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Four Common Problem Areas in Revenue Cycle Management

 |  By HealthLeaders Media Staff  
   September 17, 2009

Revenue cycle management is the backbone of a profitable medical practice. Many physicians struggle with the idea that they are businessmen as well as medical professionals, and are continually looking for ways to improve practice operations.

Below I have outlined four of the most common problem areas for physicians when it comes to revenue cycle management. These issues can be problematic on both a small and grand scale, and offer areas of opportunity for physicians to improve their revenue stream.

1. A disconnect between the physician and office manager. The lead physician should be fully committed to engaging in the revenue cycle process, even if a competent office manager is on staff. Bi-weekly meetings should occur between the physician and financial staff to review billings, collections, and office revenue to help ensure a "top-down" approach to maintaining practice operations.

Without this high level of "executive sponsorship," a disconnect can form over time between the physician and the financial state of the practice. Small problems can quickly turn into large ones. On a recent evaluation, we determined that a group practice was losing $350,000 a year—20% of the practice income—in flawed business processes related to rejected claims, unaccounted payments, and timely turnaround. None of these problems were unmanageable individually, but over time they had gotten away from the office manager and led to the practice losing a significant portion of its overall revenue.

In addition, should the physician choose to implement a new technology or process in the cycle, many times an office manager will lead the effort and then be involved in a back-and-forth on some important issues with the physician(s). This can lead to inefficiencies in the process, extended timelines, and slower adoption by the staff. With a fully engaged physician, it becomes clear that any changes or improvements are of the utmost importance to the overall success of the practice and that the entire team needs to be on board.

2. Untimely follow up in A/R, or no follow up at all. It may seem surprising that many practices would leave money sitting on the table, but that is exactly what they are doing when there isn't diligent follow up on A/R. Lagging collection times, inconsistent follow up, and improper insurance coordination all contribute to a "slow leak" of revenue.

In the aforementioned evaluation, by implementing thorough and consistent A/R processes, the practice was able to reduce A/R from $385,000 outstanding to $68,000.

Physicians should also be careful not to take excessive write offs that make A/R look favorable at the expense of overall income. If this is a current policy, or it is discovered to be a current policy of the office manager, this practice should be immediately discontinued. While it may be an attractive short term solution, it is not healthy for the longterm sustainability of the practice.

3. Lack of staff education. At a minimum, each member of the staff should be trained as to how their role fits into the overall revenue cycle. Front end reception should be diligent about collecting co-pays up front at the time of the patient's visit. Inaccurate coding can cost the practice tens of thousands of dollars a year. Technologies like card scanners to reduce data entry errors, and billing automation to provide reception access to patient financial information, are helpful tools in capturing every available dollar.

However, even in the absence of such tools every member of the team should understand how their actions impact the practice's bottom line. In addition, staff should be measured by established metrics in productivity and performance.

4. Inconsistent forms and processes. In order to have the most profitable practice possible, efficiency is key. Every form and touchpoint throughout the cycle should be standardized. For instance capturing patient data, filing a claim, and communicating with patients should follow the same process each and every time.

There are always ways to improve consistency. It is even possible to create overriding rules about primary and secondary insurance coverage to reduce confusion on how the patient is covered, and create auto-crossover. With greater attention to denial management beforehand, it's possible to reduce denial rates. Physicians can uncover many areas for improvement that may seem basic at first glance but can make significant impact to the practice.

RCM Problem Area Checklist
In addition to outlining the above problem areas in Revenue Cycle Management, here is a simple checklist for physicians in evaluating practice operations.

Are all your patient encounters are being billed in a timely manner (or at all)?

  • Are you getting paid quickly and appropriately?
  • Are your co-pays actually being collected?
  • Are treatments appropriately pre-authorized?
  • Are you taking excessive write-offs that make your A/R look good at the expense of your income?
  • Are you getting critical information about your payor performance?
  • Are your payors paying in a timely fashion?
  • Do you have a high denial rate?
  • Is a higher percentage of patient responsibility costing you additional time and money in collection?
  • Is a payor is paying more or less than your other payors for the procedures you perform?

These questions can help identify areas of improvement within the process, and allow physicians to formulate an approach to Revenue Cycle Management that will help streamline operations and increase revenue.

Chittaranjan Mallipeddi is CEO of MedPlexus, a developer of financial, administrative, and clinical software for physicians. For more information, visit
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