Revenue Cycle and Reimbursement
This domain tests how a healthcare organization converts services into cash: front-end clearance, mid-cycle charge capture and coding, back-end posting and denial management, and the reimbursement formulas behind the payment.
The three phases
Front end: scheduling, registration, eligibility verification (270/271 transactions), prior authorization, financial counseling, and price estimates. Mid cycle: charge capture, charge description master maintenance, ICD-10-CM/PCS and CPT/HCPCS coding, claim edits, and 837 claim submission. Back end: 835 remittance posting, contractual adjustments, denial management and appeals, A/R follow-up, patient statements, and charity-care screening.
Payment methods
Medicare inpatient payment under IPPS equals the base rate times the DRG weight plus add-ons such as IME, DSH, and outliers. Outpatient services use OPPS and APCs; physician services use the MPFS with RVUs adjusted by geographic indices. Commercial payers use per diems, case rates, or capitation.
Worked example
A Medicare inpatient stay bills $28,000. The base rate is $7,200 and the DRG weight is 1.35, so payment is $9,720. The contractual allowance is 28,000 minus 9,720 = $18,280. If beneficiary deductible and coinsurance total $1,600, the hospital collects $1,600 from the patient and $8,120 from Medicare, but net patient service revenue is still $9,720 assuming full collection. On the denial side, 240 denied claims out of 6,000 (4%) at an average $6,000, with 60% overturned on appeal, recover $864,000.
Key indicators
Clean claim rate, initial denial rate, days in A/R, net collection rate, cost to collect, and the share of A/R over 90 days.
Traps that cost marks
- Recording gross charges as revenue.
- Writing off denials before appeal or missing timely filing deadlines.
- Treating a front-end edit rejection as a payer denial.
- Letting the CDM drift so billed charges do not reflect services delivered.
- Overlooking 501(r) limits on collection actions before financial assistance screening.