In the Business-Minded Surgeon blog, members of OrthoFounders, a national group of orthopedic entrepreneurs, discuss how orthopedic surgeons can lead efforts to fix the problems in health care that are so palpable and apparent to themselves, but opaque and undervalued by others. Topics include how to maximize return based on business strategy and improved clinical performance, how to navigate the entrepreneurial journey, and how to connect with others who have similar interests.

 

 

BLOG: If you have the Medicare blues, read this before doing anything rash

I remember repeatedly memorizing the Krebs cycle in both college and medical school, and hating it intensely. I did not know much, but I knew I was not interested in any job where knowledge of the Krebs cycle was important, and so I never seriously “learned” it. I would simply “spec and dump” it for the test, which ensured that within 24 hours I could only vaguely remember Krebs had something to do with ATP and acetyl-CoA — and that was always good enough to get me to the next level of training.

Not all cycles are so worthless for a surgeon to understand, though. The revenue cycle is equally as complicated as the Krebs cycle, but is enormously useful to understand when running a practice. Most surgeons possess a superficial understanding of the revenue cycle — enough to know commercial insurance yields more revenue per relative value unit (RVU) than government insurance. But, is that all we should know? Hardly! Just like the Krebs cycle, the revenue cycle has inputs, processes and outputs; the real issue at the most granular level is output net of input, ie, how much revenue survives the costs of the billings and collections process and results in surgeon take-home pay. At the macro level, there are further issues.

Revenue cycle

In this blog, we will take an executive tour of the revenue cycle to stimulate some thought regarding the business strategy of practice. The good news is no memorization is required and one only needs a basic understanding of how different payers interact with the revenue cycle to significantly increase the sophistication of the practice’s payer analysis, which can translate into higher revenues and lower costs for the practice, and higher take-home pay for the surgeons.

If one were to Google “revenue cycle” and click on “images,” he or she would note there is no universally accepted version. Different revenue cycle management companies have their own artistic interpretation, which emphasizes their particular strengths. So, let us build a simple revenue cycle from scratch. At the most basic level, there are four key components. The practice performs work, bills, collects and then administers the payer relationship, which includes fighting over the differences between what we understand is owed and what (and when) the payer and patients feel they should pay.

For most payers, there is another step: contracting. From a patient perspective, the penalties for using a non-participating (or uncontracted) provider are now typically so massive that only people with massive wealth can afford to see their provider of choice, regardless of insurance participation.