What is Revenue Cycle Management (RCM) in Healthcare

What is Revenue Cycle Management (RCM) in Healthcare

Revenue Cycle Management (RCM) is the financial process of identifying, collecting, and managing the healthcare provider’s revenue. A successful RCM process is essential for a healthcare practice to maintain financial viability and continue to provide quality care for their patients.

Without this key financial process, healthcare organizations cannot keep their doors open to treat patients. Healthcare revenue cycle management is the strategy that healthcare organizations use to pay the bills.

Walkthrough of the Healthcare Revenue Cycle Management Steps

We will look at how each of those departments improves payments for the physicians and other clinicians.

1. RCM Software

RCM Software handles your processing is the first step to the cycle. Since you are a provider to you don’t have much experience with software programming. the best approach might be to outsource the RCM software to third party experts. Practices with limited staff or a much larger hospital ill find it beneficial to rely on outsiders for this task, so they can focus on their core capabilities that is patient treatment.

2. Patient Pre-Authorization

The next step in RCM is the pre-authorization of each patient. Pre-authorization is defined by the U.S. government as a decision by a health insurer or plan that a prescription medication, procedure, service or equipment is medically necessary. The exception to pre-authorization would be in cases of a medical emergency.

It’s important to remember that pre-authorization for a procedure or medicine does not necessarily mean that the insurer will cover its cost, though. Patients and providers have to double-check if there is any doubt about coverage.

3. Eligibility & Benefits Verification

Some of your front office staff has to check on eligibility and benefits for patients. When done over the phone, it can be a grueling and time-consuming process that saps employee morale.

Modern medical office software will include automatic checking of patient eligibility via the Internet over secure channels, meaning that using dedicated RCM software can speed up the work involved in verifying a patient is entitled to a particular benefit.

4. Claims Submission

Payment will not be forthcoming until your office properly submits claims for the work you do for your patients. Practice management or PM software is invaluable in this situation. You use it to submit claims automatically, including the option to do this in batches. Since human error is always a factor to contend with in submitting claims, you’ll want to deploy PM software that includes an option to detect mistakes and then explain them to you so you can fix the problem. Then you can immediately resubmit the claim.

5. Payment Posting

After the claim is successfully submitted and reviewed, the payment is posted and is able to be paid by your patient. RCM software can help in this respect not only in the convenience it offers for generating billing statements. You can even use the system to send messages to patients electronically with a “click here” to pay option to encourage them to reimburse you more quickly. Billing over networks like this is done via Electronic Data Interchange (EDI).

6. Denial Management

Including this process of denial management in your cycle can help you recover revenue that might otherwise have remained overlooked because of insurance being filed incorrectly. You might uncover patterns, such as more denied claims when certain people are working together (or actually not working very hard when they are scheduled on the same shift) or billing problems for certain types of procedures or members of your patient population.

7. Reporting

A medical practice without detailed reports is a practice that can have hidden problems that may be growing worse. You need to generate a range of reports for your meetings. Use the RCM software to define customized reports, including financial data, management information and key performance indicators to see if your team is meeting benchmarks.

Difference between Medical Billing and Revenue Cycle Management

What is Medical Billing?

Medical billing is the process of submitting and following up on claims with health insurance companies in order to receive payment for services rendered by a healthcare provider or medical billing company (interaction between a health care provider and the insurance company (payor). The same process is used for most insurance companies, whether they are private companies or government sponsored programs. The entirety of this interaction is known as the billing cycle sometimes referred to as Revenue Cycle Management.

What is Revenue Cycle Management?

Revenue Cycle Management (RCM) is the administration of financial transactions that result from the medical encounters between a patient and a provider, facility, and/or supplier. These transactions include, without limitation, billing, collections, payer contracting, provider enrollment, coding, data analytics, management, and compliance.

Why is Revenue Cycle Management Important for the Healthcare Industry?

Did you know that CMS rejects nearly 26% of all claims and up to 40% of those claims are never resubmitted? This can result in lost revenue of up to 10% per physician. However, with the proper revenue cycle processes and workflows in place, your office can increase payments while decreasing bad debt write-offs.

Helps handle the complexity of regulations

A professional RCM service company is more equipped than hospitals to navigate through the labyrinth of laws. Their teams are continually trained in the changes and updates in HIPAA and other regulations so that compliance is ensured.

Saves significant time and cost

Revenue Cycle Management Companies save considerable time and cost by utilizing the efficiencies they have gained through experience, automated systems, and trained resources. They pass these savings on to their clients

Increases ability to invest in new technologies

RCM service providers operate at a higher scale and have the incentive to invest in the latest software and advancements in healthcare RCM systems. Moreover, when such systems are used, useful data are generated. Healthcare service providers can use this data to glean valuable insights for formulating their future strategies and goals.

Other benefits of a RCM system can include:

  • Providing insights on why a claim was denied
  • Issuing employee prompts to enter information to save on claim revisions and gain insights on why claims might be denied
  • Ensuring proper reimbursement for Medicare patients
  • Opportunities to review revenue shortfalls.

How do we know billing service is performing well?

We know a billing company is performing well by an increase in collections and a consistent cash flow. If there are loopholes and/or outstanding accounts receivables, they directly affect the income of a practitioner. The aftershocks of a lazy revenue cycle can cause major backlogs in terms of pending claims for the physicians.

Simply put, the volume of interactions with the insurance companies makes medical billing services the right choice to be the manager of your finances. Once they are on the driving seat, you can function as a normal healthcare professional without having to worry about your revenue stream.

How to improve Revenue Cycle Management?

If your office is struggling to stay ahead for patient billing, take a look below to see if you’re encountering the problems below.

  • Staff has not been properly trained or educated. Optimizing your revenue cycle is like a supply chain; if one person in the chain does their job incorrectly, it will affect the outcome of the rest of the chain.  Coding errors, incorrect data entry (insurance information, patient demographics, etc) or simply a failure to understand how their job affects the revenue of the office can result in your staff making costly mistakes.
  • Lack of communication between staff. While the typical office day can be very busy, it’s important that everyone understands their role in the office’s revenue cycle. Therefore, communication between physicians and office managers must remain open and weekly meetings should occur to review the financial reports including accounts receivables, collections and revenue.
  • Poor workflow. Does your staff check patient eligibility and copay amounts before the patient arrives? Do you check for missing charges against your charge slips? How long does it take your staff to follow up on claims? Without an established workflow, your staff can end up missing steps and/or forgetting tasks which ends up in increased errors and more delays to getting paid.


Now that you have a good overview of the steps in the healthcare revenue cycle management process, you’ll need to apply what you know toward improving the flow of money at your practice. To know more you can check out our other articles.

If you find this helpful or have any other questions on this, you can tell you using our comments section.

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