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Revenue Cycle Management (RCM) in Healthcare: Part 1

Healthcare professionals strive to deliver exceptional service and outcomes to their patients throughout every facet of care. A significant point of friction for patients is cost – both the uncertainty of expense and lack of clarity in terms of understanding medical billing.

A patient-centered approach to billing can reduce that worry, improve overall patient experience, and shorten the revenue cycle of claims. Understanding the revenue cycle in healthcare is the first step toward creating a patient-centered, streamlined revenue system.

Revenue Cycle Management: What Is It?

The healthcare revenue cycle encompasses all administrative and clinical functions that contribute to the capture, management, and collection of patient service revenue. Revenue cycle management (RCM) is how an organization manages finances and associated processes as they relate to the full scope of patient care.

Primary functions involved in RCM include:

Patient registration:
Collecting patient demographics, including billing address and insurance eligibility

Insurance verification:
Validating patient insurance

Medical transcription:
Transcribing patient reports supplied by doctors and nurses

Medical coding:
Applying universal medical codes to the diagnoses of and procedures performed upon the patient

Charge entry and billing:
Applying a dollar amount to services provided and creating a claim

Claim submission:
Determining amount of reimbursement the provider seeks from insurance and applying for that amount

Claim rejections:
Instances where claims are rejected for payment by insurers

Payment and posting:
Applying payments by insurers to the balance of the patient’s claim

Secondary claims submission:
Submitting claims to additional insurers, such as Medicaid

Denial management:
Determining cause of claim denial and assessing if the denial can be appealed

Medical appeals:
Appealing a payment denial by an insurer

Patient collections:
Determining amount owed by patient after insurance payments are applied and collecting payment

Determining if any parties are owed refunds after the balance of payments has been received from all billable parties.

One of the biggest organizational roadblocks to executing these functions efficiently is poor interdepartmental communication. Having both the clinical and administrative sides of your organization unified in the process of RCM is vital to increasing revenue. When front-end and back-end administrative units communicate, there is far less duplication of effort and internal waste.

Advantages of Revenue Cycle Management

With an efficient RCM system in place, your organization can accurately forecast revenue, identify points of friction within the billing process, and more readily identify instances of waste and fraud.

• Simplified Claims, Faster Payment

When the revenue cycle is managed properly from start to finish, there are more opportunities to reduce patient stress from confusing claims and billing statements. Offering payment opportunities in-office at time of appointment and via online portals linked to digital charts enables patients to use familiar, non-threatening interfaces to submit payment for copays and associated up-front costs.

• Better Organizational Outcomes

Revenue is the engine that keeps the healthcare system running smoothly. The disruption seen in 2020 and beyond has impacted patients, providers, and stakeholders alike. Provider expenditures grew across the board, while sources of revenue were skewed greatly due to increased Federal COVID-19 spending (up 36.0% in 2020, compared to 5.9% growth in 2019) as well as reduced spending by consumers (down 3.7%) and insurers (down 1.2%). An efficient RCM system bolsters revenue streams and offers a degree of future-proofing.

Overview of the Revenue Cycle Process

There are many opportunities for process improvement throughout the revenue cycle. By better understanding how these functions relate to each other, your RCM team can identify weak points and craft a strategy to eliminate them. We’ll discuss these opportunities in our next column in MD-Update, coming in June 2022.

Adam Shewmaker can be reached at 502.566.1054 or