From Codes to Cash: Leveraging Medical Coding for Optimal Revenue Cycle Performance

The estimation of Health Revenue Cycle Management was approximately worth $229 billion in 2023 and the industry is estimated to grow at over 12.5% CAGR from 2023 to 2032 to a whopping $489 billion. Medical coding takes approximately 11% of the cake. Medical coding, when done effectively, can be critical for the proper billing cycles of healthcare organizations. Accurate translation of patient visits and its reasons into accurate codes, healthcare providers—ultimately impacting performance on its revenue cycle. In this article, we will explore the role of medical coding in Revenue Cycle Management (RCM), recent developments in healthcare billing practices, and effective strategies for reducing revenue loss so that we can examine the impact of technology, regulatory changes, and the importance of patient financial engagement in optimizing revenue cycle performance.

Recent Developments in Medical Coding and Billing

2024 brought updates to ICD10 and CPT coding and current procedure terminology codes have resulted in meaningful changes that help bring transparency and efficiency to the process. Newer codes have been added, some were deleted and some modified. For example, the new 2024 CPT codes have undergone?349 editorial changes and the reporting for Evaluation and Management (E/M) services has been revised by eliminating time. 395 new codes have been added to the 2024 ICD and 13 codes have been revised as well. One of the major CPT updates for 2024 is the consolidation of over fifty codes to simplify COVID-19 vaccination reporting. Additionally, five new CPT codes have been created to report product-specific RSV vaccinations, addressing advancements in preventing Respiratory Syncytial Virus (RSV) infections.

Impact of Medical Coding Dynamics on Healthcare Providers

1. Rising Errors, Audits and Overpayments:

In a latest research report on the changing dynamics of the "Medical Coding Market" by Coherent Market Insights it was revealed that the global medical coding market in 2024 is estimated to be valued at $21.66 Billion. It is expected to exhibit a Compound Annual Growth Rate (CAGR) of 9.6% to 14% from 2024 to 2031 and reach about $41.19 billion by 2031. The report also revealed several insights on the drivers, restraints and opportunities with respect to the key factors in the medical coding market. According to a report by the American Medical Association, coding errors contribute to a 15-25% denial rate, with reworking denied claims costing $25-$30 each. A study by Black Book Market Research found that 80% of healthcare providers identified improved coding accuracy as a key driver for increased revenue and reduced denials. Implementing effective coding practices can reduce these denial rates by 30%, enhancing financial stability. It has been found that updating one data set containing around 25 reference tables can even take a full-time engineer approximately 10 hours or more. Centers for Medicare & Medicaid Services (CMS) reported that overpayments due to incorrect coding amounted to $28.91 billion in the 2023 fiscal year. One such incident was a $10,000 reimbursement for a $6 COVID test. To mitigate issues arising out of coding, healthcare providers must have robust data governance solutions and engage expert clinical terminologists to ensure accurate and timely implementation of these coding updates.

2. Increased Risk-Based Audits:

In 2023, healthcare providers saw a fourfold increase in external payer audits, reaching around 23%. There was also a 50% rise in risk-based audits. This shows that providers must focus more on accuracy and compliance in billing. A report from the American Medical Association (AMA) highlighted that incorrect coding was a primary trigger for these audits. It noted that coding errors could lead to revenue losses of up to 10% for healthcare providers. Consider the case of a mid-sized hospital in California that experienced a 50% rise in risk-based audits over the past year. This increase was primarily due to repeated coding errors in their billing submissions. The hospital frequently miscoded routine procedures, leading to a pattern of overbilling. For instance, a simple outpatient procedure was often billed at the higher rate of a more complex surgery. This discrepancy badged the hospital for a risk-based audit by their primary insurer. The audit revealed that these errors were not intentional but stemmed from outdated coding software and inadequate training for their medical coders.

3. Consumer Challenges in Medical Bill Payments:

A recent survey indicated that fewer than one in three consumers pay their medical bills immediately, and that 72% consumers face difficulty in paying their medical bills immediately because they can’t understand it. This highlights the need for healthcare organizations to reassess their patient collection strategies. Improving patient financial engagement and providing clear, timely billing statements can help increase the likelihood of prompt payments. One notable example is a Florida-based internal medicine practice. They implemented a comprehensive billing strategy for a practice, including a dedicated team with an accounts receivable expert and certified medical billers and transitioning to electronic claims submission. This approach resulted in a significant reduction in average AR days from 141 to less than 40, an increase in the collection rate from 60.6% to 75.5%, and an expansion of the patient base from 600 to 1000, enhancing the focus on affordable and uncompromising patient care.

Decoding the code: Solving Medical Coding Challenges

1. Autonomous Coding:

North America dominates the medical coding market and is forecasted to be the largest region in the Artificial Intelligence in medical coding market in 2023, due to the expansion plans for healthcare facilities coupled with growing awareness of the advantages brought to the table by AI in medical coding. Autonomous coding, using AI to try to smoothen revenue cycle processes, is gaining a lot of attention in the healthcare space. Autonomous coding can help realize accuracy and efficiency related to medical billing by reducing the administrative burden on human coders. Healthcare Financial Management Association reports that providers with robust coding processes see a 20% improvement in cash flow and a 50% reduction in accounts receivable days. A notable example to explain this is Optum360. The provider adopted an AI-powered coding system from Optum360. This system uses natural language processing (NLP) and machine learning to analyze patient records and automatically generate accurate medical codes. In practice, this technology reduced the time required for coding by 40% and decreased coding errors by 25%. As a result, the provider experienced a 20% improvement in cash flow and a 50% reduction in accounts receivable days.

2. Data Security and Compliance:

A 2023 report by the Healthcare Information and Management Systems Society (HIMSS) highlighted that 62% of healthcare organizations experienced a data breach in the past year, with 75% of these breaches attributed to inadequate access controls and outdated security protocols. This underscores the importance of robust IAM systems in preventing unauthorized access and securing patient data. With the increasing reliance on digital health records and telemedicine, the protection of patient data and regulatory compliance come to the forefront. Identity and Access Management (IAM) is the key to security, digitization, and operational efficiency. It takes a central place among technologies designed for the protection of sensitive information and maintenance of compliance with healthcare regulations.

3. Regulatory Changes and Best Practices:

No Surprises Act: The No Surprises Act (NSA), 2022 has brought important changes to the billing process, with an aim to protect patients from unexpected medical bills. Recent updates to the NSA have focused on improving the Independent Dispute Resolution (IDR) process for surprise billing by addressing payer-provider communication. The IDR process is a baseball-style arbitration process under which the provider and the plan or issuer each submit to a third-party arbitrator (i.e., certified IDR entity) their best and final offers. The certified IDR entity must review both offers and make a determination.

Case Study: Focusing on Financial Protection

In 2023, a healthcare solutions company has become an essential partner to healthcare providers in this mess of changes to medical coding. Their technology platforms on risk adjustment offers new tools for the most accurate coding and efficient auditing, thus always keeping their clients ahead in terms of coding competence and compliance. This resulted in 50% reduction in their technology costs while increasing their productivity by 30%. A 32% increase was also seen in audit capacity with a 45% reduction in the time consumed to produce these results.

Conclusion

Medical coding plays a vital role in optimizing revenue cycle performance for healthcare organizations. By staying abreast of the latest coding updates, leveraging technology, and implementing effective patient engagement strategies, healthcare providers can reduce revenue loss and enhance financial stability. As the Health Revenue Cycle Management industry grows to $489 billion by 2032, accurate medical coding remains essential for effective billing and financial stability. Recent CPT and ICD-10 updates, alongside the rise in audits and consumer payment challenges, underscore the need for robust coding practices and data security measures. Solutions like autonomous coding, enhanced IAM systems, and compliance with regulatory changes such as the No Surprises Act are critical for optimizing revenue cycle performance and safeguarding healthcare providers' financial health. Proactive approaches and innovative solutions will be key to navigating the complexities of medical coding and ensuring optimal revenue cycle performance. After all, it’s not just about keeping the books balanced, but about ensuring the stethoscopes keep listening.