Healthcare’s ‘Plumbing’ Problem—Fixing Revenue Leakage to Improve Bottom Lines

September 2, 2021
3 Minute Read

Too many healthcare providers have long accepted leaks in their revenue cycles, with financial loss as the result. It doesn’t have to be this way. RGP's healthcare team has developed a new proprietary assessment methodology that is already tightening processes and improving bottom lines.

When we meet with clients, they often ask: “How do we know that we’re collecting every dollar we should?” At first glance, the answer looks simple: make sure you bill and collect everything. Yet, as most of us know, the devil is in the details. How can someone truly know that they are billing and collecting everything they deserve?

To answer that question, our team at RGP developed a revenue leakage assessment methodology. Similar to how a plumber assesses someone’s house plumbing to identify large or small water leaks, our team of revenue cycle experts analyzes our clients’ entire revenue cycle operations to identify a number of factors:

  • Large or small processes
  • People performance
  • Technology capabilities
  • Reporting gaps that cause them to leave money on the table

Based on our experience, we classified revenue leakage areas into the two main buckets, Charge Accuracy and Payment Accuracy.

Let’s start with Charge Accuracy and all its sub-categories first.

Charge Accuracy is the correct documentation and capture of all related information starting with what we call Charge Capture. The goal of this process is to ensure that every procedure, supply, drug, therapy service and device is captured as part of the billing process. No exceptions.

It’s highly recommended to conduct periodic audits of your most common or most complex services to make sure the templates your clinical and support teams are using are up to date and reflect the most accurate information.

The next critical area to assure Charge Accuracy is Clinical Documentation. The goal here is to ensure that clinicians’ notes completely and accurately reflect provided services. It’s considered the best practice to have a Clinical Documentation Improvement (CDI) program in place, especially in the hospitals or complex outpatient settings.

The final subcategory is the Coding Accuracy. Accurate coding is not only critical for reimbursement, it’s a key component of patient treatment, research and overall clinical and financial decision making.

According to the American Academy of Professional Coding (AAPC), “Medical coding is the transformation of healthcare diagnosis, procedures, medical services and equipment into universal medical alphanumeric codes.” In other words, this is a process of translating medical information into codes everyone understands and accepts.

The next major bucket is Payment Accuracy, covering leakage areas after a bill is sent to a payer or a patient.

This bucket includes three main areas:

  • Write-offs
  • Underpayment
  • Bad Debt adjustments

The most common reason for write-offs is final denials from the insurance companies. It can happen for multiple reasons, including lack of personnel to handle denials in a timely manner resulting in exceeding appeals deadlines and bill write-offs.

The key to managing and understanding denials is the ability to accurately track denial reasons and have a strong working relationship with your payers and internal revenue cycle teams.

By working with the upstream revenue cycle teams one can prevent denials associated with the patient demographics and inaccurate coding. Additionally, by working closely with payers, one can quickly resolve issues associated with the payer’s billing guidelines or errors in their claims processing system.

Leakage from underpayments means that a payment received from an insurance company is less than expected based on the contract. Typically, it requires a contract management system to evaluate insurance payments on every single claim. However, a simple audit—especially of the newly implemented payer or contract—can go a long way in identifying if someone has an underpayment problem.

Then there’s Bad Debt. We define it as adjusting uncollected patient balances to bad debt. There are multiple reasons they can impact patient collections. For example, it takes too long to resolve insurance balances and patients are billed months—if not years—after the service.

Another example includes poor processes in identifying insurance coverage for uninsured patients.

Whatever the reason, the first step is to compare your performance against industry benchmarks and organizations with the similar patient insurance mix. It’s also beneficial to map out the whole patient balance collection process to better identify opportunities for backlogs, the “black holes” where accounts may sit for weeks or months, or other sources of process breakdowns.

If your home had a leak, you’d call a plumber, right? Too many healthcare providers avoid fixing leaks and suffer financial damage as a result. The good news is there are new tools available to keep your money from leaking. The first step is to acknowledge something needs to be done. The sooner, the better for you and your stakeholders.

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RGP offers a variety of financial services for the healthcare sector including our proprietary assessment methodology for fixing and preventing revenue leakage.


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