Financial Management, Cost Reporting, and Revenue Cycle
Cost reporting
RHCs file an annual Medicare cost report (Form CMS-222-92) that establishes the clinic's per-visit cost, which feeds into the AIR calculation. Candidates must understand the components: allowable costs (direct and indirect), the allocation of shared costs, and the reconciliation of interim payments to final settled costs. The cost report is the financial backbone of the RHC - errors there propagate into every future encounter rate.
Revenue cycle
RHC revenue cycle management includes patient registration and eligibility verification, charge capture tied to the encounter, coding and documentation review, claim submission, denial management, and collections. Because payment is an encounter rate rather than fee-for-service, the revenue cycle must focus on visit volume, payer mix, and the accuracy of the encounter count rather than on procedure-level charges.
Traps
Questions frequently test the difference between allowable and unallowable costs (e.g., marketing, certain physician compensation, and non-reimbursable administrative costs). Another trap is confusing the interim rate with the final settled rate. A third is assuming that all patients generate the same AIR - the rate varies by geography, patient status, and payer.
Worked example
A clinic projects 12,000 encounters at an AIR of $110, yielding $1.32 million in Medicare revenue. If the cost report later shows an allowable cost per visit of $118, the clinic faces a settlement recoupment on the difference; if the cost per visit is $105, it may receive additional payment subject to the upper payment limit.
Rule of thumb
In an RHC, revenue = encounters × rate. Protect the numerator (visit volume) and the denominator (rate accuracy) with equal rigor.