HCM 345 Module 5 Final Project Milestone Two example

Milestone Two: Billing, Marketing and Reimbursement at a Composite Regional Health System

[Student Name]

Southern New Hampshire University

HCM 345: Healthcare Reimbursement

Module Five Final Project Milestone Two

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[Date]

The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.

Milestone Two: Billing, Marketing and Reimbursement at a Composite Regional Health System

Introduction

Milestone One showed that at Lakemont Regional Health, a composite system with a 210-bed hospital and 14 clinics, most revenue is lost early in the revenue cycle, in patient access and documentation. This draft examines the later stages and the forces around them: how the billing process turns an encounter into a claim and a payment, how marketing has become part of reimbursement through price disclosure rules, and how each payer's method of reimbursement shapes what the organization should do.

The Billing Process

Billing begins with charge capture. When a service is delivered, it must be entered in the electronic health record so that a charge is generated from the chargemaster, the master list of every billable item with its code and price. At Lakemont, most charges drop automatically from orders and documentation, but supplies, bedside procedures and emergency department services still depend partly on manual entry, which is where internal audits find missed charges. The chargemaster itself must be maintained; an outdated code or a service with no price will stop a claim or cause underpayment.

Once coding is complete, the claim is assembled and run through a claim scrubber, software that checks it against payer edits for missing fields, invalid code combinations and medical necessity rules before it leaves the building. Claims that pass go through a clearinghouse to the payer as electronic 837 transactions. The payer adjudicates the claim and returns an electronic remittance advice explaining what it paid, adjusted or denied and why, and the payments are posted to patient accounts. Denied and underpaid claims go to follow-up staff, who correct and resubmit or appeal them, and any remaining balance becomes the patient's responsibility, billed by statement (Casto & White, 2021).

Every stage has a failure point. A claim that fails scrubbing is delayed; a claim that passes the scrubber but fails the payer's edits is denied and must be reworked; a payment posted incorrectly hides an underpayment. At Lakemont, only 86 percent of claims pass payer edits on first submission, and each of the remaining 14 percent requires staff time to fix. Billing is not a clerical step at the end of care; it is a production line where rework is the main cost.

Marketing and Reimbursement

Marketing affects reimbursement in two ways. The first is traditional: promoting service lines changes which patients come to the organization, and therefore its volume and payer mix. A study of more than 220,000 patient visits in Massachusetts found that patients who saw a television advertisement for a hospital were more likely to choose it, and that the effect differed by insurance type, with patients in more restrictive plans less responsive (Kim & KC, 2020). For Lakemont, marketing its orthopedic and cardiac programs to commercially insured patients would improve payer mix more than general brand advertising, but only if the programs have capacity.

The second way is newer: federal law now makes prices part of the organization's public face. Since 2021, hospitals must post a machine-readable file listing their standard charges, including the rates negotiated with each insurer, and present prices for shoppable services in a consumer-friendly display (Hospital Price Transparency, 2024). Separately, the No Surprises Act requires providers to give uninsured and self-pay patients a good faith estimate of expected charges for scheduled services, and patients whose final bill exceeds the estimate by 400 dollars or more can dispute it (No Surprises Act, 2020). These rules mean that the prices Lakemont negotiates are visible to competitors, employers and patients, and that inaccurate estimates carry consequences. Marketing, patient access and managed care contracting must therefore work together: the price a patient sees online, the estimate a financial counselor gives and the bill that arrives should agree.

Reimbursement Methods by Payer

Lakemont is paid through several methods at the same time, summarized in Table 1.

Table 1

Reimbursement Methods at Lakemont Regional Health by Payer

Note. Composite payer shares for illustration.

What the Mix of Methods Means

Because 44 percent of charges come from Medicare programs that pay a fixed amount per case, Lakemont's financial results depend heavily on documentation, coding and length of stay. The commercial contracts, by contrast, pay more per case but are the most administratively complex, with different rules, authorization requirements and appeal procedures for each insurer. That complexity has a price. One academic system estimated its billing and insurance-related cost at roughly 20 dollars per primary care visit and 124 dollars per medical admission; for the visit, that equaled 14.5 percent of professional revenue for that visit (Tseng et al., 2018). The mix of methods therefore affects not only what Lakemont is paid but what it spends to get paid.

The system also participates in a small value-based arrangement through an accountable care organization that shares savings with Medicare if spending for attributed patients stays below a benchmark while quality targets are met. Its current contribution to revenue is small, but it rewards the opposite of fee-for-service volume, so the organization must be careful that departments are not pulled in two directions by incentives they do not see. Reporting results by payer to department leaders is the simplest way to make those incentives visible.

Link to the Final White Paper

This draft, combined with Milestone One, supplies the analysis the final white paper needs. The recommendations will address charge capture and claim scrubbing in billing, the alignment of price transparency, estimates and marketing, and the contracting and documentation strategies suited to each reimbursement method.

References

Casto, A. B., & White, S. (2021). Principles of healthcare reimbursement and revenue cycle management (7th ed.). AHIMA Press.

Hospital Price Transparency, 45 C.F.R. pt. 180 (2024).

Kim, T., & KC, D. (2020). The impact of hospital advertising on patient demand and health outcomes. Marketing Science, 39(3), 612-635. https://doi.org/10.1287/mksc.2019.1153

No Surprises Act, Pub. L. No. 116-260, div. BB, tit. I (2020).

Tseng, P., Kaplan, R. S., Richman, B. D., Shah, M. A., & Schulman, K. A. (2018). Administrative costs associated with physician billing and insurance-related activities at an academic health care system. JAMA, 319(7), 691-697. https://doi.org/10.1001/jama.2017.19148