Revenue cycle management (RCM) is a system through which businesses may identify, track, collect, and process revenue from their services. Businesses in the healthcare industry frequently utilize this system.
RCM processes are essential in maintaining smooth operations and ensuring financial success. For this reason, RCM is growing in popularity. According to a recent study, experts predict that the global RCM market will reach $67.8 billion by 2026. It’s currently at $40.9 billion as of 2021.
In this guide, we’ll explore the ins and outs of revenue cycle management and how it can benefit you.
What is Revenue Cycle Management (RCM) in Healthcare?
Healthcare revenue cycle management refers to the specific RCM process used by healthcare providers. It’s the system healthcare practices use to manage processing claims and collecting payments. Healthcare revenue cycle management is distinct in that it processes payments over a long period. These payments come from both insurers and patients.
Steps in the Healthcare Revenue Cycle
There are many steps in the healthcare revenue cycle, beginning with appointment booking and ending with payment. A smooth RCM system is key in preventing errors that delay reimbursement.
Here are the five main steps in the healthcare revenue cycle:
- Pre-authorization and eligibility verification
- Charge capturing and coding
- Claims submission
- Payment collection
- Medical service review
Below we explore these five steps, highlighting how RCM improves cash flow and patient care.
1. Pre-authorization and eligibility verification
Generally, the process begins with initial verification when the patient sets an appointment. At this point, the healthcare provider establishes the patient’s account. They collect the patient’s identity and insurance information to verify eligibility.
Revenue cycle management stresses the importance of completing this step at the scheduling of every appointment. Doing so ensures up-to-date information is collected to prevent denied claims, which cause delays in RCM billing and more paperwork for the provider.
2. Charge capture
Charge capture refers to the provider recording and transcribing services as billable charges. Providers do so using universal medical codes that determine reimbursement amounts. If a provider captures the incorrect charge, the insurance company may deny the claim. Effective RCM maximizes coding accuracy to avoid denials and later hassles.
3. Claims submission
After the provider codes and reviews charges, they send the claim to the insurance company. The insurer then reviews the claim for approval. RCM facilitates quick claim submission and tracks the claim from beginning to end.
4. Payment collection
After approving the patient’s claim, the insurance company reimburses the provider. The patient’s insurer determines the reimbursement amount. The provider then collects any remaining balance from the patient by sending them an invoice.
5. Medical service review
The medical service review is the last RCM step for thorough healthcare providers. In this step, the provider analyzes clinical treatment data to pinpoint process errors. The review serves the provider by increasing future revenue. It also serves the patient by improving the experience from beginning to end.
Revenue cycle management flow chart
The below chart showcases the flow of the RCM process. You might picture your own office operations to imagine how it can best be applied to your business.
Benefits of RCM
Effective revenue cycle management helps providers avoid lost or delayed revenue. It does so by maintaining accuracy throughout each step of the cycle.
RCM focuses on optimizing revenue and reducing inefficiency. Additionally, RCM offers other benefits, both to the provider and their patients. Below, we dive into these additional benefits of revenue cycle management in greater detail.
Increasing facility revenue
RCM’s primary benefit is maximizing the revenue collected by the healthcare facility. Effective revenue cycle management flags delayed or lost revenue. It does so by preventing technical errors, claim denials, and fraud investigations. These issues can cost facilities thousands of dollars.
With a proper RCM system, healthcare providers receive prompt and correct reimbursement for their services. Providers can invest extra revenue back into patient care.
Reducing administrative workload
Revenue cycle management can alleviate the burden of administrative tasks. Its prevention of claim denials reduces the number of documents the administrative staff has to process. This saves valuable office resources previously spent investigating and appealing claim denials.
RCM makes the in-office experience more streamlined for patients and administrative staff. With paperwork already complete before a visit, the patient can have a more satisfying experience.
Preventing healthcare fraud
A key benefit of RCM is its prevention of healthcare fraud. Healthcare fraud investigations are costly, both in time and financial resources. This costs the healthcare industry tens of billions every year. Healthcare providers also suffer damages to their reputations as a consequence of fraud.
What causes healthcare fraud? One significant source is inaccurate medical coding. Coding errors can arise for a variety of reasons, but poor process management can be a direct reason for mistakes in coding services rendered. This inaccurate medical coding results in charges for services unrendered, upcoding procedures, or requesting a higher reimbursement than appropriate. It can also mean billing for unnecessary procedures, improper procedures, or low-quality tests.
How does RCM prevent these errors? RCM focuses on accurate data collecting, coding, and billing. Proper RCM can remove any medical miscoding. The implementation of RCM technologies can also help flag potential opportunities for error.
Preventing patient fraud
An unfortunate reality facing healthcare providers is patient dishonesty. This is another source of healthcare fraud. There are two methods through which this happens:
- Patient provide inaccurate information – Patients may lie about their healthcare coverage. They might do this to receive treatment and services they otherwise would not.
- Medical identity theft – The theft of medical information is a growing healthcare concern. Identity theft takes a toll on both providers and patients.
RCM’s initial insurance verification detects inaccuracies and thwarts these attempts. Patients may also provide inaccurate information by accident. Providers can detect this upfront through RCM.
Challenges of RCM
While an RCM process reduces human error, it may not eliminate all human error. Additionally, changing healthcare regulations and reimbursements models may complicate the system. In this event, staff may have to dedicate more time to complete the necessary reporting. They may also have to learn and install the appropriate software to meet regulatory requirements.
In a setting with limited resources, providers may experience a reduction in administrative efficiency when updating the RCM is necessary.
Factors Affecting the Revenue Cycle
Many factors affect the revenue cycle—some that the provider can control, some they cannot. For example, the provider has almost no control over the claim review payment process. The provider may have to wait a long time to receive reimbursement due to insurance issues.
Global factors also affect the revenue cycle. According to a 2020 HFMA Pulse Survey, 75% of health systems in the U.S. are changing their RCM in response to the COVID-19 pandemic.
The provider does have some control over factors like patient volume, fee collection, and productivity. Focusing on these areas addresses issues that hinder optimal revenue cycle management. These issues include:
Collecting patient payments
Depending on their insurance, patients often share in their healthcare costs. Healthcare costs are rising for patients, with many resorting to fundraising to pay their fees. A patient’s high deductibles and lack of awareness can make this process more difficult.
To avoid a patient’s inability to pay, providers should collect payments before or during services. Providers can do this by collecting accurate information from a patient during pre-registration. This helps determine their financial responsibility and eligibility upfront.
Inefficient administrative processes
Effective RCM implements cohesiveness at the front- and back-end of an office. An efficient administrative process clearly communicates priorities and practices. This begins with optimizing communication during patient intake about coverage eligibility. This allows for smoother patient coordination, claim reimbursement, and payment collections.
To ensure that the process continues to run well in future visits, administrative staff will need to continue to verify patient eligibility. By doing so, providers can reduce claim denials.
Providers with effective RCM processes invest in the training of their administrative staff. Training areas include using billing forms, documenting charts, operating revenue software, or coding. More capable and knowledgeable staff leads to more effective billing and collection processes.
Eligibility issues
Ensuring insurance eligibility is crucial in managing revenue. This requires that providers maintain communication with insurance companies, even after submitting claims. Failing to do so can result in missing, pending, rejected, or denied claims. Tracking the claims process helps providers diagnose problem areas to reduce issues.
Lack of digital infrastructure
Today, it is more important than ever that providers maintain quality data and digital RCM processes. Providers can do this by investing in healthcare IT processes that work within their RCM. Electronic, integrated systems, like online invoicing software, help cut inefficiencies every step of the way.
Revenue Cycle Management Systems
For a healthcare provider, choosing the right RCM system is an important decision that impacts financial data management, care, patient satisfaction, and office success. Systems can range from outsourcing RCM to RCM software, usually in the form of a practice management product. Providers can choose between a stand-alone or an integrated RCM with electronic health records (EHR) and IT systems. These systems help streamline RCM strategies and store billing records. Effective systems reduce wasted time and delays in reimbursements. As the healthcare industry transitions from fee-for-service to value-based reimbursement, RCM systems can help by analyzing patients.
The Role of Technology in Revenue Cycle Management
Technology plays a significant role in revenue cycle management in helping organizations track data throughout the RCM. Also, technology can automate common issues with RCM. For example, it can recommend appropriate medical codes or auto-schedule appointments. Technology can also help providers accept payments online.
Revenue cycle management vendors
Revenue cycle management vendors offer either stand-alone products or products integrated with EHR systems. Vendors can offer a wide variety of features, including:
- EHR, or electronic health records
- EMR, or electronic medical records
- PHR, or personal health records
- Patient financial solutions
- Claims management
- Chargemaster reviews
- Benchmarking data
- Predictive analytics
A healthcare provider will need to make the right choice for its office and patients. Here is a list of the main RCM vendors you might choose from:
- McKesson – one of the largest providers of pharmaceutical supplies and health IT products/services in the U.S.
- Experian – a large company focusing on RCM, patient engagement, and care management solutions to help transition into value-based reimbursement
- Cerner – a company providing various health technologies, such as medical devices, EHR, and hardware
- ADP – one of the largest global payroll outsourcing providers, as well as a global outsourcing services provider
- Epic Systems – one of the largest providers of health IT used by large U.S. health systems to organize and share patient medical records
- athenahealth – a developer of cloud-based practice management and EHR systems for smaller physician practices
- Dell EMC – a global technology company offering products and services in computing, networking, and storage
- Meditech – a company selling health IT in the U.S., Canada, and United Kingdom
- nThrive – a company providing a combination of RCM software and consulting services at every stage of the revenue cycle
- Cleverley and Associates – a private company specializing in financial and operational data analysis
Final Thoughts
In its focus on improving revenue processes, RCM benefits the provider, patient, and healthcare industry. Revenue cycle management is a beneficial process maximizing a provider’s revenue and minimizing the time spent on tedious, costly administrative functions. As a result of revenue cycle management, healthcare offices can focus their resources on providing excellent, efficient patient treatment.
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