Revenue Cycle Management: The Essential Guide for Physicians (with Checklist)
Keys to RCM for physicians & practice managers
As a physician or practice manager, you need to understand a few key aspects of the RCM process to make sure you collect what you’re owed.
What are the Keys to successful revenue cycle management for physicians?
In this guide, you’ll learn:
Foundations of an efficient RCM process
4 steps to ensure the appointment goes smoothly (from an RCM perspective)
Essential reports to review
Focus areas for optimization & troubleshooting
Ready? Let’s get started.
Table of Contents
What is Revenue Cycle Management?
Where do Medical Billing Companies Fit In?
Foundations of RCM
The 4 Key RCM Steps of Each Appointment
Key Reports to Review
Optimization and Troubleshooting
Next Steps
What is Revenue Cycle Management?
Revenue cycle management is essentially a very complex accounting equation. The complexity stems from the fact that RCM in medical practices contains many unique elements and idiosyncrasies not found in other fields, such as:
Specific stipulations that vary between insurance providers
Government regulations and billing codes
The above is just a partial list. The important thing to understand is that, in this accounting equation, your patients are your assets, and the insurance companies are your liabilities.
Where do Medical Billing Companies Fit In?
Due to the complexity and specialized nature of medical billing, most small practices utilize the services of a third-party medical billing company to manage their collections. There are many types of medical billing companies:
Home-based one-person operations serving a few practices
Dedicated billing firms with dozens or hundreds of clients
Multi-million dollar companies
Selecting a medical billing company is a key decision for your practice, especially during the startup phase. While different models can be effective, depending on your practice, in general you want to work with a company that provides personalized service and is highly focused on collecting every dollar your practice is owed.
In general, medical billing companies are paid a percentage of the total amount collected. A low percentage rate may seem attractive, but maximizing total collections is the real goal. A biller that charges a low rate, but collects less money, will result in lower revenue for your practice. In general, most practices find they do better by working with a diligent, highly responsive billing service, which may charge a slightly higher rate, but significantly much more revenue overall, and with better customer service and less hassle for your staff.
Foundations of RCM
To maximize your revenue, you first need to master the basics.
In our experience, success in every stage of the RCM process rests on 3 factors:
Foundation 1: Use Current Technology
There’s a lot of software involved in revenue cycle management. Insurers are very strict, and will reject claims for even the most minor errors. If you or your billing company are using software that’s obsolete, you’ve set yourself up for rejected claims & lost revenue.
On the other hand, a good practice management software suite allows you & your RCM partner to scrutinize every single claim before you submit it, so you can be 100% certain that when you submit a claim, every detail of that claim is accurate, and you will get paid on time and in full. We use AdvancedMD with many of our clients, though we also have clients who use Kareo and other practice management tools.
At a minimum, the following must be up to date & fully compatible with latest standards of each insurer and with each other:
Your medical billing company’s claims processing software
Each clearinghouse your medical billing company uses
We often consult with our RCM clients & assist with setup & implementation of practice management software. If you need assistance, reach out to us. The AMA also has some resources on practice management software here.
New software tools that utilize AI have an ever-increasing role in billing and RCM as well.
Foundation 2: Establish Good Communication
What happens when there’s an issue with one of your claims? Even the best medical billing company won’t fix your problems automatically. That’s because the majority of billing errors - over 90% by some estimates - start at your front desk. To avoid lost revenue, you need to prevent mistakes before claims leave your office. However, your office staff may not know they’re making mistakes. Instead, these errors will come back as denials or delayed payments.
The best medical billing companies will close the loop, and help your office solve these problems. In short, expect your office manager to be in close communication with your billing service to prevent errors. Be aware that communication with bigger billing companies such as Kareo’s in-house billing departmet, Athena (which offers free software when they manage your billing account), and others can be challenging. This is because employees of larger billing companies often work in separate departments and don’t necessarily communicate with one another, which can make it difficult to resolve complex issues that require detailed communication.
Smaller RCM companies - as long as they use up-to-date technology - are usually better able to solve problems that require close communication between people at different stages of the billing process.
Foundation 3: Prepare to Do the Work
As mentioned above, a good medical billing service will help you identify & resolve issues at their source.
Don’t expect miracles. Instead, plan to do the work.
You and your office manager must establish effective procedures, and train your staff to implement them. While strong staff engagement is natural in healthcare overall, attention to the minutiae of the RCM process can be more challenging than interacting with patients face to face. Make sure your employees are diligent & up to the task.
If your practice has issues with any of the above, we encourage you to get in touch with us here. We’re experts at helping practices identify problems in their medical billing process & capture revenue that otherwise would have been lost.
If your practice has the above issues under control, you’re ready for the next step: the appointment.
The 4 Key RCM Steps of Each Appointment
Patient appointments are the core of every medical practice. This is what medicine is all about. But medicine is also a business, and implementing a reliable revenue cycle management process alongside great clinical care is what sets the most successful practices apart.
There are 4 key steps in the RCM process for every appointment. If you get these right - consistently, every time - your collections will improve, and delays and denials will fall dramatically.
Step 1: Verify Insurance Coverage and Benefits for Every Patient
Before every appointment, your staff should confirm how the appointment will be paid for.
In theory, this step is easy. But, sometimes things get hectic, people make mistakes, and before you know it you could be seeing several patients a day who aren’t covered. This is usually impossible to fix after the fact, so the key is to prevent this problem before it occurs. In our experience, the most reliable solution to verifying insurance is to add tier-1 level remote workers to your team. While your front desk staff may be diligent & well-trained, they probably don’t have the time to consistently call each patient to verify coverage. A dedicated remote staff member will be able to follow these verification procedures every time.
Remember, patients are usually your allies in this process. No one wants a surprise bill for medical services they thought were covered, yet some surveys indicate that over 30% of patients in the US have received unexpected medical bills, and over two-thirds of Americans are worried about unexpected medical expenses. By contacting patients to verify coverage in advance, you’ll show that your practice cares about the patient’s best interest.
Step 2: Obtain Pre-Authorizations 100% of the Time
This step is also simple, in theory. If a procedure requires pre-authorization, your staff must ensure that you indeed have the proper pre-authorization. No mistakes, and no exceptions.
But once again, the challenge is consistency, even when things are busy - and especially when things are busy. Once again, we strongly recommend utilizing remote workers rather than onsite staff for this process, as much as possible. If things get complicated, onsite staff can assist as needed.
Again, patients can be important allies in this process, and many patients are highly motivated to help obtain pre-auth for important care. Organizations such as the Junior Diabetes Research Foundation publish comprehensive guides showing patients how to obtain prior authorization for care, and how to overcome common obstacles. Manufacturers and suppliers also provide resources to help ensure that procedures involving their products are properly authorized. For example, Boston Scientific has a “reimbursement” section of their website, as do many others.
Many consultants recommend you confirm pre-authorization for upcoming appointments at least 72 hours in advance. That way, if there’s any issue, your staff will have adequate time to address it in advance. And, if the issue can’t be resolved quickly, you still have an opportunity to reschedule the appointment, and also schedule a new patient in the available time slot..
What you don’t want is either:
an uncompensated appointment
an empty slot in your schedule
Ensuring pre-authorizations goes a long way in avoiding these issues, and the wasted resources & lost revenue they entail.
Step 3: Create a Reliable System to Collect Co-Payments
Once again, the key here is consistency at the front desk. Notice the pattern?
The difference in this case is that rather than dealing with insurance companies, your staff collect co-pays from patients face-to-face. Thus, you need to show patients you care, while also ensuring your practice receives payment every time. That’s not always easy.
For most practices, patient responsibility collections requires a shift in mindset. Beyond that, your most important job is to educate and empower patients with tools and information related to payments. Your practice must:
Make sure staff are properly trained to collect payments from patients
Consider keeping patients’ payment information on file
Use appropriate technology to facilitate payments via different payment methods
Again, as much as possible, you want to avoid issues with collecting co-pays before they occur, because these issues are much harder to address after the fact.
Step 4: Ensure Timely and Accurate Clinical Documentation
At this point, you have finally seen the patient. You and your staff have done a lot of work to get to this point. Don’t let up now!
Clinical notes are a vital part of the billing process, and while EHR’s are not that complicated, they are definitely tedious. In almost all cases, we recommend you get a scribe to assist with your notes. See our guide to medical scribe services to learn more about what to look for in a scribe.
There is plenty of evidence that scribes pay for themselves by simply allowing physicians to see more patients. What is less well known is that scribes help ensure that you get paid in full for each visit, because by reducing the provider’s workload, scribes allow you to:
Focus on the most important aspects of the note
Double check to avoid mistakes in documentation
Make sure you bill at the appropriate rate for all services
A physician who is overwhelmed by documentation may not do all of this consistently, and this can easily lead to denials and undercharges. Regardless of whether you use a scribe, your clinical notes must be complete and accurate in order to bill for services. If you’re using a medical billing service, this is the final step before the claim leaves your office.
Key Reports to Review
At this point, the claims have left your office. But don’t make the mistake of thinking you can just sit back and collect your money. To ensure your practice is actually being paid in full, you need to regularly review reports from your medical billing service. This will allow you to gauge efficiency and identify potential issues.
Some key metrics to review are:
Clean Claim Rate
“Clean claim rate” is the percentage of insurance claims that are paid in full upon submission, without any delays, errors, or rejections. Although accurate data are hard to obtain, a clean claim rate of 90-95% is generally considered average for private practices.
However, rather than worrying about industry benchmarks, we recommend that you focus on trends within your own practice. Whatever your clean claim rate is, you should try to improve it.
Percent of Accounts Receivable Paid Within 60 and 120 Days
Both numbers should be as close to 100 percent as possible. According to the US Department of Commerce, you’re likely to collect only 70 percent of AR after 60 days, and the longer you wait, the greater the chance you won’t get paid at all.
Accounts Receivable Unpaid Over 120 Days
This number should be very low, and always decreasing. The reality is you won’t get paid for most of this. We specialize in collecting old & overdue charges, and our team is usually only able to collect about 40-50% of claims that are over 120 days old, and while this is far from ideal, it’s significantly better than the industry average of 30%. If you have an issue in this area, get in touch with us and we’ll help you sort it out.
Ratio of Closed Claims Vs. Overall Claims
In medical billing, if you get paid at all, you almost always get 100% of the amount you can potentially collect. That’s why this ratio is much useful than “collection rate,” “net collection rate,” or “adjusted collection rate.” It’s also much easier to calculate.
Optimization and Troubleshooting
The RCM process is so complex, with so many moving parts, there’s always something you can improve. Even if (somehow)100% of your claims are being paid, without any delays or rejections, there’s always something you can do to improve efficiency.
The following are some likely areas for improvement.
Revise Your Office Practices to Address Recurring Issues
This step may seem very basic, but most practices skip it. Here’s what’s required:
Look closely at your office processes for managing the RCM aspect of each appointment
Identify where are things are going wrong - especially recurring errors
Update your processes to fix them
We recommend doing this regularly, on a set schedule - ideally monthly, or at least quarterly. But most practices don’t, either because they’re overwhelmed by day to day work, their medical billing company doesn’t communicate with them, or both. That brings us back to the foundation. You can only optimize if your foundation is solid.
Renegotiate Your Fee Schedule as Appropriate
Insurance companies don’t automatically raise your rates. Make sure you review and renegotiate your fees with insurers that aren’t paying the way they should be. We recommend you do the following at least once a year:
Identify which insurers are paying low rates for specific services (especially if they’re paying below medicare)
Include the full value of ancillary services, such as x-rays, labs, supplies, and injectables, in your charges
Address payer-specific barriers to getting paid
This article provides an excellent overview of strategies to negotiate better rates with payers. Make sure to work closely with your medical billing service (step #2 above!) during the renegotiation process, because your billing company has easy access to all the relevant data.
Next Steps
We could also call this section, “How to know if you’re working with a good billing service.”
Here’s the test: If you have any questions about the above, your billing service should fully support you 110% help you to address any issues. If your billing service isn’t up to the task, get in touch with us.
Our own billing team are experts at helping practices capture lost revenue, especially when other billing services have made a mess of things. Many of our clients provide services in a post-acute setting, and we work with many practices in podiatry, physiatry, pain management and personal injury, as well as a number of other specialties.
For existing practices, we offer a free, comprehensive revenue analysis to help you understand the current state of your billing, including exactly where you may be losing revenue, and your potential opportunities to recover unpaid claims.