C811 Task 1 Revenue Cycle Analysis Example

From Registration Desk to Remittance: Following One Cellulitis Admission Through the Revenue Cycle of a Composite Community Hospital

Student Name

Leavitt School of Health, Western Governors University

C811: Healthcare Financial Resource Management, Task 1

Course Instructor

Month Day, Year

From Registration Desk to Remittance: Following One Cellulitis Admission Through the Revenue Cycle of a Composite Community Hospital

The Revenue Cycle Defined

The revenue cycle is the set of administrative and clinical activities that capture, manage and collect payment for the services a healthcare organization provides. It begins when a patient schedules or arrives for care and ends when the account's balance reaches zero, through payment by insurers and patients or through adjustment. The work is usually divided into three stages: the front end, which gathers accurate patient and insurance information before or at the time of service; the middle, which turns care into documented, coded and charged services; and the back end, which submits claims, collects payment and resolves denials. Billing is expensive even when it goes well. A time-driven cost study at an academic health system estimated that billing and insurance-related activities cost about $124 for a general inpatient stay and $215 for an inpatient surgical stay (Tseng et al., 2018).

This paper follows one account through the cycle at a composite 220-bed community hospital: a 46-year-old patient with Medicaid managed care coverage who arrives at the emergency department on a Friday night with cellulitis of the leg, is admitted for intravenous antibiotics and is discharged after three days.

Front End: Registration, Verification and Authorization

Steps. A registration clerk in the emergency department records the patient's demographic information and insurance, scans the insurance card and photo identification, and has the patient sign consent and financial responsibility forms. Because this is an emergency, federal law requires a medical screening examination before any discussion of payment, so registration is completed after triage. The next business day, a financial clearance specialist verifies eligibility electronically and, because the patient was admitted, notifies the Medicaid managed care plan and requests authorization for the inpatient stay within the plan's deadline.

What went wrong. The clerk selected the patient's former commercial plan from an old record rather than the current Medicaid plan on the new card, and the weekend meant no one checked eligibility until Monday. The plan's inpatient notification deadline was one business day after admission.

HIM connection. Accurate patient identification also protects the master patient index; a duplicate or merged record would put the patient's clinical information at risk as well as the claim.

Front-end errors are costly because they surface late. The claim will be built on the registration data, and nothing in the middle stage will fix a wrong payer.

Middle: Documentation, Charge Capture and Coding

Steps. During the stay, services are captured as charges: room and board each day, pharmacy charges when antibiotics are dispensed, laboratory charges when tests are resulted. Most charges post automatically from orders through the chargemaster, the hospital's master list of billable items with their revenue codes, procedure codes and prices. After discharge, the physician completes the discharge summary, and an inpatient coder reviews the record, assigns ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes, and the grouper assigns the diagnosis-related group that many payers, including this Medicaid plan, use for payment.

HIM connection. HIM staff monitor the record for completeness, send queries when documentation is unclear and code the stay. In this case the coder noticed that the progress notes described spreading redness and fever but never stated whether the cellulitis had progressed to an abscess, and sent a query to the physician, who documented that there was no abscess. The chargemaster, which HIM helps maintain with finance and clinical departments, must be accurate and current, because a missing or outdated line means a service is never billed. Under federal price transparency rules, hospitals must also publish their standard charges, including negotiated rates, which makes chargemaster accuracy a public matter as well as an internal one (Centers for Medicare & Medicaid Services [CMS], 2024).

What can go wrong. Late documentation delays coding and increases discharged-not-final-billed days; missing charges reduce revenue; coding errors lead to denials or overpayments.

Back End: Claims, Payment and Denials

Steps. Patient financial services compiles the claim, runs it through a claim scrubber that checks for missing data and payer-specific edits, and submits it electronically. The payer adjudicates the claim and returns a remittance advice showing what it paid, what it adjusted and what it denied. Staff post the payment, work any denials and bill the patient for any remaining balance.

What happened. The claim went to the patient's former commercial insurer and was denied for no coverage. Staff identified the correct Medicaid plan and resubmitted, but that plan denied the claim because the admission had not been authorized within the notification deadline. The hospital filed an appeal with the clinical documentation showing that the admission met inpatient criteria, and the plan overturned the denial after 74 days. The account that should have been paid in about three weeks was paid more than three months after discharge, and staff time was spent on two denials and an appeal.

This pattern is common. An analysis of remittance data found that claim denial rates differed sharply by type of insurance, with fee-for-service Medicaid the hardest to bill, at a denial rate 17.8 percentage points higher than fee-for-service Medicare, and Medicaid managed care 6 percentage points higher (Gottlieb et al., 2018). Hospitals that serve many Medicaid patients therefore have particular reason to get the front end right.

Measuring the Cycle

Revenue cycle performance is tracked with a small set of indicators. The table lists five, with common internal targets and the composite hospital's current results.

Improvements

The indicators point to the front end as the largest source of lost time and revenue. Three improvements follow. First, real-time eligibility checks at registration, including in the emergency department after the screening examination, with an alert when the payer on file does not match the card presented. Second, a weekend financial clearance role or automated authorization notices so that admissions on Fridays and Saturdays meet payer deadlines. Third, a denial management team that sorts every denial by root cause each month and reports front-end, middle and back-end causes separately, so each department sees its own share. In the middle stage, a concurrent documentation review for inpatient stays would reduce queries after discharge and lower discharged-not-final-billed days, and an annual chargemaster review would keep charges complete and consistent with published prices. Each improvement is measured against the indicators in the table, so leaders can see whether it worked.

References

Centers for Medicare & Medicaid Services. (2024). Hospital price transparency. https://www.cms.gov/priorities/key-initiatives/hospital-price-transparency

Gottlieb, J. D., Shapiro, A. H., & Dunn, A. (2018). The complexity of billing and paying for physician care. Health Affairs, 37(4), 619-626. https://doi.org/10.1377/hlthaff.2017.1325

Tseng, P., Kaplan, R. S., Richman, B. D., Shah, M. A., & Schulman, K. A. (2018). Administrative costs associated with physician billing and insurance-related activities at an academic health care system. JAMA, 319(7), 691-697. https://doi.org/10.1001/jama.2017.19148