Healthcare revenue cycle management outsourcing and metrics

Technological capabilities in healthcare are revolutionizing the traditional models of revenue cycle management. With integrated cloud solutions, real-time analytics, and a seemingly endless stream of data, many healthcare practices are turning toward the possibilities of outsourcing to replace and/or augment in-house teams.

At a time when the industry has been dealt a wide set of challenges that come with the COVID-19 pandemic and the acceleration of tech integration, outsourced providers handling revenue cycle management are simplifying healthcare across the board. In fact, the global revenue cycle management (RCM) market size was valued at USD $105.86 billion in 2021. According to projections, the market for RCM is projected to grow from $115.64 billion in 2022, then doubling in 2029 to USD $246.40 billion by 2029 (Source:

Fortune Business Insights). Better performance comes with better insights, all thanks to qualified 3rd parties tasked with lightening the current burdens and future challenges in the healthcare paradigm.

Understanding the modern revenue cycle management landscape

Revenue cycle management in healthcare refers to the steps taken to collect revenue from patients after providing care. From the initial phase of scheduling an appointment, sending a patient statement, and finally being reimbursed for services, each phase of the revenue cycle in healthcare represents a set of challenges in how providers ultimately are reimbursed for their services.

For reference, the seven phases of the revenue cycle in healthcare include:

- Preregistration

- Registration

- Charge Capture

- Claim Submission

- Remittance Processing

- Insurance Follow-up

- Patient Collections

The realities of revenue cycle management

While the term is a bit of a mouthful, the realities of poor management of the revenue cycle are very clear. If providers deploy proper revenue cycle management practices, they can expect reimbursement within predetermined bill periods. Typically, this period is within 30 days, though some providers offer different billing periods depending on their payment infrastructure and processes.

On the other hand, poor management for each phase of the revenue cycle more often than not leads to severe financial difficulties of healthcare providers. For example, when patients and/or commercial payers don’t reimburse healthcare providers within a predefined billing period, there’s a cascading downturn in the overall quality of patient care they can deliver. This includes:

• Reduced budgets to attract top-tier staff,

• Understaffed operations

• High employee turnover

• Shorter operating hours

• Increased costs for patient care

• Insufficient accommodations for patients (such as a fully-staffed waiting room)

• The further emphasize these realities, consider the following statistics:

• 40% of Providers fail to collect over $31,713 a year from patients. (Source: MGMA)

• An account 60 days past due has only a 70% chance of recovery. After 6 months, these accounts only have a 30% probability of being paid. (Source: U.S. Department of Commerce)

• The average timeline of reimbursement of payment by public insurers (ie. Medicare) is approximately 28 days, whereas private insurance companies average twice as long. (Source: Healthcare Financial Management Association (HFMA))

Preregistration is the initial phase of the revenue cycle process. The preregistration phase enables healthcare practices to capture demographic information, insurance information, and eligibility for care in real-time through a clearinghouse (typically through online portals or over the phone).

This phase initiates a transfer of Information to the patient’s insurance carrier via the provider’s practice management system (including on-site staff and automated online forms). The provider is then provided with the patient’s financial information, including insurance coverage, deductible, co-insurance, co-payment, and if applicable, whether a referral is necessary.

During preregistration, the healthcare provider can discuss financial expectations of the patient, setting time of payment and any no-show/cancellation policies.

Challenges:

- Insufficient capture of all relevant patient data

- Miscommunications between insurance providers

- Unrealistic financial expectations of the patient

The Registration phase ensures that the patient’s information is accurate in-person. During this phase, the healthcare provider verifies that the patient’s address, phone number, date of birth, insurance information, and other financial information are all 100% correct. financial forms are signed, and insurance benefits are assigned.

During registration, the provider collects co-payments. For specialists such as an orthopaedist or ENT physicians, it’s vitally important to ensure that an authorization or a referral is in place to treat the patient to ensure timely reimbursement.

Challenges:

• Inaccurate or incomplete patient data

• Inefficient information capture process

• Miscommunications between insurers/commercial payers

Charge Capture

Charge capture can be performed manually or through automated processes. The manual process involves in-house staff (such as front-desk employees or billing department) manually keying in payment information. For automated processes, where information automatically flows into the practice management billing side based on what the provider puts in their documentation.

Challenges:

• Missed charges for treatment(s)

• Coding mistakes due to manual/automated processes

• Miscommunications between insurers/commercial payers

Claim Submission

This refers to sending information to the insurance carrier after the charges have been entered for reimbursement. The insurer’s revenue cycle team looks at all relevant charges, the CPT code, and the diagnosis code to verify whether the diagnosis supports the procedure performed. If two or more services are provided, those need to be separated and coded correctly.

One best-practice during the claim submission phase is the practice of “claim scrubbing”, where practices ensure medical claims for errors that would cause payers to deny the claim. If there are any errors, reimbursement is delayed and the claim must be reprocessed.

Challenges:

• Inefficient claim submission processes (especially for high-volume practices)

• Errors in claims processes

• Time/effort wasted on resubmissions

Remittance Processing

After the claims have been sent out, they will get remittances back. The explanation of benefits shows the practice of what they have been paid for the services provided.

During this process, allowables are determined. Allowables are what the provider has contracted with the insurance carrier on a service provided. The provider and carrier negotiate the contract, at which time the insurance company will confirm how much they will pay for each service.

Challenges:

• Claims are not authorized by the insurer

• Referrals are not on file

• Claims are not submitted in a timely manner

Insurance follow-up

In this stage, practices look at what has been paid and what bills are outstanding. This requires continual communication with insurance providers to see what information is missing, how long the insurer is taking to process claims, and so forth.

Challenges:

• Poor tabulation of A/R

• Poor communication with all covered insurers

• Slow reimbursement and collections process

• Appealed claims

Patient Collections

This can be performed while the patient is in the office, through phone reminders, mailed statements, or automated email reminders. As a best-practice, most healthcare practices send reminders every 30 days – however, more frequent reminders accelerate cash flows until all bills are paid.

Challenges:

• Lack of automated billing based on customer’s past due balances

• Inability to contact patients for billing reminders

• Lack of cross-trained staff that’s familiar with billing

Above all, the accuracy and accountability of revenue cycle management are determining factors to avoid claims denial and delays in reimbursement. If a healthcare practice misses even a single step during any phase of the revenue cycle, reimbursement can be denied as the patient goes through the claims process.

In fact, most healthcare practices that don’t implement effective RCM, receive payment sometimes months or even years later – or may not be reimbursed at all. This is why revenue cycle management outsourcing has become the go-to solution for patient revenue collection – a delicate management system that must be placed under the guidance of an experienced 3rd-party RCM provider.

Critical Metrics/KPIs for Revenue Cycle Management in Healthcare Organizations?

Having clear data to address, predict, and resolve potential issues is absolutely necessary for a thriving healthcare practice. The following non-exhaustive list contains critical medical billing metrics and key performance indicators that healthcare practices must use to benchmark their financial operations:

- Gross Collection Rate

- Net Collection Rate

- Revenue Realization Rate

- First Pass Clean Claim Acceptance Rate

- Claim Denial Rate

- Day Sales Outstanding

- A/R greater than 90 days

Key Metrics

• Gross Collection Rate – Percentage of gross charges collected. Payments divided by Charges

• Net Collection Ratio – A measurement of how successfully you are collecting charges for billed services. Total Collections divided by Net Charges (x100)

• Revenue Realization Rate – Percentage of charges that were collected or adjusted off. (Payments + Adjustments) divided by Charges

• First Pass Clean Claim Acceptance Rate - (also referred to as “First Pass Resolve Rate” or FPRR) – The percentage of medical claims that are accepted for processing by the insurance payer upon first submission, without needing any corrections or edits. Number of claims accepted by the payer and divide it by the total number of claims submitted in a batch, or over a period of time.

• Claim Denial Rate – The percentage of medical claims that insurance payers have processed, but have denied payment. Total dollar amount of claims denied by payers within a given period divided by the total dollar amount of claims submitted within the given period.

• Days Sales Outstanding (DSO) – The time period it takes to collect each dollar owed. Outstanding Accounts Receivable (A/R) divided by average sales per day over the last month or longer.

• A/R greater than 90 days – The outstanding balance of money owed to your practice for services that you have billed for (including outstanding bills due from both patients and insurance payers.)

Being aware of these key performance indicators and medical billing metrics ensures the ongoing financial health of a healthcare practice and its future viability. Bear in mind that there are a multitude of other metrics that also contribute to more accurate insights about the short-term and long-term viability of a healthcare practice. With the widespread availability of data points to choose from, having insights that correlate to patient demographics and the performance of RCM staff can be further analyzed for better decision-making. Revenue cycle management is best served by quality RCM providers that deeply understand the evolving needs of healthcare providers. With better metrics, outsourcing streamlines all processes and develops new solutions to modernize healthcare as we know it.