What is revenue cycle management (RCM)?

Revenue cycle management is the process used by healthcare systems in the United States and all over the world to track the revenue from patients, from their initial appointment or encounter with the healthcare provider to their final payment of balance.

Revenue cycle management and Medical billing are two different terms often used interchangeably, despite of the fact that Medical Billing is a part of a vaster and dynamic Revenue Cycle. By the use of term dynamic for Revenue Cycle doesn’t imply Medical Billing being any less dynamic however the magnitude and application of Revenue Cycle and its management is far greater than mere billing operation.

Definition:

While comprehensively defining the RCM we can state that it’s a process that starts with the registration of patient and ends with the reimbursement to the provider against the services rendered.

Departments:

Registration

The first function within the revenue cycle is the registration function, which allows the service provider to obtain all of the necessary data needed in order to properly bill an insurance company. The information that is usually obtained is the patient's full name, date of birth, address, email, phone number, marital status, gender, social security number, emergency contact, release of information, primary insurance provider information.

Eligibility & Benefits verification

This department involves to verify the eligibility & benefits of the patient for the DOS, i.e. the patient would have the coverage for the services? If “Yes” then benefits needs to be determined as well, e.g.

Patient is active with Payer since,

Policy type (PPO, HMO, EPO, POS)

Provider’s participation with the payer,

Patient has Co Pay/ Deductible/Co Insurance,

Referral/P-Authorization is Required/Not Required. 

Referral

Many times, your primary care doctor must have asked you to see a specialist, to get expert advice and care to manage your clinical condition.  Seeking assistance from another specialist for additional services and management is considered as a “Referral” in Medical Billing. The fundamental thing about ‘Referral’ is that you need to take consent from your primary health care doctor before you take an appointment from another specialist. If not, your health insurance plan will not be responsible to bear the cost of the appointment consequently. In order to make sure that you get paid for the treatment, a ‘Referral’ from your doctor is a must. Under medical billing, it is a significant record obtained from a provider so that you can acquire the specialized services from a specialist, your doctor has referred you to.

Authorization

The term authorization refers to the process of getting a medical service(s) authorized from the insurance payer. The term authorization is also referred to as pre-authorization or priorauthorization. It is a legal obligation to ensure that the insurance payer pays for the specific medical service mentioned in the medical claim form. Without authorization, the insurance payer is free to refuse the payment of a patient’s medical service as part of the health care insurance plan. The medical coder and the health care provider work together to get the medical service authorized. However, the medical coder is responsible to assign the correct CPT code to the medical procedure received by the patient. Nonetheless, the medical coder must not take his/her responsibility lightly because assigning the wrong CPT code can lead to denial. As for the authorization of the medical procedure, the responsibility goes to the health care provider. The provider must apply for authorization before performing the procedure. Once approved, the payer then provides the health care provider with an authorization number for any further references.

                                I-         Pre-Authorization    II-       Retro Authorization          

Coding and Billing

Medical coding is the transformation of healthcare diagnosis, procedures, medical services, and equipment into universal medical alphanumeric codes. The diagnoses and procedure codes are taken from medical record documentation, such as transcription of physician's notes, laboratory and radiologic results, etc. Medical coding professionals help ensure the codes are applied correctly during the medical billing process, which includes abstracting the information from documentation, assigning the appropriate codes, and creating a claim to be paid by insurance carriers. The major entities while coding involves ICD, CPT, Modifier, NDC.

Medical billers, on the other hand, process and follow up on claims sent to health insurance companies for reimbursement of services rendered by a healthcare provider. The medical coder and medical biller may be the same person or may work with each other to ensure invoices are paid properly.

Payment Posting

Payment posting also called as cash posting. After the adjudication of the claim from the payer, the claim will be either paid or denied and a document known as EOB/ EOR (Explanation of Benefits/Explanation of Review), will be sent to the healthcare provider and insured.

If the claim is processed towards payment from payer, then a check will be issued or EFT (Electronic Fund Transfer) will be done to the provider from payer along with the EOB. Claim will be paid to provider only if the patient has signed the assignment of benefits (AOB) documents. If patient has not signed the AOB, then the payment will go to the patient. Payment posting is done in two ways:

I - (EOB)        II-  (ERA)

EOB: It is also called as Explanation of review (EOR), which will be issued by the payers to healthcare providers (Billing office) in order to communicate the decision taken after the determination of the claim.

ERA: electronic response of the payer against the claim. 

EOB contains following information:

Ø  Payer Name

Ø  Payer Address

Ø  Patient Name: Name of the patient

Ø  Provider Name and address

Ø  Member ID#: It is also known as policy identification number

Ø  Claim received Date: It is the date the claim received by payer from provider (Billing office).

Ø  Payment or denial date: It is the date the claim processed or denied by payer.

Ø  DOS – Date of Service: It is the date service provided from healthcare provider to patient.

Ø  CPT Code – Procedure code

Ø  Billed Amount – It is also called as charge amount for each service performed by healthcare providers.

Ø  Claim Number – It is also called as Document control number or Transaction Control Number, which will be assigned by the payer for each claim as soon as they receive in their system.

If claim is paid, then following details:

Ø  Allowed Amount: It is an amount; payer deems fair for a specific service or procedure. AA = PA+ PR.

Ø  Paid amount: Paid Amount = Allowed Amount – Patient responsibility.

Ø  Patient Responsibility: This is the balance percentage of reimbursement that the patient or his secondary insurance (if have any one) has to pay according to his policy with the insurance company.

Ø  Write off Amount: It is an amount that is waived off by the provider. Write off Amount = Billed Amount – Allowed Amount.

Ø  Check#

Ø  Check date

Ø  Electronic Fund Transfer# (EFT#)

Ø  EFT date

If claim denied, then it will have the following details.

Ø  Denial Code

Ø  Denial Reason

Accounts Receivable

Accounts Receivable (AR) is the money owed to Providers or medical billing companies for the medical care rendered to patients. The generated invoices are sent out to insurance companies or patients for payment. It is important that the staff keep a tab on the AR and see if the payments reach on time. In simple words, Accounts Receivable Management is a collection of processes such as, identifying denied/unpaid claims, re-filing the corrected claims, minimizing AR days, and eliminating aged AR.

Manage Denials:

Identifying the root cause for claim denials is one of the important processes in Accounts Receivable management. The staff must be highly skilled to analyze the reason for claim rejection, correct the claims and re-file without delay. Also, it is essential to examine denial patterns and find proper solutions to eradicate future occurrence of denials.

Timely Follow-up:

Following up on the AR on a timely basis is very important for uninterrupted cash flow. A good Accounts Receivable management team will keep track of all claims that have been filed. Also, it will execute an action plan immediately if the claims are not paid within the 30-day time limit.

The team will also ensure that there is no underpayment or overdue payment.

Patient Follow-up:

After the introduction of self-pay, medical billing companies had to rely more on the patients than insurance companies for payments. If there is any outstanding balance, the Accounts Receivable management team should follow-up with patients through phone calls or emails, so there are no delays. Good patient-provider relationship is the key to timely payments. Another best practice is to explain the patients about their financial responsibilities before providing the care.

Periodical Audits and Reports:

One of the top qualities of a good Accounts Receivable management team is conducting audits frequently to learn areas of improvement, check for problems, and assess risks. Then, the team submit reports on the audits conducted. Such reports include aging AR reports, outstanding payment report and more. These reports will ensure there are no future claim denials and payments reach on time.

Thank you so much for reading this!