REVENUE CYCLE AND REIMBURSEMENT IN HEALTHCARE 2

Revenue Cycle and Reimbursement in Healthcare

Reimbursement is payment that healthcare organizations receive from third parties such
as insurance companies for services that they provide to patients (Harrington, 2015). Healthcare
organizations use the money that they receive through reimbursement to fund their financial
operations. These operations include, among others, payment of labor costs such as paying
salaries of physicians and nurses, buying of drugs, and investment in technology meant to
increase the efficiency of services (Baker et al., 2017). Reimbursement is so important to the
health facility under consideration that if the facility did not receive the payment for the services
it provided to patients it would go out of business. Thus, for the healthcare facility
reimbursements determine whether the facility closes shop or remains operational.
Data to review when determining whether reimbursement changes are necessary
Healthcare organizations should strive to get the reimbursement that reflects the services
that they provide to patients. If the reimbursement is less than the costs that they incurred for the
services they risk ending up with more expenses than revenues which may drive them out of
business. For this reason, it is important to regularly review available data to determine reasons
why they are not getting adequate reimbursement from insurance companies.
One of the data that needs to be reviewed to determine whether to implement
reimbursement changes in this particular healthcare facility is the type of services that insurance
companies pay for and those that they do not even when they are included in the patient’s bill.
Services that insurance companies do not pay for should be identified so that patients are
informed to pay for them personally any time they receive them in the healthcare facility.

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Another data to review is medical billing. Insurance companies have their own
approximations of the cost of various services (Harrington, 2015). The medical fees and charges
of the hospital should, therefore, be within the range of these approximations. If they fall outside
this range, the medical billing should be changed.
Lastly, it is important to review the accuracy of the codes in the claims that are sent to
insurance companies. When the codes in the insurance payment transaction are different from
those included in the claims, the healthcare facility is unlikely to receive the requested
reimbursement (Harrington, 2015). It is, therefore, important that the codes are reviewed so that
they match those of the insurer.
Illustration of revenue cycle
Revenue cycle in healthcare involves all financial processes that are used to manage both
clinical and administrative functions that are associated with processing and payment of claims
(Rauscher & Wheeler, 2008). An efficient revenue cycle allows a healthcare facility to receive
adequate reimbursement for its services on time.
Revenue cycle begins when a patient checks into a healthcare facility seeking healthcare
services (Rauscher & Wheeler, 2008). This is officially done through registration. It ends when
the hospital receives reimbursement from the patient’s insurance provider. At the first step the
staff of the hospital creates an account of the patient. This account includes information that will
be included in the claims sent to the insurer. It includes the patient’s medical history,
demographics, and their insurance provider and coverage (Rauscher & Wheeler, 2008). With this
information the hospital can embark on providing the required healthcare services to the patient
fully knowing that they will be reimbursed.

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The second step is coding to list all of the patient’s procedures and diagnoses. This is
done by the clinical staff. It is important that the coding is done accurately and be identical to
that of the insurer.
The last stage is processing of the patient’s bills and sending the claims to the insurer.
Reimbursement is then made to the hospital. When the reimbursement is denied, the billing
department can appeal and, if need be, supply the insurer with more documentation clarifying the
information presented about the patient. The revenue cycle steps are summarized in the flow
chart below.
Fig. 1: Revenue Cycle Flowchart

Coding

Billing

Reimbursement
from Provider

Correction of
Errors

Patient
Registration
Patient Doagnosis
and Treatment

Department ranks based on their importance to the revenue cycle

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All departments play a role in having a successful revenue cycle. They should, therefore,
work as a team to get the best possible results. In my view, the most important department as far
as revenue cycle is concerned is the billing department. This is the department that prepares the
final bills that are taken to the insurer for reimbursement. They are the ones that are supposed to
ensure that there are no errors to the claims that may lead to denial of reimbursement by the
insurance company.
Second in importance is the clinical department. This department records all the services
that a patient receives in the hospital. Not including any service that has been offered may lead to
the hospital not receiving payments for some costs incurred when caring for the patient.
Third is the front office department that registers the patient when they arrive at the
hospital to receive various services. The data they enter at this stage is very important because
any mistake is likely to be carried over throughout the revenue cycle and may lead to the hospital
not receiving the reimbursement requested. They, therefore, need to be careful so that they
capture very accurate details of the patient.
In conclusion, reimbursement is the most important source of revenue for healthcare
facilities. Without it hospitals face closure. It is, therefore, important that hospitals put in place a
highly efficient revenue cycle management so that they are able to receive accurate
reimbursement on time.

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References

Baker, J. J., Baker, R. W., & Dworkin, N. R. (2017). Health care finance. Jones & Bartlett
Learning.
Harrington, M. K. (2015). Health Care Finance and the Mechanics of Insurance and
Reimbursement. Jones & Bartlett Publishers.
Rauscher, S., & Wheeler, J. R. (2008). Effective hospital revenue cycle management: Is there a
trade-off between the amount of patient revenue and the speed of revenue
collection?. Journal of Healthcare Management, 53(6).