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How ASC Revenue Recognition Works and Important Considerations to Make


Becoming and remaining profitable—and increasing your profitability over time—is a challenging feat for any business. For surgical centers competing with regional hospitals and large health systems, maximizing profitability can be even more daunting. 

That’s where revenue recognition comes in. Being able to recognize your facility’s revenue accurately so that you truly know your center’s profitability and where it’s at financially is critical for achieving success in a crowded and ever-evolving industry.

Here’s what you need to know about revenue recognition and how it works for ASCs.

Defining Revenue Recognition and Why it’s Important

Revenue recognition is defined as “a generally accepted accounting principle (GAAP) that identifies the specific conditions in which revenue is recognized and determines how to account for it.” Recognizing and reporting on revenue is not just a necessary evil or a way of keeping score—it's strategic, and looking at it from a different perspective can be a game changer for surgical centers. 

Getting revenue recognition right helps ASCs to:

  • Optimize operational costs. With a better idea of where you’re making (and losing) money, you can optimize your operational expenses to be more cost-effective.
  • Enhance financial performance. Closely monitoring and optimizing your operational expenses will help you maximize your facility’s financial performance.
  • Maximize net revenue. Optimized supply, labor, and other operational costs will help you increase your facility’s net revenue.

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Understanding Key Considerations for ASC Revenue Recognition

Wondering how revenue recognition works and what you should keep in mind? Ensuring timely and accurate revenue recognition requires ASC administrators to:

Maintain proper clinical documentation.

There’s a saying in healthcare: If it wasn’t documented, it didn’t happen. Maintaining clear clinical documentation—with the right coding—is vital in order to be successful and profitable in the ASC industry. You can improve your facility’s revenue recognition by ensuring your clinical documentation is always as accurate as possible.

Verify insurance eligibility in advance.

Verification of insurance eligibility is essential in healthcare today. In order to protect and maximize your potential revenue—not to mention save time and minimize inefficiencies— your staff needs to verify patient eligibility before the day of a scheduled procedure.

Keep fee schedules up to date.

Fee schedules are one of the most critical financial tools used by ASCs, which is why they need to be regularly maintained and kept current to reflect the value of the services you’re providing as well as the profit margin needed to ensure financial stability. It’s important to keep both the Medicare fee groups and procedure costs in mind to determine if any fees need to be adjusted during this process.

Carefully review payer contracts.

You need a crystal-clear understanding of your payer contracts and the terms included in them. Make sure to plan for future case mix changes, incorporate Centers for Medicare & Medicaid Services (CMS) guidelines, and build in annual increases to maximize your ASC’s profitability and revenue recognition.

Take steps to minimize denials.

Dealing with claim denials is a necessary evil in the healthcare industry. Claim denials have the potential to not only impede profitability but also slow down operations and keep ASCs from operating as strategically as possible. Make sure your charges, coding, timing, and insurance eligibility are all accurate to minimize denials when possible.

Compare revenue benchmarks.

Measuring internal and external revenue benchmarks is imperative in order to track performance over time. Tracking and assessing key performance indicators and financial benchmarks helps to identify areas for improvement as well as areas where your ASC is already excelling—all of which are critical for revenue cycle success.

Follow up on denied claims.

Sometimes claim denials are unavoidable—but that doesn’t mean they’re absolute. When a claim does get denied, it’s essential your ASC staff follows up on it to make the necessary adjustments and ensure you’re not leaving money on the table. This way you can resubmit claims that were denied due to errors or inaccuracies.

Enlisting in Expert Revenue Cycle Management

Thoughtful, strategic revenue recognition is fundamental, not only to meet regulatory requirements but also to ensure you’re increasing your profitability. Your revenue cycle needs to be optimized and performed with precision in order to maximize your financial performance, which requires expertise.

Get in touch to learn how Amblitel can help transform your ASC’s revenue cycle.

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