The main task of any healthcare organization is the fulfillment of patient needs through the provision of high-quality service at minimum cost. Revenue management practices, including financial regulations and billing requirements, help hospitals to stimulate social-economic development. Since revenues serve as the primary stimulus for the organizational growth and sustainability, the opportunity to increase profits and achieve greater cost efficiency motivates healthcare administrators to seek more effective ways for the performance improvement. Hospital revenue cycle management (RCM) is an effective methodology that allows organizations to remain profitable and, in this way, contribute to the economic development of the society, create and augment social wealth and improve social well-being.
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Considering the fact that financial indicators characterize the effectiveness of organizational performance, it is argued that the analysis of hospital financial results is one of the important aspects of revenue management. The aim of this paper is the investigation of the main principles of hospital revenue management and evaluation of the factors which influence the generation of revenues at hospitals. It is argued that RCM systems allow the identification of the major sources of income and facilitate the achievement of greater efficiency in the allocation and use of resources. The findings may be applied to balance additional costs which emerge due to catheter-associated infections (CAI). Since nowadays the U.S. national insurance services no longer cover the costs of caring for patients who develop CAI during hospitalization (Kennedy, Greene, & Saint, 2013), the issues of outstanding bills and cost inefficiency remain critical.
Costs Associated with Foley Catheter Use
CAIs are considered one of the most common healthcare problems. Over a million CAIs are reported per year, and each case is associated with an average additional cost of over $670 (Meddings, Krein, Fakih, Olmsted, & Saint, 2013). Nowadays, the enormous amounts of additional costs become a burden for many healthcare organizations because, since 2008, Medicaid and Medicare do not provide hospitals with reimbursements for catheter-related complications (Kennedy et al., 2013). Without public health insurance coverage, many patients suffering from CAI fail to pay their medical bills and, as a result, the number of outstanding revenues grows.
One of the main hospital RCM activities is the identification of potential sources of profit and loss, as well as the creation of an appropriate balance between them. RCM may help hospitals to minimize losses due to CAI through the estimation of costs per CAI prevention procedure and costs per intervention of catheter-related complications. The comprehensive analysis of financial costs is directly linked to the increased efficiency in organizational decision-making, revenue increase, reduction of patient health risks, and the improvement of the overall quality of care. The implementation of RCM analytical tools will help hospitals to implement professional strategies and treatment models that may lead to the reduction of costs and the elimination of such finance-intensive problems as catheter-associated complications.
RCM and Revenue Generation
Rauscher and Wheeler (2008) define hospital RCM as a complex of practices an organization designs and performs to maximize patient revenue and the speed of its collection. Traditionally, a revenue cycle consists of three main types of activities: front-end tasks (patient registration), core tasks (service provision and coding), and back-end tasks (billing, claims preparation, denials management, and cash collection) (Rauscher & Wheeler, 2008). Since provision of services to patients is the main source of revenue, the manner of billing negotiation at every stage of RCM is essential to hospitals’ ability to maximize the amount of patient revenue and speed of revenue collection. For example, the researchers claim that provision of information to patients during registration regarding the amount they are expected to pay and educating them about the potential ways to minimize insurance limitations may favorably impact the reduction of outstanding bills and increase in revenue collection speed (Rauscher & Wheeler, 2008).
It is observed that technology use substantially facilitates RCM. It is essential to compute all charges for services and enter them into the organizational information system to properly adjust revenues with the number of rendered services (Rauscher & Wheeler, 2008). The delays in charge entry are linked to the delays in cash collection and inhibited effectiveness of RCM. Accurate data recording leads to facilitated coding process and, in this way, allows the maximization of patient revenue (Rauscher & Wheeler, 2008). It is also important to properly record relevant demographic, clinical, and insurance information about a patient because it may affect the selection of treatment procedures and billing. the implementation of computing templates and entering important data while talking to clients may speed up the revenue cycle without reducing the quality of care (Kapsambelis, 2004).
The factor of service eligibility largely affects hospital revenue generation capabilities. The provision of services which seem to be outside the norm is associated with additional costs and the lack of a rational explanation for their rendering such a service usually leads to a payment denial. In case a hospital implements some extra procedures per treatment episode, it should provide an explanation during the submission of a claim (Kapsambelis, 2004). Since the procedures for treatment of CAI are not permitted by insurance service organizations, healthcare organizations need to elaborate a prevention strategy that will induce fewer costs. Moreover, it is suggested that a proactive explanation of intervention methods’ eligibility during the negotiation of rates demonstrate awareness of payers’ guidelines and interests and may pre-empt a denial (Kapsambelis, 2004).
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An effective RCM implies a cross-sectional approach to analysis and billing. Throughout the reception of services, a patient interacts with many specialists including clinicians, front desk and administrative staff, and the effectiveness of the provided service depends on the efficacy of all the functional areas. Kapsambelis (2004) suggests to regard billing procedures in a similar way and claims that a cross-sectional team billing may help to improve RCM practices. Team billing is associated with greater accuracy in the formulation of treatment plans and coding procedures and facilitated communication between professionals and patients (Kapsambelis, 2004). Since data inaccuracy, coding problems, and patients’ misunderstanding of the rationale for the selection of particular services are the major causes slowing down revenue collection, collaborative billing may help to eliminate some of these problems and improve organizational financial outcomes.
Potential Challenges and Benefits Associated with RCM Redesign
The increasingly constrained reimbursement inhibit hospitals’ ability to render high-quality care profitably and provoke the need for the enhancement of organizational RCM. However, the improvement of financial performance is associated with many challenges – restructuring of administrative policies, refinement of corporate culture, and adoption of new behavioral models. To overcome these challenges, healthcare organizations should conduct a comprehensive analysis of internal and external factors in terms of financial efficiency and the increase of potential sources of income. The examination of each phase of revenue cycle helps to find new opportunities for improvement and entails possibility of profitability increase (Rauscher & Wheeler, 2008).
The treatment of CAI and other catheter-related complications implies the implementation of self-pay procedures which are directly related to declines in patient revenue. Effective RCM has a potential to compensate these revenue reductions and, therefore, help organizations to be more profitable. Nevertheless, organizations need to readjust their revenue cycles through the evaluation of current models and practices. Through the improvement of financial systems, hospitals will gain an opportunity to coordinate greater patient inflows, alleviate eligibility control, and increase the availability of important financial information to patients.
Kapsambelis, N. (2004). Team spirit: Group approach to billing efficiency boosts revenues. Getting Paid in Behavioral Healthcare, 9(10), 1-4.
Kennedy, E. H., Greene, M. T., & Saint, S. (2013). Estimating hospital costs of catheter-associated urinary tract infection. Journal of Hospital Medicine, 8(9), 519–522. Web.
Meddings J., Krein, S. L., Fakih, M., Olmsted, R., & Saint, S. (2013). Reducing unnecessary urinary catheter use and other strategies to prevent catheter-associated urinary tract infections: Brief update review. In Making health care safer II: An updated critical analysis of the evidence for patient safety practices (pp. 67-73). Rockville, MD: Evidence Reports/Technology Assessments.
Rauscher, S., & Wheeler, J. C. (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), 392-405.