we can help you discover the areas of opportunity and improve the performance of your practices.