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Every year, hospitals spend about $262 billion managing denied claims. On average, insurance companies deny about 9 percent of hospital claims, after which hospitals duplicate previous efforts to ultimately regain roughly 63 percent payment for claims initially denied.

So, what’s to prevent providers from just getting claims submission right the first time?

There are a host of factors, but in a general sense, the reasons providers don’t get paid by insurance companies fall into two buckets: failure to get prior authorization for the performed services and coding errors / insufficient documentation. Eliminate these two factors and estimates are that 90 percent of claim denials simply disappear.

Unfortunately, according to “Revenue Cycle Management: The Art and the Science,” a fairly extensive list of misperceptions ensure that the two error buckets are regularly refilled.

Just what are these misperceptions?

We might call one group the ‘money magic’ errors. They start with the assumption that every sent bill results in payment. Some related ideas are that clinical services automatically spawn revenue-generating bills, that insurers automatically receive every sent claim, and that revenue cycle management is a direct, causal process that ensures payment.

And in the second bucket? Let’s call these the ‘sweatable small stuff’ concerns.

Specifically, these are ideas like accepting a certain percentage of denials as unavoidable, thinking that minor financial losses are insignificant, being fine with use of a line of credit while waiting for late payments, not taking the time to optimize the RCM system, and punting RCM knowledge to a biller, coder, or administrator.

Individually, these misperceptions may be somewhat insignificant, but they rarely if ever occur as isolated incidents. Rather, they are evidence of an approach that compounds minor issues and collectively creates major financial challenges.

So, how can healthcare provider organizations manage the revenue cycle to make sure dollars aren’t falling through the grate? How do often frenzied, overwhelmed healthcare organizations prevent inevitable human errors?

By combining RCM platforms with internal measures and best practices that minimize errors and put your organization closer to 100 percent earned revenue retention.

The most direct approach to eliminating these kinds of errors is to remove the human factor by adopting technology that automates these tasks. Beyond that generalization, “Revenue Cycle Management: The Art and the Science” identifies specific measures and practices that improve efficiency and revenue reconciliation.

What does RCM data say about an organization’s financial health?

The most important component of good RCM hygiene is understanding key performance indicators (KPIs), starting with the accuracy of data. Your primary concern with accuracy should focus on key aspects of the billing process, such as the initial accuracy of medical coding, the percentage of claims paid after initial submission, and missed charges created by either human/technological error or persistent insurance denials.

Combined, these KPIs give you a high-level view of your organization’s RCM process health and tell you where changes may be necessary.

How productive are your coding and charging efforts?

The goal is to get as close as possible to zero coding and billing errors. With that in mind, consider some granular measures of staff productivity.

For example, how long does it take to get patient information to coding staff? How many patients have been discharged without final billing and what is the total dollar value of those bills? Is coding staff productivity consistently above a 95 percent completion rate?

Lags in productivity are often indicators of bottlenecks in the process, any one of which may create delays in claim submission and reimbursement. If the RCM process is going smoothly and meeting KPI benchmarks, revenue will be regularly flowing into the organization.

How quickly and regularly is your organization reconciling revenue?

A comparison of coding and charging productivity with particular revenue reconciliation measures provides additional insight into whether inputs are generating expected outcomes.

As mentioned at the top, the cost to hospitals of claim denials is high—around $262 billion annually. Look at the percentage of claims denied for your organization and the total dollar value of all denials. Generally, insurance claim denials hover around 10 percent and can be improved significantly using the automated workflows an RCM platform provides. Also, compare appealed denials to total denials and aim for a ratio as close to one as possible.

Additionally, track how long it takes to get paid and aim for fewer than 30 days, and be aware of underpayments so you know how much money is left on the table.

What are the details of your costs and cash flow?

To stay on top of cash flow trends, track payor volumes and look for even modest declines that may indicate fewer referrals, more no-shows, appointment cancellations, payor agreement cancellations, or payors trying to shift patients to a different provider. Small data changes may be a red flag of something that should create concern.

Also look at how many days it takes to bill/charge. More than two days may be a sign of incomplete documentation or untrained/overwhelmed staff. Further along in the process, also pay attention to how many days it takes to receive payment, bearing in mind that the average varies based on the payor, i.e., private insurance, Medicare, and worker’s compensation.

A robust RCM platform will also provide you with information about how long claims languish in accounts receivable (AR) and when they’ve been there more than 90 days, your claim denial and net collections rates, the percentage of claims that are clean (no edits required) on initial submission, and both the percentage of claims and dollar value associated with bad debt.

Much of the information a robust RCM platform can provide may seem like it overlaps to the point of redundancy, but the value lies in different perspectives on data that illuminate various approaches to achieving greater efficiency. Because this blog post provides just an overview of the specific and valuable information provided in “Revenue Cycle Management: The Art and the Science,” it’s worth spending more time with the specific data points the article provides.

Apply those recommendations to your organization but be wary of a specific misrepresentation the article warns against—that of thinking an RCM platform can magically transform a healthcare organization. What RCM tools can do is automate your processes and workflows, but they’re only effective to the extent that they are properly configured and regularly evaluated. Do the leg work up front and a functional RCM system will show you exactly where you can improve processes to protect your financial health.

Medsphere’s RCM Cloud® platform is an all-inclusive suite of patient access and revenue cycle components that can replace any existing HIS and its’ add-on applications. The solution is all browser-based and easy to use, and it enables all the recommended best practices listed in “Revenue Cycle Management: The Art and the Science.”