Revenue Leakage: What Is It and How Does It Impact RCM?

May 04, 2023
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Do you know what revenue leakage is and how it impacts your practice’s revenue cycle management (RCM)? Many healthcare providers don’t realize how much money they’re losing as a result of gaps in their administrative, claims, billing, and collection practices. Discover where common gaps exist and how providers can prevent critical revenue from slipping through the cracks as loss, bad debt, or incorrect reimbursements.

How much money are you losing to revenue leakage? It’s a question far too few providers ask themselves, primarily because they don’t even realize revenue leakage is a problem. The fact is, any provider would be stunned to learn how much revenue they’re losing as a result of poor revenue cycle management (RCM) practices. From undercharging patients to improper claims documentation and reimbursement, it’s important to find and plug the gaps in your RCM process.

What is Revenue Leakage?

Revenue leakage is the loss of potential revenue a practice could have generated but did not. Within the context of RCM, it’s specific to the loss of potential revenue during the billing and collections process. This can include missed charges, coding errors, denied claims, and other common problems.

Consider a basic example — one likely to have occurred at your practice. Imagine a patient comes in for a regular check-up, and your office simply forgets to bill them. If the billable cost for the visit would’ve been $200, there’s $200 in lost potential revenue. While this is a surface-level example, numerous opportunities exist for similar issues during the RCM process.

Causes of Revenue Leakage in RCM

Revenue leakage most often occurs when there’s a disconnect between the practice’s operational processes and its revenue cycle management approach. Incorrect or missing data, overlooked service charges, wrong billing or payer information, etc., can add up to lost revenue.

Some of the most common catalysts for revenue leakage fall into the following categories:

  • Inaccurate coding (denied claims or billing for the wrong service)
  • Inefficient claims management (lack of claims remediation or unfiled claims)
  • Incorrect charge capture (failing to record and charge appropriately for services)
  • Underpricing of services (can go back to poor coding or documentation)
money in water

Additionally, revenue leakage may occur due to a lack of communication between individuals or steps in the revenue cycle. Person A thought Person B sent a bill or vice versa. As a result, it’s essential to regularly review revenue cycle processes to identify and address potential areas where mistakes or miscommunication can occur (or regularly do).

How to Prevent Revenue Leakage

Minimizing revenue loss comes down to attentiveness within a well-defined framework for preventing leakage. It requires good systems, an emphasis on quality control, and a series of checks and balances to ensure efficient, expedient billing while also avoiding common RCM pitfalls.

Some of the simplest and best ways to address revenue leakage include:

  • Regular audits of each phase of the RCM process
  • Training staff on proper coding and billing practices
  • Utilizing technology to identify and prevent loss
  • Partnering with an outsourced RCM expert

Mistakes happen, and human error will always exist, as well as claim denials. But even if 100% revenue capture isn’t attainable, it still should be the goal.

Plug the Holes in Your RCM Process

Revenue leakage can have a significant impact on the financial stability of any practice. Not only does it result in decreased revenue, but it also negatively affects compliance and patient care. By regularly auditing RCM processes, training staff on proper coding and billing practices, and partnering with RCM experts, providers can take steps to prevent loss. Best of all, shoring up your RCM processes doesn’t just improve cash flow and bottom-line results — it keeps your practice’s administrative, coding, billing, claims, and accounting practices airtight.

Need help with your RCM practices? Talk to the revenue leakage experts at TruBridge.