What Is a “Good” Revenue Cycle? Evaluating the Health of Your Practice’s Finances

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Two common questions we field from clients are: “So how do we know when we’re done optimizing? When do we know our revenue cycle is good to go?”

These are the billion-dollar questions. Similar to a patient with an ongoing condition asking, “When will I be cured?” the answer is always going to be, “Well, that depends on a lot of factors.” That is where we come in.

Revenue cycle optimization is not a one-size-fits-all prospect. Nor is it a process with a discrete start and end date. Think of it as a living organism, affected by any number of variables that can shift from year-to-year, week-to-week, even hour-to-hour. Revenue cycle management isn’t a “build-it-and-leave-it” task. You must shepherd this complex organism through the life of your organization and keep it as healthy as possible.

Grading Your Revenue Cycle Against the Competition

Clients often want to look at data points from competing or neighboring practices and use them as a measuring stick for their success. Rather, you should be thinking about your revenue cycle as a reflection of your organization’s needs and abilities. In other words, look within.

How much do you need to be bringing in to cover your growth plan? To make stretch goals? What are your margins? Are you trying to present better figures for a merger? Acquire another practice yourself? Stay solvent or get out of the red for this year’s operations? We guarantee that your goals won’t be the same as the objectives of the other practice down the street, so there’s no reason to make a direct comparison.

Not all practice types are created equal when it comes to revenue cycles. Different types of organizations must pay attention to different elements:

Critical access hospitals (CAH)—Margins are typically much slimmer at these small rural hospitals, and an optimized revenue cycle can mean the difference between organizational success and failure. These hospitals usually see far more Medicare and Medicaid-based reimbursements and deal with a populace with a lower ability to pay, necessitating a finely tuned system where coding, billing, accounts receivable (A/R), collections, and claims must work seamlessly to minimize rejections and maximize payments. A “good” revenue cycle for these hospitals may mean a narrower margin of error and more parts of the system functioning flawlessly for success.1

Physician group practices—Physician acquisition is one of the leading trends in healthcare right now, creating a mini-frenzy around these organizations. This excitement can lead to too much focus on negotiating rates, drafting contracts, and navigating Stark compliance, rather than building the foundation for a strong revenue cycle.

Additionally, whereas hospitals often have built-in levels of executive leadership and management for all things financial, physician groups sometimes lack the appropriate organizational model or the right management group for successful revenue management. If a practice begins to acquire or merge with other physician-owned practices, billing can become complicated and centralized.

We’ve found that growing physician group practices benefit greatly from the steady hand and expertise of revenue cycle management partners. With a good partner, physicians can focus on patient care without having to worry about managing their practices at the same time.2

Hospitals and hospital networks—Hospitals are complicated by nature. With more moving parts to deal with than most other practice types, and usually larger margins, hospitals are the most likely to have completely unnoticed gaps in their revenue cycle management plans. We usually find that our clients benefit greatly from audits of their systems. Even an outwardly successful revenue cycle program can show massive potential for improvement under careful scrutiny.

For instance, hospitals often find charge capture to be a challenge, especially when there are outpatient services involved or a physician has a different coding or billing structure within a sub-section of services. Hospitals also face challenges of scale—with so many frontline staff, payers, patients, physicians and points of contact in a day, hospitals produce loads of data with many variables. It can be overwhelming if your systems aren’t built to handle it.3

The revenue cycle situation for a hospital can get more complex if they begin to acquire physician practices. We strongly recommend for hospitals without a centralized billing manager to either create room for that position and consolidate control over revenue cycle optimization, or work with a dedicated revenue lifecycle management partner at that point in their growth.4

Clinics and ambulatory surgical centers (ASC)—Independent clinics and surgical centers sometimes find that their revenue cycle concerns stem from issues with scheduling accuracy or benefits verification. When most of your payments and reimbursements come from actual patient procedures, not getting the right information at the time of scheduling (or at the follow-up point before a procedure) can lay waste to your first-time claims success numbers.

Additionally, because most procedures involve reimbursements (surgical centers, in particular, are less likely to have patients covering costs), not properly assessing or verifying patient benefits up-front can lead to a lot of tail-chasing after the procedure during the claims process.5

Other types of practices with specific revenue cycle health variables include preferred provider organizations (PPO), managed care organizations (MCO), accountable care organizations (ACO). Factors such as a facility’s location and the demographics of the patient population also play a huge role in how to optimize revenue while maintaining a high level of patient care.

We like to tell our clients that the mere fact that they’re thinking about their revenue cycle and ways to improve it is half the battle. Being mentally prepared to make changes and implement programs puts your organization a step above your competitors still mired in other concerns. The next step is understanding that a “good” revenue cycle is all relative. A good revenue cycle looks different in every organization, and we are passionate about helping our clients find out the exact nature of their best revenue cycle and the best way to keep it healthy for the foreseeable future.

Physician Revenue Navigators is a leading healthcare revenue cycle management partner, supporting health care organizations of all different practice types in all aspects of a healthy revenue lifecycle, including coding, billing, contractual adjustments, collections, HIPAA compliance and more. Contact us to learn more about how we can assist your organization.

Show 5 footnotes

  1. Steve Boline, “Revenue Cycle Management in a Critical Access or Small Rural Hospital,” National Rural Health Resource Center, 2012, https://www.ruralcenter.org/tasc/resources/revenue-cycle-management-critical-access-or-small-rural-hospital
  2. Benjamin C. Colton and David A. Wofford, “6 Essential Elements for Physician Revenue Cycle Management,” September 1, 2013, http://www.hfma.org/Content.aspx?id=19144
  3. “Hospital Revenue Cycle Management: 5 Ways to Improve,” Health Catalyst, accessed January 12, 2016, https://www.healthcatalyst.com/success_stories/increase-professional-billing-charges-with-healthcare-analytics/; “6 Metrics to Improve Hospital Revenue Cycle ROI,” HIT Consultant, November 10, 2014, http://hitconsultant.net/2014/11/10/6-metrics-to-improve-hospital-revenue-cycle-roi/
  4. Dave Wofford and Ben Colton, “Revenue Cycle Strategy for Hospital-Owned Physician Networks: A Primer,” May 1, 2012, http://www.ecgmc.com/thought-leadership/articles/revenue-cycle-strategy-for-hospital-owned-physician-networks-a-primer
  5. Janice Crocker, “How to Improve Your Revenue Cycle Processes in a Clinic or Physician Practice,” accessed January 12, 2016, http://library.ahima.org/xpedio/groups/public/documents/ahima/bok1_035391.hcsp?dDocName=bok1_035391; “7 steps for effective ASC revenue cycle management,” Becker’s ASC Review, October 15, 2014, http://public.zirmed.com/7-steps-effective-asc-revenue-cycle-management/

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