Home medical equipment (HME) providers are split on how best to measure revenue in their businesses. In general, tracking HME revenue falls into four camps:
Charge billing is full “retail” pricing, not including payer contracts and fee schedules. For most providers, this measure inflates expected cash by 100%–200%. For example, if charge billing is $100, then the expected actual payment is $50 or less.
Allowable billing is charge billing less the expected contractual adjustments based on fee schedules and contracts with payers. This is typically a provider’s “best guess” upfront of what they will get paid. However, not all payer contracts are typically loaded, and many are dated and inaccurate, so this can inflate the actual payments.
Net revenue is allowable billing less the additional contractual adjustments taken during cash posting, credit adjustments, and balance transfers. It is calculated after a payment has been made and indicates exactly what a provider should expect to see in payments in a world without write-offs.
Cash is the actual payment received, net of any other adjustments. Providers on cash basis can use this measure.
So, What is the Right Solution?
Charge billing is generally seen as a throwaway measure due to its extreme inaccuracy. Instead, providers turn to allowable billing as their revenue measure prior to getting paid and posting payments. The majority of payer contracts—the 80/20 rule—need to be loaded and accurate in the provider’s billing system. Once payments are posted, providers should analyze net revenue collections and actual cash to measure revenue cycle performance.
If you have questions, Prochant’s HME billing experts are here for you. Contact us to see if we can help you move track your HME revenue more effectively.
This article originally appeared in HME News’ Smart Talk series.
Prochant is the nation’s leading HME billing and process outsourcing company. Our highly-skilled team helps providers become more profitable by outsourcing or enhancing front- and back-office processes. We rapidly implement changes and proactively monitor metrics to ensure client success. Headquartered in Charlotte, North Carolina, we work with top medical equipment providers and health systems.