Significance of Medical Coding in Revenue Cycle Management

Did you know medical coding is considered the most significant process for revenue cycle management? You must assign accurate codes to your healthcare services to upscale your revenue cycle with an increased cash flow.

This blog covered the link between medical codes and revenue cycle management. We explained the common types of codes and how they impact healthcare RCM. We have mentioned the key elements and challenges that come along with these processes as well.

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What Is Revenue Cycle Management (RCM)?

Revenue cycle management is a process that handles medical bills and collects revenue. The first step of this process is appointment scheduling by patients. This process is completed whenever hospitals receive their payments from insurance companies.

RCM is important for increasing your revenue as it reduces claim denials. You can also decrease your days in accounts receivable. As a result, your collections are likely to increase. This means that correct and timely payments can improve your financial performance.

What Is Medical Coding in Revenue Cycle Management?

Medical coding is a process in which healthcare providers assign specific codes to their medical services. These codes are used to generate specialized bills as part of your revenue cycle management for appropriate reimbursement from insurance companies.

Medical coding facilitates revenue cycle management by applying specific codes to complex medical information. You can accurately communicate with your patients and their insurance providers about the payments for your healthcare treatments and procedures.

Why Is Accurate Coding Important for RCM?

Medical coding generates accurate bills, streamlines reimbursement payments, and regulates accountability. It also enables transparent communication, creates efficient claims processing, and much more. Let’s analyze the medical coding importance to healthcare RCM:

1. Generating Accurate Bills

Medical coding is an effective way with which you can generate accurate healthcare bills for your Revenue Cycle Management (RCM). It makes your complex medical procedures, diagnoses, and services easy to understand. 

It does that by converting them into standardized codes, which your patients and their insurance companies are well-versed in. A specific code assigned to its corresponding medical service ensures that your billed amounts align with the services availed by patients.

This minimizes discrepancies and denials with which you can safeguard your healthcare organization against revenue loss due to underbilling or non-compliance. In this way, medical coding maintains financial stability and integrity throughout your revenue cycle.

2. Streamlining Reimbursement Payments

You can also streamline your reimbursement payments from insurance companies through effective medical coding. Medical codes optimize the RCM cycle in medical coding by building a strong bridge between healthcare organizations and insurance providers.

They also form clear and standardized communication between them regarding your healthcare treatments and procedures. Accurate coding enables insurance companies to comprehensively validate your medical services and expedite reimbursement approvals. 

You can use your medical codes to justify the necessity of your services so that payment delays are minimized and your cash flow is optimized. By doing this, you can ensure that your accurately coded services maximize timely and accurate reimbursement payments to you.

3. Regulating Accountability

Regulating accountability is one of the most important aspects of medical billing and coding. Specific codes assigned to specific medical services enable you to accurately document and report your medical procedures and treatments.

It also reinforces following industry standards and regulatory guidelines and, therefore, establishes a framework to elevate transparency and consistency within the healthcare environment. The validity of medical services can also be substantiated by insurance providers.

By properly coding your services, you can mitigate the risk of legal penalties and unethical practices for your institute. In this way, you can foster trust and ethical conduct throughout your revenue cycle, which effectively contributes to your healthcare financial ecosystem.

4. Transparent Communication

With accurate medical coding, you can also establish transparent communication between you, your patients, and their insurance providers. Your standardized codes can become a universal language for them, and they can easily work with your complex medical information.

In this way, these codes enable a common understanding for all parties involved so that the nature of your medical procedures and diagnoses can be effectively conveyed. In addition, transparent communication prevents misunderstandings and reduces errors. 

As a result, medical coding enhances collaboration and supports informed decision-making to model a reliable healthcare environment. You can be a part of this by promoting a transparent exchange of medical information in your revenue cycle.

5. Efficient Claims Processing

Medical coding also plays a pivotal role in creating efficient claims processing for boosting the RCM mechanism of a healthcare organization. You can accelerate the submission and adjudication processes for your reimbursement claims through standardized codes.

Your medical codes enable the insurance companies of your patients to swiftly evaluate and process your claims. In this way, they enable a proper justification for those companies to reimburse payments to you and reduce delays or denials due to imprecise documentation. 

Moreover, efficient claims processing can improve your cash flow and minimize administrative burdens on you. This can, in turn, create operational efficiency for your healthcare organization and also contribute to optimizing its RCM medical coding process.

6. Improved Data Analytics

You can improve your data analytics through medical coding as a way to make data-driven decisions for managing your RCM. Your standardized codes transform medical data into structured data sets that can be used to comprehensively analyze various characteristics.

Healthcare organizations can use this to make informed decisions on which resources can be strategically allocated, and several areas can be identified for improvement. This data-driven approach is beneficial for you to enhance patient care and rationalize your RCM process.

This is how you can enhance data analytics by specifying accurate codes and fostering a modernized framework for your healthcare organization. In this way, medical coding in healthcare improves data analytics and contributes to your overall success.

7. Clinical Research

Clinical research also adds to the importance of medical coding and billing for your healthcare organization. An accurate translation of medical treatments and procedures into specific codes manufactures valid and reliable data.

You can use this data to conduct intensive research and analyze treatment outcomes, patient demographics, and disease prevalence. In this way, healthcare organizations can propagate evidence-based medical advancements and informed decision-making for their patients. 

Furthermore, you can also use your properly coded data to identify trends, evaluate treatment efficacy, and devise effective medical practices. This is how medical coding generates reliable data for you to enhance patient outcomes and conduct effective clinical research.

8. Preventing Frauds

Medical fraud can be prevented by accurately coding healthcare services and effectively managing your revenue cycle. Specific codes for specific services ensure that your reimbursement claims directly align with the treatments and procedures available. 

This decreases the likelihood of inconsistencies within the healthcare environment that can be potentially exploited to execute fraud. You must clearly document your healthcare services with appropriate codes so that any discrepancies in the services and their claims can be identified.

By doing this, you can protect your organization and the insurance companies of your patients against fraudulent billing schemes. Moreover, this also enhances your financial integrity in the market as you do not have to invest much in devising mitigation strategies against fraud.

9. Auditing Healthcare Practices

Healthcare practices can also undergo robust auditing by fulfilling the appropriate medical coding requirements. A coherent documentation of healthcare practices through accurate codes can provide a clear trail of the services availed.

You can diversify this process by conducting internal and external audits through properly coded records. This will eventually streamline the process while maintaining compliance with the relevant policies. With this, you can ensure accurate financial reporting with simplified auditing. 

In this way, you can successfully audit your healthcare practices while promoting trust and accountability with your patients and their insurance companies. Moreover, you can also evaluate your reviews to identify patterns in the performance of your revenue cycle.

Types Of Codes Used In Medical Coding

1. ICD-10-CM Codes

The full form of ICD-10-CM is International Classification of Diseases, 10th Edition, Clinically Modified. It is a medical coding system that catalogs health conditions by similar disease categories. There are more specific conditions listed under those categories.

These codes have around three to seven characters. The first character of every code is alphabetical. This character corresponds to the chapter in which that code is classified. Moreover, the second and third characters have to be numerical.

The rest of the characters can either be numerical or alphabetical. You have to use ICD-10-CM codes to report medical claims in your hospital. It is a standardized system to classify your diagnosis codes. Those codes represent patient conditions and diseases. Their injuries, signs, and symptoms are involved as well, apart from other characteristics.

2. CPT® Codes

The full form of CPT is Current Procedural Terminology. It is a set of medical codes used by medical entities. These entities include hospitals, physicians, outpatient facilities, laboratories, and much more. The set of CPT codes is updated every year to add, update, and delete them.

The codes describe the procedures and services of these entities. CPT® codes report those procedures and services to federal and private insurance companies. Their reports release the payments of medical entities from those insurers.

These codes have a total of five characters. Most of those codes are numeric, with some having an alpha character. The character can be among F, A, U, or T. Your coders have to assign a code to each of your services or procedure.

3. ICD-10-PCS Codes

The full form of ICD-10-PCS is the International Classification of Diseases, 10th Edition, Procedural Coding System. It is a set of codes that you can assign to inpatient and hospital services. This set has a detailed catalog with which you can track several medical procedures.

It is important as it can accurately and efficiently manage that data. An ICD-10-PCS code can be composed of any combination of numbers and letters.

4. HCPCS Level II Codes

The full form of HCPCS Level II is Healthcare Common Procedure Coding System, Level II. It is a standardized system that classifies medical items and services. These items and services have to be similar in nature. They are classified into categories for claims processing.

An alpha-numeric HCPCS code refers to a descriptive terminology. The terminology identifies a category of similar items or services. The codes involved are mostly used for billing purposes. They can identify items on the reimbursement claims sent to insurance companies.

5. CDT® Codes

The full form of CDT® is Code on Dental Procedures and Nomenclature. It is a set of standardized codes that describe dental procedures. This way, dental professionals are able to bill patients for their dental services.

The insurance companies of their patients are also involved. A specific CDT code is assigned to every dental procedure. This practice ensures uniformity in assigning CDT codes to dental treatment procedures.

6. NDC

The full form of NDC is the National Drug Code. It is a directory that contains information on the drugs submitted to FDA. They are classified into active and certified finished and unfinished categories. The information is in the form of structured product labeling electronic listing files.

Each drug has a unique and three-segment National Drug Code. It acts as a universal product identifier for its specific drug. The full NDC number and the relevant information are submitted to the Drug Registration and Listing System (DRLS).

7. Modifiers

A modifier comprises two characters that are appended to either a CPT or HCPCS Level II code. Those characters can either be letters or numbers. Modifiers provide extra data about medical services. They do not change the meaning of the code.

As an example, some modifiers are used for those services that are not provided exactly as described by their CPT® or HCPCS Level II code. Keep in mind that the situation did not change that code. Other modifiers also provide details that are not provided by the relevant medical code.

8. MS-DRG and APC

The full form of MS-DRG is Medicare Severity Diagnosis Related Group. It is a system that classifies patient cases into diagnosis-related groups. These groups are approximately 500 in number. They are expected to have similar medical resource use as part of your payment system. The full form of APC is Ambulatory Payment Classifications.

It is a method to pay for outpatient services, specifically for Medicare. You can receive these payments once your Medicare outpatient is discharged. They also apply if those patients are transferred to another hospital or facility. Those hospitals and facilities should not be affiliated with you.

Key Elements That Make Up The Coding And Revenue Cycle Field

There are six key elements that make up your coding and revenue cycle field. Let’s take a look at them in detail:

1. Patient Pre-authorization

Patients have to go through a pre-authorization process. It is done before they see their physicians. This process also has to be conducted before they pick up certain medications. In this process, insurance companies authorize the medical services provided to your patients. In other words, they conclude that they will pay for those services.

2. Insurance Eligibility and Verification

Hospitals have medical software that can conduct insurance eligibility verification. It works on secure channels via the Internet. You can use it to speed up your verification. This way, you can determine if your patients are eligible for your services.

3. Charge Codes

Medical coding is important for quality review as it oversees data collection. This data is about the medical services provided to patients. Every patient visit has to be properly coded. The codes should follow individual payer requirements as well.

4. Claim Filing and Submission

Payment reimbursements directly depend on the submission of their claims to insurance companies. It is crucial for hospitals to know if the payer will reimburse them in a timely manner. In case of any potential errors, they have to act quickly and submit appeals if needed.

5. Denial Management

Insurance companies can also deny reimbursement claims. In this case, the revenue cycle management includes resolving the errors that caused them. Those claims have to be scrubbed for them. Then, they have to be resubmitted in a timely manner as part of denial management.

6. Collections

Reduced reimbursements from insurance companies mean that their coverage cannot be reimbursed for all services. In this case, you should follow up with the relevant insurance company. You may have to make adjustments and record the errors so that you can avoid them in the future.

The Role Of Revenue Cycle Management In Healthcare

Revenue cycle management is important for healthcare as it prevents claim denials. This way, you do not have to manage much administrative burden. It is kept to a minimum. You do not have to spend time and resources on handling denied claims. You can allocate them for patient care.

With RCM, you can also focus on your front-end tasks. This simplifies the interactions between your patients and administrative staff. You can easily smoothen out processes like appointment scheduling and submitting claims to create a satisfactory experience.

Challenges Associated With Healthcare RCM

Hospitals can face a lot of challenges with their revenue cycle management. We have covered the three major challenges in-depth for you!

1. Timely Collection of Payments

Hospitals struggle to receive their payments soon after they have provided the services. These days, the number of deductibles is also on the rise. At the same time, patients are not paying a considerable amount of their hospital costs. As a result, hospitals are not getting their payments in a timely manner, and their revenue is taking a hit.

2. Time Waste

Hospitals have to treat their patients while improving their revenue cycle. But sometimes, they lack the resources to do both at the same time effectively. They end up spending way too much time on their revenue cycle management. And they are unable to focus on other important areas of operations.

3. Coding Errors

There are different types of code errors, such as upcoding, unlisted, and unbundling codes. They take up extra time and money. Many hospitals still rely on outdated approaches to manage their revenue cycles. So, they often end up with a lot of claim rejections.

The Bottom Line

The significance of medical coding in revenue cycle management has multiple layers of depth. It has a substantial impact on various operations of healthcare organizations. We discussed its key elements and role in RCM apart from the major codes used.

The healthcare experts at Healthquest RCM can enrich your medical coding with the best practices possible. Contact us today and skyrocket your revenue cycle through effective medical coding.