2. The revenue cycle can no longer be seen as a simple
process of being paid for services rendered. At the
basic level we have people, processes and technologies
that intersect to recoup monies from patients and
third parties. Revenue cycle staff must be knowledge-
able about the policies and procedures as they pertain to
physician practice management. Policies and procedures
must be well written and clearly defined to guide staff to
the proper ends. Processes and workflows should be
clearly laid out such that staff accountability can be
demonstrated. Additionally, the technologies that are
available in today’s market further demonstrate the
need for well educated staff and clearly defined
processes.
This white paper focuses on identifying key targets in the
people, processes and technologies of the revenue cycle
that will lead the revenue cycle manager to improved per-
formance in benchmarking, accountability and revenue.
Further Complexity
While basic blocking and tackling skills are required to
maintain staff proficiency, it is the integration of
Electronic Medical Records (EMRs), Claim Scrubbers,
Electronic Remittances, ICD-10 Implementation, Health
Savings Accounts (HSAs), CCI updates and regulation
changes and provider-based billing, among other
influences, that add a level of sophistication and
complexity to the revenue cycle. Though the routine
processing of claims requires strict monitoring and
control, organizational hierarchies typically allow
soft technology to report to Information Technology (IT),
with the often poor results falling on the revenue cycle
manager’s shoulders.
Integration and interoperability become focal points for
the seamless exchange of data among systems for insurance
verification, auto-charging of facility and professional
fees and the use of a single MPI (Master Patient Index).
The revenue cycle manager now more than ever must
communicate across occupational skills to identify
signals of trouble in performance and exact appropriate
remedies. Avoiding a revenue cycle breakdown means
reducing the number of hand-offs among individuals
and departments, further streamlining the cycle and
eliminating errors.
Appropriate communication flows and aligned
responsibilities among department heads and revenue
personnel are vital to revenue cycle health. All facets of
a medical practice must revolve around the revenue
cycle.
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What is the Revenue Cycle?
The following graphic defines the revenue cycle for our discussion.
1
Utilization
management
Claim
submission
Third-party
follow-up
Rejection
avoidance
Transaction
posting
Contract
management
Appeals
HIM
Charge
capture
and coding
Financial
counseling
Patient
access Scheduling
and
pre-arrival
Back End
• Editing
• Claim submission
• Account follow-up
• Customer service
• Cash posting
• Contractual posting
• Denials management
• Payment varianceFront End
• Scheduling
• Demographics
• Insurance verification
• Eligibility checking
• Financial counseling
• Documentation
• Charge capture
• Charge entry
Encounter Management
3. The Pyramid Effect
As more processes are automated, a natural hierarchy,
or pyramid, of the dollars to be collected is formed. The
more difficult dollars at the top are often hard to tap,
while dollars at the bottom of this pyramid tend to flow
in more easily using current automation levels.
While recovering the easy dollars is good, it is not
sufficient. Logically, while most operations are built to
focus on the bottom of the pyramid, the most successful
practices involve advanced workflow processes to
address the more difficult dollars at the top. It is most
often how well revenue is retrieved at the top of the
pyramid that marks the difference in success versus failure.
Measuring and Monitoring
The revenue cycle manager must take a comprehensive
look at his/her own performance by examining all of the
business processes involved in moving a patient through
the system and ensuring that the provider is being paid
appropriately. These business processes, including up-
front patient referral and scheduling, patient registration
and insurance verification, medical records coding,
utilization management, billing, and follow-up ac-
tivities associated with collections, are all part of the rev-
enue cycle.
The monitoring and ensuring of the quality of each of
the processes and functions is vital. Without oversight
and feedback to all contributing departments on the
quality of performance, the cycle cannot be optimized.
The old adage of measure twice cut once may be
appropriately applied; we must be careful when using
measurement and benchmarks as calculations can be
made using different formulas. Improved accounts
receivable (A/R) days may be achieved by increasing
payments or writing off balances. We must measure,
monitor and retool the workflow to minimize errors and
maximize revenue. There are five key benchmarks to
measure the health of your revenue cycle:
1) Cash flow – All improvements in workflows and de-
cisions on contracting and policies affect cash flow.
Incremental increases in cash flow should be measured.
This can be better explained in tracking First Pass
Payment Rates. Improvement in First Pass Payment
Rates improves cash flow and reduces costs.
2) Denial and bad debt rate – The former usually leads
to the latter. Align write-off codes to their denial
categories. If a charge is denied due to untimely
filing, the subsequent write-off should be defined as
an untimely filing write-off.
3) Days in receivable – Properly calculated and
compared to national benchmarks, improvements
can be measured.
4) A/R greater than 90 days – Reductions will improve
your cash flow. Be wary if a strong referral to collection
agency policy is implemented. You should not allow
the referral amount to be written off the books. This
will improve the AR >90 days, but will it improve cash
flow (item 1)?
5) Lag days – This is the time between the date of service
and the date of actual billing. Compare inpatient and
office charges to national benchmarks. Improvements
will provide a timely submission of charges and
may provide a significant one-time increase in cash
flow.
Deny, Deny, Deny
Denials will show you where improvement in performance
can have the greatest impact. Breakdowns usually occur
in three common areas; the first area involves patient
referrals and scheduling. When patients are referred
from one caregiver to another, the information that is
passed along is often inconsistent or incomplete. Scheduling
systems are set up to capture a minimum amount of
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EFFORT
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information on a computer screen. Therefore, schedulers
are focused on filling in these screens, rather than
capturing the patient information most needed to send
out the bill. A second set of breakdowns typically occurs
when staff gathers patient information at preregistration.
This includes verifying patients' insurance, determining
whether care needs to be authorized or securing
payment sponsorship for patients who do not have
appropriate financial coverage for their care. Rather
than obtaining this information in advance, staff often
collect it quickly when the patient arrives for care,
resulting in incomplete or inconsistent information.
A third set of problems that ultimately delays billing and
revenue collection arises when care concludes and/or
after service has been rendered. One example is the failure
to collect insurance co-payments and deductibles before
patients check out. Another is incomplete medical record
information that either delays initial billing or forces an
insurer to deny the claim. Staff assigned to follow up on
unpaid bills often have other responsibilities as well.
And, typically, they do not have the information they
need or a systematic process in place to resolve
outstanding balances in an appropriate and timely
manner. Providers that have redesigned their revenue
cycles have found that the dollar value of bills that
should have been sent out for payment, but were
delayed for an unresolved deficiency, is typically three
times higher than they estimated.
Denials reveal the health of the revenue cycle. Capturing
denial information can sometimes be a difficult task for
organizations. Even with the advancements in technology
and system capabilities, it is not unusual to see organizations
with very limited, if any, understanding of their denials
and the dollar impact. Organizations must take full
advantage of technology tools to analyze their financial
health. Capturing, analyzing and disseminating denial
information are important elements in the process of
denial management. We need to distinguish between
controllable versus uncontrollable denials for this
discussion. Controllable denials are those denials that
could be avoided if steps were taken to fully understand
the extent of coverage that the patient has or may not
have or whether or not the claims were filed according
to payer guidelines. Examples of controllable denials are:
• The patient cannot be identified with the information
submitted.
• The patient is not covered by the insurance plan
billed on the date of service.
Controllable denials will include:
• Coding error.
• Inaccurate eligibility.
• No authorization/no referral obtained.
• Not medically necessary.
• Provider enrollment is not valid.
• Registration error/unable to identify.
• Untimely filing.
Uncontrollable denials fall under circumstances that are
beyond the control of the provider. Examples of uncon-
trollable denials are:
• Patient paid directly.
• Co-pay or deductible has not been met.
• The payer is requesting information from patient.
Retooling for Improved Performance
A smoothly functioning revenue cycle requires clearly
delineated work processes that prioritize all activities
and measure performance at each step. Redefining work
processes and flow and retraining employees are the
keys to improvement. To keep the revenue cycle
functioning appropriately, staff must know what they
should be focusing on; they should have all the information
they need in front of them. Establishing work volume
and quality goals also helps drive productivity and
improve results. It is important to have information
available at several levels of detail, from the account
level up to the employee, department and then the
entire revenue-cycle level, to improve accountability and
demonstrate how each individual and each step in the
cycle has an impact on overall performance.
A revenue cycle operating at peak performance becomes
a strategic resource for helping providers combat the
widening gap between increasing costs and declining
reimbursement. A healthy revenue cycle not only
ensures the provider is getting paid for the care and
service delivered, but also provides revenue to help
reduce expense cuts and financial losses while improving
long-term viability. High performers have an organizational
strategy and culture that elevates the importance of the
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revenue cycle. High performers master areas important
to their particular circumstances. They do not necessarily
focus on the same revenue cycle areas as others, but they
target those elements most crucial to their success. Simply
put, they are good at what they need to be good at.
High performers accelerate improvements. High
performers are not just good at setting goals; they take
action and execute strategies to achieve these goals.
Organizations that have comprehensively redesigned
their revenue cycles typically see a range of benefits,
including:
• A 2 to 4 percent increase in annual net patient
revenue that is sustained year to year.
• Reductions of up to 25 percent in administrative, bad
debt and charity care write-offs.
• A/R levels decreased by 15 to 30 percent or more.
• Significant improvements in employee productivity
and morale and patient and physician satisfaction.
Inclusive to an organization’s revenue cycle strategy
should be people, processes, technologies, metrics,
communication and culture. Here are some steps to im-
prove these factors in your organization:
People
• Apply high standards to hiring.
• Emphasize education.
• Take a career approach to revenue cycle positions.
• Leverage compensation and work arrangements for
employee satisfaction.
Process
• Use formal structures to obtain stakeholder input.
• Target revenue cycle improvements around the
consumer experience.
• Adopt established improvement methodologies,
including those not traditionally used in healthcare.
Technologies
• Selectively use technology for interactions with
customers.
• Manage for investment value.
• Dedicate IT staff to the revenue cycle.
Metrics
• Measure and report frequently.
• Look beyond traditional metrics for success.
• Develop and enforce systems of accountability
around monitoring and reporting practices.
Communication
• Drive a positive scheduling/registration experience.
• Provide estimates of financial obligations.
• Promote financial assistance.
• Support clear and simple billing and collections
materials.
• Recognize the importance of external communications.
Culture
• Support the revenue cycle at the highest level.
• Garner appreciation for the revenue cycle from non-
financial staff.
• Demand high performance.
• Celebrate success.
• Make innovation a priority.
Conclusion
Although organizations pursue a variety of strategies to
attain revenue cycle excellence, results of the research
are clear: high performance does not just happen. Those
providers that are making good on efforts to realize
patient-focused and value-driven revenue cycle
processes have done so by instilling organizational
commitment to their goals.
Efforts must reach beyond the business office. Revenue
cycle performance is affected by everyone throughout
the organization, with success dependent on support
from health information management, physicians,
nurses and IT, to name only a few. As such, key actions
will be needed from revenue cycle leadership to attain
the widespread support vital for achieving high
performance.
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ABOUT THE AUTHOR
Philip Villacci has 30 years of healthcare experience with 25 years in C-level positions. He has served roles in academic medical
centers, private medical groups, corporate medicine and healthcare consulting. He has expert knowledge of physician
practice management in the areas of governance, ambulatory operations, physician compensation, revenue cycle
management, strategic planning, team development, finance and reimbursement. Mr. Villacci is recognized for building self-
sustaining and effective teams, improving revenues and profits and implementing successful change. He uncovers strategic
flaws and implements corrective actions. He has a proven ability to improve operations with a strong tenacity for success in
start-up and turn-around environments.
Mr. Villacci holds a BBA in Management Science from the City University of New York, Bernard M. Baruch College and an
MBA from CUNY, Bernard M. Baruch. He is a Certified Medical Practice Executive and holds board positions on Surgical Im-
plant Services and The Wellness Community.
