Revenue Cycle Management and Reimbursement
Where the front end hands off
Revenue cycle management covers everything from charge capture to cash posting and denial resolution. Know the sequence: service documented, charges captured against the chargemaster (CDM), coded with CPT/HCPCS and ICD-10-CM/PCS, claim scrubbed, submitted as an 837 transaction, adjudicated by the payer, returned as an 835 remittance or ERA, posted with payment plus contractual adjustment, then patient balance billed.
Metrics and definitions
- Clean claim rate: percentage of claims accepted on first submission.
- Days in A/R: total A/R divided by average daily charges; the denominator uses charges, not payments.
- Net collection rate: payments divided by (charges minus contractual adjustments). Gross collection rate (payments divided by charges) is misleading when payer contracts differ.
- Denial rate vs. first-pass denial rate: the first-pass measure isolates front-end quality.
- Write-offs: contractual, bad debt, small balance, administrative. Only contractual adjustments are amounts you agreed to forgo by contract.
Reimbursement methods to recognize include fee schedule, DRG (inpatient), APC (outpatient), per diem, case rates, and capitation. Coordination of benefits (COB) determines which payer is primary.
Traps in questions
Items conflate a denial with a rejection (a rejection never entered the payer's adjudication system) and confuse a clinical denial with a technical one such as missing authorization or bad demographic data. Another trap treats a payer request for records as a denial requiring appeal; often it is an additional-information request that only becomes a denial if unanswered.
Worked example
Charges are $500,000, contractual adjustments $200,000, and payments $255,000. Net collection rate = 255,000 / (500,000 - 200,000) = 255,000 / 300,000 = 85%. The gross rate (255/500 = 51%) understates performance and is the wrong measure for a contracted payer mix.