How the Revenue Cycle is Evolving in Hospitals

The healthcare revenue cycle, particularly within hospitals, is prone to both human and system error. The revenue cycle is complex, has many touch points, involves many systems and relies on the best efforts of individuals.

However, for some hospitals, the revenue cycle is evolving. It is transitioning from an old-fashioned pay-and-chase structure to a unified system of internal control. So how can hospitals be a part of this developing change? It all starts by looking at the current problems.


When most people think of the traditional revenue cycle team at a hospital, they may picture a group of two to five people who are strictly revenue cycle experts. They are responsible for the integrity of the hospital's chargemaster, ensure prices are accurate and conduct projects to improve the accuracy of items in the chargemaster where needed. That's where assumptions need to stop, says Sandy Rasmussen, senior vice president of finance and operations at Craneware.

"That's not the revenue cycle team," Ms. Rasmussen says. "The revenue cycle team consists of all people who are involved in charge capture. They represent every part of what creates and assures the integrity of a revenue cycle transaction. This is not a tiny group of people — it's a virtual group of people and can involve hundreds of individuals across the organization."

Clinicians, department managers and all other hospital personnel that are actually part of a "revenue cycle transaction" need to consider themselves as part of the revenue cycle. Otherwise, Ms. Rasmussen says, the revenue cycle will continue to be viewed as an administrative labyrinth.

This is partially a problem due to a lack of communication. When a clinical event, such as treatment for pneumonia, is translated into a revenue transaction, it involves great variation by its nature from patient to patient and procedure to procedure. Patients react differently to different diseases and/or treatments; physicians document things differently; and although there is a standard for coding, interpretation of procedures still varies. This results in incorrect transactions that create revenue leakage or, perhaps even worse, correct transactions that government auditors view as potential errors — and in come Recovery Auditors, formerly known as Recovery Audit Contractors or RACs.

Ms. Rasmussen used to be the health system controller at Minneapolis-based Fairview Health Services, and she says these types of revenue cycle problems came about when there was no well-defined and documented process or workflow. Different members of the team had different ways of starting a revenue transaction through different paper files, notes and other individual practices. However, that led to variation and, often times, no immediate visibility nor accountability when mistakes were made.

When a hospital's revenue cycle is in a position where communication is fragmented, variation occurs, revenue is leaking and RAC audits inundate employees, it can be overwhelming.

"Finding the resources to justify receiving accurate reimbursement is an administrative burden," says Cynthia Fry, vice president of revenue for Catholic Health East in Newtown Square, Pa. "New strategies are needed — technology, education, collaboration and leadership — to create and sustain an integrated revenue integrity program."


How are hospital revenue cycle teams evolving to avoid the morass of problems? Ms. Rasmussen says one of the first solutions successful hospitals adopt is the creation of an information system that standardizes critical pieces of the process and normalizes disparate information used to monitor their effectiveness. From the moment a clinical procedure is completed to the moment when the hospital receives revenue from the payor, there should be control points and a performance monitor along the way, and newer technology systems help spur this innovation.

"When there is a systematic way of doing things, people feel like participants, and this includes CFOs, etc.," Ms. Rasmussen says. "They can actually have a sense that there is a system of accountability and visibility allowing them to succeed in their jobs. The right workflow provides sustainability and gives outsiders visibility of activities automatically being documented."

This information system can also focus on what's right within the system, what's wrong and where hospitals need to focus their attention, Ms. Rasmussen says. These are known as internal controls. A hospital's revenue cycle could deal with millions of transactions per year, and it needs to know where it is bleeding too much in the form of lost revenue to address the greatest point of risk. People wouldn't worry about treating sunburn if their leg was broken, and the same concept applies to hospitals.

Ms. Rasmussen adds that revenue cycle team members need to evolve with the system. This means there has to be a culture of responsibility and accountability among all team members. "It is incumbent upon individuals in the revenue cycle to audit themselves," Ms. Rasmussen says. "You have to have a systematic way of assuring what you need to do every day gets done and is organized in a way so you don't lose sight of your impact on organization."

Finally, a running theme within healthcare — and other industries — is the ability to do more with less. This directly applies to the evolving revenue cycle, as well. "The revenue cycle team of the future isn't going to be bigger," Ms. Rasmussen says. "Hospitals have to find a way where it only takes two to three people the equivalent time to do basic maintenance of the chargemaster so you're redeploying others to educate and influence other internal stakeholders in the revenue cycle and monitor external influences, including audits. Hospitals cannot let other important [revenue cycle] projects continue to fall to the bottom of the priority list."

More Articles on Hospital Revenue Cycle:

Achieving Positive Medicare Margins: 5 Strategies for Hospitals

7 Risks of Not Integrating Supply Chain and Revenue Cycle

Internal Controls May Help Block Hospital Revenue Leakage

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