Revenue Cycle Management
Revenue Cycle Management tests how documentation becomes payment and how the process is measured. Expect items on cycle stages, payment methods such as MS-DRG and APC, and metric interpretation - including arithmetic you must perform.
Cycle stages
Pre-service: scheduling, insurance verification (270/271), prior authorization, financial counseling. Mid-cycle: registration, charge capture, clinical documentation integrity, coding, claim edits, claim submission (837I/837P). Back end: payer adjudication, remittance (835), denial management and appeals, patient responsibility, and collections. Revenue integrity sits across the cycle, maintaining the chargemaster, charge capture, and charge lag.
Payment methods
- Inpatient facility payment under IPPS uses MS-DRG assignment driven by principal diagnosis, procedures, and complications/comorbidities, then multiplied by the hospital's base rate and adjusted for factors such as wage index and outlier status.
- Hospital outpatient services pay under OPPS by APC, so packaging and status indicators matter.
- Physician services pay by RVU × geographic practice cost index × conversion factor.
- Value-based programs adjust payment for readmissions, hospital-acquired conditions, and quality performance.
Metrics that matter
- Clean claim rate = claims accepted on first submission ÷ total claims submitted.
- Denial rate = denied claims ÷ claims submitted; track denial reasons, not just volume.
- Days in A/R = total A/R ÷ average daily charges (or net revenue).
- Net collection rate = payments ÷ (charges − contractual adjustments).
- DNFB (discharged, not final billed) measures unbilled accounts; each day adds cost and write-off risk.
- Case mix index = sum of DRG weights ÷ number of discharges.
Worked example
A hospital bills $2,000,000, records $700,000 in contractual adjustments, and collects $1,170,000. Net collection rate = 1,170,000 ÷ (2,000,000 − 700,000) = 1,170,000 ÷ 1,300,000 = 90%. If the target is 96%, the gap is roughly $78,000. Before touching chargemaster prices, investigate denial rates, underpayment variance, and patient-balance aging, because pricing changes do not affect a rate computed on collectible balances.
Traps that cost marks
Confusing gross and net collection rate; treating charge levels as revenue; assuming a claim is clean because coding is complete (eligibility and edits also fail); writing off denials as contractual adjustments; and selecting a higher-paying DRG on soft documentation, which is upcoding rather than revenue cycle optimization.