Top Challenges in Healthcare Revenue Cycle Management

The healthcare industry is highly regulated and rapidly evolving. Effective revenue cycle management (RCM) is crucial to the financial success of a practice, but it's not without its challenges. Claims, patient payments, and insurance reimbursements are each incredibly intricate; dealing with them simultaneously can make RCM even more complex.

Suppose you are a healthcare business owner considering an exit strategy or are interested in acquiring such a medical practice. In that case, a well-optimized healthcare revenue cycle management process can significantly enhance the appeal and value of your company to potential buyers.

What Is Revenue Cycle Management in Healthcare?

The revenue cycle process in healthcare encompasses a patient's financial journey from the moment they schedule to the final payment. RCM can be broken down into five main stages.

Stage 1: Patient Scheduling and Registration

Any missteps at this initial stage, such as leaving out insurance details or incorrect demographic information, could create issues later in the process. One delay during the initial stages could lead to delayed reimbursements.

Stage 2: Insurance Verification and Pre-Authorization

Before services are rendered, providers should:

• Confirm healthcare coverage
• Obtain necessary authorizations from insurance providers

Failure to obtain the necessary authorizations may result in denied claims and lost revenue.

Stage 3: Service Delivery and Medical Coding

Healthcare providers rely on accurate medical coding to ensure proper reimbursement. Errors, such as incorrect modifiers, may lead to a claim denial and trigger an audit.

Stage 4: Billing, Claims Submission, and Payment Posting

All claims must be submitted accurately and promptly. Once payments have been received, they must be correctly posted to ensure proper revenue tracking.

Stage 5: Denial Management and Collections

Should a claim be denied, it must be corrected and resubmitted. One area that's elusive for many in healthcare is having an efficient, timely, and reliable way of collecting outstanding patient balances.

Top Challenges in Healthcare RCM

There are several healthcare revenue cycle management challenges to contend with.

Data Errors

Data errors, whether caused by patient errors on forms or incomplete information input, can cause payment delays and claim rejections. Even something that seems like a quick fix, such as a misspelled name, can take weeks to correct, costing providers time and money.

Insurance Issues

Any delays in pre-authorizations can lead to postponed treatments. That can significantly impact patient experiences and damage a healthcare provider's reputation over time. Moreover, insurance verification errors could result in unpaid claims, increasing the burden on collections personnel.

Coding and Billing Complexities

Medical coding is becoming increasingly complex, especially given evolving payer requirements and the transition to ICD-10, a standardized coding system for healthcare providers. Thanks to changes and regulatory updates, even experienced coders could face challenges regarding accuracy.

Claims Denials and Rejections

Denial rates have been on the rise, with common reasons including:

• Lack of required documentation showing medical necessity
• Duplicate claims
• Incorrect or missing patient information
• Coding and modifier errors
• Expired authorizations

Any healthcare provider must have a proactive denial management strategy to help mitigate financial losses and protect the practice's value.

Payment Collection Issues

In recent years, there's been a notable shift toward high-deductible plans. These plans put more financial responsibility on patients, and many providers are struggling with their collection efforts. This struggle is resulting in increased bad debt and write-offs.

Regulatory Changes

Staying compliant with CMS guidelines, payer-specific rules, and HIPAA requires continuous training and investments in technology. Even with the right tools, keeping pace with regulatory changes can be time-consuming.

Your Trusted Healthcare Merger or Acquisition Advisor: Betty Schulte

Whether you are looking to exit a healthcare business or acquire one, optimized revenue cycle management is not only about financial stability; it can directly impact business valuation and appeal. A well-managed RCM is indicative of a well-run business.

If you are considering moving into the healthcare revenue cycle management industry, contact Betty Schulte, a mergers and acquisition advisor at True North M&A, to discuss opportunities that could be a good fit for you.