IHP 630 Module 6 Milestone Two Example

Milestone Two: Where Stonebridge's Revenue Leaks

[Student Name]

Southern New Hampshire University

IHP 630: Healthcare Finance and Reimbursement

Module Six Milestone Two

[Instructor Name]

[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: Where Stonebridge's Revenue Leaks

Milestone One identified claim denials and slow collections as one of three drivers of Stonebridge Regional Medical Center's operating loss. This milestone examines the revenue cycle in detail: how claims move from registration to payment, where they fail, what failures cost and which changes would recover the most revenue and cash.

The Revenue Cycle in Brief

The revenue cycle has three stages. The front end covers scheduling, registration, insurance verification and prior authorization. The middle covers clinical documentation, coding and charge capture. The back end covers claim submission, payment posting, denial management and patient collections. An error at the front end, such as a wrong insurance number, may not surface until weeks later as a denial at the back end, so the cheapest place to fix most problems is the beginning.

Current Performance

Stonebridge's key indicators lag its peers on nearly every measure. Over three years its first-pass denials climbed four points to 11%, only 82% of its claims pass payer edits cleanly the first time and its days in receivables stand at 59. Write-offs from denials that were never overturned reached $7.9 million last year, and the cost to collect, revenue cycle expenses as a share of collections, is 4.1%.

Table 1. Revenue Cycle Indicators

Note. Composite data; peer medians from the state association's revenue cycle benchmarking report.

Why Denials Happen

A review of 12 months of denials shows that registration and eligibility errors caused 31% of them, missing or invalid prior authorizations 24%, medical necessity disputes 18%, coding errors 14%, late filing 5% and other reasons 8%. More than half, those from registration and authorization, originate at the front end and are largely preventable.

Table 2. Denials by Cause

Note. Composite analysis of 12 months of denied claims.

Which Payers Deny Most

Denial rates vary sharply by payer. Traditional Medicare denies about 5% of initial claims, commercial insurers about 9% and Medicare Advantage plans about 17%, driven mainly by prior authorization and medical necessity disputes. Medicaid managed care plans deny about 14%. Growth in Medicare Advantage enrollment explains much of the rise in Stonebridge's overall rate.

The Cost of Complexity

Denials are expensive even when they are overturned. Tseng et al. (2018) found that billing and insurance-related work absorbed a substantial share of revenue for many physician services at an academic health system, far more for simple visits than for complex procedures. Gottlieb et al. (2018) analyzed physician billing data and documented frequent denials, resubmissions and payment adjustments, with wide variation across payers, which impose costs beyond the resources spent on care. At Stonebridge, reworking a denied claim costs an estimated $38 in staff time, and the hospital reworked about 41,000 claims last year, roughly $1.6 million, while recovering only about 60% of the denied revenue.

Patient Balances

Self-pay balances and patient deductibles are a growing share of receivables. Kluender et al. (2021) used credit bureau records to show that nearly one American in five carried medical bills in collections in 2020, with higher rates in states that had not expanded Medicaid. Aggressive collection of these balances often recovers little and harms patients and the hospital's reputation. Many self-pay patients at Stonebridge qualify for financial assistance but are never screened.

What Staff Say

Interviews with twelve registration, authorization and billing staff added detail the data could not. Registration clerks described handling up to forty patients a shift with no time to verify coverage for walk-in outpatients. Authorization staff are spread across departments, each keeping its own spreadsheet, so no one sees which payers are changing rules. Billers reported that the same denial reasons recur month after month because lessons never reach the front desk. Several staff noted that turnover in registration has exceeded 30% a year, meaning new clerks are frequently learning on the job. These accounts support centralizing authorizations and closing the feedback loop between the back and front ends.

Proposed Changes

The plan puts prevention first. At the front end, the hospital would automate real-time eligibility checks, create a central prior authorization team with a tracking system and require verification before scheduled services. In the middle, clinical documentation specialists would expand reviews for high-denial services, and coding edits would be tailored to each major payer. At the back end, a denial prevention committee would review weekly trends and feed lessons back to the front end, while persistent Medicare Advantage disputes would be escalated through contract terms. For patients, financial counselors would screen for assistance and Medicaid eligibility before discharge.

Projected Gains

If the initial denial rate falls from 11% to 7%, write-offs would drop by about $3.5 million a year and rework costs by about $0.6 million. Collecting twelve days faster would free roughly $9.7 million in a single step, raising days cash on hand by about twelve days. Screening self-pay patients for coverage could convert about $1.2 million in likely bad debt into Medicaid or assistance-covered care.

Table 3. Projected Annual Effects of Revenue Cycle Changes

Note. Composite estimates for the first full year after implementation.

Owners and Timeline

The vice president of revenue cycle owns the plan. Eligibility automation and the authorization team launch in the first quarter, payer-specific coding edits in the second and the denial committee immediately. Financial counseling expands in the third quarter after two counselors are hired.

Measures

The team will track initial denial rate by cause and payer weekly, clean claim rate, receivable days, write-offs, cost to collect and the share of self-pay patients screened for assistance. Results will be reported monthly to the finance committee.

Conclusion

Most of Stonebridge's denials start at registration and authorization, and each one costs money to fix. A prevention-first plan could recover about $5 million a year in revenue and savings and release nearly $10 million in cash, while treating patients with balances more fairly.

References

Gottlieb, J. D., Shapiro, A. H., & Dunn, A. (2018). The complexity of billing and paying for physician care. Health Affairs, 37(4), 619-626. https://doi.org/10.1377/hlthaff.2017.1325

Kluender, R., Mahoney, N., Wong, F., & Yin, W. (2021). Medical debt in the US, 2009-2020. JAMA, 326(3), 250-256. https://doi.org/10.1001/jama.2021.8694

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