Medical revenue cycle management guide

Short guide to understanding medical revenue cycle management. Start with denials, work upstream to front desk issues. Learn how.

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Medical billing and medical revenue cycle management are not rocket science, although sometimes it certainly seems so. We all usually get caught up in the daily grind of denials. 

Taking a step back and wrapping our heads around the “CYCLE” part of the medical revenue cycle management generally helps us understand why things go wrong, end up in denials and why we spend more money in account receivables.

I.e. We spend money in recovering monies due.

Do not confuse medical billing with medical revenue cycle management.

Medical billing is only one part of the entire financial management process for a healthcare organization.

If you want to get paid more and collect each dollar you are owed for the patients you see, you really do need to understand financial management a bit better.

Steps in the medical billing revenue cycle

We are not discussing self pay patients here. Self pay patients are a lot simpler. Your patient pays out of pocket – no insurance companies to deal with, no claims to file, no hassles. You set the charges and the patient decides if they want to avail your services at your asking price or not. If they do, you service them, they pay you. Case closed.

We are discussing the insurance claims processes below. Read below to get a detailed explanation for each step as well.

  1. Credentialing: You / your doctor gets enrolled with an insurance company / payer. They get credentialed with the payer and are contracted by the payer at predetermined rates for specific services (CPT codes). This contract is specific and it states that for this service, under these conditions, at this location of service, the payer will pay the doctor this $ amount if the doctor submits the claim with specific supporting documentation. You already know this.
  2. Once a doctor is “par” (participating) with a payer and accepts certain plans of that payer, the doctor (provider) is considered in-network for that provider. Each patient that has that insurance and that specific plan can now make an appointment with that doctor. You already know this, I am sure. Just a reminder.
  3. Eligibility: When the patient makes an appointment, you of course make sure that you accept that patient’s insurance and the specific plan they have. After that, you ensure that the patient’s insurance is going to be valid on the date of the appointment. A patient’s eligibility needs to be valid ON the day of service. I.e. On the day the patient is treated. Even if you had checked the patient’s eligibility on the day you gave them an appointment, they might have terminated their insurance (or have their insurance coverage terminated) the day before their appointment. Always run an eligibility check of the next day appointments.
  4. Prior Authorization: Eligibility is the first level of “authorization”. That’s still not a guarantee to pay. You ALWAYS need to know whether the patient’s plan covers the service (CPT) that is going to be performed or not. Over time, of course, you will very easily know which ones are surely covered and which ones are almost always in need of authorization. Prior Authorizations take time to get done. Always be on high alert w.r.t prior authorizations.
  5. Collecting patient responsibilities: Based on the contract your provider (doctor) has with the payer AND the contract your patient has with the payer, YOU are required to collect dues from the patient. Yes YOU are responsible. By contract. Collect, each time, every time. Before the patient goes into the office with the technician. We would advise you to collect even when you give them an appointment on the phone. This also ensures that the patient has no intentions of being a no-show.
  6. Coding: Each visit has to be coded. You know this already. Your doctor circles things on a thing called superbill (many doctors still use that). That superbill contains the CPT code. Meanwhile, they enter the ICD in the EMR. You know the difference between CPT code and the ICD already. The CPT is WHAT the doctor did (service) and the ICD is WHY the doctor did what they did. Coding is that interlinking of CPT to multiple ICDs. You are going to post charges (aka submit claims) to the payer stating that “I did CPT 123 because of ICD 1, 2, 3 on patient A on date xx for charges YY (which is almost always 3x of Medicare set amount each year)”. The payer is going to pay ZZ (contracted, allowed amount, which goes back to the contract defined in the credentialing step).
  7. Charge posting: Prepare the charge or if your PMS does this for you, check the charge for billing compliance. Prepare the claim and add all necessary information to ensure a clean claim. Then, transmit the claim(s). I would ask that you double, triple check before transmission because the more you check your work, the less chances of denials and the more you avoid double the work and the more you reduce A/R.
  8. Adjudication : Within or after 30 days, monitor payer adjudication for the claim(s) you submitted. The claim is either going to be denied or paid. It will either be paid fully or paid partially and denied partially. When the claim is paid, the payer is going to bundle multiple payments into one. Your team will have to deconstruct this and make sure that payments are posted in your charge posting software against the claims made.
  9. Denials:  If needed, handle the denial based on why the claim was denied.

What is the “revenue cycle” in medical revenue cycle management

The entire medical revenue cycle management at your healthcare business follows a simple few steps.

  • A patient books an appointment with you.
    • You might accept their insurance. 
    • You might not accept their insurance. When you do not accept the patient’s insurance, the patient is a self-pay patient.
      • If you accept the patient’s insurance, you may accept the patient’s plan.
      • You may not accept the patient’s specific plan. In this case, you would have to charge the patient as “out of network”.

Credentialing and provider enrollment

All of this is made quite clear to you and your staff during the credentialing step of revenue cycle management.

Before the patient comes in, your office checks for insurance eligibility of the patient. Most EMRs give you a simple way to check patient eligibility. This just shows that the patient will have active insurance on the date of their appointment.

Insurance eligibility verification

What could go wrong?

The patient might terminate their insurance just before they visit you. Alternatively, the insurance company (payer) might terminate the insurance just before the patient’s appointment date. When that happens, the patient is no longer covered. All of this is made quite clear to you and your staff during the eligibility verification step of revenue cycle management.

The patient arrives at your front desk. At this point, your frontdesk knows the copay amount that the patient has to pay to see you.

If it is a self pay patient, then your office needs to charge the patient the same amount that you charge the insurance company (unless you are using a sliding fee scale).

This copay amount needs to be paid not only because you need to get paid, but also because you signed an agreement with your payer (insurance company) that you will collect that copay from your patient. When you collect that copay from your patient, the payer agrees to pay you a certain contracted (predetermined) amount.

All of this is made quite clear to you and your staff during the credentialing step of revenue cycle management.

Your office knows how much to collect because they have taken care of that during the eligibility verification step.

Prior Authorization / Pre certification

You see the patient and diagnose the patient with certain ICD codes. To diagnose the patient, you followed some procedure. This procedure has a CPT / HCPCS code.

When the patient comes in for the first consult, you are almost 100% sure that the visit (consult) CPT is covered. However, while seeing the patient you might want to perform certain other procedures (each one of those procedures also has a CPT).

You do not always know whether the additional CPT you performed is covered by the patient’s insurance.

  • You may choose to perform those procedures right away.
  • OR You may choose to ask the patient to come back for the additional procedure at a later date.

Either way, before you perform that procedure you want to know whether the insurance company / payer will cover that CPT or not.

The insurance company / payer might require you to get a prior authorization for the CPT that you are proposing. 

So, your office might need to submit a prior authorization request to the patient’s payer. The payer might deny your request or might approve your request. When the payer denies it, they will submit the denial reason back to you. You can choose to appeal that decision and would have to provide your reason / proof of medical necessity.

All of this is made quite clear to you and your staff during the prior authorization step of revenue cycle management.

Charge posting in medical revenue cycle management

After you have seen the patient, you or your staff will need to submit a claim to the insurance payer. To be able to submit the claim, your staff is going to need the CPT and the ICD codes. 

Effectively, you or your billing staff is going to say that you, the doctor, performed CPT 1234 because they diagnosed the patient with ICD A123. 

What is the difference between a CPT code and a diagnosis code?

CPT is just a numerical representation that describes what was done to the patient during the consultation/visit. This will include diagnostic, laboratory, radiology, and surgical procedures 

The ICD code on the other hand, is an alphanumeric representation of why what was done to the patient was done. This identifies a diagnosis (or diagnoses). ICD describes a disease or medical condition.

What is a DRG code?

DRG is a Diagnosis-related group/ This is typically used in hospital cases and is a system which classifies hospital cases. The classification is done according to certain group, which are expected to have similar hospital resource usage (cost). 

Further on charge posting in medical revenue cycle management

For each CPT code, there’s a specific contracted amount that the payer is going to pay you (no matter what you charge the payer).

Keep in mind that diagnosis code is also known as DX code in medical billing.

The CPT code is also called as PX code in medical billing

Your biller might need to know the modifiers as well. Modifiers are used with the CPTs when they need to differentiate the medical services rendered to the patient (there are specific guidance around that). 

Your biller will need the accurate Date of Service.

You will also need to provide the units of service to your biller. This will indicate the quantity of procedures to claim for.

If, for some reason, a prior authorization was needed to post this charge, the biller is also going to need an authorization number (pre certification number). 

Then, your biller is going to enter the “Billed amount”. This is also called “charge amount”. 

Much of this information should or could be available in your “SuperBill” (if you are still using superbills). Paper superbills are typically easier and faster to use than entering that same information in your EMR. As you know, it’s just a form listing procedures, service and diagnosis codes for a patient’s visit.

After all this data is gathered and entered into the charge posting software, your medical biller will submit this to the insurance company / payer.

Hopefully your office is already using electronic submissions. If not, this charge will be posted via a paper claim (discussed below). 

When you submit the charge electronically, it goes through a clearing house (e.g. EMDEON) and is submitted to the payer.

The above steps of revenue cycle management is collectively called charge posting.

How does coding affect the medical revenue cycle management process

Medical Coding is crucial in revenue cycle management (as you might have already guessed). 

If you have inefficient practice workflows, you could be slowing down your medical billing department even further.

Coding correctly AND on time can make or break your medical billing process. This will, of course, affect your collection rate and days in AR as well.

When you or your biller has a backlog of charts to code, you are effectively running the risk of missing the timely filing deadlines set by payers. Each payer has their own timely filing limit set up and your medical billing department needs to be cognizant of those timelines.

What is the difference between professional and institutional claims?

Institutional claims are submitted by hospitals and skilled nursing facilities (SNFs). Professional claims are submitted by physicians, suppliers and other non-institutional providers.

What are the two types of forms used for health services billing?

This really depends on whether it’s an institutional claim or a professional claim.  

Professional billing is going to use the CMS-1500 form and/or the 837-P form. The CMS-1500 is the paper version (the red ink one). The 837-P is the electronic version of this same claim form.

Meanwhile, institutional claims use the UB-04 form and/or the 837-I forms. The UB-04 form, (or CMS-1450) is the paper version and the 837-I is the electronic version.

Do note that institutional billing is a lot more complex (and the forms as well) than the professional one.

What are the codes for medical billing?

Overall, you have 3 categories of code in medical billing

  • Category I Codes – These are the 5 digit CPT codes
  • Category II Codes – These are performance measurement tracking codes. They are alphanumeric and will have a letter as the last digit.
  • Category III Codes – These will also have a letter in the last digit. These are temporary data collection codes that CMS uses.

The ones you are going to deal with on a regular basis are broken down here.

  • (E&M) Evaluation and Management: 99201 – 99499.
  • Anesthesia: 00100 – 01999. You also have 99100 – 99140 (most of you will not handle these)
  • Surgery: 10021 – 69990.
  • Radiology: 70010 – 79999.
  • Pathology and Laboratory: 80047 – 89398.
  • Medicine: 90281 – 99199. You also have 99500 – 99607

Handling rejected claims in medical revenue cycle management process

Do not confuse this with a denied claim. 

An electronic claim is submitted (usually) to a clearinghouse (e.g EMDEON). If there are errors in the claim itself, the claim is rejected by the clearinghouse (trust me, it’s better than a denial).

It’s better this way because the payer would have denied your claim and that would have contributed to longer account receivable days anyway (and more work).

Your claim may get rejected by the clearing house for various reasons. 

It could be a simple clerical error.

It could be a mismatch between the procedure code (CPT) and diagnosis (ICD) codes. 

These rejected claims will be sent back to your practice and your biller will have a chance to correct and resubmit the claim.

Think of this process as “claim scrubbing” (which it actually is).

What are the reasons for claim rejections?

There could be several reasons. E.g. 

  • Incorrect patient demographics – including patient gender, name (spelling or missing out middle name), date of birth, member ID, etc.
  • Provider information issues – yes, it does happen 🙂 Your team might have screwed up the rendering provider information as well (NPI, name, contact info etc)
  • Incorrect payer information – e.g. wrong member ID, address.
  • Incorrect ICD/CPT/HCPCS codes. Yes, codes are confusing and codes are changed each year (call them enhancements). Sometimes modifiers used do not belong to the CPT being submitted. Your claim might get rejected due to these errors as well.
  • Mismatched or missing codes – We have seen CPT and ICDs being reversed. This kicks the claim back immediately
  • Duplicate claims – this is a bit harder to catch and it usually eats up a lot of biller time. A biller might not have noticed that a claim for a particular patient, particular date of service and CPT has already been submitted. Such claims would have been rejected by the payer anyway. This is a huge headache.

Payment posting in medical revenue cycle management

Now that the charge has been posted, you will need to wait for the outcome.

  • The payer can pay the claim in full if everything went correctly.
  • The payer can pay in part and deny some parts of your claim.
  • The payer can deny the claim altogether.

There’s another state that the claim might be in. That’s called “no response”. This is where the payor has not yet made a determination on your claim. Typically, payers ask for a minimum of 30 days before responding to your claim. During this time, the claim stays in a “no response” state.

Every day or on certain days a week, you will notice payments from your payers. Of course, the actual payment will go to your bank directly or will be sent to you via check which you will deposit in your bank. Meanwhile, the payment advice will come to your charge posting software or along with the check that you received. This is known as the ERA (electronic remittance advice) or a RA (remittance advice) when it comes to you via the mail.

Keep in mind that you might get multiple checks or a single check with multiple remittances for multiple claims. 

Also, understand that it’s better to use electronic remittances as ERAs follow a universal format (ANSI) called 835. If your software (most charge posting software can) can handle ERA files, you are good to go.

Along with the ERA you are also going to get an explanation of the benefits (EOB) file – either electronically or via mail.

This EOB is going to explain the claim payment. This will tell you about any or all patient responsibilities as well. E.g. co-insurance, deductible, copay.

The EOB will state the “Billed Amount” – the amount you or your office billed the payer. It will contain the “Allowed Amount” – the amount that you and your payer had contracted for, while credentialing. The EOB will contain the “Not Covered” section that will tell you the amount not covered by the patient’s policy (depends from employer to employer). It will also tell you the “Deductible Amount” – if the patient’s plan has a deductible amount, this amount will be specified in the EOB.The patient is supposed to pay this amount.

The EOB will tell you “Provider Paid” – that will be the amount that the insurance company actually paid you. It will also tell you the “Adjustment Amount” – this is the amount by which the payer’s payment is reduced due to “adjustments”. The reason for the adjustment will be explained by the Claim Adjustment Reason Code (CARC).

​Finally, the EOB will tell you the “Patient Responsibility” – that’s the amount that the patient still has to pay you, the provider.

With the above information, you or your medical billing staff can apply the insurance payment(s) to reconcile the same. 

For this, the lump payment would need to be broken down and applied against each individual claim. 

This whole step is known as payment posting in revenue cycle management.

You can start submitting secondary claims once the primary insurance payments are posted. That, of course, would be “charge posting” as explained above and even that will follow the same payment posting steps mentioned above.

Finally, once all insurance payments have been received and account adjustments made, the remaining patient responsibility can then be billed.

Take a look at the images below for remittance advice and EOBs to understand EOB and ERAs better.

Sample remittance advice in medical revenue cycle management
Sample remittance advice
Sample remittance advice in medical revenue cycle management
Another remittance advice sample

Medical revenue cycle management claim denial types

Your claim could also get denied – either partially or completely.

There are two types of denials: hard and soft. 

Hard denials – there’s not much you or your billing team can do about it. You will have to write this off, accept the lost revenue and make sure that you and your medical billing team doesn’t make this mistake again.

Soft denials on the other hand are considered temporary. Your medical billing or revenue cycle management team has the potential to get this reversed.

Your team should work with you, the provider,  to correct the claim.

This might require you to provide  additional information / visit note /document to support medical necessity.

Why are medical claims denied?

Denials will happen – we can guarantee it. It happens to every single provider, practice, health system – no matter how good/bad their medical billing team is.

Some of the reasons for claim denial include (but are not limited to):

  • Credentialing Issues – The provider is not at par with the payer.. I.e. the credentialing department never got this provider empaneled but submitted the claim with this provider as the rendering provider.
  • Eligibility issues – The patient is not enrolled in the plan or with the payer in the claim. This can also happen when the patient was out of coverage (either payer or patient might have terminated coverage) on the date of service.
  • Prior authorization issues – As mentioned above, you performed a procedure and your biller submitted the claim with a specific CPT. However, that specific procedure / CPT is not covered by the plan that the patient is participating in. This means that you were required to get pre-certification / prior authorization for this procedure. However, the prior authorization is not on file. Sometimes it so happens that you did receive the prior authorization but your medical biller forgot to include the authorization number in the submitted claim.
  • Inadequate documentation. These days payers are asking for more and more documentation (consult notes) for claims submitted. Your claim could get rejected due to the lack of adequate supporting information / documentation. You need to have enough documentation via visit/consult notes to support the reason for performing the medical procedure your claim uses.
  • Your claim could also be missing a valid referral number. At times (especially with HMOs), you need to have a referral from a primary care before your payer will pay you for the patient visit.
  • Your billing department entered incorrect demographics information in the claim. The procedure you performed might be age inappropriate according to the demographic information on the claim. Your billing department might have just screwed up and not submitted the correct demographics of the patient.
  • Under-coding claims. This typically doesn’t always belong in your medical biller’s hands. However, you need to know about these. You might have (intentionally) left out a CPT from the superbill. Sometimes providers do so to avoid audits and you might have done the same as well. You might have coded for a less serious procedure. You could have under-coded for various reasons. However, this is illegal/fraudulent.
  • Up-coding claims – pretty much the opposite of undercoding. This is where the provider or the practice or the biller adds CPTs in the claim that does not belong there. In other words, the patient was never treated for that procedure. There are several practices (although fraudulent and illegal) that do this – to collect more from the payer. 
  • Clinical documentation issues. Again, this is out of the biller’s hands. You, the provider, are supposed to provide adequate documentation for each patient visit/consult. That not only bolsters your claim submission but is also necessary for appropriate patient care continuity. The sad part is that when your claim gets denied, you are asked for supporting documentation. If your documentation is sloppy, the chances of getting paid are quite slim.
  • Payer issues. This is also out of your billing department’s hands. Sometimes a claim is denied without enough explanation (codes) in the EOB document. 

How to reduce medical claim denials?

The more proactive you are in your billing department, the better you will be at reducing claim denials. If you understand the reasons claims are denied (read above), you will be in a better position to reduce those denials.

  1. Continuing education. There are no two ways around this. Codes change and will change (sometimes yearly). New codes are introduced and older codes are phased out. Codes are moving toward more specificity. That means, they are getting more granular. You need to invest in yourself, your career as a medical biller.
  2. Double check you work. We cannot say this enough. Even if this means that you need an extra day to submit claims – do so. We have seen so many simple clerical errors (mostly data entry errors) that derail a claim. Double check your claim before you submit it.
  3. Communicate and collaborate. You are not clinically trained. Revenue cycle management takes a large team with several moving parts and several people involved in the process. Make sure you are talking to others on your team. Questions about the visit notes? Don’t be afraid to ask your providers for further information. Don’t be afraid to kick back a visit note or superbill to the providers either. 
  4. Stay in touch with the payer reps. When you submit the claim, it stays in the no-response bucket. Be in touch with the payer reps so you can be aware of errors they have already identified (if any). Start working on those and proactively so that you can re-submit as soon as your claim has been submitted.

Medical revenue cycle management – Appealing claim denials

One point to note here. If your billing team strongly believes that you should not have been denied a particular claim (or claims), you can always appeal the denial. 

Do keep in mind that Medicare/Medicaid are a bit harder and arduous to deal with (they take longer). We find that many practices don’t bother with them. In our opinion, you still should try to appeal the denial. We can show you how to.

Calling the payer

If you do not understand the claim denial code in the EOB/ERA, call the insurance company.

When you call your payer line, make sure that you record the date/time of call, the customer service rep you spoke to and the reference number of the conversation (ticket). Put that information on file (usually, we put it as a note on the pt record itself).

You are going to have to call the payer rep again and having the reference number speeds up the process. When you do understand the issue and are re-submitting the claim to get paid, make sure you are also using the reference number there. This allows the claim to be processed as a corrected claim and not as a duplicate claim.

Prioritize your denials

You are not going to have enough time to appeal every denial. 

Handling denials is a labor intensive process and labor = costs. Make sure that you prioritize which denials you are going to work on first. 

Typically, our advice is to go after the high dollar value denials first. Clear those out, then go to the next bucket of denials.

Denial buckets – understand them, create them, use them

Understand the denials – very, very well. A few common denial reason codes (that you get in an ERA) are:

  • Provider is considered out of network.
  • No prior authorization or precertification.
  • Incomplete claim information entered.
  • Medical necessity – not sufficiently supported documentation provided.
  • Lower level CPT was deemed appropriate but your provider did a higher level, more costly service.
  • Procedure or CPT is not covered in a patient’s benefits.
  • Ineligible patient – i.e. patient no longer covered
  • Pre-existing conditions – not covered by the policy.
  • CPT and ICD mapping/linking issue.
  • Bundled service was unbundled – i.e. you submitted multiple codes for a set that is included in a bundled service

Some of these denials are preventable and some are not preventable.

Your practice management system will show you a report on what is preventable and what is not. 

Note these.

Preventable denials should be brought down to zero. They are simpler to fix and you just needed to be more diligent about your billing process and integrity checking.

Each payer has specific requirements as well. Make sure you are aware of those. 

Research has shown that it is always more efficient and productive to have individual team members specialize on specific payers. This way, they learn the ins and outs of those payers, thereby reducing the denials.

A generic approach does not work.

Sending appeals letter(s) to the payer(s)

Sometimes you really do not have any other way than sending an appeals letter.

Most payers (if not all) have standard appeal letters on their websites. Yes, you might have to hunt them down, but we recommend that you use those denials letters. 

When you send the standard appeals letter, make sure that you include ALL the required information (e.g. member name, ID, date of service, claim number etc).

Denials related to medical necessity are a bit tougher to handle. For this, you need to create a customized letter, have the necessary medical documentation attached to the letter as well.

Do not rely on the knowledge of the payer’s claims department. 

You obviously have proof or a strong reason to believe why your claim should be paid. 

Note down the CPT or CMS or even payer guidelines that you have researched – include those information in your appeals letter.

Include just enough information needed to process your appeal. Never assume that it is better to overwhelm the processor with more information. This will most certainly slow down the appeals process/timeline.

If you are not confident about your ability (or want to save time), just go ahead and recruit a professional reviewer. You can also find (inhouse or external) physicians with experience in billing, coding, HIM or utilization review. 

Claim denials workflow

Most practices we work with do not have a workflow / process around revenue cycle management. 

Payer contact list

You always, always need to maintain a list of appropriate contact personnel for EACH payer. 

Make sure you and your team maintains a list of denials coordinators (not the accounts receivables) at each payer.

Establish a relationship with them. Make sure they also understand that you and your practice know what you are doing.

Denials workflow spreadsheet or use software

Unless you work for a small practice that barely has 100 claims per month to work on, you cannot possibly manage denials in your head or on paper.

At the very minimum, use a spreadsheet to manage your denials.

Spreadsheets have their own limitations but they are better than managing your denials workflow on paper.

There are several (paid) denial management software in the market. Use them. If you want to use our free denial management software, contact us.

You need to track information about each and every appeal – date appeal submitted, payer, filing requirements.

Set up reminders to follow up – ideally per month. Do not let any appeals fall through the cracks.

Here are the steps of appealing medical revenue cycle management related claims

  1. Call payer to find out more information about the denial
  2. Request a review of the claim on the phone. If they deny this request, you can call the dept of insurance or the Ombudsman office. If nothing works, consider legal action (and let the coordinator know as well)
  3. Once you learn more, resubmit the claim. Make sure that you prevent this from being considered a duplicate claim (as mentioned above). You need to file the resubmission with updated clam copy + the original claim copy. You need to submit the remittance advice (RA) and any further documentation your payer rep has asked for. Make sure you mark it as “RESUBMISSION”. This will avoid the claim being rejected as a duplicate claim.

What’s an average denials rate?

According to MGMA, the average denial rate for most practices ranges from 5% to 10%. 

Imagine – even if you are a small practice of two providers, you probably see 50 patients per day. That’s about 1000 claims per month.

If you have a denial rate of even 8%, you are looking at 80 denials per month. 

Even at a charge of $100 per claim you are (potentially) losing $8,000 a month in denied charges.

On top of this, reworking claims typically costs $25/claim reworked. So, you are spending an average of $2,000/month to rework denied claims. You will never really recover all of the $8,000. Let’s say that you are recovering $7,000/- out of those $8,000 denied charges.

At the end of the month, you have lost $3,000 and have only recovered $7,000. 

In other words, you need a strong strategy to reduce denials as months progress.

Otherwise you will always be playing catch-up and will always be “busy” but not making enough.

Strategy needed to reduce claim denials

If you have created a workflow and are using buckets to do root cause analysis of denials, you will also very easily understand how to reduce denials.

Denials due to eligibility

This immediately tells you that you need to have better training at the front desk. Maybe the front desk does not have a good grasp of how important their job is. It also tells you that you need to train your front desk and scheduling team to do a better job at rescheduling appointments that failed eligibility checks.

You would even have cases where the provider is considered out of network (based on the work that your credentialing team has done). When that’s the case, you can change the provider for that appointment to one that is considered in-network for this particular patient’s plan. Or, you can communicate the issue with the patient. 

When you find out that there are eligibility related issues, put these patient appointments in an “appointments at risk” bucket.

Your frontdesk or scheduling team should call these patients before the appointment and apprise the patient of their options. The patient can either cancel the appointment, reschedule the appointment until the insurance issues are resolved or they can choose to pay from their own pockets.

The workflow you are using here (or modifying) is that the billing department analyzes the denials, forms buckets, then trains / informs the front desk to make corrections upstream. This strategy allows you to reduce such denials moving forward.

Denials due to coverage issues

For recalled patients, you already know the procedure that your provider wants to perform (vs a new patient appointment). This is clearly mentioned in the visit note and when your front desk made the appointment, they chose this visit type as well.

This tells your eligibility team that they need to ensure that not only is the patient covered on the date of service, but that the procedure/ service requested by the provider is also covered by the patient’s plan.

In other words, simply having coverage on the date of service is not enough. Your eligibility team needs to find out whether the service is covered by the patient’s benefits as well.

When you find out that there are coverage related issues, you need to do the same as above – put them in an “appointments at risk” bucket.

Your frontdesk or scheduling team should call these patients before the appointment and apprise the patient of their options. The patient can either cancel the appointment, reschedule the appointment until the insurance issues are resolved or they can choose to pay from their own pockets.

The workflow you are using here (or modifying) is that the billing department analyzes the denials, forms buckets, then trains / informs the front desk to make corrections upstream. This strategy allows you to reduce such denials moving forward.

Prior authorization related denials

When your eligibility team is checking for a patient’s eligibility for the specific procedure proposed by the provider, they will also find out whether this service/procedure requires prior authorization or not.

Give yourself adequate time to get the prior authorizations done. Prior authorization does take time and the payers do not always respond on your schedule. If you find out that a procedure requires prior authorization by the patient’s plan, immediately move the appointment to a “appointments at risk” bucket.

As described above, you need to call those patients and give them the options discussed above. In all probability you are going to get the prior authorization if you do your job properly so the patient would just need to reschedule their appointment to after you obtain the prior authorization / precertification.

The workflow you are using here (or modifying) is that the billing department analyzes the denials, forms buckets, then trains / informs the front desk to make corrections upstream. This strategy allows you to reduce such denials moving forward.

Denials due to medical necessity documentation

Monitor these closely. Usually you get denials for “Medical necessity” due to mismatched or missing diagnosis. Your payor might consider a particular CPT as medically necessary diagnosis for another related CPT.

There is no universal rule per se (unless you are dealing with Medicare/Medicaid that has NCDs). 

You need to understand AND have a “ready to go” checklist per payer.

This checklist should have this intelligence to show you the medically necessary (deemed) CPT for the related CPT that you are submitting in the claim. You might even need to consult with your provider to get further information on this as well (since clinicals are out of your area of expertise).

Review the documentation, make sure that the documentation supports the diagnosis, then resubmit the claim.

Most importantly, keep building this internal database of yours.

The workflow you are using here (or modifying) is that the billing department analyzes the denials, forms buckets, then trains / informs the coders to make corrections upstream. This strategy allows you to reduce such denials moving forward.

Denials due to bundling

You will have situations where you need to be careful with modifiers. 

There are services (per payer) that are considered integral to another service that’s reimbursed. This is called bundling. Most payers will have some technology based logic that disallows separate payments for each line item. These CPTs will be reimbursed as a bundle.

Make sure you are up to speed on all the bundled services and reimbursement policies. Use NCCI for guidance on the same. 

You need to be careful of what you report “together” on the same date. You cannot also unbundle and submit the claim with multiple provider names from the same practice. 

Make sure you review the documentation properly. You will see the denied claim line item that’s related to the bundled service/line item. You cannot just blindly resubmit the claim with a modifier. You need to have supporting documentation to be able to appeal that claim or resubmit that claim.

You need to understand AND have a “ready to go” checklist per payer.

This checklist should have this intelligence to show you whether a CPT is bundled in payments by that payer.

Most importantly, keep building this internal database of yours.

The workflow you are using here (or modifying) is that the billing department analyzes the denials, forms buckets, then trains / informs the coders to make corrections upstream. This strategy allows you to reduce such denials moving forward.

Denials due to Incorrect data entry

These data entry issues could be related to demographic information, procedural or diagnosis codes. Usually, the practice management system will do part of the work but it is NEVER 100% correct and your charge posting team and the medical coding team will have to provide their inputs as well.

The workflow you are using here (or modifying) is that the billing department analyzes the denials, forms buckets, then trains / informs the coders and billers to make corrections upstream. This strategy allows you to reduce such denials moving forward.

Denials due to coordination of benefits

Coordination of benefits is an arduous process. It also needs your scheduling team/front desk and your billers to coordinate / collaborate a LOT more than usually occurs in practices.

Several denials are due to coordination of benefits. 

Coordination of benefits usually comes into picture when your patient is covered by multiple insurances / health plans. By law (COB provision and regulations), all health plans are supposed to coordinate amongst themselves to reduce any chances of duplicate payments for the same procedure(s). It is also built in this way to maximize the benefits and coverage that a patient obtains.

  • According to regulations, the primary payer is supposed to pay first.
  • The secondary payor is supposed to pay next.
  • The tertiary payor is supposed to pick up the rest.

It is YOUR job to know all the insurances that the patient is covered by. This is a crucial task for the scheduling team or your front desk. Each patient registration needs to have ALL the insurances that a patient has.

Get the insurance details each time

Our recommendation (based on research and our own experience) is that your scheduling team needs to get in touch with the patient a few days before the appointment to ensure that they truly do know the insurance details of the patient.

Keep in mind that patients flow in and out of insurances many times and the primary/secondary/tertiary coverages will change over time.

This also means that your medical revenue cycle management team needs to have a concerted effort to keep your patient coverage information up to date as much as possible.

It does not hurt to ask the patient one more time when they are checking in for their appointment at your front desk. Ask the patient about their spouse and dependents as well.

Ensure that you have a policy about this,

Make sure you submit the primary payer’s EOB each time

Each payer has their own rules. But every payer does require you to submit the EOB of the primary payer along with the claim you submit to them.

Make sure that your medical revenue cycle management team has a checklist created per payer and share it with your billing team.

When your medical billing team is doing their due diligence before submitting the claim, it has to pass this “checklist”.

Make sure you understand Primary and Secondary Payer determination

Sometimes you can get this info when your eligibility verification team is doing their job. Sometimes you do not.

As a general rule of thumb, if the patient themselves is a subscriber, then the payer of that patent is going to be the primary payer.

Know about the birthday rule – this comes into the picture if the patient is a dependent. When a dependent child is covered by both parents’ benefit plan, then you need to find the parent whose birthday (date) falls first in the year. The person whose birthday falls first in a calendar year is considered as the primary. The payer of that parent will be considered as the primary payer.

What percentage of denials are traced back to the front end?

As you can see quite a few of your denials can be traced back to the medical revenue cycle management front end team.

In other words, if you fix these errors upstream, you reduce the chances of denials.

As per a Change Healthcare report, front end revenue cycle teams (registration and eligibility) contribute to 23.9 percent of claim denials.

What is the front end revenue cycle?

Now that you see the contribution of front end revenue cycle teams (or the lack thereof), it would be good to understand that the medical revenue cycle management teams are (and should be) broken into two sections.

The front-end part of the medical revenue cycle manages the patient-facing aspects. This department should have its own policies (some of what we described above) and should have their own staff. They handle everything “before” the visit.

The back-end part of the medical revenue cycle manages everything “after” the visit. This team handles claims management and reimbursement. This team should have its own protocols, policies, checks and balances as well.

Both teams should be communicating between each other and should be contributing to the overall goal of maximizing revenues.

Credentialing process timelines

Plan for a good 90-120 days, start to finish.

If there are any errors or mistakes in your submission, then the timeline starts over again.

While the credentialing process is not rocket science, it does require meticulous efforts to reduce errors and rejections.

First, you are going to get credentialed (i.e. the payer will verify the credentials you submitted). That is, if your documentation was error free.

Then, you are going to get a contract.

This contract is also going to have effective dates.

This is when you actually are “par” (aka participating provider).

Keep in mind that unless you are “par”, you cannot bill the payer.

Most, if not all, payers do not allow retroactive billing.

Medicare is a tiny bit faster – 60 – 90 days.

However, this will vary based on the state (i.e intermediary).

The good thing about Medicare is that they will consider the application receipt date as the effective date.

This allows you to retroactively bill Medicare.

Additionally, you also get a 30 day grace period from Medicare that’s above and beyond the effective date.

So, you get to bill retroactively for 1 more month.

DMEPOS applications are harder to get approvals for.

For DMEPOS suppliers, you need to plan for some additional time for sure.

Medicare scrutinizes DMEPOS applications a lot – primarily due to all the scams that had come to light of late.

Expect a site visit,

Plan for a total turnaround time of 90 – 120 days. There’s nothing you can do to speed this up.

Here’s one thing you can do.

When you hire a new provider, make sure you hire one that’s already credentialed with various payers.

Next, have these payers add your business location/tax ID to the provider’s records. This will get your process sped to completion in about 30 days.

Go ahead, try it out !

Documents needed for provider credentialing

In healthcare, provider credentialing is a pain. A necessary evil, justifiably so.

Your provider has to be credentialed at each location they service, each payer panel they are accepted on, each plan they’re participating in.

It’s a matrix that you need to maintain.

Without that, your revenue cycle management processes will be dead on arrival.

Here are some required payer documents:

  • Provider Licenses (you can upload this as PDF or fax to us)
  • Malpractice Insurance (We will need the certificate of insurance – you can upload this as PDF or fax to us)
  • DEA (federal) and state CDS certificates (you can upload this as PDF or fax to us)
  • Board Certification (you can upload this as PDF or fax to us)
  • Diploma – copy of highest level of education (you can upload this as PDF or fax to us)
  • Latest “resume” (this needs to show the current employer)
  • IRS Form W-9
  • Driver’s license (has to be current)

For your business (aka – legal entity) we need the following documents, You can fax these to us or upload them using our CRM:

  • IRS form CP 575 or replacement letter 147C. We need this for EIN verification. IRS would have sent you this letter when you obtained an EIN from them (when you first registered your business). Medicare will NOT process your application without the 575 or the replacement 147C.
  • Business Licenses.
  • If you are a therapy facility, we would need a copy of your office lease as well.
  • If you are enrolling in Medicare, we would need a Letter of bank account verification.

We *might* need various other documents (based on the payer). These *might* include:

  • Collaborative Agreement (required for Nurse Practitioners)
  • Admitting Arrangement letter (required for providers who do not have hospital admitting privileges). Do keep in mind that we also help with hospital admitting privileges.
  • Prescribing arrangement letter. If for some reason, your providers do NOT hold a DEA certificate.

For provider(s) educated outside of the USA, you need the following:

  • ECFMG Certificate (if educated outside of The United States)
  • Passport or other citizenship documents

Service location requirement

You need to have a service location before you can be credentialed.

There are no 2 ways about it. You cannot use your home address.

You CAN, however, list the address of an office space you’re having built out or taking over.

But, you cannot do this more than 30 days prior to starting to see patients at that location.

How to handle Medicare Revalidation

Your providers need to revalidate Medicare enrollment every 3 years. 

Your providers need to complete the CMS 855I paper application. Alternatively, they (or you) can use PECOS to complete the revalidation online. 

If you are a group practice, then you should be using the CMS 855 B application. This is a good time to set up EFT (electronic funds transfer) for your group as well.

IMPORTANT – you need to respond within 60 days from the date the revalidation letter was sent. If you delay or disregard this, your billing privileges will be terminated.

Relevant medicare forms to use

For individual providers, you can use the CMS 855 I form. This can be used whether you are a physician or a non-physician.

However, supporting documents vary based on your “provider type”. Take note of these supporting documents for your particular provider(s).

Sometimes, you do have to submit (new providers) the CMS 460 form as well. However, if you do not submit this form (and are called non-par provider), you can still get more reimbursement from patients at a maximum rate of 115% of Medicare rates.

If you are a group practice, you will also need to reassign your payments to the business entity. This is done using the CMS 855R form.

When you enroll, you should be setting up for electronic funds transfer (EFT) using the CMS 588 form as Medicare is not going to issue you a paper check.

They will ALWAYS pay using EFT (good thing).

So, effectively, plan for using the CMS 855I, CMS 460, CMS 588 forms if you are registering a new solo practice.

If you are adding a new provider to your existing group practice, you are going to need the CMS 855I and CMS855R forms.

If you are NOT enrolled with the state intermediary, you are going to need the CMS855R. Sometimes, you are going to need the CMS460 form as well.

Medical revenue cycle management processes cheatsheet

You can model a cheatsheet for your entire RCM process.

Create a baseline report

  1. How many claims are pending to be submitted as of date + reasons (e.g. no visit notes)
  2. How many claims are in “no responses” status
  3. How many claims have been denied and the reasons 
  4. How many claims that are still within timely filing deadlines where we could recover monies
  5. Average claims cycle – days between DOS and claim paid


  1. Maintain a list of all plans accepted 
  2. Maintain a matrix of all plans accepted at each location
  3. Maintain a matrix of all plans that a provider is par with 
  4. Maintain the delta of which plans our providers still need to be on par with
  5. Each day, receive update file from eligibility team to update provider credentialing
  6. Use website / application to track statuses
  7. For each provider vs each plan to be credentialed for, complete required documentation and identify exceptions.
  8. Next, verify provider/ location information from providers or the payer roster. Even if a provider does not practice at a specific location, get them credentialed so we can bill under. 
  9. Regularly, follow-up on submitted credentialing requests.
  10. After receiving credentialing notice, capture that data, label and link images to specific providers/ locations in the payer’s database.
  11. Once a month, update provider information, and CAQH profile.
  12. Validate and update the provider’s pay-to address or the billing address with the payers
  13. Validate and if possible, enroll us for Electronic Data Interchange (EDI), Electronic Remittance Advice (ERA), Electronic Fund Transfer (EFT) and CSI with all payers possible

Insurance eligibility 

  1. Verify insurance eligibility 3 days before patient visit
  2. For each eligibility check, ensure that you update as many details as possible e.g
    1. copayment, deductible, outstanding deductible, coinsurance
    2. Secondary, tertiary insurance
    3. Medicare / medicaid details if any
    4. Effective from / effective to dates
  3. Mark differences in patient PCP and patient address from verification website (payer) vs your EMR
  4. Each day, deliver a file to the call center team for failed eligibility verifications (in active or eligibility check failed). Call center has to call the patient and sort out the correct insurance details. If a patient does not answer, leave a note in your EMR that is triggered upon the patient / appt open event in your EMR.
  5. If eligibility fails due to credentialing errors or credentialing TODOs (e.g. provider is not at par with the particular payer), reassign the patient to a provider that is at par with the patient’s payer. Leave a note that triggers an open patient/appt event in your EMR to inform front desk and techs/scribes that the patient cannot be seen by provider X/Y because they are not par.
  6. Each day, deliver a file to the credentialing team of patients that had to be reassigned (appointments) because of the provider not being credentialed. This will allow the credentialing team to prioritize providers that need to be credentialed for specific plans (based on volume of patients that needed to be reassigned to another at-par provider).
  7. Each day, deliver a file to call center team that notes patients whose demographics have not been updated in more than 6 months

Prior authorizations

  1. Refer to the billing cheat sheet to determine which patients need to get prior authorization for the visit.
  2. In your EMR, enter the authorization number, referring provider NPI, authorized provider and if necessary the ICD10s
  3. In your EMR, upload the referring provider referral PDF as you get via fax or werq website

Patient Demographics

  1. Capture Patient’s legal name, gender, address, phone numbers (work/home/mobile) – check “face sheet” and validate info
  2. If possible, Patient’s social security numbers for identification 
  3. Health insurance information (name of the insurance company, name of the insured person and his/her place of work, mailing address for claims, and group and policy numbers)
  4. Medicaid or Medicare card (if the patient receives federal or state assistance)
  5. Name, address and telephone number for person who will be responsible for payments
  6. Enable patient portal by using patient email address if available or manually mark it as enabled (within 4 days of patient DOS)

Charge Entry / Charge Capture Audit (CCA)

  1. Use / refer to the charge description master
  2. Receive superbills from FTP or some kind of a shared drive
  3. Validate clinical data information (CDI) and ensure completeness / accuracy. Validate visit note for level of care, and all treatments rendered
  4. Daily, create a file and push CDI issues back to providers
  5. Capture the date of service, billing provider, referring provider, CPT/procedure codes, ICD-10, number of units and modifiers.
  6. Prepare charges after coding (done by coders), validate via software like EncoderPro
  7. Daily, create a file and push coding errors to coding team
  8. Run them through claim scrubber / EncoderPro (perform Charge Capture Audit CCA)
  9. Append necessary modifiers, bill exact number of units
  10. Verifying charges against fee schedule / CDM
  11. Identifying undercharges / under-coding, duplicate posting, and overcharges/over-coding
  12. IMPORTANT for commercial payers – if the patient has a referral provider, bill it as a consult rather than a visit because the reimbursement rates are higher. This doesn’t matter for Medicare/Medicaid.

Payment Posting / Remittance processing

  1. Daily, first do Electronic Remittance Advisory (ERA) Posting – question, what do we do here? Run ERA batches and post to your EMR? Process any exceptions by making corrections in your EMR.
  2. Daily, perform Manual Payment Posting from EOB. First, create inventory of EOBs received, payment details then post accurate payments, adjustments, write-offs and balance transfers. Update the inventory daily and prepare report
  3. Create a daily denials file and hand off to the denials team. First, create inventory of daily denials, reasons for denials. Create a file if denial is related to billing the secondary payer as well. 
  4. Create a daily no-responses file and hand off to the denials team. Maximum time to wait is 30 days, so you should create a file for all claims wherein we have not received responses in 2 weeks.
  5. Create a daily patient responsibility file and hand off to the collections team. Also, create a file if denial balance has to be transferred to the patient account as patient responsibility. 
  6. Create a daily file preparing remaining data to get approvals for making adjustments/ write-offs as per defined policies. 
  7. Route the denied claims to appropriate work queues (call center, practice management staff etc)
  8. Daily Patient Payment posting. First, get a file from your payment processor for daily payments received. Look up patient accounts and post payments to avoid inflated A/R. Next, get a file for all payments made at the counter. Ensure that those payments are reflected in patient account balance to reduce A/R. Ensure that these payments are credited to the collections team to be applied to their daily quotas.


Denials is a separate topic altogether and covered here.


Collections is a separate topic and covered in its entirety here. This requires you to understand how to collect as first party vs third party. Plus, you also need to understand reading out Miranda rights (mini Miranda as well)

Create a billing cheat sheet

  1. List of payers
    1. including Medicare, Medicaid, Blue Cross Blue Shield by state, Cigna, Aetna, United HealthCare, Tricare etc)
    2. include all contact information such as claims address, website, and provider information phone numbers.
  2. List of insurance verification websites + credentials
  3. Timely filing deadlines for each payer (e.g)
    1. Medicare – within 1 yr
    2. UHC – depends on agreement
    3. Cigna – in-network (90 days),  Out-of-network – 180 days
    4. Aetna – 90 days
  4. List of payers requiring verification and prior auth, list process of prior auth for each payer, list all services (codes) for each payer that needs prior authorization
  5. Billing limits per service per payer – maintain the frequency allowed for specific services or procedures by payer. Include the number of procedures allowed and the process for billing multiple procedures (there are some gotchas for each specialty)
  6. Billing methods – make sure all your payers accept electronic claims (otherwise it is a laborious and painful)
  7. Payment timings – most payers are required to pay within 30 days, but if there are any payers that do NOT pay within 30 days of filing, note it in this cheat sheet.
  8. Denials / no responses – Identify and notate the appeals process required for each payer. Keep the timely filing deadline for each payer.

Hopefully this guide helps billers out there.

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