Medical Coding and Revenue Cycle Management - Explained

Your healthcare organization must have a functional revenue cycle to consistently achieve your clinical goals.

But because revenue originates from patient encounters, the revenue cycle depends on building a reliable system to turn those encounters into reimbursable claims. The process typically involves using medical coding to convert documentation into a standardized language that payers can understand.

This post explains how medical coding fits into revenue cycle management and how to streamline it to reduce denials.

What is Revenue Cycle Management (RCM) in Medical Billing?

Revenue Cycle Management is the financial process healthcare organizations use to get compensated for the services they deliver. It tracks activities from the point of registration up to claims management.

You should prioritize RCM because it can help you improve revenue performance and reduce days in accounts receivable (AR):

• Improving revenue performance: RCM enhances revenue by reducing leakages. It does this by helping you capture and bill for every patient care activity and by streamlining collections.

• Reducing days in accounts receivable (AR): Days in AR is how long it takes you to get paid after submitting a claim. An effective RCM process reduces it by ensuring you submit cleaner claims on the first try and by reducing denials/rework.

Key Stages of the RCM Medical Billing Process

To build a functional revenue cycle, you’ll need to integrate care, documentation, and billing activities.

So, the RCM medical billing process must cover the following essential stages:

• Patient registration: It includes eligibility checks and the capture of the patient’s demographic data. The eligibility check involves verifying the patient’s insurance coverage, active status, and the benefits they qualify for.

• Documentation: The next stage is the clinical encounter and its documentation. You can capture the documentation manually or use one of the AI scribes for physicians to automate the process.

• Medical coding and charge capture: Based on the documentation, you can assign ICD-10, CPT, and HCPCS codes to transform the diagnoses, procedures, and medical services into alphanumeric codes. You’ll then use the codes to generate billable charges.

• Claims submission: At this stage, you package the documentation, coding, and charge capture into a claim and submit it to the payer for reimbursement.

• Remittance processing: You’ll receive payment from the payer and an Explanation of Benefits (EOB) document summarizing the charges and coverage.

• Denials management: If the payer denies payment for missing information, coding errors, or lack of medical necessity, the denials management stage begins. You’ll submit an appeal or correct the issue and resubmit the claim.

How Medical Coding Impacts Revenue Cycle Accuracy and Compliance?

Each of the above RCM stages depends on the one before it. That’s why medical coding will affect the accuracy and compliance of all your downstream revenue cycle activities.

Here’s how:

Impact on Revenue Accuracy

Because medical coding is how you translate clinical documentation into financial data, coding errors directly impact revenue.

For instance, a missed code results in revenue leakage, while an incorrect code results in denials. Also, there is a risk of downcoding. It happens when you code to a lower service than documentation supports, resulting in lost revenue.

To achieve true revenue integrity, consider moving away from error-prone manual workflows to partially automated or fully autonomous ones.

DeliverHealth’s InstaCode is an AI-powered coding solution that has the following key capabilities:

• Support for both partially automated and fully autonomous coding.

• Ability to generate coding suggestions directly from your clinical documentation.

• Ability to surface potential gaps and inconsistencies earlier to help reduce downstream rework.

• Denial prevention features to help address documentation and coding issues before submissions.

Additionally, it integrates seamlessly with InstaNote, our AI-powered documentation solution that automatically turns your patient conversations into structured clinical notes. It serves coding suggestions at the point of care.

Request a free demo to see how we achieve revenue cycle accuracy by uniting documentation and coding in one seamless workflow.

Impact on Compliance

Your coding practices must comply with legal requirements and payer-specific rules.

Specifically, coding accuracy helps with compliance in the following ways:

• Mitigating audit risk by ensuring that every submitted claim is supported by clinical documentation.

• Maintaining payer contract integrity by satisfying the rules outlined in each payer agreement.

• Ensuring compliant value-based care reporting, as accurate coding is essential for reliable quality reporting and risk adjustment.

How to Structure a Medical Coding Workflow

To improve coding accuracy and revenue performance, you need a well-defined coding workflow that standardizes how you review, code, and validate documentation.

Generally, an effective workflow can be structured as follows:

• The intake: You’ll need an input layer for documentation, which can be your EHR or a documentation solution like InstaNote. The intake should be prioritized, with high-dollar or time-sensitive cases moving to the front.

• The coding act: The documentation is pushed to the coding solution for analysis and medical code assignment. Your coding process can be manual, partially automated, or fully autonomous.

• The validation: You need an internal audit system to catch errors that could trigger rejections, denials, or compliance issues. Check for the accuracy and completeness of both documentation and coding. Also, ensure you are following all payer rules.

• The feedback loop: You should use denials and coding corrections to train the system to get smarter. For instance, InstaCode uses edits, acceptance rates, audit findings, and other operational insights to fine-tune our Autonomous Coding Engine over time.

Steps to Improve Coding Accuracy and Reduce Denials

As we’ve explored, one of the key ways to reduce rejections, denials, and compliance issues is to ensure coding accuracy.

Let’s explore additional approaches to do this beyond the validation and feedback loop systems we’ve discussed above:

• Track accuracy metrics: You cannot improve what you don’t measure. You should track the coding accuracy rate, the denial rate by reason, and the first-pass acceptance rate.

• Improve documentation quality: Because coding is downstream of documentation, documentation quality is important. You can improve the quality by training your clinicians and using Clinical Documentation Improvement (CDI) Software.

• Automate documentation: Manual documentation workflows can lead to significant human errors. Leverage the benefits of AI-driven documentation solutions to automatically create structured clinical notes in your preferred format. Your documentation will automatically align with coding logic.

• Leverage autonomous coding: Coding technology now allows the automatic generation of medical codes from your documentation with minimal or no human input. A good autonomous coding engine will have embedded audits and a robust rules engine to promote coding accuracy.

That said, autonomous coding also includes marking generated codes as “high-confidence” and “low-confidence” as a quality assurance measure. The high-confidence generations go straight to billing, while the low-confidence ones are routed to your coding professional for human review.

At DeliverHealth, our powerful AI technology typically tags 40% - 70% of generations as high-confidence (95% accurate), pushing them straight to billing.

Common Challenges in Revenue Cycle Management

Inefficiencies in medical coding aren’t the only challenges in revenue cycle management. Here are some of the other challenges you should prepare for:

• Fragmented RCM systems: It is hard to optimize RCM when it isn’t a single, coordinated system. If you’re using several RCM tools that aren’t integrated, the data silos will limit your ability to streamline your revenue cycle. Therefore, prioritize interoperability when choosing RCM tools.

• Staffing constraints: There are staffing shortages across the entire RCM pipeline. For instance, medical coding faces a 30% staffing shortage. The best way to address these constraints is to embrace automation, especially as AI-driven documentation and coding solutions improve.

• Changing rules: With value-based care seeing wider adoption, regulatory and payer rules are evolving fast. It makes it harder to keep RCM practices up to date. It is best to use platforms like DeliverHealth’s InstaCode that are built to evolve incrementally over time.

Frequently Asked Questions (FAQs)

Let’s now answer some common questions about medical coding and revenue cycle management:

What is the Difference Between RCM and Medical Billing?

RCM covers the full financial lifecycle from patient registration to denial management.

Medical billing is part of this cycle and involves claim creation and submission, as well as payment collection.

What are the Key Metrics Used to Measure RCM Performance?

To measure RCM performance, use the following key metrics:

• Net Collection Rate

• Days in Accounts Receivable

• First-Pass Acceptance Rate (Clean Claim Rate)

• Denial Rate

• Coding Accuracy Rate

• Missed Charge Rate

• Cost to Collect

What Causes Claim Denials in Revenue Cycle Management?

The most common causes of claim denials include:

• Incorrect patient demographic information

• Gaps in documentation

• Missing prior authorizations

• Coding errors

• A lack of medical necessity

• Not meeting payer-specific rules (claim format, billing guidelines, etc.)

What Role Does Insurance Verification Play In RCM?

Its role is to minimize denials. It does this by confirming that the patient’s insurance is active and covers the service you intend to provide.

Also, it helps you ascertain the patient’s financial responsibility before you deliver care.

What is the Role of Medical Coders in the Revenue Cycle?

The role of medical coders is to translate your clinical documentation into standardized alphanumeric codes that payers can easily understand.

With advances in technology, you can now complement this human expertise with AI-driven coding solutions.

What are the Benefits of Using RCM Software in Healthcare?

The benefits will mostly depend on the features and capabilities the RCM software offers.

Generally, you can expect the following benefits from most RCM tools:

• Fewer documentation/coding errors (results in lower denials).

• Reduced days in AR due to cleaner claims.

• Better revenue performance by improving charge capture.

• Greater ability to comply with regulatory and payer requirements.

• Lower administrative costs because of automations.

Conclusion

The function of medical coding in revenue cycle management is to help you translate the care services you’ve provided into billable data. Therefore, ensuring coding accuracy and scaling capacity directly translates into better revenue performance.

You can achieve such a scale without proportionally increasing your coding staff. At DeliverHealth, we offer an AI-powered coding solution that analyzes your clinical documentation and automatically generates compliant medical codes.

Further, you won’t lose control because of automation. Our SmartAudit tools give you the freedom to choose manual coding, partial automated coding, or full autonomous coding.

Book a demo today to see how our AI-driven solutions can transform your revenue cycle.