"Reimbursements" - Term Explanation

What Are Healthcare Reimbursements?

In healthcare, reimbursements are the payments providers — physicians, hospitals, clinics, and other healthcare entities — receive from third-party payers (commercial insurers, Medicare, Medicaid, managed care organizations) or directly from patients for services delivered. They represent the revenue side of the revenue cycle: the financial return on care provided.

Reimbursement amounts are determined by a complex interplay of contracted rates, government-set fee schedules, coding accuracy, and coverage determination. Understanding how each element works — and where it can fail — is foundational to maximizing revenue cycle performance.

How Reimbursement Rates Are Determined

• Commercial payers: Rates are negotiated in provider-payer contracts, typically expressed as a percentage of Medicare rates or a custom fee schedule. Contracts define allowed amounts for every CPT code and rules for adjustments, timely filing, and coordination of benefits
• Medicare: Based on the Medicare Physician Fee Schedule (MPFS) for outpatient and Diagnosis-Related Groups (DRGs) for inpatient, set annually by CMS and varying by geography
• Medicaid: State-administered programs with rates varying significantly by state — often the lowest payer category for the same services
• Value-based contracts: Increasingly include performance-based components tied to quality metrics and cost targets under Value-Based Care frameworks

Where Revenue Leaks Between Allowed and Collected

The gap between what payers allow and what is actually collected is the core revenue cycle challenge. This gap widens through:

• Denials of covered services due to process failures — missing auth, eligibility errors, coding mismatches
• Underpayments where payers pay below contracted rates without challenge
• Missed timely filing deadlines that void coverage obligations
• Patient balances that are billed but never collected
• Coordination of benefits errors that leave secondary payer revenue unclaimed

Maximizing Reimbursement Through Automation

The most effective path to maximizing reimbursement is eliminating every process failure that prevents legitimate payment from being fully collected. RCM automation addresses this at every stage: pre-service eligibility and authorization, clean claims submission, automated follow-up on pended claims, systematic underpayment detection, and denial appeal workflows that recover denied but recoverable revenue.

Organizations that automate their core RCM workflows consistently achieve Net Collection Rates of 97–99% — capturing nearly all contractually entitled reimbursement, compared to industry averages leaving 5–10% on the table. See documented reimbursement improvement results from our healthcare clients.