Healthcare Finance and Reimbursement
What to know
Understand revenue cycle flow-registration, coding, charge capture, claim submission, adjudication, denial management, and collections-and the difference between gross and net revenue. Know reimbursement methods: fee-for-service, prospective payment (DRG for inpatient, APC for outpatient), capitation, per diem, and value-based arrangements (shared savings, bundles, pay-for-performance). Grasp cost concepts: fixed vs. variable, direct vs. indirect, contribution margin, and break-even. Recognize the role of the chargemaster, contractual allowances, and payer contracts.
Traps
Questions often confuse charges (list prices) with reimbursement (contracted amounts) and with cost. A high chargemaster price does not equal payment. Another trap is mixing DRG (inpatient) with APC (outpatient) prospective payment. Under capitation, revenue is fixed per member per period regardless of volume-so utilization becomes a cost, not a revenue driver. Watch for break-even questions that misstate contribution margin as gross margin.
Worked example
A clinic receives $100 per visit, has variable cost of $60 per visit, and fixed costs of $20,000 monthly. Contribution margin is $40 per visit; break-even is $20,000 ÷ $40 = 500 visits. Rule of thumb: break-even volume = fixed costs ÷ (price − variable cost per unit).
Practice converting between charge, contractual allowance, and net revenue, since multi-step calculations are common.