outlining the revenue cycle management process

The CEO has asked you to create a PowerPoint presentation (using speaker notes for each slide or voiceover narration) outlining the revenue cycle management process. Your presentation should
1. include a discussion on value-based care models as introduced by the Centers for Medicare and Medicaid Services (CMS), such as ACOs and the Medicare Shared Savings Program. In addition, based on the research you’ve done, you will need to
2. include a recommendation for a possible strategy to strengthen the organization’s financial operations in preparation for the transition to value-based care.
3. Includes Comprehensive speaker notes or narration

Module 5: Reimbursements and Revenues

Video: Generally Accepted Accounting Principles (GAAP)

Financial accounting is guided by a set of concepts and rules. GAAP are a set of accounting standards that promote uniformed recording and reporting of financial information. GAAP is used by: Organize financial information, summarize accounting records into financial statements, Provide disclosure of certain supporting information.

GAAP is authorized by the U.S. Securities and Exchange Commission (SEC) and managed by the Financial Accounting Standards Board (FASB). GAAP establishes measurements and classification criteria for the financial reporting. The main goal of GAAP is to create financial statements that are relevant, reliable, and comparable.

The four principles from which GAAP is based are: Revenue Recognition, Measurement, Presentation, and disclosure.

  1. Revenue Recognition
    1. Revenue is recognized at the time that goods and services are provided to the customer
    1. Takes place when certain conditions are met following a critical exchange in which the amount revenue is measurable.
  2. Measurement
    1. Often referred to as the cost principle
    1. Requires that accounting information is based specifically on actual cost, which is equal to cash or its equivalent at the point at which the asset is acquired.
  3. Presentation
    1. Expense recognition is also known as the matching principle, which requires an entity to record expenses incurred
    1. Entities are required to report an expense on their income statement during the same period as related revenues
  4. Disclosure
    1. Requirement that the company reports all details that are used in the financial statement for which decisions are made
    1. May be footnotes to the actual statements

Four key assumptions -going concern, monetary unit, time period, business entity assumptions that are applicable to GAAP.

  • Going concern assumption suggests that the business will continue to operate, which is significant in assuring that assets are reported at costs as opposed to liquidation value.
  • Monetary unit assumption implies that transactions are expressed in monetary units, which is the common denominator of business.
  • Time period assumption is the presumption that the division of the life of a company is categorized as months and years.
  • Business Entity assumption refers to the classification of business as sole proprietorship, partnership, or corporation.

The International Financial Reporting Standards (IFRS) is the international accounting framework that applies to the financial reporting of organizations outside of the U.S. IFRS is more of a principles-based accounting standard, whereas GAAP is more rules-based. IFRS process represents and captures the economics of transactions better than GAAP. The provisions of GAAP establish a framework for which checks and balances and accountability exists within the financial reporting process. The financial reporting standards of GAAP are fundamental to the efficient operations of the capital markets in the U.S. GAAP promotes transparency, trustworthiness, and relevancy of information, which is used to make decisions for how health organizations operate.

Healthcare Payment Systems

How has healthcare reimbursement evolved?

Reimbursement methods have evolved in recent years. There has been a significant movement away from the retrospective reimbursement model toward a more prospective model of reimbursement. In the retrospective model, which is based on the traditional fee-for-service approach to reimbursement, providers assumed little or no financial risks. The provider treated the patient and billed for the services rendered. The payer remunerated based on the provider’s billing. Rapidly rising costs and increased demand for accountability fueled efforts to implement a more fiscally responsible approach to reimbursement. This effort led to the intensified economic restructuring of the healthcare reimbursement process. Prospective payment systems were introduced as a means of addressing concerns relative to costs and accountability.

Under the fee-for-service reimbursement method, providers are reimbursed for each unit of service provided. Units included visits, tests, and various types of procedures. Providers commonly prefer the variability of the fee-for-service method because the provider controls the type and volume of care. Payment is made based on billed charges taking into account negotiated rates, discounted charges, and usual, customary, and reasonable (UCR) fees aligned with geographic location. The fee-for-service method focuses on the supply side of healthcare financing.

With the goal of improving patient outcomes, which are intrinsically linked to the enhancement of quality and the reduction of costs, promoting alternative payment models (APMs) have become a common goal for insurers. APMs shift compensation models from care volume to care value. The four categories of APMs include pay-for-performance (P4P), shared savings arrangements, episodic payments, and global budgets.

  • Pay for performance model: rewards healthcare providers for meeting or exceeding quality measures. The P4P also imposes financial penalties when providers fail to meet specific goals or cost saving objectives.
  • Shared Savings Program Model: reward the collaborative efforts of providers to reduce the overall cost of care for a specified population by creating accountable care organizations (ACOs).
  • Episode of Care Model: are used for the provision of all clinically related services for the patient for a specific condition from the onset of symptoms until the treatment is completed.
  • Global Budget Model: an emerging payment innovation is the all-payer global hospital budgeting. This approach involves an annual expectation for revenue for all inpatient and hospital outpatient care in advance, creating a powerful incentive to reorganize care for prevention and to invest in community services (Sharfstein, Gerovich, Moriarty, & Chin, 2017).

Transitioning from volume-based payment to value-based payment is necessary to reduce the costs associated with expensive and often unnecessary tests and treatment. The value-based approach is considered more efficient and alternative payment methods have shown significant promise in the efforts to reverse recent trends toward the economically unsustainable costs facing the U.S. healthcare system.


Sharfestein, J., Gerovich, S., Moriarty, E., & Chin, D. (2017). An Emerging Approach to Payment Reform: All-Payer Global Budgets for Large Safety-Net Hospital Systems. The Commonwealth Fund. Retrieved from https://www.commonwealthfund.org/publications/fund-reports/2017/

Managing the Revenue Cycle

What is the Healthcare Revenue Cycle?

Healthcare revenue cycle management (RCM) is the financial process used to manage the administrative and clinical functions associated with claims processing, payment, and revenue generation. The process encompasses the identification, management, and collection of patient service revenue. Without this key financial process, healthcare organizations cannot maintain viability (LaPointe, 2018). The RCM process includes creating, submitting, analyzing, and ultimately obtaining payment for the services rendered.

Managing the Revenue Cycle

Managing the revenue cycle involves a series of steps that begins with patient scheduling and pre-registration, point of service registration, counseling collections, encounter utilization review and case management, charge capture and coding, claim submissions, third-party follow-up, remittance processing and rejections, payment posting, and appeals and collections.

With declining cash flows, tightening margins, and increasing bad debt, today’s health organizations must be more diligent than ever in ensuring the efficient management of the revenue cycle. However, there are often obstacles health organizations face to achieving the most efficient revenue cycle management process. Among the major challenges facing the health organizations are the inability to adequately leverage costs of collections, challenges with price transparency, and increasing claim denial rates.

  • Costs of Collections: cost sharing responsibilities for patients are increasing. Within the next few years, providers are likely to see a 50% increase in the amount of revenue owed directly from patients. This could result in $200 billion, or 30% of those collections written off as bad debt because it can be more difficult to collect from patients than commercial payers (Woughter, 2017). Consequently, health organizations must address process gaps in the RCM process at all intervals in order to mitigate the challenges associated with collections.
  • Price Transparency is a growing concern for many organizational leaders. Hospitals, specifically, have previously been able to develop their own pricing methodologies and were not pressed to divulge their pricing strategies to other stakeholders. However, there is an industry-wide push to increases price transparency. Some states have even implemented guidelines for which hospitals must comply with respect to providing pricing documents to industry officials (LaPointe, 2017).
  • Claim Denial Rates: one of the biggest challenges for RCM is the increased rate of claim denials from payers. Reasons for claim denials vary significantly. There are several lines of defense that could be implemented to improve denial rates. Identifying eligibility at the initial stage of the RCM process and ensuring all pre-authorizations are obtained can help to mitigate the associated denials risks. Finally, the use of best practices in terms of conducting denial analysis and examining the most common reasons for denials can go a long way toward reducing the occurrence of such denials.

The revenue cycle management process is an on-going process. It encompasses the entire customer experience from beginning to end. Each step in the process has significant importance for the RCM process. Healthcare revenue cycle management is continuing to evolve. Keeping pace with rapid changes in the healthcare ecosystem, such as value-based reimbursement methodologies, can aid in breaking down potential barriers to successful RCM.


LaPointe, J. (2018). What is Healthcare Revenue Cycle Management? Cycle Intelligence. Retrieved from https://revcycleintelligence.com/features/what-is-healthcare-revenue-cycle-management

Woughter, A. (2017). What is Cost to Collect? Nthrive. Retrieved from https://www.nthrive.com/blog/what-is-cost-to-collect

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