White Paper: Navigating Key Healthcare Revenue Trends for Better Financial Outcomes

Though a medical facility is a business, it differs from others by the complexity of the billing and payment systems and the rigid framework of laws that regulate it. These regulations and payment determinants are changing rapidly, and a healthcare organization must navigate current healthcare revenue trends efficiently to remain profitable. Payment formulas, delivery models, and payment metrics are getting more complicated and a medical facility needs business and finance skills to continue operations and generate profits.

Revenue cycle management, or RCM, is the process that keeps a medical practice financially viable. It includes all the healthcare revenue activities associated with patient care, from initial contact with a patient, through billing and claim submission, and ending with final payment. Efficient RCM for private practices ensures the good financial health of the clinic.

Traditional RCM tends to be labor-intensive, error prone, and economically wasteful. Claims processing, payments, billing, and bad debt cost the country's annual healthcare spending $400 billion.¹ About 15% of total healthcare spend goes toward these aspects of healthcare. 

Understanding Revenue Cycle Management

A medical clinic cannot survive without generating revenue, making RCM a vital part of operations. This financial process tracks every patient care episode from initial contact to the realization of all payments. RCM for private practices includes:² 

First Contact

Your staff schedules an appointment for the patient and collects their information for billing purposes. This includes a photo ID, name, contact details, and insurance coverage. 

Patient Registration

This step is critical in ensuring that claims will be reimbursed by an insurance provider. Insurance discovery processes not only help avoid claim denials but can also identify active coverage unknown to the patient. Patient registration also includes collecting demographic data and completing patient intake. 

Charge Capture

Medical billing and claims depend on assigning precise diagnostic and Current Procedural Terminology (CPT) codes for services provided. Undercoding leads to underpayment, while inaccurate or exaggerated coding can lead to claim rejection or denial. Detailed software systems and well-trained staff are essential for accurate charge capture. 

Billing

Billing is a highly skilled process that aims to generate accurate, error-free claims for submission to payers. Clean claims with proper patient ID details, precise diagnostic codes, and appropriate procedural codes are highly likely to be paid rapidly at the first presentation. However, claims with errors are likely to be rejected by the payers. For example, claims for services not covered by the patient's insurance, failure to secure pre-authorization where required, and other faults will result in claim rejection. 

Denial and Rejection Management

Denied claims must be studied for flaws and resubmitted after correction. To be appealed, rejected claims must be challenged within a definite time frame. Dealing with denied and rejected claims is expensive, and clinics should implement strategies to minimize errors and reduce denials.

Accounts Receivable (AR) Management

Unpaid claims and direct collections can be an enormous drain on your revenue stream. Good AR management identifies and tracks unpaid bills and follows up to realize unpaid charges.

A well-implemented RCM ensures proper identification, collection, and management of revenues from patient services. Automation is essential; current best practices in RCM rely heavily on medical billing software that integrates seamlessly with electronic health records (EHR) and clinic management software. RCM is vital for healthcare providers and facilities to maintain financial stability.

Revenue Trends in Healthcare

The healthcare industry is transitioning from the traditional fee-for-service model to newer delivery and payment models. Understanding and adapting to current healthcare revenue trends is vital for healthcare providers and organizations. Insurance provider requirements and regulations are ever-changing, reimbursement models are evolving, and patient satisfaction and experience are assuming increasing importance. Healthcare organizations must be willing to agilely adapt newer delivery models and meet quality assessment metrics.

More than ever before, patient outcomes are being linked to quality measures and payments.³ Alternative payment models like the Merit-based Incentive Payment System (MIPS) and value-based care are innovative modifications to healthcare payments that assess the quality and outcomes of medical care to determine reimbursements. Since payments depend on better health outcomes for patients and reduced healthcare costs, value-based care incentivizes healthcare providers to deliver coordinated, high-quality care to patients. Such payment models aim to improve patient outcomes, reduce unnecessary procedures and costs, and enhance care by improving coordination among healthcare providers. 

Alternative payment models, such as value-added care, are discomforting for traditional RCM practices. The conventional method of billing for the volume of services provided is being replaced by patient-centered care that prioritizes outcomes, cost savings, and patient satisfaction. Healthcare organizations must make the complex transition to these novel payment models, which requires significant alterations to existing workflows and procedures. 

Implementing new delivery models and reimbursement procedures can be financially challenging. Organizations will need to invest in new care delivery systems and processes and significantly retrain medical and support staff. Value-based care and other alternative payment models rely heavily on robust data collection and skillful analytics to track performance and health outcomes. Implementing technology like artificial intelligence (AI) and machine learning (ML) is increasingly important to healthcare providers progressing to value-based care. 

Alternative payment models have the potential to disrupt RCM for private practices that are slow to adopt new technology. In the short term, the complex reporting requirements, changing focus on results rather than volume of services, expenses of new equipment, and staff reorientation can be challenging. As a result, flexibility of thought and rapid deployment of the required technology and skills can help practices improve patient outcomes while maintaining financial health. 

Challenges in Healthcare Revenue Cycle Management

Efficient RCM is necessary for the smooth day-to-day operation of a healthcare organization. Improper implementation of this vital facet leads to healthcare revenue losses, putting the entire organization at risk. The healthcare industry depends on effective RCM management for efficient functioning. Some of the critical aspects of RCM that must be efficiently managed include: 

Denial Management

Major payers return 29% of claims without paying.⁴ Correcting and resubmitting denied claims is costly and delayed payments adversely affect an organization's financial health. It is imperative for healthcare facilities to have strategies in place to avoid claim denial. Some measures you can implement include:⁴

• Timely filing: Every payer has a timeframe during which claims must be submitted to be considered for payment.
• Diligent patient identification: Errors in patients' identity and insurance ID numbers can cause denials. This information should be entered carefully and checked before submission.
• Coverage determination before providing services: There can be several reasons for limited coverage under insurance, and clinic staff must identify non-covered services during the registration process.
• Bundled services: Some procedures are covered and paid for as part of another service. Mentioning them again on a claim can lead to the claim being denied.
• Precise use of modifiers: Modifiers can only be attached to specific codes. Applying modifiers incorrectly can lead to claim denials.
• Data discrepancies prevention: Inconsistencies, such as applying a newborn procedure to an adult claim, inevitably result in the claim being denied. 

Additionally, you should study and analyze the most common reasons for claim denials you're encountering and formulate strategies to counter them.

Medical Coding and Billing Error Elimination

Medical coding and billing are at the heart of RCM for private practices. Both require qualified staff with ongoing training. Medical coding and accurate billing are discrete processes, and both must be precise for a healthcare organization to receive reimbursement for services provided. Each of these processes is complex and requires extreme caution; inaccurate claims lead to lost revenue and additional expenses. 

Ongoing Procedures and Regulations Training

Insurance companies and other payers have inflexible rules and procedures, which billing and coding staff must be familiar with. These departments also require regular training to stay current on changing regulations. Outsourcing coding and billing to specialists is one way that smaller practices can ensure this crucial task is handled by experts in the field. People working in healthcare billing companies have specialized knowledge of coding guidelines, payer preferences, and appeals processes. They also keep current with changes to regulations or payer requirements.

Improving Revenue Cycle Processes

Given the extreme complexity of medical billing, coding, and claim submission processes, it is no surprise that healthcare reimbursements are a challenge for most organizations. Manual entry of codes, insurance IDs, and other data is fraught with errors and lost revenue. RCM practices must also comply with government regulations requiring high standards for coding accuracy, and compliance with audits, regulatory rules, and Health Insurance Portability and Accountability Act (HIPAA) standards.² Compliance failures not only reduce revenues but can result in significant fines if discovered by government auditors.

A practice's denial rate is calculated by dividing the dollar amount of denied claims by the dollar amount of all claims submitted in that period. The industry average is 5% to 10%, but organizations should strive to keep it under 5% for the best financial outcomes.⁵ RCM software can automate much of the manual billing and coding work to reduce manual labor, errors, and denials. 

RCM systems, such as those provided by Chartpath, significantly reduce the effort of documentation and billing for an organization's staff while reducing errors and delays in submissions. Such software solutions manage encounter documentation, coding and billing, and even full revenue cycle management. This frees up staff time for patient care activities and elevates the quality of care. Implementing EHR and RCM management software can streamline claims processing, track claims and accounts receivable (AR), and enhance revenues. 

Automating data collection and billing is a significant step towards reducing denials. RCM software can also generate alerts when it detects data discrepancies, averting claim denials. With the software's assistance, denied claims can be rapidly resubmitted or appealed. A well-designed software solution also offers data analysis. With minimal effort, you can analyze patient service revenue and healthcare revenue trends. The availability of such data enables optimization of revenue cycle processes and enhances financial performance, justifying the expense of RCM software. 

The Impact of Value-Based Care

Value-based care is changing the delivery of healthcare and the reimbursement of healthcare providers for patient services. It focuses on five key goals:⁶

1. Provide the best patient experience.
2. Advance health equity.
3. Improve patients’ health outcomes.
4. Deliver health care services at a reasonable cost.
5. Support the well-being of the healthcare workforce.

It is now mandatory for healthcare providers to pay attention to the patient experience and satisfaction. Reimbursements are based on health outcomes and the quality, equity, and cost of healthcare. Value-based care intends to improve coordination among healthcare professionals to reduce redundancies, unnecessary services, and errors. It will also improve access for marginalized populations and clinically complex patients. Value-based care holds clinicians accountable for their patients' quality of care. 

Reimbursements under value-based care require accurate and complete data. This alternative payment model rewards providers for patient outcomes and quality of care rather than the traditional fee-for-service model. Value-based care rewards healthcare organizations for population health and for patients who live longer, healthier lives, rather than for the episodic encounter and service-based model. Opting for this model of healthcare allows patients broader access to care and greater satisfaction. Providers will need a robust IT infrastructure and adaptability to benefit from this model. 

Value-based care is growing rapidly; 57.8% of clinicians work in a practice that is part of an accountable care organization (ACO).⁷ Commercial ACOs are more prevalent than Medicare and Medicaid ACOs. In addition, approximately 64.3% of clinicians receive revenue from an alternative payment model.⁷ Value-based care, pay-for-performance, bundled payments, capitation, and shared savings are some of the novel payment models growing in popularity. Healthcare providers must adapt to these innovative delivery and payment models and insurance provider requirements to improve revenue cycle outcomes.

Financial Performance of Healthcare Organizations

Revenue cycle management is the crucial arm of a healthcare organization that makes all the other components possible. It is time-consuming and arduous, and demands a specific skill set and diligence for successful navigation. Effective RCM optimizes cash flow and maximizes revenue, keeping the clinic in sound financial health. A well-planned RCM system includes timely and accurate submission of error-free claims, automates and standardizes the preparation of bills and claims, and frees staff to devote more time and effort toward patient care. 

The complexity and unforgiving nature of healthcare billing are inevitably associated with errors and lost revenue. Approximately 20% of all claims submitted are denied at first submission, leading to additional work for billing staff.⁸ Resubmitting claims entails added expenses, too — appealing denials costs $25 for practices and $181 for hospitals. As many as 60% of returned claims are never resubmitted; denied and unresolved claims can cost practices as much as 5% of overall patient care revenue.⁹ Much of this additional work and lost revenue can be mitigated by deploying well-designed software that automates all the processes from registration to billing and comprehensive revenue cycle management. 

Accounts receivable management is a vital component of RCM. It tracks and collects payments owed to the practice by insurance companies, other payers, and patients. RCM also requires expert data analytics and information systems, and proficient implementation optimizes revenue collections, reduces losses, and improves financial health. Metrics like days in AR, average collection period, and A/R >90 help healthcare managers keep the organization thriving and financially healthy.

Revenue Cycle Management Software Solutions

RCM can be challenging for private practices, consuming valuable staff time and still causing revenue loss due to errors and omissions. Manual data entry and processing of claims are a significant source of denied claims and lost revenue. Additionally, failure to track and collect outstanding payments also leaks revenue. To streamline the process and generate real-time analytics and insights, healthcare organizations need innovative automation solutions that utilize AI and ML. 

RCM automation systems are already in use in healthcare and are now enhanced by AI to enhance operational efficiency and deliver better financial results. RCM management software provides several benefits for healthcare providers: 

• It ensures correct and quick reimbursements after patient care. Organizations implementing RCM software realize payments in 40 days instead of 90 days with conventional methods.¹
• It increases reimbursement rates, positively impacting the practice's finances.
• Software replaces the traditional slow, error-prone manual billing system with quick and accurate coding and billing. Fewer mistakes translate to less lost revenue and additional work.
• RCM software includes patient registration, insurance verification, coding, claim submission, payment tracking, and report generation. This comprehensive approach ensures that all components run smoothly.
• A well-implemented RCM system generates real-time reports and analytics, enabling the organization to assess financial status and future revenue, enabling meaningful, data-based decisions.
• RCM management software integrates with the EHR and Clinic Management System, linking clinical, administrative, and financial tasks, enormously improving efficiency. Any change in clinical services automatically reflects in the billing, reducing the likelihood of errors and omissions.
• RCM software not only reduces denials immediately but also continuously analyses denials to identify common causes and patterns. Such data enables practices to further refine their claims processes and reduce denials. 
• RCM software uncovers revenue losses caused by under-coding, incorrect pricing, and missed charges. 
• Implementing an AI-powered RCM system reduces staff burnout and improves patient satisfaction.¹

Choosing the Right RCM Software Solution

This can be a challenging decision, as managers have to weigh the best-of-breed stand-alone solutions, their compatibility with existing systems, the need for staff retraining, and the benefits of single-vendor solutions. Single vendors that provide all the software for a clinic have the benefit of frictionless compatibility between the automation components. The availability of 24/7 support is also crucial. 

A US-based company will have in-depth knowledge of the regulations and processes governing healthcare reimbursements. A company focused solely on healthcare is likely to provide specialized features in their software like cross-compatibility with electronic health records (EHR) and patient engagement tools. These industry-specific extras are valuable for boosting efficiency and ease of use. Chartpath, owned by LivTech, has been a trusted leader in this field since 2012, and provides automation solutions that relieve staff workload, reduce errors and claim denials, and improve financial stability and revenue. Their RCM solutions for private practices help staff with prior authorization requirements and the current climate of increased payer scrutiny. 

Optimizing Healthcare Revenue

RCM for private practices allows them to meet operational costs, deliver high-quality care to patients, and invest in better infrastructure and modern technology. Optimizing revenues requires organizations to be agile in adapting to current and future healthcare revenue trends. Anticipating the needs of the future and being well-prepared and equipped to meet them can keep practices financially robust. 

Patient service revenues are in flux. The traditional fee-for-service models are being replaced by novel delivery and payment models. Patient satisfaction, health outcomes, and overall better health of the population under care are driving provider reimbursements. Identifying and monetizing current and future healthcare revenue trends is essential for practices to remain profitable, provide the best possible services to patients, and allocate resources for staff training and development. Generating appropriate revenue under these novel alternative payment models requires excellent data collection and analysis. Unfortunately, the traditional methods of accounting and billing are inadequate.

RCM software empowers healthcare organizations to submit claims efficiently and quickly, reduce denials, generate valuable data, and remain financially healthy. It also helps practices anticipate income from alternative payment models, identify slow-to-pay carriers, and create payment plans for patients paying out-of-pocket.⁵ Integrating RCM software into your existing workflows helps organizations meet the compliance requirements of the strictly regulated healthcare industry. 

Chartpath by LivTech, is an Austin, Texas-based solution provider for physician practices. Our easy-to-use, frictionless systems handle documentation, billing, and revenue cycle management (RCM) so that clinic staff can focus on providing the best services to their patients. Chartpath offers you the benefits of a custom-built EHR system that integrates effortlessly with a complete RCM system. Our 24/7 support aids practices to maximize efficiency and profitability.  

Citations

1. Pennington, Rachel.  "Artificial intelligence (AI) and its opportunity in healthcare organizations revenue cycle management (RCM) (2023)." 
2. American Academy of Professional Coders. "What Is Revenue Cycle Management (RCM)?"
3. American Medical Association. "Payment and Delivery Models."
4. Family Practice Management. "The Cure for Claims Denials." 
5. American Academy of Family Physicians. "Finances and Your Practice."
6. American Medical Association. "What is Value-Based Care?"
7. American Medical Association."Nearly 60% of doctors work in a practice that’s part of an ACO."
8. Journal of AHIMA. "Claims Denials: A Step-by-Step Approach to Resolution." 
9. Becker's Hospital Review. “4 Ways Healthcare Organizations Can Reduce Claim Denials.”