Revenue Reality Check: Evaluating Where Your Money Comes From

Updated on May 22, 2015

revenue cycle, medical billing, revenue cycle management, Healthcare Billing & Management, generating revenue,This is the first of a four-part series on the revenue cycle. Our next installment will help you identify holes in your billing cycle and where revenues often leak.  In the third article of the series, we will discuss how to tune up your revenue cycle—how to identify the biggest issues in your revenue cycle and some insight on how to benchmark your revenue cycle against the competition. Our final article will discuss how to improve payer performance and better manage and monitor your contracts with payors. 

Physicians are always challenged to find ways to generate revenue from their medical practice.  Nearly every function in your hospital or practice can generate revenue, yet many are leaving money on the table. Smaller practices, in particular, do not have sophisticated practice management systems to help them see the big financial picture or not using a billing partner to assist them in collecting money.

“One way practices can be proactive in determining solutions that make sense to their specific need and their speciality is to look for a partner, such as billing company, that can focus on some of the challenges they are faced with so they can do what they do best—diagnose and treat patients,” says Jackie Willett, president of the Healthcare Billing & Management Association (HBMA) and senior vice president for Intermix. “The billing partners could help maximize reimbursements as well as ensure compliance in regard to coding and billing regulations.”

Before you begin to worry about how to collect money, you first need to understand how to make money off your practice and where in your practice can you derive revenue.

Services rendered

Medical practices and hospitals that create revenue from services rendered are usually paid for by third parties including insurance companies (payers) and government payers (Medicare and Medicaid).

“Revenue originates from services rendered by the provider but the actual payments or reimbursement come from different sources,” says Sou Chon Young, senior consultant for Hayes Management Consulting. “They can come from government payers and insurance companies which traditionally have received their money from employees and employers, depending on the type of insurance product such as fee-for service or managed care. Money also comes to the practice directly from the patients, for example, co-pay, co-insurance, or deductible amounts that the patient, or guarantor, is financially held accountable.”

Although there are some practices that are cash-and-carry, Dr. Robert Rowley, chief medical officer at the San Francisco, CA-based Practice Fusion, adds that these usually don’t have as much volume, since most people seek health care through their insurance.

“The insurance-paid piece of the bill is generally considerably more than the patient-paid co-payment part of the bill,” he says.

Payment rates are a function of the agreement signed between the physician and the insurance company. Most agreements are still fee-for-service, though increasingly a pay-for-performance component is being seen, notes Rowley.

A medical practice can make themselves more financially stable by increasing top-line revenues and offer a broad spectrum of services as well as participating in insurance plans that result in higher volumes of services to the practice.

One specific challenge physicians face is trying to navigate through all of the different regulations and the requirements that the payers are mandating on the providers.

“Contracts are constantly being updated and changed and different requirements are being imposed on providers,” says Sou Chon Young, senior consultant for Hayes Management Consulting. “It’s challenging especially for smaller practices that don’t have the efficiencies and the operations to handle all of these different nuances and they get tripped up in trying to meet those. A lot of times, they fail and they can leave a lot of money on the table.”

Ancillary and follow-up services

Ancillary services such as skin care services for an OB/GYN office or even providing massages from a chiropractic or orthopedic practice is another place where you can generate revenue.

“You can increase top-line revenues by offering a broad spectrum of services or by participating in insurance plans that result in higher volumes of services to the practice,” says Rowley. “Some of the challenge is expanding services to cover overhead. “More of the challenge is managing overhead to improve margins.”

Follow-up procedures with your patients are as important, yet is often neglected by practices. This is where e-tools become important, adds Rowley. An EHR product might generate lists of people who need follow up.

“This generates revenue by identifying people who have dropped off the map and need some proactive disease prevention intervention,” he says. “But a practice has to be able to do something with that list which can be a staff-overhead burden. EHRs that help clinicians reach out to patients via connected PHR or email reminders to contact the office, without encumbering extra staffing needs—these are the products that really help.”

Subleasing space

Today’s healthcare providers are becoming more versatile in looking for alternative revenue for their practices while ensuring they do not violate any regulatory or compliance laws. One such way to generate revenue, says Melissa Turner, CEO of Mainstream Services, Inc., is to actively seek other healthcare providers—not necessarily those who share your specialty—to rent available office space from you.

“The value in this is lower monthly overhead as they are sharing front desk assistants and in some instances outsourcing services,” she explains. “Cross specialty providers are seeing a benefit in a growing patient roster, easier coordination of care and the convenience for the patient.”

Patients who visit a office for OB/GYN services are more likely to also visit the same facility to see the imaging office and pediatrician. Imaging offices are offering specialty services for expecting mothers like 3D imaging, for example.

“This is not covered by insurance carriers because it’s seen as cosmetic, however expecting mothers love the ultrasounds to use as the beginning of their new arrival first pictures for the baby books,” says Turner. “Gift certificates for 3D ultrasounds are also becoming a popular baby shower gift.”

Making house calls

Another novel way some practices are adding revenue is by integrating a house calls practice into their service mix.  

“A medical house call/cash pay medical practice opportunity offers a number of attractive advantages to any physician seeking to start a new medical practice or add a profit center to an existing office based practice,” says Rowley. “The demand for medical house calls has grown within the last 10 years and is expected to expand massively within the next few years.”

Some of the main reasons that make doing medical house calls attractive for physicians is:

  • Aging baby boomer population
  • No managed care or HMO’s
  • Lower overhead
  • More free time
  • Increased reimbursement
  • Marketing appeal to the patient of having the doctor come to them

Raymond Boyd, another senior consultant for Hayes, says that generating revenue isn’t the issue for most practices.

“It’s amazing to me how much falls through the crack and how much healthcare practices are not collecting just because of the inefficiency of the workflow,” he says. “The revenue stream they have are probably pretty healthy, but a lot of those practices don’t realize how much they are losing.”

In our next article, we’ll examine the cracks and holes in your revenue cycle where dollars can be lost if a practice is careless.

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Daniel Casciato has his own business as a social media consultant, freelance copywriter, ghostwriter, and ghostblogger. The Pittsburgh native loves his Steelers, Penguins, and Pirates. Learn more at