Revenue Cycle Overview
The revenue cycle encompasses all administrative and clinical functions that contribute to the capture, management, and collection of patient service revenue. It begins when a patient schedules an appointment and ends when all payments for the encounter have been collected.
Front-End Processes
| Process | Description | Key Activities |
|---|---|---|
| Scheduling | Initiating the patient encounter | Appointment scheduling, provider assignment, resource allocation |
| Pre-registration | Collecting patient information before the visit | Demographics, insurance information, contact details, emergency contacts |
| Insurance Verification | Confirming coverage and benefits | Eligibility verification, benefit determination, copay/deductible identification, coordination of benefits for multiple payers |
| Prior Authorization | Obtaining advance approval from payers for specific services | Submitting clinical documentation, obtaining authorization numbers, tracking approval status |
| Registration | Completing the patient check-in process | Verifying/updating demographics, collecting signatures (consent, NPP acknowledgment), scanning insurance cards, collecting point-of-service payments |
| Financial Counseling | Assisting patients with financial responsibilities | Estimating out-of-pocket costs, establishing payment plans, screening for financial assistance programs |
Middle Processes
| Process | Description | Key Activities |
|---|---|---|
| Charge Capture | Recording services provided for billing | Documenting all billable services, supply usage, and procedures; using charge description master (CDM/chargemaster); ensuring completeness of charges |
| Clinical Documentation Improvement (CDI) | Ensuring documentation supports accurate coding | Concurrent record review, physician queries, documentation education, specificity improvement |
| Coding | Translating clinical documentation into codes | Assigning ICD-10-CM/PCS, CPT, HCPCS codes; DRG assignment; ensuring compliance with coding guidelines and payer rules |
| Claim Submission | Sending claims to payers for reimbursement | Claim scrubbing (edits checking), electronic claim submission, UB-04 (institutional) and CMS-1500 (professional) forms |
Chargemaster (CDM) Management
The chargemaster (charge description master) is the comprehensive list of items, services, and procedures billable to patients or payers. Proper maintenance is critical:
- Each item includes a description, charge amount, revenue code, CPT/HCPCS code, and department
- Regular review ensures accuracy of code assignments and pricing
- Updates must reflect annual CPT, HCPCS, and revenue code changes
- Compliance reviews should verify that charges are appropriate and defensible
- A multidisciplinary chargemaster committee should oversee maintenance
Claim Forms
| Form | Also Known As | Used By | Key Data Elements |
|---|---|---|---|
| UB-04 | CMS-1450 | Institutional providers (hospitals, SNFs, home health) | Revenue codes, HCPCS/CPT, ICD-10 codes, condition codes, occurrence codes, value codes |
| CMS-1500 | Professional claim | Physicians and professional providers | CPT/HCPCS codes, ICD-10-CM codes, place of service, NPI, modifiers |
Back-End Processes
| Process | Description | Key Activities |
|---|---|---|
| Remittance Processing | Receiving and applying payer payments | Processing EOBs/ERAs, posting payments, identifying variances, reconciling expected vs. actual payment |
| Denial Management | Addressing rejected and denied claims | Identifying denial reasons, categorizing denials (clinical, technical, administrative), correcting and resubmitting claims, tracking denial trends |
| Appeals | Formally challenging denied claims | Preparing appeal letters with supporting documentation, following payer-specific appeal processes, tracking appeal outcomes, meeting filing deadlines |
| A/R Follow-Up | Managing outstanding accounts receivable | Aging analysis, payer follow-up, patient collections, write-offs, bad debt management |
| Patient Billing | Collecting patient responsibility | Generating patient statements, payment plans, collections, financial assistance applications |
Key Revenue Cycle Metrics
| Metric | Definition | Target/Benchmark |
|---|---|---|
| Days in A/R | Average number of days it takes to collect payment after a claim is submitted | Less than 40-50 days |
| Clean Claim Rate | Percentage of claims that pass all edits and are accepted on first submission | Greater than 95% |
| Denial Rate | Percentage of claims denied by payers | Less than 5% |
| DNFB (Discharged Not Final Billed) | Dollar value or days of discharged accounts not yet coded and billed | Less than 5 days |
| Net Collection Rate | Percentage of collectible revenue actually collected | Greater than 95% |
| Cost to Collect | Total cost of billing and collections divided by total collections | Less than 3-4% |
| Initial Denial Rate | Percentage of claims denied on initial submission | Less than 5-6% |
| Appeal Overturn Rate | Percentage of denied claims successfully overturned on appeal | Greater than 50% |
Common Denial Categories
- Registration/eligibility errors: Invalid insurance information, lapsed coverage, authorization issues
- Coding errors: Incorrect codes, unbundling, missing modifiers, medical necessity
- Clinical/documentation: Insufficient documentation, missing signatures, incomplete records
- Timely filing: Claims submitted past the payer's filing deadline
- Duplicate claims: Same service billed more than once
- Coordination of benefits: Incorrect primary/secondary payer assignment