HA520 Unit 9 Hospital Revenue Cycle Review Example

Six Point Four Million Dollars Waiting in Receivables: A Revenue Cycle Review Following One Claim From Registration to Final Payment at a Composite Nonprofit Hospital and Converting Each Leak to Dollars

[Student Name]

Purdue University Global

HA520: Health Care Financial Management

Unit 9 Revenue Cycle Review

[Instructor Name]

[Date]

The hospital, its claims and every figure are composite and bracketed; targets are illustrative benchmarks.

Scope

Inpatient and outpatient hospital claims; the employed physician group's professional claims are excluded. Data cover the last twelve months: [186,000] claims and [$312.4] million in net patient revenue.

The Process Map

Scheduling and registration, then charge capture, coding, billing, payer adjudication, denial work and patient collections. Each stage has a key indicator:

1. Registration: share of claims with correct insurance and demographics at first submission.

2. Charge capture and coding: discharged-not-final-billed days.

3. Billing: clean claim rate.

4. Adjudication: initial denial rate.

5. Denial work: share of denials overturned.

6. Collections: days in receivables, share over ninety days, point-of-service collections.

Indicators Against Targets

1. Days in accounts receivable: [52.5] against [45].

2. Discharged-not-final-billed days: [6.1] against [4.0].

3. Initial denial rate: [11.8] percent against [8].

4. Receivables over ninety days: [24] percent of the total.

5. Point-of-service collections: [$1.9] million a year.

Converting Gaps to Dollars

Excess receivables: [7.5] days × [$855,890] = about [$6.4] million of cash tied up. Unbilled accounts: [2.1] excess days × [$855,890] = about [$1.8] million held before a bill is even sent. Avoidable denials: [11.8] percent of [186,000] claims is [21,948] denials; at the [8] percent target the hospital would have [14,880]. The [7,068] excess denials each cost about [$118] in staff time to rework, [$834,024] a year. Never collected: about [$1.07] million a year in denials written off after appeals fail or deadlines pass. The largest leak is not money lost but money late: [$6.4] million sitting in receivables is cash the hospital has earned and cannot yet use.

Following One Claim

A composite outpatient echocardiogram shows how the leaks connect. At registration, the patient's new insurance card is not scanned, so the old plan is billed. The claim is denied ten days later for eligibility. A biller corrects it and resubmits; the new plan pays [42] days after service. The registration step that took two minutes too few cost five weeks of cash and about [$118] of rework.

Causes by Stage

Registration: eligibility errors account for about [38] percent of denials. Coding: documentation delays from two service lines drive most unbilled days. Payers: Medicare Advantage and two commercial plans account for most authorization-related denials. Collections: patient balances under high-deductible plans grow, while point-of-service collection remains low.

Why It Matters Beyond Cash

Administrative work related to billing and insurance is costly. Measured with time-driven costing in one academic system, the billing and insurance work behind each professional visit took up a meaningful share of what the visit earned, and the share differed by visit type (Tseng et al., 2018). Practices also spend considerable time interacting with health plans (Casalino et al., 2009). Every avoidable denial adds to that cost.

Who Owns Each Stage

Patient access owns registration; health information management owns coding; patient financial services owns billing, denials and collections; clinical departments own documentation that drives coding. No single leader owns the whole cycle, which is one reason leaks persist. The review recommends a monthly revenue cycle meeting chaired by the chief financial officer with all four owners and the two service lines whose documentation delays drive unbilled days.

What Patients Experience

For patients, revenue cycle problems show up as confusing bills, unexpected balances and calls about insurance months after a visit. Clear estimates at scheduling, accurate registration and simple payment plans improve both collections and patient experience, which are often treated as competing goals but here point the same way.

Working Capital

The revenue cycle connects directly to liquidity, because receivables are a current asset waiting to become cash (Cleverley & Cleverley, 2018). Reducing receivables by [7.5] days would release about [$6.4] million, raising days cash on hand by roughly [eight] days, enough to fund part of the hospital's capital needs without borrowing.

Recommendations

1. Real-time eligibility checks at registration.

2. Daily review of unbilled accounts with the two slow service lines.

3. A denial prevention team focused on the top three payers and the top five denial reasons.

4. Point-of-service collection with price estimates and payment plans.

5. Monthly reporting of all indicators to the finance committee.

Limits

Rework cost per denial and write-off estimates are averages drawn from a sample of staff time logs, and real costs vary by denial type. Targets are illustrative and should be replaced with the hospital's chosen benchmarks. The review covers twelve months and may not reflect recent contract changes.

Conclusion

The revenue cycle leaks at registration, coding, payer adjudication and collections. Fixing those points would release millions in cash and save hundreds of thousands in rework, without a single new patient. The first step is giving one meeting ownership of the whole cycle.

References

Casalino, L. P., Nicholson, S., Gans, D. N., Hammons, T., Morra, D., Karrison, T., & Levinson, W. (2009). What does it cost physician practices to interact with health insurance plans? Health Affairs, 28(4), w533-w543. https://doi.org/10.1377/hlthaff.28.4.w533

Cleverley, W. O., & Cleverley, J. O. (2018). Essentials of health care finance (8th ed.). Jones & Bartlett Learning.

Tseng, P., Kaplan, R. S., Richman, B. D., Shah, M. A., & Schulman, K. A. (2018). Administrative costs associated with physician billing and insurance-related activities at an academic health care system. JAMA, 319(7), 691-697. https://doi.org/10.1001/jama.2017.19148