American Hospital — “The Most Complex Organization in the History of Man”
The modern American hospital has been called “the most complex organization in the history of man.”
The complications involve the relationship between patient, facility, nursing staff, and providers, the complexity of diseases, treatment options, medications, etc., but one of the complexities that many in the public are only vaguely aware of is what is referred to in hospital lingo as the “revenue cycle.”
When you run a convenience store your lifeblood is volume.
People pull up to buy gas, they swipe their card, and money appears in the store’s bank account. They come in and buy a candy bar and a soda and they pull cash out of their pocket or pay with a credit or debit card. Again, money appears in the store’s account.
When it comes to healthcare, people don’t walk in and pay with cash or credit card. They may pay a small co-pay at the time of service, but the great majority of the payment comes later. Healthcare organizations must first register the patient with accurate information. A wrong middle initial, a wrong or missing birth date, a transposed or missing number in their insurance information, a wrong address or phone number, or any number of other possible errors or omissions during the registration process can lead to delayed or even denied reimbursement. After that, accurate documentation of the entire episode of care further complicates the matter. Nursing staff and providers must document everything, from the exams performed, to the diagnosis given, to the treatments, supplies, and procedures provided. Leave one checkbox unchecked, or forget to list a diagnosis, or a procedure, and reimbursement may be delayed or denied. Did the Doctor forget to sign one of the orders? Payment denied.
Next comes coding. There are special codes that represent every possible diagnosis, every possible treatment, and even supplies. Healthcare systems are now using electronic healthcare record systems. These systems can theoretically streamline the process and help ensure accuracy and complete documentation, but organizations that are just now adopting those systems are way behind the curve. Their staff may not be accustomed to these systems, and without adequate training and complete competence using the system, the adoption can be to the short-term detriment of the organization. After registration, proper documentation of the visit, and coding, comes billing.
Medical billing isn’t quite as simple as mailing out an invoice to a customer or client. There are hundreds, maybe thousands of payers involved. Medicare, Medicaid, a great number of other government-administered programs, private insurance companies, self-insured employers, Indian Health Services (which comes in many complicated varieties), “self-pay” patients, and many other variations of payers exist, and each one of them has its own rules with respect to proper billing. Some of them require electronic billing. Some of them cannot accept electronic billing. Some of them require certain pieces of information, and certain codes, while others require a different information set and operate under a different code standard. Just getting that bill to the right place with the right information on it is a daunting task. Not there in a timely manner? Denied. Missing information? Denied. “T” not crossed, “I” not dotted, denied.
Many patients have a combination of multiple payers.
After the first bill goes out, the payment and “Explanation of Benefits” (EOB) comes back form the first payer. Now that information must be forwarded to the second payer. Bill the second payer before the first payer? Denied.
After all of that happens, healthcare systems must then try to collect the balance due (if any) from the patients themselves. That entire process can take weeks, and often months, and patients become very frustrated when they receive a bill long after the service was provided.
This is a simplified explanation of the healthcare revenue cycle, and there are many, many complexities not mentioned here, but the point is that an organization can be very busy, generating lots of business, and the bulk of the payment for those services can be delayed for months and months or lost altogether. This is a complex system that involves a variety of different individuals in the organization as well as a qualified transparent administration to over see it all and ensure its success.
