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49 Cards in this Set
- Front
- Back
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Revenue Cycle
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-Getting harder to maintain profitability within hospitals
-Set of recurring business activities and related info associated with billing and collecting for goods or services provided to customers |
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3 parts of the revenue cycle
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1) Those that occur before the service is provided
2) Those that are simultaneous with the service 3) Those that occur afterward |
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(Before-Service activity)
-Preservice patient financial counseling |
The patient should be counseled before the service regarding both the payer's and the patient's responsibilities of payment for services
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(Before-Service activity)
-Precertification of managed care patients |
If verification indicates that a payer requires precertification, it should be done right away
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(Before-Service activity)
-Preinsurance verification |
The payer status of the patient is identified right after the appointment is scheduled
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(Service activity)
-Time of service |
-The patient’s insurance status should be checked at the time of service to ensure that there have been no changes, should be done both with the patient and the payer
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(Service activity)
-Claims production |
-The services provided should be documented in a way that facilitates correct claims submission
-Should ensure that the services are coded in accordance with the payers claim system and it reflects the highest reimbursement amount |
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(After-service activity)
-Claims submission |
-The claim should be submitted to the payer as quickly as possible after the service is received
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(After-service activity)
-Third-party follow up |
-If payment is not received within 30 days, a follow-up should be sent
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(After-service activity)
-Denials management |
-Claim denials by third-party payers are one of the major problems to prompt reimbursement
-Most claim denials are caused by improper precertification and incomplete claims data -Prompt claims resubmission is essential to good revenue cycle management |
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(After-Service activity)
-Payment receipt and posting |
-This activity ends the revenue cycle
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(After-Service activity)
-Monitoring and reporting |
-Once the revenue cycle activities are identified and timing goals are set for each activity, the patient accounts manager should implement a system of key performance indicators to ensure that these goals are being met.
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Electronic Claims Processing (ECP)
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-Claims and reimbursement information is electronically transmitted in a standard format that can be processed without human intervention
-Health Insurance portability and accountability act (HIPAA) of 1996: Requires all providers and insurers to follow electronic data transaction standards -It helps insure the shortest possible revenue cycle |
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Goal of cash management
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-Minimize the amount of cash the business must hold to conduct its normal activities
-To have a good amount of cash on hand to support operations |
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Cash budget
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-Tells managers how effective they are in applying the cash management techniques
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Net float (float)
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-The difference between the balance shown on the bank’s records and the balance on the business’s checkbook -Also known as the sum of disbursement and collections
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Disbursement float
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-When a business’s balance at the bank is greater than the amount shown on the checkbook
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Collections float
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-When a business’s balance at the bank is less than the amount shown on the checkbook
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A business's net float
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-A business’s net float is the ability to speed up collections on checks received and to slow down collections on checks written
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3 ways to speed up collections and get funds where they are needed:
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1) Lock box
2) Concentration banking 3) Electronic claims processing |
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Automated clearinghouses
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Communication networks that provide a means of sending data from one financial institution to another
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Disbursement control
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Effective cash management can only result if both inflows and outflows are effectively managed
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Payables centralization
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Permits the firm’s managers to evaluate the payments coming due for the entire business and to meet those needs in an organized and controlled way.
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Zero-balance accounts (ZBA's)
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-Disbursement accounts that have a zero-dollar balance on which checks are written
-Found in the concentration bank and are automatically transferred from the master account -They simplify the control of disbursements and cash balances and reduce the amount of idle (noninterest- bearing) cash |
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Supply-chain management
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-The requisitioning, ordering, receipt, and payment for supplies, and is an essential part of all businesses operations
-Also known as inventory management -Depend heavily on volume and must be dynamic |
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Just-In-Time (JIT)
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-When a company sells their inventory to a major hospital supplier, the hospital they sold their supplies to becomes a full-time partner in ordering and delivering the products hospital supply companies
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Stockless inventory
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-When a supplier fills orders in exact, small quantities and delivers them directly to departments inside the hospital, including the operating rooms and nursing floors
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Point-of-service distribution
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• The supplier delivers supplies, medical forms, etc. to the supply rooms
-The supplier owns the products in the supply rooms until they are used by the hospital, at which the hospital pays for the items |
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Inventory management
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-referred to as "supply chain management"
-It is important for a healthcare manager who will be responsible for maintaining inventroy to be knowledgeable about this topic. -It will be an important part of the budgeting process |
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Base Inventory
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-The minimum quantity of an inventory item to be on hand. -Related to "order point", which is the point where the minimum level has been reached and an order for additional inventory must be placed with the supplier.
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Cost of goods sold (cost of sales)
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-The term used for the cost of inventory items used in the generation of patient revenue.
-For example, when a $10 item is removed from inventory for use in caring for a patient, the item is said to have a cost of goods sold (or cost of sales) of $10. |
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Safety stock (buffer inventory)
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-An amount of inventory kept on hand, above the expected minimum
-Held so as to be prepared for unexpected increases in patient volume and to allow for waste or loss of items. |
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Lead time
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-The amount of time required to receive an inventory item after it has been ordered.
-Sometimes items can be delivered within the same day. - Other items, such as surgical implants, may require the item to be order days, even weeks, in advance before delivery because the items are specially made for a patient. |
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Stock-out
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-The situation occurring when a needed inventory item is not available
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Just in time/ stockless inventory system
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-Inventory ordered from a supplier on an "as needed" basis.
-Requires a sophisticated computer system and close working relationship with one or more suppliers to ensure prompt delivery of items |
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Cost of inventory
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-Managers must balance the need to have sufficient amounts of inventory on hand against the cost involved in holding too much inventory.
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(Cost of inventory)
Staffing cost |
-Employees who monitor inventory levels, order and process the receipt of inventory items, and maintain those items in storage (e.g. monitoring expiration dates and possible obsolescence).
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(Cost of inventory)
Warehouse cost |
-The cost of maintaining the physical space used to store the inventory items
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(Cost of inventory)
Opportunity cost |
-The profits foregone on money invested in inventory which might otherwise be earned by investing the money elsewhere.
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Flow of Inventory
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-The flow of inventory may simply be compared to that of a checkbook: a beginning balance plus deposits minus withdrawals equals ending balance
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(Flow of inventory)
Equation |
Beginning inventory balance
+ Purchases of items - Usage of items =Ending inventory balance |
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Three methods of capital investment analysis
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-Decisions on where to spend a business's money
1) Average accounting rate of return (ARR) 2) Payback period 3) Net present value (NPV) |
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"Average" accounting rate of return (ARR)
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-Important because of its relationship to the return on assets ratio
-Average annual increase in net income/ (initial investment/2) -(initial investment/2) also known as the "average book value" |
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Payback period
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-How long it takes for a company to get their money back
-The amount of time it takes for cash inflows to recover the cash outflows of the investment |
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Net present value (NPV)
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-The most popular method of the three
-Compares the discounted net cash flows of the investment over its economic life with the initial cash outflows required to purchase the investment |
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Cash basis
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-Recorded when cash changes hands
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Accrual basis
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-Is recorded when the event actually happens
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Salvage value
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-Will it be worth anything at the end and what's left over
-Same thing as residual value |
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Time value of money
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-The value of something today loses its value as time goes on
-You could have invested it earlier -$5 now is more valuable than a year from now |
