Turning the revenue cycle upside-down - patient financial services

Healthcare Financial Management, Oct, 1998 by Bobette M. Gustafson

Managed care, regulatory compliance, and increasing customer service demands are creating a need for greater processing efficiency in the patient financial services (PFS) revenue cycle. In the traditional PFS revenue cycle, most processing occurs after patients have received healthcare services and tends to be complex, time-consuming, and labor-intensive. To simplify the revenue cycle and achieve better results, PFS professionals need to turn this model upside down by completing most processing before scheduled services are provided. This transformation typically requires more efficient use of PFS information systems or, for some organizations, investment in improving such systems.

Traditional Revenue Cycle

Preservice processing. In the traditional PFS revenue cycle, healthcare providers and PFS stag gather minimal demographic, insurance, and clinical data before service. Few, if any, concurrent edits are in place. Attempts to verify insurance benefits and eligibility and to identify and address managed care plan preauthorization and referral requirements are limited primarily to inpatients and some ambulatory surgical outpatients. Failure to routinely address these managed care plan requirements at this time can lead to reduced or denied third-party payments and time-consuming appeals. In addition, potentially new and confusing patient payment liability issues are not discussed with patients or resolved before service.

Time-of-service processing. Traditionally, charges are not posted immediately, and medical records coding is not initiated at the time of service. This makes it difficult or impossible to effectively monitor and control utilization. Moreover, because proration and monitoring of charges are not performed during service, patients still cannot be informed of their payment liabilities, and patient payment plans cannot be developed.

Postservice processing. At this point in the traditional revenue cycle, PFS staff must perform all the steps that have been postponed. Bill production is delayed because many charges are not submitted until this late phase. Medical record coding must be completed, and PFS staff must focus on resolving extensive billing errors.

Postservice PFS processing also entails manually verifying third-party payment accuracy, calculating postpayment adjustments, and responding to carrier and patient inquiries. As a result, PFS staff are left with little time to monitor and follow up on unpaid third-party balances.

Furthermore, most patients learn of their financial liabilities weeks after their service, after their insurer's payment has been received. Such practices undermine both patient satisfaction and collection success rates.

Upside-Down Revenue Cycle

Preservice processing. In the upside-down revenue cycle (see Exhibit 1), the following data, including required forms, is furnished by the referring provider (or in some instances, by the patient) at the time the service is requested:

* All patient and guarantor demographic information;

* Comprehensive third-party data, including Medicare secondary-payer screening information;

* Managed care authorization numbers and referral information;

* Release of Information Authorization and Advanced Directives forms;

* The clinical care plan, including all available clinical information and orders, such as anticipated length of stay, coded diagnoses, and anticipated procedures.

Comprehensive UB-92 and HCFA 1500 bill edits are applied systematically Staff responsible for gathering and recording data also are responsible for flagging data deficiencies and electronically monitoring them until they are resolved.

At this time, PFS staff initiate additional insurance screening and patient financial processing. Insurance coverage is verified electronically to determine patient eligibility, contract status, and current benefit level. Charges for tentatively scheduled services are calculated along with anticipated third-party and patient liabilities.

Patients then are informed of their insurance benefits and liabilities, including copayment requirements. Financial counseling is provided to help patients develop a plan for meeting their payment obligations. Appropriate clinical education and instructions also are provided.

In addition, required-activity edits are created to electronically track the completion of each essential preservice step, including:

* Initial data set receipt;

* Anticipated charge identification;

* Managed care screening/authorization completion;

* Insurance eligibility and benefits confirmation;

* Patient and third-party liabilities calculation; and

* Patient financial education and financial plan negotiation.

The PFS information system produces daily edit lists and work queues that remind staff of incomplete activities and expected patient arrival dates, thereby ensuring that all processing requirements are satisfied and patient scheduling clearance can be confirmed. Materials such as written confirmation notifications, instructions, and maps are created automatically and sent to patients to remind them of their appointments and help them arrive on time.