Healthcare Revenue Cycle Management (RCM): A Blueprint for Success

January 9, 2023

According to Bloomberg, 53% of U.S. hospitals were projected to lose money in 2022. The bottom line is that 2022 — and the few years preceding it — were rough on healthcare organizations. In response, many doubled down on healthcare revenue cycle management (RCM) strategies in 2023, which resulted in a global RCM market value of $53.15 billion.

While you’ve likely heard the phrase “revenue cycle management,” you may not be quite sure what it is, how it works, or why so many entities are investing heavily in it. Join us as we take a deep dive into “What is RCM in healthcare?”

Understanding Healthcare Revenue Cycle Management (RCM)

Healthcare revenue cycle management encompasses all administrative and clinical functions that contribute to the capture, management, and collection of patient service revenue. The RCM workflow involves collecting funds from both patients and payers.

From a person’s initial appointment to the final payment of a bill, healthcare revenue cycle management is a holistic process. Healthcare organizations can use it to streamline billing and money-generating operations.

As a healthcare provider, you must navigate a series of complex steps to capture revenue, including:

Registering patients
Providing pricing and billing for patient care
Submitting claims
Charge capture
Addressing denials
Billing individuals and payers

Each step is critical in ensuring accurate and timely medical billing in healthcare facilities.

An efficient claim submission and billing process is critical to organizational continuity. Healthcare providers must also have protocols for addressing claim denials, which will help minimize lost money and optimize cash flow. Insurance companies have entire teams dedicated to denial management, and providers must do the same.

You should strive to avoid denials altogether whenever possible. While that’s easier said than done, a proactive approach to denial prevention will certainly cut down on how many claims get kicked back.

What Is RCM? Unpacking the Basics

Healthcare revenue cycle management is all about optimizing the collection of payer and patient payments. Organizations with the most efficient revenue cycle management processes will quickly move from care delivery to claims processing and payment collection. The goal is to minimize delays and maximize reimbursement for services rendered.

Managing billing and payment processes is integral to the healthcare industry, affecting everything from the patient experience to the organization’s bottom line. Health systems use these workflows to bridge the gap between clinical care and financial operations, ensuring that their providers are able to continue offering quality care without financial hindrance.

Common Terms and Concepts in RCM Explained

In order to fully understand billing and payment workflows, you need to brush up on important terms like:

The revenue cycle itself begins when a patient schedules an appointment or walks into a hospital and ends when the final bill is paid and a report has been made to reflect on the efficiency of the process.

Here’s a breakdown of the revenue cycle and how RCM supports each step.

Patient Registration

The start of the revenue cycle is when a patient schedules an appointment or walks into a healthcare facility for the first time. This is when patient demographic information is documented and a medical record number (MRN) is assigned to the patient, ensuring the facility remains compliant with clinical and financial regulations.

Pre-Authorization and Eligibility Verification

Upon registration, patient insurance information is collected by the healthcare provider, and coverage is verified. This helps to ensure the patient is billed the correct amount, that they are aware of any out-of-pocket costs, and that the bill is directed to the proper insurance provider (or patient).

Patient Experience and Care Delivery

While clinicians provide direct care to the patients, revenue cycle management teams work to ensure patients receive exceptional customer service, their care plan is communicated, treatments offered to them are covered by insurance, a safe timely discharge plan is arranged, and they are satisfied with the care they receive.”

Clinical Documentation

This is a critical step in the revenue cycle, wherein details of the patient, their visit, and all necessary details are documented swiftly, correctly, and according to regulatory standards. This is not only vital to patient care in the way that symptoms, warning signs, and the like are tracked – but also essential for billing and insurance tracking. Improper, missing, or incorrect documentation can impact the care a patient receives or result in unbilled medical services and more out-of-pocket expenses for the patient.

Charge Capture

During charge capture, healthcare providers record and submit the details of the medical services they provide to individuals. This process ensures that the patient account accurately reflects all services rendered. Effective charge capture is essential for preventing revenue leakage, wherein services provided are not billed or are underbilled due to lapses in documentation.

Medical Coding

Medical coders use the information documented during the patient’s encounter and properly code the services and procedures. This determines how much reimbursement the provider will receive from the patient’s insurance and prevents claim denials.

Claim Submission

At this step, services and procedures are broken down into billable charges and sent to the patient’s insurance provider in a timely manner. The previous steps of the revenue cycle are vital to ensuring this step goes smoothly for all parties involved.

Payment Collection

If the payment is approved by the patient’s insurance provider, the healthcare facility will be reimbursed in accordance with the patient’s eligibility. If a balance remains, the healthcare facility will send that bill to the patient and manage the process going forward.

Denial Management

Denial management is a subsequent phase where healthcare organizations address and resolve claims that have been denied by insurance coverage. This involves identifying the reasons for the denial, correcting any errors or discrepancies, and resubmitting the claims for reconsideration. Effective denial management is crucial for minimizing financial losses and improving the rate of successful claim reimbursements.

Reviewing and Reporting

While the bill may be paid, the revenue cycle is not quite over. The final step in the process is to perform a utilization review, examining whether the services the patient received were necessary, where resources may have been wasted, and how the cycle can be optimized to minimize unnecessary expenses on the sides of the patient and healthcare provider.

The RCM Process: From Patient Encounter to Reimbursement

There aren’t any one-size-fits-all approaches to patient billing and payment collection. Instead, you need to align your strategy with your company’s unique business model. However, most cycles will include the following phases:

Patient Registration and Scheduling: Staff will gather basic patient information and schedule appointments
Charge Capture and Coding: Medical coders will document services based on electronic health records
Claims Submission and Adjudication: Claims are submitted to payers, who then make a decision regarding billing and payment
Payment Posting and Denial Management: Payers will remit payment or issue a denial, which providers may contest
Revenue Analysis and Reporting: Finally, healthcare organizations will analyze revenue capture and generate reports

After the analysis and reporting stage, organizational decision-makers will be able to review their strategies and identify recurring issues that may be impeding revenue management efficiency.

For instance, a particular service might have a high denial rate. In that case, the organization needs to find out why and make necessary adjustments to improve profitability. The goal is to maximize revenue cycle visibility so that business leaders can make informed decisions and capture the most revenue possible from insurance companies.

Benefits of Effective RCM in Healthcare

In the ever-evolving landscape of healthcare, effective Revenue Cycle Management (RCM) employees are paramount for organizational success. By adding talented RCM staff, healthcare facilities can reap numerous benefits that contribute to financial stability, operational efficiency, and improved patient care.

Capitalizing on revenue cycle management opportunities will yield benefits such as:

Improved Revenue Capture and Cash Flow

One of the key benefits of optimizing your cycles is better revenue capture and cash flow. A streamlined revenue cycle will mean fewer denials and higher repayment rates. Moreover, a modernized workflow decreases the gap between the time services are rendered and payment remittance.

Simply getting claims paid is not enough. Healthcare organizations need to ensure that invoices are being paid in a timely manner so that they are not waiting months to receive outstanding revenue. Timely and consistent payments strengthen cash flow and promote business continuity.

Enhanced Billing and Coding Accuracy

Effective RCM processes improve the accuracy of billing and coding, which is crucial for minimizing claim rejections and denials. By employing sophisticated coding software and regularly training staff on the latest coding standards, organizations can ensure that claims are submitted correctly the first time.

Streamlined Operations and Reduced Costs

Effective workflows contribute to the streamlining of operations across the healthcare organization. By automating different stages of the revenue cycle, healthcare providers can reduce the time and labor involved in these processes. Automation helps eliminate manual errors and reduces the need for rework.

Compliance and Risk Mitigation Audits

Compliance with healthcare regulations and policies is a significant concern for healthcare organizations. Once you’ve got a great system and set of rules in place, you can use data analytics and audits to ensure best practices are in place for compliance.

Best Practices for Successful Healthcare RCM

If you want to make sure your organization wins at billing and payment collection, you need to use proven best practices. The goal is to transition from services rendered to cash in hand as quickly as possible. To achieve that, you should:

Automate where possible
Get rid of manual processes
Train your workers
Invest in new tech

You aren’t going to fill all the gaps in your RCM workflow with a single solution. Chances are that you’ll need to make changes in multiple departments to recapture lost cash.

Technology and automation play a crucial role in streamlining RCM processes, reducing manual errors, and increasing efficiency. That’s why you should take advantage of advanced software that seamlessly integrates with your ERHs to help automate registration, eligibility verification, and charge capture. As you continue to automate, you lower the odds of making data entry errors.

The quality of your revenue cycle management staffing will play a critical role in the success of your organization. Make sure that your teams, including receptionists, medical coders, and denial management, are adequately staffed and well-trained.

You should also consider cross-functional education and upskilling to ensure that each group can step into other roles as necessary. For instance, if you experience an uptick in denials due to a payer administrative change, you can reallocate cross-trained medical coders to assist in denial resubmissions.

Challenges and Solutions in Healthcare RCM

Poor financial performance is often indicative of inefficiencies in the revenue cycle. These may include front-end shortcomings, such as subpar eligibility verification processes. Alternatively, you could experience back-end failures, like a lack of follow-up on denials or frequent medical coding errors.

Regardless of what challenges your organization is facing, the key to solving them involves a combination of cutting-edge technologies and skilled staff. By prioritizing these strategies and using data-driven decision-making to guide your RCM optimization efforts, you can recapture lost revenue and strengthen cash flow.

Finding the Perfect Candidate or Career in RCM?

Healthcare revenue cycle management is hard. There is no denying that. However, you’ll be able to master this critical task by using a multifaceted approach.

If you are an organizational leader looking to modernize your healthcare revenue cycle management strategies, explore our staffing solutions and let us connect you with skilled RCM professionals who can help. If you are an RCM professional looking for new challenges, check out our healthcare job opportunities.

Why is Revenue Cycle Management So Important?

To answer this question, we talked to GHR’s director of Compliance for Case Management and Social Services, Patrick O’Boyle, RN, BSN, ACM-RN, CMAC, CCM. Patrick has over 20 years of experience in revenue cycle management and was recently named president of the Florida chapter of the American Case Management Association (ACMA)! Here’s what he had to say:

Revenue cycle management is an essential function of any healthcare provider. It connects the clinical and non-clinical aspects of a patient’s time under the care of a healthcare facility, allowing little opportunity for miscommunication and error across the entire continuum of care. The result is maximized efficiency, improved fiscal well-being of the healthcare provider, streamlined communication between the clinical and non-clinical aspects of the patient experience, and, most of all, high-quality care for patients.

“Our specialty of revenue cycle management is providing you with trusted coding & auditing resources to ensure quality metrics are met or exceeded. We support front-end coding and denial management. From billing to denials management and everything in between, GHR RevCycle can help with supplemental staffing and managed solutions.”

For Healthcare Employers For Revenue Cycle Professionals