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THE CLINICAL PRACTICE AND BUSINESS OF MEDICINE intersect in the revenue cycle of a medical practice. In the revenue cycle, the patient’s diagnosis and the services you provide to the patient are translated into codes that permit you to be paid. It is this payment that allows your medical practice to keep its doors open to treat patients today, tomorrow, and in the future.

Changes occurring in today’s healthcare environment present a challenge to optimal revenue performance. With the increasing prevalence of high deductible health plans, patients are more financially responsible for their health care. In turn, this means that a greater portion of a medical practice’s revenue is derived from its patients. The change in financial responsibility— from the insurance company to the patient—means that your medical practice will have to adjust its revenue cycle to capture patient payments earlier in the billing process.

If you are seeking a new practice opportunity, ask questions regarding the practice’s revenue cycle and its financial health. If you are continuing in your current position, routinely evaluate the performance of your practice’s revenue cycle. In any situation, it is important to determine if the revenue cycle is functioning at its optimal level. Throughout this article, we’ll describe actions to help you take your revenue cycle to the next level of performance.

The revenue cycle

There are five key steps in a revenue cycle:

Step 1: Conduct Registration and Financial Clearance
Step 2: Provide, Document, and Code Clinical Service
Step 3: Submit and Edit Claim or Statement
Step 4: Follow up on Claim or Statement
Step 5: Post Payment and Manage Denial

Take action in each of these steps to ensure that your revenue cycle is aligned with changes in today’s healthcare environment in order to optimize revenue in your medical practice.

Step 1: Conduct Registration and Financial Clearance

Accurate registration and insurance information is required to begin the physician billing process. Today, medical practices are advised to take this step to the next level. Make sure that an error-free claim is submitted to payers and that you attempt to collect payments from patients at the time of service. The goal is to reduce the time to payment and billing costs.

• VERIFY INSURANCE AND ELIGIBILITY WITH THE PAYER. Patient registration should take place at the time of scheduling to obtain full demographic and insurance information. Confirm the status of the patients’ insurance, as well as coverage limitations and eligibility requirements. By performing the verification process before you provide care, you’re able to accurately communicate the patient’s financial responsibility. Telephone, physician websites, and now software—that allows you to perform the process automatically through an interface with the scheduling system and payers, can confirm verification.

• COLLECT PATIENT FINANCIAL RESPONSIBILITY AT THE TIME OF SERVICE. Collect the patient’s portion of payment at the time of service. Instruct your staff to ask patients: “How would you like to take care of your account today?” instead of “Would you like to pay on your account today?” Consider collecting the patient’s portion of the payment prior to the service for elective services. Ask yourself if at each appointment you were successful in collecting the most amount of money you could at the time of service to optimize time of service collections.

• SEGMENT PATIENT ACCOUNTS BASED ON FINANCIAL RISK. Implementing risk strategies may help you predict the success of collecting from your patients and establish follow-up processes based on this financial risk. A patient with a small balance, for example, who has not paid on a timely basis in the past, may be given two statements and one letter before being sent to the collection agency. A patient with a large balance who has regularly paid on time might be given a telephone call as part of the follow-up process. Resources are more easily delegated this way with consistent probable return on your investment.

Step 2: Provide, Document, and Code Service

Document the services you perform and choose the code that best represents your documentation. Report the diagnosis code(s) at the highest level of specificity. Today, many payers use the diagnosis to determine differential payment for services rendered.

• EVALUATE CODING VARIABILITY. Evaluate internal coding variability and compare your coding with external benchmarks, for example, the levels reported by the Centers for Medicare and Medicaid Services (CMS). This comparison helps determine if there are areas of education that are needed.

• CONDUCT FORMAL CODING AUDITS. Coding audits should be performed periodically by expert coders to assess internal coding knowledge.

• CONSULT WITH CODING EXPERTS. Use external coding experts to be sure your coding is accurate and at a level required to obtain appropriate reimbursement for your services.

Step 3: Submit and Edit Claim or Statement

To be paid, you will need to submit one of two different documents depending on the patient’s payment source. A claim form is submitted to payers, while a statement is submitted to the patient or his guarantor. Claims are typically submitted electronically through a clearinghouse—a vendor responsible for taking your claim and transmitting it to payers.

Think of a clearinghouse as a rapid transit system with a navigating operator to get the claim to the correct destination in the proper format. Track and resolve any claim errors that may cause delay in processing the claim, and to also prevent future errors from occurring.

Statements are typically sent through the mail system or electronically to the patient. Online bill payment has gained consumer acceptance in recent times and your patients appreciate may the convenience of it. Regardless of how you send statements, ensure that your medical practice is submitting or has plans to submit on-line statements to patients permit patients to pay online.

Step 4: Follow up on Claim or Statement

Once you’ve submitted your claim or statement, if it is not paid within a specific timeline, then take steps to follow up on payment. You cannot afford to delay payment from the payer or the patient; the operating margin of a medical practice is simply too thin to permit payment delays.

• FOLLOW PAYER TIMELINES. Take action and follow up on claims based on payer payment timelines. Medicare, for example, typically reimburses physicians within 13 to 17 days. Therefore, action should be taken on unpaid Medicare claims at 17 days. If payer payment timeframes are unknown, take action on each account every 30 days and note the follow-up steps taken.

• SHRINK YOUR COLLECTIONS CYCLE. Reduce the time it takes for you to complete your guarantor statement and collection cycle. Many medical practices send out three statements, two letters, and make multiple attempts to contact the patient by phone prior to sending an account. In any situation, it is important to determine if the revenue cycle is functioning at its optimal level to the collection agency. Consider sending only two statements and one letter to the patient. Follow up with a telephone call, and if there is no response, then send the account to the collection agency.

Step 5: Post Payment and Manage Denial

Payment posting is the process of posting the reimbursement you receive to the patient’s account on your practice management system. During this process, determine whether you have been correctly paid, underpaid or overpaid, and whether all or a portion of the service you provided was denied for payment. In today’s revenue cycle, payment management must be at the highest level of precision and accuracy.

• INSTITUTE ELECTRONIC REMITTANCE. Leverage technology by enabling electronic remittance. Electronic remittance permits the payment to match up electronically with the charge on the patient’s account. This saves the staffing cost required to manually post payments to the system and also reduces errors associated with the process.

• WORK DENIALS. Confirm that claim denials are being appealed if appropriate, and that the appeal process is done in a timely manner. Payers typically allow short appeal timelines.

• UNDERSTAND—AND PREVENT—ADJUSTMENTS. Contractual adjustments are financial adjustments you agree to make as part of your contract with the payer. If you agree with commercial payers to accept 140 percent of current Medicare reimbursement for a particular procedure code, then you would contractually adjust the difference between your charge and this payment level. A contractual adjustment, however, should not be confused with a non-contractual adjustment. Non-contractual adjustments include, but are not limited to, untimely filing of a claim, lack of authorization for the service, service conducted out-of-network, or service denied due to patient deductible. Many non-contractual adjustments are controllable and such adjustments represent real money that your medical practice is losing due to administrative or other errors in the revenue cycle process.

• EVALUATE PAYMENT LEVELS. Evaluate payment levels and the denial rates of payers. A payer may be under-reimbursing you for your services and creating obstacles that increase your billing cost and delay payment. It is important that you are paid accurately and timely with minimal hassle from the payer and any concerns are brought to the payer’s attention.


In order to meet healthcare challenges, the business of medicine and clinical practice of medicine must be in sync. Make sure your medical practice—or the medical practice that you are interested in joining—is taking action to bring its revenue cycle to the next level of performance.