Altruis Blog

Medical Billing Revenue Cycle Management: Are Gross Versus Net Margins Hurting Your Mission?

Mar 25, 2024 1:00:00 PM / by Chris Caspar, CEO

Revenue Cycle Billing

When it comes to medical billing profit margins, the phrase “no margin, no mission” can ring too true. After all, if a care center doesn’t bring in enough revenue to keep things running, any higher purpose they have is meaningless. 

That’s why you devote so much time to keeping your health center afloat. But it’s important to remember that the reverse of this well-known phrase is also true: No mission, no margin. If you’re devoting too much time to the billing side of your practice, it’s the patients who suffer.

Why Revenue Cycle Billing is Important

Revenue cycle billing is a critical component of any health center's financial strategy and plays a vital role in achieving revenue goals. As the primary means of generating income, efficient and accurate billing processes are essential for ensuring timely reimbursement for services rendered. Effective revenue cycle billing encompasses various tasks, including patient registration, coding, claims submission, payment posting, and accounts receivable management. By optimizing these processes, health centers can minimize revenue leakage, reduce denials, and accelerate cash flow, thereby enhancing financial stability and sustainability.

Of course, effective medical billing revenue cycle management (RCM) will bolster your center’s economic stability. The ability of any provider — whether they have a safety net or not — to receive payments for billed services promptly keeps profit margins healthy, and it also allows them to deliver higher levels of care to their patients.

But it’s that last bit that’s so important. Are you making enough time for your mission — your patients?

Here’s what you need to know about RCM and revenue cycle billing, including strategies to get beyond the stress of cash flow and get back into the exam room.

Revenue Cycle Management: The Secret to a Short, Happy (AR) Life

When medical bills are submitted for payment, how long does it take you to get your money? The sooner a patient’s account is marked “paid,” the better it is for everyone involved — and the more likely your center is to recoup its costs of treatment.

Here’s the truth: When an account has gone 60 days past due, it has only a 70% chance of ever being recovered. After six months of not being paid, there is only a 30% chance this account will be paid in full.

At the average multispecialty practice, 13.54% of A/R is sitting at over 120 days. The Medical Group Management Association (MGMA) calls this “not-so-graceful aging” because it drains the life out of a healthy medical billing profit margin.

Billing and accounts receivable teams are like safety net providers. In collecting payments, they keep things running and support financial wellness. Aim for a revenue cycle timespan of fewer than 60 days to maximize intake. You need to keep the money flowing.

Measure What Matters: Net, Not Gross Margins 

Is your center spending too much time measuring your gross collection rate? Here’s a secret: The gross collection rate isn’t really that important. It simply reflects the ratio between what you charge and what the payer allows.

All this figure shows is the total of payments received over a specific period divided by your total charges without write-offs. It doesn’t mean much in real-world applications.

Here’s an example of why your gross collection rate doesn’t have much impact on whether or not you can keep the lights on, so to speak. If you charge $1,000 for services provided and you receive a payment of $650, you have a 65% gross collection rate. However, if the payer’s rate is set at $650 and you charge $650, your gross collection rate is 100%. The gross collection percentage is higher, but it doesn’t affect anything in execution.

A gross collection rate of 100% sounds good in theory, but it doesn’t do much for your bottom line. And more importantly, if you have a high Medicaid/Medicare payer mix, it doesn’t matter what you charge. You’ll get paid a set amount. Why spend valuable time focusing on this figure?

In contrast, the net — or adjusted — collection rate is more telling. That’s the total payments for the period divided by the total charges after the write-offs or adjustments. To come up with the net collection rate, you examine all your payments received from a particular period and divide these total payments received by the charges after adjustments, equaling the total net collection rate. 

How does this work? If your total payments received are $500,000 and your charges after adjustments are $550,000, you divide $500,000 by $550,000, totaling a net collection rate of 91%.

The net rate collection is a true reflection of your health center’s overall financial performance. In our experience, this net rate collection should be at least 90%. If you aren’t hitting that mark — or if you’re having trouble figuring out your medical billing profit margins — Altruis can help with that, too.


Medical Billing Revenue Cycle Management: Is Your Quest for Margin Hurting Your Mission?

The MGMA reports that in recent years, 60% of medical practices have been meeting their revenue goals while 40% have not. Are you in the 60% or the 40%? 

Understandably, many providers believe devoting more time to revenue cycle management is the way to advance their mission. Unfortunately, the more time they devote to their billing procedures, the less they have to focus on other core operations: managing employees, ensuring compliance with government programs, performing crucial administrative tasks, and caring for patients.

Even centers with internal billing departments struggle to stay up-to-date with the latest regulatory changes. By streamlining billing processes with outsourced revenue cycle management, it’s possible to establish an efficient billing solution

Effective RCM not only reduces overhead costs but also helps the centers to stay aligned with industry changes. This further boosts providers’ ability to maintain a competitive edge.

Is It Time to Outsource Revenue Cycle Billing?

If you want to improve medical billing collection rates and keep your AR lifespan short, it may be time to outsource your medical billing.

A full-service revenue cycle management solution can provide the foundation to address both margin and mission in one. You can build on this foundation to foster improved administrative performance, better compliance, new patient services, more strategic use of your staff, and better patient care.

Outsourcing RCM ensures claims are submitted correctly the first time. It decreases collection expenses by taking advantage of procedures that reduce the overall revenue cycle process. And when claims are rejected, you can analyze them to ensure future denials are minimized — or to make a solid case for an appeal.

Whether you need a temporary billing solution, a complete AR overhaul, or help appealing denials, Altruis is your solution for outsourced medical billing services. We resolve the immediate issue, which starts bringing in money sooner. At the same time, we address systemic issues to keep revenue flowing.

Here are the results for one Altruis client:

  • 75% reduction in AR days from 115 to 29
  • Medicaid AR days at an all-time low of 22
  • Overall AR days below the national standard of 45
  • Reduction from 48% of AR over 90 days to 20% of AR over 90 days
  • 10% increase in cash collection, up $2.54 million from the prior year
  • Net collection improvement from 71% to 95%

While the numbers speak for themselves, our client also had rave reviews about what outsourcing medical billing did for their operations as a whole. They shared the following feedback with us:

“We have used the services of Altruis and were very satisfied with their results. We have found them to be efficient, accurate, and trustworthy. Having confidence in their services took a huge weight off of our shoulders. They not only file fast and accurately, but they never give up on a claim and work it for every dollar they can get. I would highly recommend their services to any medical professional or practice.”

Calm Patient Fears Regarding Payment for Treatment

Investing in revenue cycle billing management allows you to reach more patients — especially those who avoid care because of financial constraints. Care providers know all too well that when patients delay care because of cost concerns, their conditions often worsen and their medical costs become even greater. We can help here, too.

Our customized solutions can allow patients to pay at a pace that is comfortable for them. That means they not only end up paying their medical bills  — creating more revenue for you — but they also get access to the healthcare they need, which means they get better care.

With the right RCM solution, providers can improve outreach to patients who have missed their appointments and let them know they can still make their visits even when they have an outstanding balance.

Optimize Retroactive Medicaid Reimbursements

We’ve all heard about states trying to abolish retroactive Medicaid through the passage of Section 1115 demonstration waivers. This is a serious threat to providing great patient care. 

However, as long as retroactive Medicaid is still allowed, Altruis remains committed to helping clients collect those funds and turn potential write-offs into meaningful revenue. 

The truth about retroactive Medicaid? Most, if not all, unpaid encounters go unchecked for retroactive Medicaid eligibility simply because of the lack of time and resources in the center. Asking your existing staff to manually review the eligibility status of every unpaid encounter, and bill them, is impractical and virtually impossible.

Altruis regularly analyzes all of your self-pay encounters for the last year to identify when a patient has qualified to receive Medicaid coverage. After a patient is enrolled, their eligibility is applied retroactively to cover the costs of previously provided care as per the retroactive eligibility rules in each state. Altruis then bills Medicaid for these encounters and collects for previously uncompensated care, bringing in a steady stream of new revenue.

Improve Your Medical Billing Collection Rates

We get it. You’re overloaded, and so is your staff. Your patients are getting older and sicker. You have a shrinking pool of providers from which to hire. It’s more important than ever to laser-focus your efforts on providing quality patient care.

Outsourcing medical billing and collection to Altruis improves cash flow, increases collection rates, strengthens your medical billing profit margins, and fuels your mission. At Altruis, we can work with your existing systems and tailor our partnership to your needs. 

We’ll handle the margin. You take care of the mission.


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Chris Caspar, CEO

Written by Chris Caspar, CEO

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