Revenue Cycle Management: A Guide to RCM in Healthcare

Before diving into what Revenue Cycle Management is, we need to understand why it’s needed. The US healthcare industry continues to expand rapidly — domestic healthcare spending now accounts for more than $4.5 trillion annually^[1]Centers for Medicare & Medicaid Services. “National Health Expenditure Data.” Accessed December 18, 2024. However, healthcare organizations have uniquely complex revenue models. Successful healthcare billing requires organizations to manage registration, patient payments, insurance payments, write-offs, and other variables. Revenue cycle management, or RCM, refers to managing healthcare billing and collections. Its goal is to increase successful payments and, in turn, increase revenue. Likewise, good RCM practices help provide better services to customers, increasing overall patient satisfaction. With so many variables involved in the healthcare billing process, RCM is a significant task for providers.

This guide explores revenue cycle management, its stages, its importance, the benefits of robust RCM strategies, and other related topics. Read ahead to learn how your healthcare organization can improve its billing processes and increase revenue.

What is Revenue Cycle Management?

Revenue cycle management (RCM) tracks and optimizes a healthcare organization’s revenue from when a patient contacts a provider to the final payment after a procedure or treatment. RCM involves registering patients, coding treatments, processing claims, requesting payments from insurers and patients, managing claim denials, and more. By creating a coordinated RCM process, healthcare practices benefit from fewer claim denials, higher revenue, better compliance, and improved patient satisfaction. 

All stages of the healthcare revenue cycle are essential. Mistakes in one stage of the cycle can lead to errors throughout the rest of the revenue collection process. Let’s explore a stage-by-stage breakdown of a standard RCM process:

1. Patient Registration

First, a patient contacts a healthcare practice to request an appointment, procedure, or treatment. The healthcare practice registers the patient and collects critical personal details, such as identity information, previous medical history, and insurance information. Correctly collecting demographic data is essential to the rest of the billing process, as insurers require accurate information for insurance claims.

2. Patient Verification

Next, it’s time to verify critical information about the patient and their insurance arrangements. This involves verifying their insurance policy and ensuring their eligibility for specific treatments or procedures. Verifying insurance before a procedure or treatment reduces the chances of denied claims.

3. Charge Capture

Charge capture involves capturing all services provided to a patient after their registration with a practice. By using a comprehensive charge capture process, healthcare practices ensure they don’t forget to record billable services, reducing the chances of missed revenue or incorrect billing.

4. Coding

Next, it’s critical to translate medical services into standardized medical codes. This requires healthcare practices to train staff members on the latest medical coding standards. Medical coding software can also help automate this process and reduce errors. 

5. Billing

Once a healthcare practice finishes translating services to codes, it’s time to bill patients and insurers. Billing is crucial in healthcare as it ensures accurate and timely claims submission to insurers, leading to proper reimbursement.

6. Claim Submission

Next, it’s time to formally submit claims to the patient’s insurer. Using an electronic submission system can speed up this process. Likewise, software is available to verify that claims contain the required information for submission, reducing denials and delays.

7. Payment Posting

Now it’s time for payment posting — the process of recording payments from insurance companies and patients in a healthcare provider’s billing system. It involves applying received payments to the correct patient’s account and claims, ensuring that all payments are accurately reflected. This step helps track reimbursements, identify claim denials, and manage outstanding balances, playing a key role in maintaining the financial health of a practice.

8. Insurance Claim Denial Management

If insurance providers deny claims, it’s critical for healthcare organizations to have an insurance claim denial management approach. Identifying the reasons for denials, correcting errors, and resubmitting claims ensures proper reimbursement and reduces the financial impact on healthcare organizations. Not learning from insurance claims mistakes is a surefire way to waste money and upset patients. 

9. Patient Payment Collections

Lastly, it’s time to ensure revenue is collected from patients. Using modern payment systems ensures patients have payment method flexibility. By offering online payments, digital invoices, and other modern payment options, healthcare practices can increase the chances of timely payment. Likewise, automating the follow-up process for unpaid bills makes it easier to collect payments after their due date.

Why is Revenue Cycle Management Important?

Revenue cycle management (RCM) is essential because it leads to higher revenue capture, less waste, and better patient satisfaction. With no RCM strategy, healthcare organizations are left without a structured system for managing the various components of the patient billing process. Given the complex nature of insurance claims, co-pays, and other healthcare payment factors, a lack of RCM leads to financial mismanagement, resulting in existential risk to healthcare practices. Likewise, confusion in the billing process can lead to unhappy patients. With just 40% of Americans rating USA healthcare as good or very good, providing a quality patient experience is a substantial competitive advantage for providers.^[2]Forbes. “60% Of Americans Have Had A Recent Bad Healthcare Experience, New Survey Shows.” Accessed December 18, 2024.

What is the Main Goal of RCM?

The primary goal of RCM is to improve a healthcare organization’s billing and collection processes. This improves revenue and simplifies financial forecasting. It helps streamline the process of collecting payments from patients and insurers. Without proper RCM processes in place, the nuances of healthcare billing can quickly become unmanageable for organizations, both small and large. RCM provides a framework to manage payments, track KPIs, and audit collections performance.

Benefits of RCM Healthcare and the Revenue Cycle

For medical organizations, the benefits of RCM healthcare are endless. Not managing the nuances of billing and collections can quickly sink a successful healthcare business. Let’s take a closer look at the various advantages of prioritizing RCM:

One primary benefit of improving RCM is increasing patient collection rates. RCM ensures a robust process for billing patients, following up on overdue bills, and more. It also makes tracking patient payment success much simpler.

One of RCM’s unsung benefits is the vast amount of internal data it provides healthcare organizations. By streamlining registration, charge capture, and coding, healthcare organizations can collect significant data for analysis. This data helps organizations spot inefficiencies, manage patients, and forecast finances.

Insurance claims are the backbone of many successful healthcare practices. Unsuccessful claims can quickly damage a business’s revenue and lead to cashflow problems, unhappy patients, and many other issues. By spotting trends within denied claims, healthcare organizations can fix problems and proceed with better insurance claim approval rates.

With one in three Americans saying that convenience is more important for non-emergent healthcare scenarios, it’s critical to prioritize patient needs if you want your healthcare business to succeed^[3]Savills Research & Data Services. “State of the U.S. Healthcare Market.” Accessed December 18, 2024. While much of the focus of RCM is its direct benefits to healthcare organizations, it also creates a better patient experience. Healthcare businesses can avoid disappointing patients with unforeseen bills by understanding insurance denials and other billing variables. With proper RCM systems, it’s much easier to confirm insurance eligibility before a patient agrees to a treatment or procedure. Likewise, RCM allows for better record keeping, benefiting patients who receive repeat healthcare services from the same provider. 

Billing Challenges and RCM Systems

Many healthcare practices face various challenges within their billing and RCM systems. Let’s explore some of the common issues below:

One of the largest challenges for healthcare organizations regarding RCM is inexperienced staff members. If staff don’t have experience with the latest medical coding standards, serious issues, such as billing mistakes and lost revenue, will arise. Healthcare providers must train staff on the latest coding standards and routinely inspect coding and billing processes.

Healthcare practices without modern RCM systems often lack automation. This means insurance claims, payment reminders, and other payment-related tasks are all manual. This leads to excessive workloads for administrative staff, mistakes, and missed revenue. By automating invoicing, payment follow-ups, and other lines of communication, healthcare practices can improve revenue and reduce the administrative burden on staff members. 

Another hurdle for many healthcare businesses is a lack of integration between RCM and legacy systems or processes. For example, if a healthcare organization relies on paper charts (physical or handwritten medical records), coding and billing errors will likely occur. While some healthcare professionals may prefer paper charts, they lead to issues with charge capture, making it harder to identify chargeable services provided to a patient. Likewise, paper charts result in manual data entry for staff, exposing organizations to mistakes and waste.

Best Practices for Revenue Cycle Management

If you want to improve your RCM, utilizing a series of best practices is critical. Let’s explore four best practices in more detail below:

1. Keep Staff Trained on Latest RCM Protocols and Codes

First, always ensure staff members benefit from routine training on the latest RCM protocols and codes. If you are planning to update your RCM approach, it’s essential that all staff, both at a practitioner and administrative level, be fully aware of new protocols, expectations, and systems (such as new software). Medical coding can be complicated—some healthcare organizations outsource coding to specialist companies. If continuously training staff on the latest advances in coding protocols seems too laborious, consider outsourcing.

2. Use RCM Software

Next, using RCM software to automate processes and reduce errors is critical. Modern RCM software platforms automate various tasks, from lodging insurance claims to following up on late payments from patients. Likewise, the software makes it easy to track analytics and KPIs, ensuring you have real-time awareness of how well your business revenue strategies are performing. Without RCM software, healthcare organizations are left exposed to increased insurance denials and additional missed payments, leading to revenue loss.

3. Assess Claim Denials

Overall, health insurers decline between 10% and 20% of claims they receive^[4]ProPublica. “How Often Do Health Insurers Say No to Patients? No One Knows.” Accessed December 18, 2024. Claim denials lead to missed revenue and unhappy patients. It’s critical to notice patterns and learn from mistakes to increase the chances of insurance claim success. All RCM strategies must involve a comprehensive overview of the specific reasons for claim denials. For example, suppose a healthcare organization notices increased claim denials from a particular insurer. In that case, they may request clarification from the insurer or exclude the insurer’s policyholders from future treatments.

4. Prioritize Patient Communication

Patient communication is key to any well-functioning RCM strategy. From the moment a patient contacts your practice, there should be clear communication regarding insurance requirements, co-pays, and other payment-related issues. Fortunately, RCM software makes it much easier to manage patient communication by automating components of the registration and billing process.

How to Analyze and Improve the RCM Process

Improving revenue cycle management healthcare processes can yield substantial revenue benefits. Let’s explore various steps for analyzing and improving the RCM process:

Healthcare practices must develop KPIs to track revenue cycles and meet targets. KPIs may include indicators such as Net Collection Rate or Claim Denial Rate. Set targets and create systems for assessing KPIs to ensure targets are met. By generating standards for your organization, it becomes easier to track if revenue keeps up with expectations. 

An audit trail makes it easier to spot issues in your RCM processes. The best way to develop audit trails is to implement software that tracks every financial transaction, billing entry, and claim activity. Ensure logs capture timestamps, user actions, and data changes.

Once you have your audit trails, it’s time for routine reviews. Regularly review and audit these logs for discrepancies and compliance issues. In addition to reviewing audits, it’s also essential to review industry best practices to see if there are any areas where you can adjust your RCM approach or processes to improve revenue capture.

How to Monitor and Track KPIs in Your Healthcare Revenue Cycle

As discussed, monitoring and tracking KPIs is essential to a profitable healthcare revenue cycle. Start by defining your KPIs. Common examples include Days in Accounts Receivable, Collection Rate, and Claim Denial Rate. Next, use RCM software with real-time dashboards. By leveraging software, you can automate the data collection and monitoring process. The software reduces the administrative load of tracking KPIs and shields healthcare organizations from errors.

Why Should Healthcare Facilities Consider RCM Software?

Leveraging healthcare software is essential for tracking KPIs, automating processes, and reducing staff errors within your healthcare organization. 

How to Choose the Best RCM System for Your Facility

If your healthcare organization is considering modern RCM systems, it’s critical to assess the following elements before opting for a specific provider:

The primary benefit of a modern RCM system is automation. Ensure your RCM system allows your team to automate data entry, claims, payment reminders, and other core elements in the revenue optimization process. RCM automation saves your business time and money.

Integrating your healthcare organization’s RCM system with other internal systems is essential to improve productivity and accuracy. For example, integrating your RCM system with your accounting platform and payment processing solutions is essential. Always prioritize RCM systems that can integrate with your existing software stack.

If you want your healthcare organization to benefit from an RCM system, it has to be easy for your staff to use. A modern RCM system aims to help you capture more revenue without making your processes more complex. Prioritize RCM providers with easy-to-use dashboards.

Choosing an RCM provider with around-the-clock technical support is essential. If your organization experiences issues with its software, technical support is essential to resolve the issue and avoid any revenue-related consequences. Don’t work with software providers with poor technical support track records. 

Lastly, it’s critical to have access to analytics with a few mouse clicks. Accessible analytics make it easy to track your healthcare organization’s KPIs in real time. 

Final Thoughts on Healthcare Revenue Cycle Management

Research suggests healthcare profit pools may grow at a Compound Annual Growth Rate (CAGR) of 7% from 2022 to 2027^[5]McKinsey & Company. “What to expect in US healthcare in 2024 and beyond.” Accessed December 18, 2024. However, much of this profit increase is due to technological changes, so healthcare organizations must be willing to adopt new technology and processes to take advantage of increased margins. RCM software is one of the many advances designed to help healthcare organizations retain more earnings. If you operate a healthcare company, it’s time to invest in RCM software.

RCM and payment processing for healthcare help improve revenue, generate more successful insurance claims, and increase patient satisfaction. A healthcare merchant account is another useful tool for increasing healthcare business revenue. Healthcare organizations can benefit from industry-specific features, lower processing fees, chargeback protection, and other useful features for increasing revenue capture!

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