NUR 8250 Module 4 Revenue Cycle Paper: Billing and Insurance-Related Costs, Claim Denials and a Leaner Process Example

Twenty Dollars to Bill a Visit: Costing and Redesigning the Revenue Cycle at a Princeton Multispecialty Group

Student Name

Doctor of Nursing Practice, Thomas Edison State University

NUR-8250: Health Economics and Finance

Mentor Name

Month Day, Year

Twenty Dollars to Bill a Visit: Costing and Redesigning the Revenue Cycle at a Princeton Multispecialty Group

The Question

This scenario is made up for teaching: the group is 85 physicians, nurse practitioners and physician assistants across primary care, cardiology, orthopedics and women's health in the Princeton area, with about 310,000 visits a year. Its revenue has grown, but its margin has shrunk, and the billing department has grown from 22 to 34 staff in five years. Claim denials have risen. The chief executive, a DNP-prepared nurse practitioner, wants to know what it actually costs to get paid and where the money goes.

The chief executive's question became urgent after a cardiology practice in the group was paid nothing for three months of echocardiograms because a payer changed its authorization rules and the change was not noticed. By the time the denials were discovered, many were past the appeal deadline. The loss, about $410,000, was larger than the practice's annual profit. That event showed that the revenue cycle is not a back-office detail but a risk to the group's survival, and it prompted the analysis in this paper.

National Context

Himmelstein et al. (2020) compared the two countries' administrative costs for 2017, building the U.S. and Canadian figures from government reports, provider accounting data, physician surveys and census employment data. Administration cost American insurers and providers $812 billion, $2,497 per person, or 34.2 percent of national health spending, compared with $551 per person, or 17.0 percent, in Canada. Physicians' insurance-related costs alone were $465 per person in the United States compared with $87 in Canada.

Jiwani et al. (2014) synthesized studies of billing and insurance-related costs across U.S. health care and estimated a total of about $471 billion in 2012, of which physician practices accounted for $70 billion and hospitals for $74 billion. Compared with a simplified financing system, about 80 percent of these costs were attributable to the complexity of the multipayer system.

These studies show that a large share of administrative cost comes from the structure of U.S. payment, which one group cannot change. The question for this paper is what the group can control.

Measuring the Group's Own Cost

Tseng et al. (2018) used time-driven activity-based costing at Duke University Health System. They interviewed administrators and physicians to map every step of an insurance claim through the revenue cycle, estimated the time each step took and multiplied by the cost per minute of each person involved. Billing and insurance-related costs were 13 minutes and $20.49 per primary care visit, $61.54 per emergency visit, $124.26 for a general inpatient stay, $170.40 per outpatient operation and $215.10 per operation on an inpatient. Physicians' own share was a median of 3 minutes, or $6.36, for a primary care visit.

The group applies the same method. A team maps the revenue cycle from scheduling to final payment: eligibility checks, prior authorization, coding, charge entry, claim submission, denial management, payment posting and patient collections. Staff estimate the time each step takes for a typical visit in each specialty, and finance supplies the cost per minute for each role.

Where the Time Goes

The map shows three hot spots. Prior authorization for imaging and surgery takes the most staff time in cardiology and orthopedics, often with several calls per case. Denied claims take about 22 minutes each to rework, and the denial rate has risen to 11 percent, mostly from missing authorizations, eligibility errors and coding mismatches. Physicians and nurse practitioners spend time on documentation queries from coders that could be avoided with clearer templates.

The patients' side of the cycle also matters. With more patients on high-deductible plans, a growing share of revenue now comes from patients themselves, and the group collects only about 55 percent of what patients owe after their visits. Patients who receive surprise bills are less likely to return, so poor estimates at scheduling cost both revenue and trust. The redesign therefore includes estimates before scheduled procedures and payment plans for patients who need them.

The Redesign

The redesign targets what the group controls. Eligibility is verified automatically two days before every visit, with flags sent to front-desk staff. A centralized prior authorization team, using payer portals and standard clinical packets, replaces scattered requests by clinic staff. Denials are analyzed weekly by root cause, and the top three causes are fixed upstream. Coding templates are revised with clinicians to reduce queries. Patients receive cost estimates before scheduled procedures, which reduces unpaid balances.

Expected Results

If denials fall from 11 to 6 percent, the group avoids about 15,500 reworked claims a year, roughly 5,700 hours of staff time. Centralizing prior authorization is projected to reduce the time per case by a third. The group expects to hold billing staff at current levels while volume grows, rather than hiring more, and to lower the cost per claim by 15 to 20 percent over two years.

Measures

The group will track cost per claim by specialty, the denial rate and its causes, receivable days, the proportion of claims paid the first time they are sent, time to authorization and clinician time spent on coding queries.

The measures will be reviewed in a monthly revenue cycle meeting that includes clinicians, not only billing staff, because many of the fixes, such as documentation and authorization requests, depend on clinical teams. A nurse practitioner from each specialty attends, and denials traced to clinical documentation are returned to that specialty with examples and a fix.

Conclusion

National studies show that administration eats roughly one dollar in three of American health spending, much of it from payment complexity that one practice cannot change. Applying time-driven activity-based costing, the Princeton group found its own cost of billing and its three hot spots: prior authorization, denials and coding queries. The redesign targets those steps, with measures that will show whether the cost of getting paid falls.

References

Himmelstein, D. U., Campbell, T., & Woolhandler, S. (2020). Health care administrative costs in the United States and Canada, 2017. Annals of Internal Medicine, 172(2), 134-142. https://doi.org/10.7326/M19-2818

Jiwani, A., Himmelstein, D., Woolhandler, S., & Kahn, J. G. (2014). Billing and insurance-related administrative costs in United States' health care: Synthesis of micro-costing evidence. BMC Health Services Research, 14, Article 556. https://doi.org/10.1186/s12913-014-0556-7

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