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Mastering Revenue Cycle Management

April 22, 2011
by John Degaspari
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Two Strategies for Tightening up the Revenue Stream


Having a good understanding of the billing process, whether through internal workflow audits or employing a software solution to make sure a hospital is being reimbursed for every service it provides, is crucial to maximizing revenue streams.

Now more than ever, hospitals, regardless of their size, are being asked to produce more with less. This has prompted healthcare leaders at many organizations to take a hard look at their operations, in an effort to minimize revenue leakage as well as to help ensure they are getting reimbursed for all of the services that they legitimately deserve.

To reach that goal, having a good understanding of the billing process is absolutely key. But hospital leaders nationwide are pursuing widely diverse strategies to achieve their goals. What follows are two case studies of hospitals that have taken two different routes to stopping revenue leakage and maximizing reimbursements in their organizations.

In one, the physicians practice group of a large academic center applied internal audits, in the form of activity-based management, to identify workflow problems in its billing department, and came up with relatively low-cost solutions that have improved its revenue performance. The other example is offshore, in a small hospital that is part of a national health system, which has used a software solution to gain a better understanding of its pricing structure to maximize reimbursements.


University Physicians Healthcare (UPH) is a 450-member physician group that is part of the University of Arizona Health Network, a two-hospital academic system and health plan based in Tucson. UPH made national headlines in January as the level-one trauma center that treated Rep. Gabrielle Giffords after an unsuccessful assassination attempt outside a local supermarket. UPH is the only hospital in southern Arizona that treats major trauma, and its location some 50 miles from the Mexican border means that it receives many patients who do not have adequate means to pay. Both factors contribute to financial pressures for the hospital.

With that said, the health system's physician practice group lagged in days in receivables, the performance measure of how long an organization takes to collect a dollar of revenue. According to Dan Klaber, director of central business operations with responsibility for the physician providers, prior to 2008, his group's performance was at an average of 53 days, compared to the standard for academic medical practices, of 38 to 40 days. He established a goal for his group of 35 days. His challenge, he says, was to align his staff to collect the invoices in an effective manner. “In truth, it wasn't being done very effectively,” he says.

To tighten up the group's collections process, Klaber called in a consulting firm, Atlanta-based Tatum. Its strategy was to put in place an internal auditing procedure, known as activity-based management, to analyze who does what in terms of revenue cycle management tasks at the hospital. What is notable about the strategy was not only that it identified gaps that were resulting in revenue loss, but that the solutions were both effective and relatively low-cost.

John Ortiz, partner at Tatum who was involved with the project, calls activity-based management a foundation for six-sigma, a business management strategy, long used in manufacturing, that is used to identify causes of defects. As applied to the healthcare industry, activity-based management is used to understand particular activities and, just as important, what resources are being applied to perform the activity, Ortiz says. In the case of UPH, it was used to identify what Ortiz terms cost drivers, which were not only costing the organization, but also were not delivering.


Ortiz notes that the activity-based management audit revealed significant gaps in the billing process, which lent themselves to relatively low-cost solutions.