Revenue Cycle Management

Staying atop your incoming funds amidst the chaos

Flexibility is one of the ‘gold-standard’ qualities in American business. Employees are always looking for flexible schedules, flexible hours—anything that allows for consideration of unexpected occurrences in life.

But when discussing revenue cycle management, flexibility is where many organizations find trouble. If your organization can’t stick to hard-and-fast rules and meet certain predetermined goals, it can be the first step to creating disorganization and even insolvency.

Kevin Fine, MHA, MSM, leads the healthcare strategies advisory group for Kaufman Rossin, one of the nation’s leading accounting and advisory groups.
“Simply put, revenue cycle management is the ability to track a patient care episode from registration to payment of a balance,” he explained. “Everything from when the patient enters until the facility gets paid.”

One challenge—perhaps in a broad sense, the greatest challenge—of revenue cycle management in healthcare is a facility’s mission. Patient care, communication with families—these tend to be points of emphasis in any organization. But how does a hospital pay the bills to keep the lights on? That’s the business side, often overlooked in the grand scheme but ultimately, equally important and non-negotiable to fulfillment of the primary mission.

Another challenge arises with the anatomy, or natural sequence of events in healthcare. “Sometimes, appointments are pre-arranged, other times, a person comes in without warning through trauma or the ER,” Fine explained. “In either case, services are rendered immediately, but payment isn’t reconciled until sometime in the future.”

And this precise point is where a revenue cycle management department—the business side, in other words—takes over, and the focus switches to operating at maximum efficiency in order to capture the right amount of money in the shortest amount of time possible.


In revenue cycle management, the KPI dashboard is the equivalent of its namesake in an automobile.

“Have you ever tried to drive your car without your dashboard?” asked Fine. “Imagine trying to determine how fast you’re going, how much gas you have left—but you’re doing it with a piece of cardboard blocking your view of all that information.”

Similarly, organizations without all the relevant information appropriately organized are, at best, guesstimating as to what they’ve collected and which debts remain outstanding.

KPIs, or Key Performance Indicators, come into play by identifying the critical metrics and allowing users to drill down as deeply as they wish into the data. “In today’s world, it’s absolutely essential to identify and understand your KPIs.”

The tricky part is that KPIs can differ for each organization. But each organization has its own ability to identify its areas of focus and hone in on what really matters. “Different leaders within each organization have their own roles and responsibilities,” said Fine. “But with revenue cycle management, what’s the top KPI? Accounts Receivable (AR). In other words, ‘where is my money?’”

“The AR report can be broken down many different ways—per department, per physician, per insurance carrier. You can drill down as deeply as possible, and the deeper you go, the more you know. If you hit a speed bump, you can make a decision and adjust. Without knowing the details, how can you make a decision? A challenging situation for any leader is to not know whether to go right or left.”

Denial rates

An analysis of KPIs should also include denial rates, which allows an organization to see what percentage of its claims are hitting the speed bumps.

When a hospital sends out a claim that is, in turn, denied by the insurance carrier, it adds time to the process. “These claims, they take 45 days or so to get paid—but then you might get a denial for some reason, for example if that claim was sent out incorrectly,” he explained. “Now your staff has to fix it—that’s a cost—there’s a resubmission time barrier.

“Maybe in the end, it takes 120 days for that claim to be paid. Think about the cost of the hands that touched it to fix it. You’re talking about a cost of say $27–$32 to fix the claim, and your reimbursement was $100. So you think you made $100, but in reality, you’re in the $60+ range.”

Denial rate is, in essence, a metric that allows you to determine what percentage of your money is not coming in efficiently. But the close sibling of denial rate is a KPI known as first-time submission (i.e., how many claims are being paid the first time they’re submitted?). This is where the lack of flexibility discussed in the opening becomes crucial.

“You ideally want to be in the 90+ percentile—90 percent or more claims are being paid the first time you submit,” Fine simplified. “If it’s in the 80 percent range, that’s a problem.”

A third critical KPI is time elapsed from date of service to date of submission. As Fine explained, the nature of the healthcare industry is one of “serve now, get paid later.” This is unavoidable, but minimizing the amount of time that passes between these two events is imperative to proper revenue cycle management.

“A claim is made today,” he said, “and until the moment that claim is out the door for payment, you’re sitting on your money.”

That’s why the recommended turnaround time is no more than 72 hours. If it takes five days or a full week—which happens too often, according to Fine—imagine the consequences.

“Every area has an impact on many other areas,” Fine concluded, “and it all starts with revenue cycle management.”

Editor’s note: Kevin Fine will be assisting in the creation of numerous articles and other content related to the financial side of healthcare. Topics will include more on revenue cycle management, KPIs, operations improvement, assessing profitability and others.

In our next installment, Fine continues his discussion of KPIs and how their proper application is the first step towards effective revenue cycle management.

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