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Hospital Reimbursement Cycle


The effectiveness and efficiency of reimbursements in healthcare organizations are of extreme importance for all stakeholders. A model revenue cycle helps care providers offer services of the best quality, which positively affects patient outcomes and satisfaction. Timely reimbursements also help hospitals to create additional incentives for employees. In other words, a sound reimbursement system is crucial for constantly improving the performance of healthcare organizations and the US healthcare system in general.

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All departments affect the revenue cycle of healthcare organizations. Even though the impact differs depending on the department, every employee can influence the efficiency of the reimbursement process. The present paper aims at educating the department managers of Eisenhower Medical Center (EMC) about reimbursement. The whitepaper includes information on how each specific department affects reimbursement for services, which in turn impacts the healthcare organization as a whole. The central goal of the present paper is to increase awareness about the reimbursement cycle to emphasize the importance of compliance with EMC’s standards of services on all levels.

Reimbursement and the Revenue Cycle


Reimbursement is the process of collecting payment for services provided by doctors, hospitals, diagnostic facilities, or other healthcare providers. There are several types of reimbursement mechanisms, including salary, Fee-for-service (FFS), capitation, Pay-for-performance (P4P), and diagnosis-related groups (DRGs) (Britton, 2015). Different types of reimbursements provide varying levels of incentives for healthcare providers, and all of them have their flaws. For instance, FFS is associated with the provision of excessive services, while capitation may lead to undertreatment and large patient numbers per provider (Britton, 2015). Thus, countries use a combination of these systems to find balance.

Even though achieving a perfect reimbursement system is impossible, having no reimbursement would lead to a disaster. If no money was collected for services, the sustainability of the healthcare system would be questionable, and the provided services would be minimal. Moreover, if patients did not pay for the services, healthcare providers would not have the money to improve the quality of existing services. Thus, the US healthcare system needs to find a balance between the interests of all stakeholders, including care providers, patients, insurance companies, and the government, to create and manage a sustainable reimbursement system.

Revenue Cycle Flow

There are nine steps of the revenue cycle commonly acknowledged by healthcare professionals. Figure 1 depicts the cycle in a comprehensive diagram. The first step is the pre-registration process, during which the hospital gathers all the required information about the patients. Care providers register names of patients, demographic info, medical history, together with insurance and payment information. This stage helps to reduce the waiting hours for the patient and prevent unexpected out-of-pocket expenses (Kay, 2019). The second step is registration, during which all the gathered information is validated, and all the errors in register forms are corrected (Kay, 2019). The third step is called charge capture, which implies that the medical services are translated into billable charges (Kay, 2019). During this step, care providers start to prepare billing information for third-party payers.

The revenue cycle
Figure 1. The revenue cycle

The next two steps are reviewing the entered information and coding all the diagnoses and procedures using a standard classification. After that, the information is submitted to the insurance company for reimbursement. The seventh step is called remittance processing, which is “applying or rejecting payments after they have been received” (Kay, 2019, para. 8). During this step, the A/R staff reviews if all the payments were approved and identify what errors caused payment rejection. The eighth stage is negotiating the non-reimbursed services with third-party insurers. The final step is collecting the payments from patients for the services, which were not covered by the insurance. The patient, however, sees only the first two steps and the last step of the process.

Almost all the departments are engaged in the reimbursement cycle in healthcare organizations. The most important, however, is the financial departments that deal with billing, coding, submitting, and reviewing payment information. Second in importance is the admission department, as it keeps all the information about patients, including names, contacts, insurance, and billing data intact. The therapeutic and diagnostic departments are next in importance, as they make sure that all the provided services are carefully described and justified. The participation of the legal department is also crucial, as it helps to keep track of all the changes in the law that can affect reimbursement. Finally, the IT department makes sure that all other stakeholders use the latest tools for controlling payments.

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Departmental Impact on Reimbursement

Impact of Departments and Audit

EMC is an acute care hospital situated in southern California. It is a progressive 463-bed hospital that is famous for its reputation as a premier health care facility (Eisenhower Health, n.d.). Its mission is to serve the changing healthcare needs of the region by providing excellence in patient care with supportive education and research (Eisenhower Health, n.d.). Its total revenue in 2017 was $759,840,157, with almost $17 million in net income (Nonprofit Explorer, 2018). All the departments in any medical organization of such size need to carefully handle reimbursement data to ensure steady financial performance.

In order to determine whether the reimbursement impact is reached fully by the departments, an internal audit needs to be conducted in every one of them. A typical audit process consists of an assessment of possible risks, identifying standards, assessing compliance with these standards, summarizing findings, and providing recommendations (RSM, 2015). At the beginning of the process, the auditors receive access to the accounts payable and account receivable, find discrepancies between them, and determine departments responsible for these discrepancies. Based on the preliminary findings, an audit plan is created and executed.

The impact of each department on pay-for-performance incentives may be measured using structural, outcome, and process measures. Structural measures include the number of board-certified physicians and the provider-to-patient ratio. Process measures include evaluation of the efficiency of methods of diagnosis and treatment. The outcomes measures include mortality rates, readmissions, the safety of care, patient experience, and timeliness of care (Tinker, 2018). Auditors may use different standards depending on the department.

Activities of Departments

Departments may have a different impact on the reimbursement cycle. Health Information Management (HIM) and coding departments can make mistakes in billing, coding, submitting, and reviewing payment information or fail to notice discrepancies in reimbursed payments, which can lead to underpayment or additional financial burden on patients. Therefore, when assessing these departments, reviewers look at the number of rejected payments due to incorrect coding and non-timely submissions. The admission department may record the patient data incorrectly, which may also delay reimbursements. Therefore, assessors identify errors in inpatient data, the number of missed appointments, and a number of complaints. When assessing medical departments, investigators value consistency in processes of diagnosis and treatment, as discrepancies in the procedures may lead to costs that cannot be reimbursed. Finally, when evaluating the IT department, auditors look for the number of hours the system was unavailable, and for the time spent on every ticket.

Billing and Coding

As mentioned earlier, HIM and the coding departments are responsible for billing and coding in EMC. The staff in these departments is knowledgeable about current coding and billing standards and makes sure policies in the organization adhere to these standards. The impact of these departments on the reimbursement cycle is straightforward, as billing and coding accuracy decreases bad debt and maximizes income. Low accuracy may lead to the organization’s inability to pay the staff and partners. Thus, billing and coding staff is the most important for the revenue cycle efficiency.

Billing and Reimbursement

Data Collection

Data collection by patient access personnel is of extreme importance for the reimbursement cycle in EMC. Patient access personnel serves the revenue cycle on two separate levels. First, the personnel is responsible for the initial encounter of patients with EMC. This includes visit scheduling, confirming a person’s identity, verifying insurance coverage, and creating an estimate based on treatment taken (National Association of Healthcare Access Management [NAHAM], 2016). This step is crucial for the revenue cycle, as mistakes may lead to significant complications with reimbursement, including delays and bad debt. Therefore, patient access personnel needs to closely follow the EMC’s database search protocols, data collection guidelines, and information entry procedures, with special attention to spelling, punctuation, and spaces (NAHAM, 2016). All the other departments depend upon the accuracy of information gathered by the patient access personnel during this step.

Second, patient access is associated with referrals and authorization. This also includes patients’ out-of-pocket expenses and exploration of financial options based on the patient’s circumstances. These competencies are crucial for both patients and EMC, as it ensures that all the payments are made in time. Accurate estimation of out-of-pocket expenses and relevant financial consultations help patients avoid unexpected costs, which increases the chance of collecting payments without complications.

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While collecting data, patient assessment personnel needs to provide exceptional customer service that adheres to EMC’s policies and guidelines. Top-quality service increases patient satisfaction, which makes patients return customers. Working with loyal clients positively impacts the reimbursement cycle, which is crucial for the financial well-being of the organization.

Third-Party Policies

The reimbursement cycle is also highly dependent on third-party policies. Third-party reimbursement refers to allowing entities other than patients and patients’ families to pay for medical expenses. Standard third-party payers are private insurance companies, Medicare, and Medicaid. Billing guidelines need to comply with third-party policies to maximize reimbursements. Besides problems with repayment, hospitals may be charged with fraud, waste, or abuse (Merrit, 2015). Therefore, EMC and other healthcare organizations need to demonstrate “organizational commitment to legal and ethical conduct” (Merrit, 2015, para. 7). Ultimately, if billing guidelines do not adhere to the policies of third-party payers, the financial stability of medical organizations may be in danger.

Key Areas of Review

Timeliness and maximization of reimbursements can be achieved only with consistent reviews of current practices. The review areas include pre-service, the process of care, process integrity, billing services, and administrative services (Murphy, 2016). The priority of areas of review is Demonstrated in Figure 2 below.

Figure 2. Area of review priority

  1. The most important area of review is the first touch with patients or pre-service. Without careful collection and management of patient data, efficient billing is impossible, as errors lead to an increased number of denied payments and add to days to the repayment cycle. Thus, data collection practices need to be assessed frequently.
  2. Process integrity is also vital for the maximization of reimbursements and the efficiency of the cycle. The review should capture the chargemaster, coding compliance, and clinical documentation. Poor adherence to the policies of third parties may lead to delays in reimbursement and legal claims (Murphy, 2016).
  3. The process of care is the third crucial area of review. A tuned process of care minimizes fraud, waste, and abuse claims by third parties and patients. Therefore, reviews should aim at ensuring the use of best evidence-based practices in diagnosis, treatment, and preventive services (Murphy, 2016).
  4. Next in importance is the review of billing services, such as customer support, collections, and follow-up. If the patients are provided with comprehendible information about the expected cost of care and possibilities to decrease out-of-pocket expenses, they are less likely to reject paying the bills (Murphy, 2016).
  5. Finally, administrative services, such as contract management, fee schedules, debt collections, managed care contracts, denial management, also need to be reviewed frequently to minimize bad debt.


The follow-up staff is also of extreme importance for the reimbursement cycle. In order for the follow-up team to be effective, it needs to record and carefully manage patient information using the latest technical solutions. All the contacts with patients should be registered in electronic health records. An expert monitoring team should be created to assess the effectiveness of follow-up practices. This team should make recommendations about the ways to improve current policies to make them more efficient.

Periodic Review Plan

According to the U.S. Department of Health and Human Services, there are several crucial steps towards achieving compliance that leads to efficient billing practices (Office of Inspector General, 2015). The process of improving compliance consists of nine steps equally important for achieving success. The process is illustrated in Figure 3 below.

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Figure 3. Process of improving compliance with third-party policies

While this review plan requires significant financial and human resources, EMC can afford to spend the needed resources on innovation. Moreover, the plan adheres to the organization’s mission to serve the changing healthcare needs of the region by providing excellence in patient care (Eisenhower Health, n.d.).

Marketing and Reimbursement

Managed Care Contracts

Managed care contracts (MCCs) are essential for healthcare organizations, and EMC is not an exception. According to the Health Financial Management Association (HFMA, 2015), MCCs are an essential part of a sound financial strategy. In order to negotiate MCCs successfully, care providers need to understand several rules. First, EMC needs to set individual goals for a relationship with every patient (HFMA, 2015). Second, the care provider needs to look beyond the money matters and review other aspects of future relationships, including the impact of workflow and responsiveness to claims (HFMA, 2015). Third, the organization needs to develop and keep clear payer profiles to ensure that offers to match the financial capacity of every patient (HFMA, 2015). Finally, all offers should be flexible, and care providers need to be ready to compromise (HFMA, 2015). These four steps are crucial for increasing the number of MCCs.

Importance of MCCs

New MCCs ensure the financial stability of EMC and improve its performance. MCCs, help to shift the focus from treatment to preventive services, which can improve patient outcomes and increase customer satisfaction (Maniam, 2018). In general, MCCs increase perceived healthcare quality. However, EMC can maximize the flow of new MCCs only if all employees of all departments work, as every healthcare worker can influence the situation. According to Maniam (2018), the emergence of new contracts depends on the quality of care, which is determined by location, availability, physician-patient trust, health outcomes, specialized care, and disease management. Different individuals can affect different factors mentioned above. For instance, an attentive nurse can carefully follow treatment plans to improve health outcomes. A compassionate doctor can enhance physician-patient trust. Finally, a skillful IT manager can provide the medical personnel with needed data to improve disease management. Thus, every employee in EMC can enhance the performance and financial stability of EMC.

Needed Resources

Billing and coding compliance is associated with the allocation of considerable resources. According to Clements (2017), billing and coding need to adhere to the latest legal regulation and best practices. This implies that healthcare organizations need to allocate qualified human resources to review hospital policies at least once a year (Clements, 2017). Revision of policies requires access to online libraries and collaboration with other healthcare organizations, which leads to financial costs. However, failure to allocate the needed resources will lead to an increase in denied payments, longer reimbursement cycles, and legal charges. Thus, EMC needs to make sure that the required resources are available to avoid the adverse effects of billing and coding noncompliance.


Reimbursement is a complicated process dependent on multiple factors and stakeholders. Every department and every employee can improve the current situation with the revenue cycle. The present paper provided illustrations and specific instructions for different departments of EMC to assess and change the current practices to enhance financial performance. The change processes include careful assessment, planning, and implementation, which requires significant resources. Allocation of these resources is vital for EMC to become one of the most successful healthcare organizations in the US.


Britton, J. (2015). Healthcare reimbursement and quality improvement: Integration using the electronic medical record comment on “Fee-for-service payment – an evil practice that must be stamped out?” International Journal of Health Policy and Management, 4(8), 549-551.

Clements, J. Strategies to ensure coding compliance in 2017. Outsource Strategies International. Web.

Eisenhower Health. (n.d.). About us. Web.

Health Financial Management Association. (2015). Successfully negotiating managed care contracts. HFMA. Web.

Kay, G. (2019). The 9 steps of healthcare revenue cycle management explained. PMMC.

Maniam, G. (2018). Effect of managed care systems on healthcare quality of low-income women. Journal of Business and Educational Leadership, 7(1), 72-85.

Merrit, M. (2015). ABCs of healthcare corporate compliance programs. Physician’s Practice. Web.

Murphy, K. (2016). Key ways to improve claims management and reimbursement in the healthcare revenue cycle. Revcycle Intelligence. Web.

National Association of Healthcare Access Management. (2016). Best practice recommendations for the collection of key patient data attributes. YMAWS. Web.

Nonprofit Explorer. (2018). Eisenhower Medical Center. ProPublica. Web.

Office of Inspector General. (2015). Practical guidance for health care governing boards on compliance oversight. OIG HHS. Web.

RSM. (2015). Health care internal audit: Identifying prevalent risks within your organization. RSMUS. Web.

Tinker, N. (2018). The top seven healthcare outcome measures and three measurement essentials. Health Catalyst. Web.

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