Originally published in McKnight’s 

By Betsy Rust

Nursing homes have an epidemic health problem these days, but it’s not in their patient population, it’s on their own balance sheet.

Many are not paying close enough attention to a fundamental aspect of any business: revenue cycle processes that facilitate getting payment for services rendered!

SNF owners and operators are focused on new rules, increasing regulation and filling beds, as the industry shrinks, and demographics change. But managing billing and collection processes is not top of mind. It should be, given increased complexity that means many are suffering from claims adjustments and lost revenue. These are claw backs that are quietly draining much needed cash from the business.

The problem has been quietly mounting: A decade ago, the revenue cycle process was less complicated. Private pay patients paid in advance, and Medicare and Medicaid billing and collection protocols executed well by most providers.

Today, it’s a different world.

Due to the growth of managed care for both  Medicare and Medicaid, SNFs are dealing with at least  a dozen health plans that are providing services in lieu of the federal and state government. Each plan has its own contract requirements and billing rules, and most are more prescriptive and rigorous than what the government would have required.

The increasing number and complexity of contracts has led to a huge problem with contractual adjustments and bad debts triggered by issues ranging from minor documentation mistakes to providing services not authorized by payers. These issues can result in a denial of payment for a submitted claim.  Unfortunately, revenue cycle errors may also materialize during a post-payment claim review in which case you will need to return payment already received.

Making matters worse is that sometimes these issues are not readily identifiable in reviewing a SNF financial statement. Owners and administrators generally understand and monitor bad debt expense, but if billing cycle problems reside in contractual adjustments they can sit, buried in a company’s financial statements and go unnoticed for a long time, or until dwindling cash balances raise the red flag.

There is a remedy to this problem and it is strong  revenue cycle management (RCM). RCM encompasses a set of internal processes from pre-admission to billing that will help to facilitate timely collection for services rendered.  But ask senior management at many nursing homes about their revenue cycle management and, you might get a blank stare.

There’s no one magic bullet that drives success with revenue cycle management. Many SNFs often mistakenly focus on the billing process, when the source of the lost revenue usually occurs very early in the revenue cycle process  – at or before the time the patient is admitted. Revenue cycle management requires that an Organization understand all of the administrative and clinical requirements of each payer contract and establish processes to ensure compliance with all of the specific contract terms. Adequate technology and staff expertise can significantly influence revenue cycle results.

Start 2018 with a commitment to revenue cycle management! You have worked hard to build your census so make sure you get paid

Betsy Rust, CPA, is a senior care and living consulting partner at the accounting firm and consultancy Plante Moran in Detroit, MI.