Powered Autonomous Medical Coding

Healthcare Systems Are Walking a Financial Tightrope

In the U.S., healthcare is a $4 trillion business. Most hospitals and healthcare systems, however, struggle with profitability, posting negative-to-low, single-digit operating margins. Challenges include evolving payer and insurance mixes, increasing regulatory demands, and rising costs. These financial pressures strain healthcare systems ability to effectively recruit and retain staff, provide high-quality care, and ensure patient satisfaction.

To combat the financial pressures, healthcare systems must optimize revenue recognition. By accurately billing for services rendered and ensuring timely payments, healthcare systems can achieve smoother cash flow, enhanced financial stability, and increased profitability. While healthcare systems typically aim to keep A/R below 40 days, the reality is that for many, a large percentage of their A/R exceeds 90 days, significantly hurting cash flow and profitability. 

The Opportunity in Revenue Cycle Management 

Optimizing revenue recognition requires streamlined revenue cycle management (RCM). The RCM process is multifaceted and involves multiple interconnected steps, technologies, and internal teams, each responsible for managing specific aspects of the workflow. Each step in the RCM process plays a role in revenue recognition and profitability:

RCM leaders understand the importance of streamlining the revenue cycle, but often work in high-stress environments with limited budgets and personnel bandwidth. Emerging technologies, especially GenAI, have resulted in new solutions for improving various stages of the revenue cycles. Some solutions such as scribing focus primarily on improving productivity, others, such as those related to coding and denial management primarily focus on maximizing revenue capture. So the question is, “where should healthcare organizations prioritize their efforts to improve RCM?”

Coding plays a pivotal role and has an extensive impact on the efficiency and effectiveness of RCM —making it a natural starting point for optimizing RCM.

The Impact of Coding on RCM and Revenue Recognition  

Coding—the process of translating a patient's medical history and treatment into a standardized set of alphanumeric codes—is at the heart of revenue recognition. These codes are the keys that unlock reimbursement from insurance providers and government programs, and are essential for tracking patient care, disease patterns, and treatment outcomes.

When coding is done in a timely manner, claims are submitted promptly, helping reduce A/R days and expediting the reimbursement process. When coding is accurate, claims are more likely to be approved the first time around, reducing denials. 

Coding practices thus impact the mid-cycle and the latter stages of RCM, especially ‘denial management’. Reducing denials minimizes the need for claim resubmissions and follow-ups, thereby lowering costs and freeing up valuable time and resources.

Current Coding Practices Have Widespread Negative Consequences 

Coding blindspots can reduce revenue and profits

In ambulatory care and specialties with high volume and low value per chart, less than 30% of charts are typically coded or reviewed by a professional coder. The rest of the charts are passed through to billing with only the physician’s input. But physicians are not professional coders, and especially in complex specialties like primary care, they can produce suboptimal coding. This blindspot in coding accuracy can negatively impact revenue, profits and compliance. 

Managing denials increases costs ‍

Inaccurate coding can lead to denials or requests for information which increases costs to  healthcare systems. Industry data shows that nearly 15% of all claims submitted to payers for reimbursement are initially denied. More than half of denied claims (51.7%) are eventually overturned and paid. But the process adds cost: hospitals and health systems that fight denials do so at an average cost of $47.77 per Medicare Advantage claim and $43.84 per claim across all private payers. Many denials may not be appealed at all, resulting in healthcare systems having to absorb the cost and write off the potential revenue.

Denials increase A/R days and negatively impact cash flow 

Denials also delay payments. On an average, healthcare systems need to conduct three rounds of reviews with insurers, with each review cycle taking between 45 and 60 days. They are often unable to get payments for up to six months after delivering their services. This extended cycle wreaks havoc on cash flow and accounts receivable performance. 

Coding requirements drain physician time and income potential 

Coding is part of the administrative burden on physicians. According to the Physicians Compensation Report, physicians spend an average of 15.5 hours per week on paperwork and administration. This ‘pajama time’ is often completed outside of normal hours and contributes to physician stress and burnout. Moreover, when the coding is inaccurate, it can mean physicians aren’t paid accurately for their services.

Coding practices can create excessive burden on coders

Coders, especially in high-volume specialties such as ambulatory care, operate in a high-stress work environment owing to the volume of work and the frequent updates in guidelines. This workload forces coders to work in a reactive, repetitive mode rather than using their skills for activities that maximize revenue impact for the healthcare system. The daily pressure also limits their time and ability for professional development and upskilling.

Unclear coding undermines patient satisfaction

Ineffective coding can lead to patients receiving unclear or incorrect statements for the services they’ve received.This can result in billing disputes, delays in payment, and contribute to a negative patient experience.

Inaccurate coding creates compliance and reputational risks

‍When coding is inaccurate, it can lead to compliance issues including allegations of fraud and abuse. Persistent inaccuracies can raise red flags for insurance companies or regulatory bodies, leading to heightened scrutiny and more frequent audits. This increases costs, strains resources, and adds reputational risk for the healthcare system.

Automated Medical Coding: A Game Changer for Healthcare Systems

The coding pitfalls outlined above are not new, and given their significant impact on revenue and compliance, RCM leaders have long been searching for ways to optimize coding and the revenue cycle. 

Hiring more coders isn’t a practical solution. Medical coders require specialized and ongoing training, and aren’t interchangeable across specialties. Healthcare leaders report that among all the revenue cycle roles, medical coders are the most difficult to hire. In specialties that generate a high volume of charts with low-dollar values, the cost and scarcity of coders makes it inefficient for coders to review every chart, especially as the practice grows and chart volume increases.   

Technology could help, but prior attempts at using technology have been ineffective because of the limitations of technology itself. Computer-assisted coding (CAC) provides suggested codes, but requires a coder to work on the charts. Moreover, CAC technologies cannot interpret free-flowing subjective text, severely limiting its ability to provide accurate coding suggestions. These code recommendations are a black box, making it difficult to judge accuracy or provide an explanation in case of an audit or denial. 

What has changed? Recent technological advances, especially in GenAI, have removed the limitations of the prior generation of tools. The breakthrough in AI has made it technologically feasible to automate coding, even from unstructured and ambiguous case notes.

This has led to the emergence of a new category of solutions for optimizing coding: autonomous medical coding. These GenAI powered platforms are proving to be a game changer, especially in high-volume specialties. Healthcare systems can now code and bill the vast majority of charts without any human intervention, significantly reducing coding backlogs and A/R days while ensuring coding accuracy compliance. Leading healthcare systems are effectively leveraging autonomous medical coding to streamline their revenue cycle and improve profitability.  

‍Learn more about how you can automate coding and accelerate revenue recognition with Arintra.

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References

¹ https://www.beckershospitalreview.com/finance/the-hospital-margin-myth.html 

² https://www.statnews.com/2024/05/01/insurance-claim-denials-compromise-patient-care-provider-bottom-lines/

³ https://premierinc.com/newsroom/blog/trend-alert-private-payers-retain-profits-by-refusing-or-delaying-legitimate-medical-claims 

⁴ https://www.medscape.com/sites/public/physician-comp/2023

⁵ https://www.mgma.com/mgma-stats/bottom-line-impacts-from-revenue-cycle-staffing-challenges

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