Maximizing Revenue Cycle Efficiency with Expected Reimbursement Strategies

Integrating expected reimbursement into RCM software enables real-time comparisons and automates denial management for effective AR oversight.

Effective Accounts Receivable (AR) management is crucial for healthcare providers to meet their financial goals. Unlike other industries, healthcare providers deal primarily with insurance billing, making AR calculations uniquely complex. Variations in reimbursement amounts, frequent claim denials, and ever-changing payer requirements add layers of difficulty.

What is Expected Reimbursement?

Expected reimbursement is the anticipated payment for each charge or procedure line, differing from the gross charge amount billed. For instance, a CPT laboratory test might charge $500, but historical data or payer contracts might indicate an expected reimbursement of $250 from Payer 1, $200 from Payer 2, and $0 from Payer 3. Adjusting these expectations as contracts or fee schedules change, such as a new rate of $225 starting in 2025 with Payer 2, is essential for accurate AR management.

Expected reimbursement is essential because it bridges the gap between what is billed and what is realistically collectible. By leveraging historical data, payer contracts, and reimbursement patterns, healthcare providers can set realistic expectations, for both contracted and non-contracted claims, and better manage their receivables. This proactive approach helps in predicting cash flow more accurately, identifying discrepancies early, and ultimately improving financial stability.

How Expected Reimbursement Enhances Revenue Cycle Management

Managing AR effectively requires precise oversight over payer reimbursements and contracts. Integrating expected reimbursement into your Revenue Cycle Management (RCM) software allows for real-time comparisons between expected and actual reimbursements, automating denial management and appeals. This proactive approach helps in:

• Improving average sales price (ASP) and net collection rates (NCR).
• Reducing days in AR by quickly identifying contract variances.
• Better management of underpayments and overpayments; Medicare mandates 60 days reporting, and many private payers also require overpayments be reported when contracted.
• Swift identification of changes in payer behavior, aiding contract management and minimizing payment disruption.

Automating Denial Management

One of the significant advantages of integrating expected reimbursement into RCM software is the ability to automate denial management. By setting up expected reimbursement rules, the system can flag discrepancies between expected and actual payments, triggering automatic appeals for underpayments or denials. This automation reduces the administrative burden on staff, ensures timely follow-ups, and increases the likelihood of recovering owed amounts.

Enhancing Payer Contracting and Negotiations

With detailed expected reimbursement data, healthcare providers gain insights into payer behaviors and payment patterns. This information is invaluable during contract negotiations, allowing providers to advocate for better rates and terms based on historical performance. By presenting data-driven arguments, providers can strengthen their negotiating position and secure more favorable contracts.

The Impact of Expected Reimbursement on Reporting and Compliance

Expected reimbursement is not just vital for AR management but also for financial reporting and compliance, particularly with Generally Accepted Accounting Principles (GAAP) standards like Accounting Standards Codification (ASC) 606.  Importantly, many financial auditors report increased scrutiny of revenue recognition practices in the last several years.

5 Core Rules of ASC 606 and Revenue Recognition:

Implementing expected reimbursement at the DOS, CPT, and payer levels, allows you to manage rules 3-5 from inside your RCM software. While ASC 606 compliance may be more important for publicly traded companies, it also applies to private companies, since it follows GAAP and can impact tax liability.

Implementing expected reimbursement helps manage the critical aspects of ASC 606, ensuring compliance and improving reporting accuracy. Benefits include: 

• Near real-time AR valuation, reducing errors from manual calculations
• Easier adaptation to changes in contracts, fee schedules, and payer policies.
• Streamlined financial close cycles and reporting, avoiding delays from manual adjustments

Reducing Errors and Improving Efficiency

Manual calculations and spreadsheet-based tracking of AR are prone to errors and time-consuming. By automating expected reimbursement calculations within RCM software, healthcare providers can minimize human error, save time, and ensure that their financial data is accurate and up-to-date. This efficiency leads to faster financial close cycles and more reliable reporting.

Optimizing Expected Reimbursement Setup with Quadax Solutions

Quadax provides flexible and detailed expected reimbursement setups, allowing you to set reimbursement rates by various criteria:

✅ NPI, location, laboratory, or region
✅ Date of service (DOS)
✅ Procedure, CPT, or DEX Z-code
✅ Insurance plan or insurance category
✅ Percentage of the Medicare fee schedule or procedure list price

 Customizable Reporting

With Quadax, you can run reports directly in your RCM, synchronizing data with accounting or ERP software, and managing financials seamlessly. This capability ensures that your financial and operational teams have access to the same data, improving collaboration and decision-making. Furthermore, Quadax’s Decision iQ dashboard product provides expected reimbursement visual analytics for AR, CPT reimbursement, and financial metrics.

Streamlining Financial Operations

Quadax’s robust reporting features allow healthcare providers to analyze AR from different perspectives, whether by current ticket value or expected reimbursement. This flexibility helps in identifying trends, uncovering issues, and making informed decisions to optimize financial performance.

Real-Time Insights

By leveraging Quadax’s solutions, healthcare providers can gain real-time insights into their financial health. This visibility is crucial for making proactive adjustments, managing cash flow, and ensuring that the organization remains financially stable.

Integrating expected reimbursement into your RCM not only simplifies AR management but also enhances compliance, reporting, and financial performance. Quadax’s flexible, detailed, and customizable solutions empower healthcare providers to optimize their revenue cycle management, improve reimbursement rates, and ensure compliance with GAAP and ASC 606 standards.

Schedule a strategy call to discover more ways Quadax can transform your revenue cycle, helping you stay ahead in an increasingly complex financial landscape.