After delving into cash flows, financial statements, and accounts receivable (AR) in the previous chapter, it’s time to shift focus from financial accounting matters and delve deeper into the managerial accounting aspects concerning IBNRs and revenue cycle improvement. Traditionally, the revenue cycle in healthcare organizations was segmented into seven steps:
1. Patient eligibility and verification
2. Coinsurance payments and deductible capture
3. Billing, CPT ® coding, and invoicing
4. Paper or e-claim submission
5. Remittance and/or explanation of benefits (EOB) advice
6. Patient billing statements
7. Patient payment options and mechanisms
However, modern hospital revenue cycles are now categorized into three distinct areas, symbolizing a patient’s journey through the system—referred to as the “three doors”: the front door, the middle door, and the back door.
Front Door:
Front-door processes, termed patient access functions, encompass scheduling, registration, preadmission, and admissions. Streamlining these processes ensures swift service, benefiting both patients and the hospital’s revenue maintenance and enhancement efforts. Efficient patient access relies on highly skilled and motivated staff who can capture information effectively while meeting customer service objectives. This stage is also crucial for effective denial management.
Middle Door:
Middle processes involve case management (CM) and health information management (HIM). CM professionals review clinic referrals, establish financial clearance, and develop discharge plans while ensuring timely and appropriate care levels. HIM functions include document management, coding, transcription, and charge capture. Optimizing CM and HIM activities with integrated information technologies enhances financial performance and reduces regulatory risks, leading to increased revenue and streamlined operations.
Back Door:
Back-door processes, termed patient financial services (PFSs) functions, focus on billing, collections, follow-up, and resolution. These functions support frontline caregivers and interact with external payers and patients to address outstanding AR. Improving back-door processes reduces administrative costs, boosts collections, and minimizes aged receivables, thereby adding significant value to hospitals.
Hospitals aiming to enhance their bottom lines through improved revenue cycle management across these three areas—front, middle, and back—often encounter challenges related to people, processes, and technology. Addressing these challenges is crucial for achieving operational excellence and financial sustainability.