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  • 2016-09-September

Managing Revenue Cycle

By Stacy M. Menz, PT, DPT, PCS

Revenue Cycle Management—three of my favorite and least favorite words all at the same time. I love them when payments are coming in, agings are appropriate, and days and Accounts Receivable (A/R) are short. I’m not so fond of these words when those metrics trend in the opposite direction and the A/R is creeping up and there are mistakes—causing payment to be delayed—or insurance errors have occurred. Needless to say, having a strong revenue cycle team that truly considers all aspects of this cycle is key to keeping your finances on solid ground.

This month, in “The Cycle Never Ends,” Eric Cardin takes a look at the big picture of revenue cycle management (RCM) and explains how each part connects to the next. What are the touches involved from the first client encounter to a paid claim? Are you maximizing each touchpoint to be the most effective?

“Alternative Solutions Needed,” by Susan Nowell, breaks down components of RCM in the current traditional practice paradigms. She further discusses how changes in health care and advances in technology are opening up the doors for alternative solutions. This piece can jumpstart a brainstorming session with you and your team: Are your systems the most effective? How can they be updated to address and take advantage of changes?

Phyllis Levine tackles technology. Can the advances in technology translate into increased profitability for private practice? She looks at areas where technology can support our practice in data collection and communication to allow informed decisions that will drive your business practice.

“Making the Most of Your Relationships,” by Sturdy McKee, puts a spin on using data to drive marketing decisions. He presents one more way you can look at your practice’s metrics in terms of revenue and use that information to drive how you manage your referral sources.

As you can see, this issue has a variety of insights on the topic of revenue cycle management. I know that it has triggered some questions for me to find the answer to and see if those answers will translate into a more efficient and effective approach to RCM. Another great resource is the Revenue Cycle Management Compendium (see p. 14 and 79), which includes articles from past issues of Impact on this topic.

I’d love to hear your stories about how you have taken what you are reading and translated it into practice!


Alternative Solutions Needed


Revenue Cycle Management—current challenges in traditional practice paradigms

By Susan Nowell, PT, DPT

Proper bottom-line management is the lifeblood of any successful business.

Revenue cycle management (RCM) is essentially the workflow involved to ensure payment for services provided. One revenue cycle begins with initial patient/client intake and ends with collection of payment for services. In short, it’s the lifecycle from patient to payment. While simple in definition, the process of revenue cycle management is quite complex. At any given moment for a private practice physical therapy business, there will be multiple revenue lifecycles in action at different phases. This multiplicity poses challenges for private practitioners and can create unnecessary retroactive workload and loss of revenue when not managed correctly.

In the past 20 years, we’ve seen health care changes and reimbursement restraints that have made revenue cycle management more complex and challenging. The shift from cost-based to prospective payment systems with the Balanced Budget Act has been accompanied by increasing claim denials in third-party payer systems. In addition, Medicare and other health maintenance organizations (HMOs) are increasing contracts with auditing agencies, so claim audits are also on the rise for private practitioners, often leading to payment denials.


Historically, hospitals and private clinics have lacked adequate information systems for tracking documentation and billing to allow financial managers to efficiently identify and resolve revenue-integrity problems. In turn, handling claim denials has typically involved retroactive analysis of errors, demanding digs through medical record archives, and submission of potentially copious documents in support of an appeal. Handling denials has become so commonplace that Medicare itself publishes guidelines on the appeals process: www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/MedicareAppealsprocess.pdf.

Traditional private practice paradigms rely primarily on the revenue from third-party reimbursement. For this business model, the RCM process tends to fall into four main phases: (1) patient demographic intake, scheduling, and insurance verification and authorization, (2) clinical documentation and pre-billing audit, (3) billing and payment posting, and (4) accounts receivable (A/R) management. Errors in any of these phases, in the form of inaccurate or missing data, can lead to denials, having a very negative impact on overall revenue. According to Hodges (2016), the root causes of denials include: inadequate information technology (IT) systems for tracking errors, changes in billing and coding regulations, and inadequate staff training on new systems or changes. While the current push for streamlined, automated health care software and increased patient transparency is very positive, it requires proper user understanding and usage. A small error in an automated system may still travel through the revenue lifecycle unnoticed, creating more retroactive work or subsequent revenue loss. Since multiple staff members are usually involved in the entire revenue cycle, there is greater room for human error, even when part of the process is automated.

For each one of the four revenue cycle phases in a traditional paradigm, certain strategies have become widely used to avoid downstream payment delays. Let’s review!

1. Patient intake demographics and insurance verification and authorization:

  • Doublecheck the accuracy of patient demographics and insurance information.
  • Determine insurance coverage and patient responsibility; directly communicate this to your patient.
  • Clearly establish the primary payer for your patient if they are covered by more than one insurance agency.
  • If your patient is uninsured, discuss payment options and clearly document the agreement, obtain signatures from provider and patient, and include a collections action plan to be taken in the event of patient fiscal noncompliance.

2. Clinical documentation and pre-billing audit:

  • Ensure complete and accurate documentation including functional limitations and measurable progress toward functional goals.
  • Implement peer review among clinical staff to promote greater awareness and a collaborative environment for accurate clinical documentation.
  • For Medicare patients, ensure entry of correct procedural codes, including modifiers and G-codes for functional limitations and quality measures. For more information on functional limitation reporting, see: www.cms.gov/Medicare/Billing/TherapyServices/Downloads/Functional-Reporting -PT-OT-SLP-Services-FAQ.pdf.
  • Put into place a system (either manual or automated) of obtaining signed physician orders for initial certification and recertification of care.
  • Create a clinic-based audit system to ensure that all physician order requests have been returned to the clinic with a signature.
  • Preschedule reevaluations to ensure compliance with Medicare guidelines (Medicare requires that reevaluations occur every 30 days or 10 visits, whichever comes first).

3. Billing and payment posting:

  • Educate therapists and billing staff to perform a pre-billing screen to ensure treatment notes accurately reflect services billed.
  • Train billing staff to ensure timely billing and accurate code entry and charge entry.

4. Accounts receivable management:

Your Accounts Receivable is the total balance owed to you for services or products you provide. The accepted turnaround for A/R is 45 days or less in most situations, and the best-performing clinics with a relatively normal payer mix may see it as low as 20 to 30 days.

  • Know your clinic A/R days; to calculate A/R days, divide your total accounts receivable by your average daily revenue. Find the average daily revenue of the three past months by calculating total charges billed in the past three months divided by number of days in those three months. This is your A/R days.
  • Keep track of payers to make sure you are getting paid on time.
  • Collect patient copays at the time of visit when possible.
  • Put in a uniform policy on how to handle delayed patient payments; be upfront with the patient and communicate this at the very first visit.

According to a recent publication in the MicroMarketMonitor, there is a huge unmet demand for new versions of RCM solutions due to consolidation of health care providers and declining reimbursement rates. This is pushing providers to find areas wherein they can increase internal efficiency and automate processes with the aim of reducing expenditure. “Standalone billing and practice management solutions are on the wane in the market today as medical practices move towards integrated, end-to-end systems that unite front and back office data flows, provide seamless access to clinical data from EHRs [electronic health records], and rationalize and streamline the entire RCM process” (2016).

In his recent Impact article “Not a Cup of Coffee: Strategies for Fighting Physical Therapy Commoditization,” Clinicient CEO Rick Jung asserts that despite the Affordable Care Act, there is little correlation between price and quality in our current health care environment. It is critical for therapists to demonstrate greater value through data. One important aspect of this is consolidating clinical and financial data into one system. This consolidation will allow us to rapidly analyze metrics across large population groups, develop evidence-based therapy guidelines, and better manage care for patients with chronic conditions—“The technology is out there to help therapists understand and communicate the clinical effectiveness and financial efficiency they provide.” Electronic health record companies continue to evolve as needs for integrated RCM processes increase. These companies can utilize integrated billing, A/R services, and customizable account management solutions. In addition, the platforms are starting to add pathways for increased patient transparency and access to clinical and financial data. The trend toward integrated RCM processing systems is growing, and we will likely see more technological advances in this arena.

It is clear that as our industry continues to evolve and health care changes continue to be implemented, technology and practice paradigms will evolve as well. Staying on top of the changes and analyzing the effectiveness of your current systems will support your practice in staying on top of RCM in the ever-changing world of health care.


Hodges J. Effective claims denial management enhances revenue: claims denial management has become a critical component of a hospital’s strategic effort to offset the adverse impact of Balanced Budget Act payment reductions. Healthcare Financial Management. Aug. 2002: 40+. Academic OneFile. Web. June 21, 2016.

Jung R. Not a cup of coffee: strategies for fighting physical therapy commoditization. Impact. May 2016.

MicroMarketMonitor. North America revenue cycle management (RCM) market, by product (Integrated RCM, Standalone RCM), by component, by deployment (on premise, web based, cloud-based), by end-user (hospitals, physicians, labs, others), by function (front office, middle office, back office)—forecast to 2021.April 2016. www.micromarketmonitor.com/market/north-america-revenue-cycle-management-rcm-8558256575.html.

Susan Nowell, PT, DPT, is a PPS member and founder of Endurellect PT in San Francisco. She is licensed as a physical therapist in Italy and works as an onsite PT for international endurance running events. She may be reached at sunowell@gmail.com.

Technology & Profitability


Advances in information technology can improve profitability for the physical therapy practice.

By Phyllis Levine, PT, DPT

If you are like me, while you may use technology, the thought of undertaking a new technological program in your business creates anxiety. I have a lot to learn about what I can expect from technology to help increase my clinic’s productivity, reduce expenses, and increase overall profitability. I have been reflecting on how I can take better advantage of technology in my private practice. In the realm of revenue cycle management, technology provides ways to gather and utilize data to guide business activity. It can be challenging to stay abreast of the offerings and keep realistic expectations for what type of data can be collected. As physical therapists, many of us have little education in business concepts and finance. Since time and money are involved in bringing new technology into one’s business, owners must be able to make an educated decision about which of the multitude of technological opportunities is the best fit for the business. This decision requires knowledge of the current business status of our practice, defined goals for the future, and an understanding of the capabilities of the programs being considered. It is also useful to know which specific technologies competitors may already use as well as how likely what we are considering will produce a more competitive edge.

The various topics of information technology related to productivity and cost are frequently found in business journals and therefore some simplified definitions presented here may provide clarity. Technology can be defined as the practical application of science to business and industry.1 Productivity is defined as the ratio of the quantity of outputs to the quantity of inputs used.2 The cost of production or services offered and rendered is therefore the valuation of the inputs.3

As profit margins become tighter, owners of private practices must place an increasing importance on the implementation of strategies critical to reducing expenses. In most cases, the costs related to communication are the ones most dramatically reduced. Communication allows the exchange of information between at least two parties. Thus information technology assists in this. In private practice, like all business enterprises, information is considered one of the most valuable commodities. Therefore, fostering good communication is mandatory for success. In the work environment, communication occurs at three levels:

  1. internally between the company and its employees,
  2. externally between the company and its suppliers, and
  3. externally between the company and its customers—or patients.

Technology, instrumental in the handling of information at all three of these levels, can be specific to our industry or may be found in an outside industry. These concerns are as pertinent to an outpatient physical therapy clinic as they are to retail or manufacturing business. The first of these areas deals with data-based software. This provides transactional data, such as tracking individual tasks and/or individual productivity and analytical data, which cross-examines individual data with the performance of the entire company. This is perhaps the most common information gathered in our rehabilitation world. Most of the commonly used electronic medical record programs and billing programs are capable of collecting this data. Looking at which reports your software can provide may reveal that you have some valuable data available to you that is currently being underutilized.

The second area where information should be collected is termed Customer Relationship Management (CRM). Any area of your business that manages the patient experience is considered CRM. Improving performance in CRM gives a high return on investment despite some difficulties in implementation. As the technology in CRM becomes more sophisticated, the human interaction is minimized. Examples of technology pertaining to CRM would be a computerized phone-answering system instead of a receptionist. Many advances have been made in this area, and the public is more likely to expect an automated response than not. However, for this to be most successful the human presence must still be obvious. The technology needs to fit the organization more than the organization fits the technology. What we use should be value added to our patient’s experience and not a substitute for excellent hands-on service.


The third area where technology simplifies information is productivity. Referring back to the definition of productivity as the ratio of the quantity of outputs to the quantity of inputs used, it is obvious that we must be able to clearly define how we account for inputs used in the process of production. In the service industry such as physical therapy, inputs are typically measured based on revenue generated by an employee divided by salary.

Productivity gains are a good proxy of cost reduction and can be a reliable tool for measuring technological progress. Minimizing production costs can be achieved through an increase of your physical capital such as more equipment, or an improved quality of the present equipment. We can also reduce cost by improvement in the quality of the labor force with adequate and ongoing training. Clearly, as technology advances, training becomes more critical. We can certainly increase productivity by using a combination of these factors.

In summary, technology is a cost-effective tool for all business aspects of our private practices. As owners, we should embrace new technology and all it offers. It is flexible yet precise. The return on investment is excellent when used appropriately and with the provision of good ongoing training for all. Gathering of data to drive decisions is imperative. However, good data does not guarantee good decisions. The ultimate responsibility lies in an informed human decision.


1. Merriam-Webster.com. Merriam-Webster, n.d. Accessed August 2016.

2. Mueller S. www.planetofsuccess.com/blog/2010/productivity-improvement. October 9, 2015. Accessed August 2016.

3. Merriam-Webster.com. Merriam-Webster, n.d. Web. Accessed August 2016.

Phyllis Levine, PT, DPT, is a PPS member and owner of Functional Therapy and Rehabilitation, PC, an outpatient practice in Homer Glen and Joliet, Illinois. She can be reached at Phyllis@functionaltherapy.net.

Making the Most of Your Relationships


Marketing in a revenue cycle management world.

By Sturdy McKee, PT, MPT

Most businesses generate the majority of their revenue from a few customers or clients. I prefer the term client, as it refers to a long-term, ongoing partnership, whereas customer is usually considered transactional. For most of us in physical therapy private practice, those clients are our referring providers. Of course our patients are our clients too, but for the purpose of this article we will stick with referring providers as our focus, and we’re going to look at reports and data about those referring providers to guide our decisions.

From your revenue cycle management (RCM) platform, pull your Referral Revenue Report, or whatever your system can create, that tracks the charges or collected amounts by referring providers. Notice I said revenue report and not number of new patients. By pulling both of these numbers on the same report, and comparing, you can start to ask more informed questions around your relationships and marketing efforts. Now, export your report to Excel. Sort it. Share it with your business partners and have a discussion. Is it what you expected? Did you find any surprises?

The providers at the top of this list obviously like you and your practice. From a business standpoint they have a certain worth. It’s typical to see the top 12 referring providers account for 30 percent or more of a practice’s revenue. And for the next 12 to account for another 10 percent. This is in a practice that has 300-400 referring providers in the course of a year. If you track this metric, what you may learn is that 10 percent of the providers who refer to you account for over 45 percent of your practice’s revenue. If that’s the case, where should you be spending your time? How do you take care of your top 10 percent? And why is that important?

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The numbers in the table (below) are “based on a true story.” They are “real” numbers. As you can see, not all are tracked effectively. Some patients don’t have a referring provider assigned. But this is the real world, and you can begin to see some numbers that may affect your future decisions.

Nearly 5 percent of patients do not have a referring provider assigned, which tells us there may be room for process improvement and training to have staff better track where referrals are coming from. But notice that the top doctor refers enough patients to represent over 7 percent of all charges generated by this practice, and the top 3 doctors account for nearly 19 percent. There are 328 referring providers or “doctors” on this list. The top 12 referring providers account for over 32 percent of this practice’s annual revenue. That’s 3.7 percent of the referring providers accounting for more than 30 percent of all charges generated in the course of a year.

If this is the case for your practice, when is the last time you talked to your top 12 referring providers? Did you talk with all of them? What did you talk about, you or them? Is everything okay in their practice and world? Are any of them moving offices? Are any hiring new people? Are they frustrated with their referrals? What are their current challenges? And how can you help?


Oh wait, did you think this was going to be about postcards, seminars, and automation? It’s about relationships. It’s about conversations. It’s about prioritizing your high touch activities. Automated conversations are hard to have and at that point, do you really get to call them conversations? There’s a lot you can automate or create systems around and I urge you to do that. Creating this report is something you may be able to automate. Or you may be able to create a system so someone else can fetch the report, sort it, and share it. But the conversations are yours. Relationships are about people. And it’s our job as owners to take care of those who take care of us. So find out who they are and take care of them—and then find more like them that you can take care of.

Why is this all-important?
You are building relationships. When you spend the time to build those relationships, they know you care about them and their patients. You’re opening lines of communication. Having done this, you’re continuing to build trust over time, and this may in itself generate more patient referrals. It may help your biggest fans to talk about you more with their colleagues. On the flip side, it will also help when something goes wrong, like when you get a bad Yelp review, or a patient complains. It means they are more likely to engage you when you let a physical therapist go, or you decide to opt out of a lousy payer contract. This also puts you in a better position to have more meaningful conversations and further advance the relationship.

All of these things will happen if you stay in business long enough. The question is, how will your top referring providers react after you’ve invested time in the relationship?

Take note, all of these things will also happen with your competition. Are they investing in the relationships the way you are? If not, when one of these things happens in their world, what position will you and your practice be in? A position of trust and a solid reputation will help you build your practice, and weather the rough times and mishaps—perhaps better than your competition.

Sturdy McKee, PT, MPT, loves helping physical therapist practice owners achieve their goals. He is cofounder and CEO of ScheduleDoc.co and San Francisco Sport and Spine Physical Therapy. He can be reached at Sturdy@ScheduleDoc.co or @Sturdy on Twitter.

The Practical Coach


Inspiring, encouraging, and challenging your team.

By Media Partners Corporation | Reviewed by Jean Darling, PT, LAT

As I was looking over old Impact journals, I saw an article analysis stating “millennials like to be coached.” This brought me back to a paperback book I received as a gift a long time ago, but felt appropriate to get out and read it again. The older I get, I think I have forgotten as much as I have remembered! In the busy world of today’s full-time therapist, owner, and parent, I enjoy quick reads that give me practical advice. This book is a working journal that you can take notes on as you proceed through the pages or simply take in its snippets of advice.

The very basic message of the book is in the title: As leaders in an organization, we are inspiring, coaching, and challenging team members every day. If we break it down to each area, coaching could mean that along the way in life, someone let us know that we matter. “From the day we were born, we all want to know that what we do affects our world, that we matter.” The people you lead are no different. They need to know that what they do matters to you.

Second, never assume your team is self-motivated. Most leaders are internally driven, but some of your team members may need extra help in the motivation department. Remember to get to know your team, as everyone buys in to your philosophy for a different reason. To really lead your team members to a new level of success, you want to know their styles so you can personalize your coaching for each of them. Coaching is the idea of selling hard work. You can only sell the idea of hard work if you are willing to work hard, too!

Next, try to encourage your team toward both individual and team success. “Never let great work go unnoticed.” Encouraging your team members means identifying specific actions or behaviors that are good, and then pointing them out. Remember that very similar to getting to know your team members for motivation, it is helpful to know if they are encouraged by applause, appreciation, or access to you or your time.

Finally, challenging your team members when things are not working or an individual is not doing his or her job correctly is every bit as important as encouraging them. A good coach gives feedback when there are great plays and when there are mistakes, because both have a tremendous impact on the vision of the success the team is working toward. Always remember to make it private and make it positive. Look at reasons for poor performance: Unclear communication? Do they have appropriate training to complete the task? Are there consequences for delivering poor performance?

To sum up this short working booklet, a reminder that adults learn by doing. A nice statistic they listed was that we remember 10 percent of information someone tells us, 60 percent when someone shows us, and 90 percent if we do it ourselves. This can be a take-home message for coaching our staff and our patients.


Jean Darling, PT, LAT, is an Impact editorial board member and co-owner and vice president of Advanced Physical Therapy & Sports Medicine, Shawano, with six locations in Wisconsin. She can be reached at jean@advancedptsm.com.

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