The revenue cycle: what it is, how it works, and how to enhance it

AORN Journal,  Oct, 2006  by Marilyn Hart Niedzwiecki

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The article "The revenue cycle: What it is, how it works, and how to enhance it is the basis for this AORN Journal independent study. The behavioral objectives and examination for this program were prepared by Rebecca Holm, RN, MSN, CNOR, clinical editor, with consultation from Susan Bakewell, RN, MS, BC, education program professional, Center for Perioperative Education.

Participants receive feedback on incorrect answers. Each applicant who successfully completes this study will receive a certificate of completion. The deadline for submitting this study is October 31, 2009.

Complete the examination answer sheet and learner evaluation found on pages 605-606 and mail with appropriate fee to

AORN Customer Service

c/o Home Study Program

2170 S Parker Rd, Suite 300

Denver, CO 80231-5711

or fax the information with a credit card number to (303) 750-3212.

You also may access this Home Study online at http://www.aornjournal.org.

Behavioral Objectives

After reading and studying the article on the revenue cycle, nurses will be able to

1. identify reasons payers may deny health-related claims,

2. discuss different methods by which health care facilities receive compensation,

3. describe the components of the chargemaster, and

4. explain why team members from various departments should participate in the revenue cycle review process.

The revenue cycle encompasses numerous processes relating to the billing function of a health care facility. It begins with patient registration, includes a number of actions during a patient's hospital stay, and ends when the bill is paid in full or the account is closed (ie, the balance is written off to a contractual allowance or the balance is sent to bad debt). The billing process involves many departments, and because of its complexity, the possibility exists for problems to occur. The focus of this article is to explore the relationship between OR charges and reimbursement and to suggest some strategies to enhance an organization's billing processes to maximize reimbursement.

REGISTRATION

The entire billing process begins with a patient's registration. At this point, it is essential to collect correct demographic and insurance information. Eligibility can be adversely affected by having incorrect information on an account. A 2003 study by the Health Insurance Association of America reported that 14% of all health-related claims are denied and 45% of these denials are related to eligibility. (1) Other reasons for denials include billing errors, noncovered benefits, and a lack of medical necessity for a procedure.

At times, nurses may be asked to assist in the information-gathering process as a convenience to the patient. It is essential, therefore, that the perioperative team collect and verify any patient information requested by the department in charge of this process. If perioperative staff members in an organization are assisting with the information-gathering process, regular meetings with the patient financial services department could provide valuable information to improve the patient registration process.

REIMBURSEMENT

Health care billing is becoming more complicated because of frequently changing regulations, so organizations are becoming more proactive in reviewing their current charging practices. Charging practices also are being scrutinized more closely by consumers, government agencies, and insurers. Price transparency is encouraged by consumers and is mandatory in California. (2)

Health care facilities are more likely to review their charging practices when the facility implements new technology to assist in record keeping, such as electronic medical records. This often provides an organization with the opportunity to implement changes or question its current practices and to make recommendations for future processes. For example, it may be appropriate to question why each procedure is assigned a certain charge level. Many times, this is based only on the history of how it has always been done. Having an understanding of the whole reimbursement process is essential before making any decisions regarding the OR charge structure.

Health care facilities receive compensation by many different methods. For example, a hospital may have 10 identical bills for the same surgical procedure performed on 10 patients. If each patient has insurance coverage with a different insurance company, the hospital most likely will be reimbursed 10 different amounts. This is one of the many complexities and challenges in the health care system today. To better understand the reimbursement process, it is essential to understand the reimbursement terms and methods that commonly are used (Table 1).

Diagnosis-related groups (DRGs). The DRGs initially were developed in 1983 by the Health Care Financing Administration (HCFA), now the Centers for Medicare and Medicaid Services (CMS), and they were intended to describe all types of patients in acute care hospital settings. (3) This system is used to classify into groups all medical procedures expected to use similar resources. The DRG groupings represent common