5 Commonly Used Healthcare Revenue Cycle Management Terms

One of the key components for healthcare providers and facilities, healthcare revenue cycle management can be intimidating and confusing for a lot of people.  Statutory requirements, coding and billing, payments and denials – add to these the various terms and acronyms that are used – and you have a mine-field on your hands.  Given below are five commonly used healthcare revenue management terms along with a short description of what they mean.

Alternative Payment Models

The traditional method of paying healthcare providers through a ‘fee for service’ model, allowed the system to be misused.  Payments under the ‘fee for service’ model were made for any tests conducted or any service provided, at a pre-negotiated rate for each activity.  This created an incentive for healthcare providers to ask patients to undergo tests or services, which they may not have required for their treatment.  A simple example is a patient who comes with a coughing problem – the first tests that could be asked for is a chest X-ray and a complete blood test, which may not be required at all in this case.  In order to put a stop to this financially draining and open to abuse system, alternative payment models have been developed by healthcare reformers.  Creating incentives that favor quality of service over quantity, these models include bundled payments, ACOs and value based reimbursements.

Bundled PaymentsAs the term denotes, this is a single payment covering all services and tests delivered to a patient suffering from certain acute medical conditions, over a specific time period, covering the full episode of care.  One of the key components of this model is the sharing of a single payment by multiple providers for the different services they administer in a single episode of care.  The healthcare reformers believe that this will bring about better and more dynamic relationships between different providers.  Organ transplants, knee and hip replacement and other similar procedures are some of the many services that are being paid by insurers under the bundled payment model.

Accountable Care OrganizationA coming together of different members of the healthcare community like hospitals, testing labs, doctors etc, under a single umbrella to share responsibility and provide care to a population of patients, an Accountable Care Organization(ACO) delivers coordinated care, which can result in a reduction of unnecessary medical tests and services, higher savings for providers and better health outcomes for patients.  Value based payment models tied to quality metrics, create incentives to provide cost effective and quality healthcare.

Value based reimbursementDriven by Medicaid, Medicare and other commercial payers, value-based reimbursement is directly linked to quality of care and patient outcomes.  Under this system, costs related to unnecessary or excessive tests and services shifts back onto the healthcare providers – thus ensuring that they have no incentive to ask for or provide more than what is required.  Healthcare reformers believe that this will eventually result in superior quality healthcare minus the inefficiencies, redundancies and fraudulent services.

Price transparencyConsumers are becoming more demanding about knowing in details how much the treatment would cost, as it would allow them to take better informed decisions regarding their treatment.  With increasingly high deductibles and out-of-pocket copayments, consumers want accurate data about the costs involved in their treatment.  However, in many cases, it becomes difficult for the healthcare provider to offer this data as they need to negotiate with payers on pricing.  An ACO for example, would be dealing with multiple payers and different price variations.  Price transparency is becoming an important aspect of the healthcare industry revenue cycle.  The lack of price transparency will eventually lead to trust issues between everyone involved.  Healthcare reformers feel that price coordination between payers and providers is as important as care coordination – something that can be achieved through Accountable Care.