What is Revenue Cycle Management? The Ultimate Guide (2020)

What is Revenue cycle management (RCM)? Check here various details on revenue cycle managements services from EMPClaims like how it works, importance, how to improve and revenue cycle management challenges to know and benefits of RCM.
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For the past few years now, favorable Medicare and Medicaid federal regulations have led to more health care providers implementing electronic records for processing claims and receiving payments. This has seen institutions improve their efficiency and strengthen their financial accounts.

Health care providers who choose to integrate revenue cycle management (RCM) in clinical applications have benefited greatly as well. This integration has bridged the gap between clinical care issues and health IT. Today, you are likely to notice patient care applications intertwined with an element of rcm management services, ranging from typing procedure codes to billing codes, among other elements.

This guide will help you understand all the aspects of revenue cycle management systems. We dive deep into what revenue cycle management is, how it works, why it is beneficial, and Revenue Cycle Management best practices, to name but just a few.

Would you like to learn more? Let’s get right into it.

What Is Revenue Cycle Management?

Revenue cycle management (RCM) is an institutional financial process that uses medical billing software. It enables health care providers to track patient care procedures from the moment of registration all the way to appointment and the final payment of balance after service delivery.

The process is intended to link the clinical and business elements of a health care institution. It is achieved through the integration of administrative information that bears patient’s data, insurance policy with the actual treatment received by these patients.

Revenue Cycle Management in USA

Why Is Revenue Cycle Management Important?

Effectively managing your revenue cycle is a crucial aspect of your health care institution’s operations. The overall goal of RCM is to increase your revenue. This is achieved by identifying and fixing points of revenue leakages. 

The leakages may be as a result of waste, misappropriation such as unnecessary procedures or tests and fraud. An efficient hospital Revenue Cycle Management takes care of both the security of patient financial information and PHI. Lastly, health care providers need to adopt RCM processes for safe automation of the institution’s process so that more time can be spent on patient care.

How Revenue Cycle Management Works?

To understand how the RCM process works, these are the steps taken from the beginning to the end.

  1. Patient Eligibility: Upon arriving at the healthcare provider, a patient’s eligibility for insurance is verified first and information stored in the facility’s EHR.
  2. Charge capture and coding: Here, the patient’s visit and service received is coded using ICD-10 standards into a bill.
  3. Patient co-payments and deductibles: The patient makes any co-payments before leaving the facility. Deductibles are the fixed charges in a health plan that you have to pay before the insurance company starts paying for those health care services received.
  4. Submission of claims: The bill is submitted to the insurance company through a clearinghouse.
  5. Reimbursement: Based on the patient’s insurance coverage, the payer(insurer) determines and reimburses what the healthcare provider should receive.
  6. Denials: The RCM process cannot be complete without the management of denied claims. When this happens, the hospital’s billing department makes necessary amendments and resubmits the claim. This may involve reviewing patient records, scrubbing code errors, and direct consultation with the payer.
  7. Patient collections: In case the patient receives services beyond their coverage, the extra amount not paid after reimbursement is billed to the patient directly. Billing services commence through prices to recover the balance.

How to Improve Revenue Cycle Management

The RCM process can be improved if the hospital gets a better understanding of patient financial responsibility. This helps to devise a streamlined payment collection method that ensures they maintain financial stability. 

Moreover, improving RCM requires providers to implement a competent billing infrastructure that includes both software and staffing. Best RCM billing practices are discussed in detail below.

Revenue Cycle Management Benefits

There are multiple benefits to a healthcare provider who implements an effective RCM system. Let’s take a look at some of the value-adding benefits of a healthcare revenue cycle management services.

  1. Saves time: An effective RCM should be designed to save the time taken between the provision of service and receipt of payment. Time is also saved by the automation of duties that were previously handled manually.
  2. Saves money: Revenue cycle management systems provide insights into denied claims. Besides, by providing a straightforward claim filing process, it helps to cut down on denied claims.
  3. Provides a secure revenue monitoring system: With RCM, a healthcare provider can use software to set and monitor their revenue goals. This helps them to visualize possible areas that need improvement.
  4. Makes inter-system communication easier: With the help of a compatible RCM, communication between the EHR and accounting systems becomes easier and more reliable.
  5. Links the institution’s clinical and business sides: It bridges the gap between the business and clinical sides of healthcare.
  6. Secure storage of health billing records: Healthcare providers utilize RCM systems for preserving and managing patients’ billing records.
  7. Lessens administrative duties: A robust RCM takes care of most administrative tasks such as alerting patients of their scheduled appointments. It also reminds payers and patients of outstanding bills as well as questioning insurers during claim denial.

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Revenue Cycle Management Challenges

The healthcare revenue cycle management is a complex and dynamic process that is ever-evolving. This has posed a lot of challenges to healthcare professionals mandated with revenue cycle management. These challenges include:

Billing and claim collections errors

Errors in billing have resulted in millions of losses for health care providers. There have also been cases where patients are shocked with huge outstanding balances that they cannot pay.
Many providers are yet to master efficient revenue collection. 85% of them admit that it is difficult to collect once patients leave the facility.

Health information technology challenges

RCM necessitates the use of IT to track the lifecycle of all claims for collection of payments and denied claims. Some health institutions do not have the right technology and billing software in place for the successful management of claims.

This challenge arises primarily due to the insufficient capital to invest in the right RCM infrastructure or even to upgrade the existing ones such as EHRs. The inability to consolidate ends up forcing some providers to outsource while others shut down completely. A Healthcare Analyst, Chad Sanderfur, states that “Generally speaking, to strengthen Revenue Cycle management, embracing technology is key within the revenue cycle.”

Lack of staff training

Healthcare providers may not have their staff well trained to use the latest Revenue Cycle Management systems in billing or charge capture. If the staff responsible cannot correctly capture demographic data on the front-end and translate it into undeniable claims, then the institution will be facing a huge problem.

Failure to monitor the claims process

The claims process is important in the institution’s revenue cycle management and thus should be monitored all the way. Failure to do so will result in the inability to detect when, how, and by whom errors were made.

Revenue will be lost in the process because coding issues will not be identified, and claims denied will not be adequately addressed.

Lack of a financial policy

We have healthcare providers without a documented financial policy; yet these policies are essential, especially in the management of revenue. Employees should be able to access these policies in print and electronically.

These policies guide patients with regards to the collection of co-payments as well as unpaid balances. These guidelines should conform to The American Health Information Management Association.

Factors That Can Affect RCM

Several factors affect the revenue cycle of a healthcare facility, including the ability to cut down on losses and maximize collections. Let’s look at the most important factors.

Patient experience

The experience of your patients with regards to awareness of what their responsibilities are plays a huge role in the RCM process. Informed patients will be more useful to the process. This is why patients must be aware of their responsibilities from the very beginning of the RCM process.

Patient’s Insurance Eligibility

A patient without an insurance policy or one whose cover provider refuses to reimburse for treatment received will be required to foot the entire bill. In such cases, patients may find such bills too high and may not be able to pay up. This will negatively affect the Revenue Cycle Management process and result in losses.

This is why verification of insurance eligibility comes at the top of the RCM process.

Patient Collections and Billing

The payment collection process can be quite tedious and often time-consuming. Billing errors are common, especially where there there is a lack of an organized and well-consolidated RCM system. The result is that patients will end up being frustrated with delayed.

EHR Technology

EHR technology is a huge factor in the revenue cycle management process because it is slated to promote accurate data processing. The EHRs streamline the coding and claim processes, which go a long way in ensuring no claims are denied and no revenue lost. Through the EHR system, codes are captured and passed to the billing system.

On the other hand, inaccurate EHR data can also be detrimental to the RCM process as it generally escalates claims denial.

The Impact Of Healthcare Regulations

The hospital’s revenue cycle management process has been affected by several healthcare regulations. 

The HITECHI Act, for instance, provides that eligible healthcare institutions receive financial incentives through Medicaid and Medicare programs. The incentive cushions their investment in health IT such as EHRs that would eventually see their Revenue Cycle Management get better. 

Many providers have moved to take advantage of this IT incentive program. This will help them transition to an integrated patient accounting and EHR. Besides, it will have a considerable impact on hospital revenue cycle management, according to the Healthcare Information and Management Systems Society (HIMSS). New accounting systems that include changes in registration and scheduling can affect preauthorization procedures.

Another important aspect of the health regulations was announced way back in 2013, and it touched on ICD-10 codes. From October 1st 2013 onwards, any claims that were incorrectly used would automatically lead to a claim denied. Some charge capture systems may still not be able to support ICD-10; hence its transition will require new training.

Revenue Cycle Leakage Points

Health revenue leakage points include:

  • Incompetent billing staff
  • Payer contracting that offers low rates of reimbursement
  • Missed charges that lead to unbilled claims
  • Fee scheduling for every procedure and service you offer can be too detailed and demanding thus leaving out some details
  • Credentialing issues especial in denied claims management
  • Inadequate management of patient balance
  • System errors and deficient software issues
  • Frontdesk customer support issues
  • Porous management of denied claims
  • Insufficient and poor reporting

Professional Billing & Collection Best Practices

Health revenue leakage points include:

Conduct Financial Clearance

Conducting a financial clearance puts in place plans that should be followed when claiming payments for services rendered. This includes a patient’s financial responsibility where patients will be footing the entire bills for services received. If there is an insurance company or revenue cycle management company to submit claims to, then this will be determined upfront. This prevents any frustrations during the actual payment collection and reimbursements.

Streamlined Check-In & Check-Out Process

Streamlining the check-in process ensures patients submit correct information, which is helpful during the payment collection process. This is especially important where the billing staff has to follow up on patients for any balances.

The check out process is critically important. It enables healthcare providers to clear payments collections before the patient leaves the premises.

Charge Capture

Provide a seamless and full proof charge capture process for all the services rendered. The staff responsible should review charts and claims for any missed charges.

Charge Entry

The RCM billing process utilizes codes to record services and charge them to the patients. Care must be taken by the staff responsible for the prevention of denied claims resulting from errors at the charge entry stage.

Claims Management

Proper claim management is essential to ensure all claims are paid, and the provider receives full payment for the services rendered. This process can be streamlined by ensuring the billing staff submits claims on time and in the correct manner.

Patient Statements

Patient statements are critical in keeping a streamlined billing process. The statements should be well consolidated and reconciled to detect all the patient collections and balances.

Payment & Denial Posting

Payments received should be updated in the system to keep a traceable record. Where claims have been denied, the billing staff should post this to the payer through the clearinghouse. The staff should also prepare to consult with the payer to clear any issues for the denial.

Insurance Follow Up

Healthcare providers are encouraged to do a follow up with the insurance company to make sure the reimbursement rates are as per the current schedule. This stage is significant in the RCM billing process. It irons out any differences between the insurance company and the provider, which might lead to revenue loss.

Denial Management

Denied claims should be managed appropriately by monitoring and tracking to identify trends’ primary causes. The provider should have a denials prevention program in place for standardized processes to help mitigate denials risk.

Patient Collections

Optimize patient collections by collecting deductibles or presenting payment plan options before services are rendered.

Payor Management

Payor management is an important aspect among the RCM best practices because it helps streamline the claim collection and denial management.

Collecting Patient Payments

It is recommended to collect patient payments before they leave the facility, according to the American Medical Association. The association further recommends completing an electronic eligibility verification to acquire information about the patient’s cost. Healthcare providers can then use this information, along with the current fee schedule, to calculate the amount the patient owes.

Fragmented Administrative Processes

The administrative process is an essential part of the RCM process. Therefore, it should never be ignored. The administrative staff should be aligned with the goals of the revenue collection process. This is critical when linking the business and the clinical sides of the healthcare institution.

Eligibility Issues

Patient eligibility issues must be tackled at the preliminaries. It is important to note whether the patient has an insurance cover and to contact the cover provider in advance. This will ensure that patients receive treatment that their insurance cover can pay for.
The process of verifying patient eligibility also plays a vital role in the RCM process of patients’ collections. The healthcare provider will be able to alert the billing staff to collect full payment from the patient after treatment is received to avoid bad debts.

Lack Of Digital Workflow

Lack of a digital workflow can be counterproductive to the revenue cycle management process. Digitizing the records keeps track of the RCM process from the moment a patient hits the front desk to when the payment is received.
A lack of digital workflow slows down the entire process and can lead to a lot of unbilled claims.

Invest In Administrative Staff

Lack of a digital workflow can be counterproductive to the revenue cycle management process. Digitizing the records keeps track of the RCM process from the moment a patient hits the front desk to when the payment is received.
A lack of digital workflow slows down the entire process and can lead to a lot of unbilled claims.

Managing The Revenue Cycle Management (RCM) Process

For proper management of the RCM process, you need to adequately train the front desk staff as well as the billing staff. The front desk staff kick-off the RCM process; hence training them well ensures no errors are perpetuated to the billing and claim management end.

Managing the RCM process is key to ensuring that healthcare providers keep their business side afloat and their clinical side efficient. There are guidelines and rules provided by the federal government to help the healthcare provider take advantage of the IT incentives. These incentives will ensure that your institution deploys robust electronic health records systems that are compatible with billing systems.
It also takes into account the IT personnel who need consulting for the procurement and maintenance of the RCM billing systems as well as the HER system.


Adopting RCM as a health care provider has multiple benefits. However, most important of them is that it takes care of the business so that more time can be spent on healthcare. Streamlining the RCM process and fixing the possible leakage points will ensure that your health facility performs its functions without going under due to bad debts.
Implement this guideline and adopt the RCM best practices for billing and claim management for the efficient operation of your health institution. Even better you can get in touch with EMPClaims for a comprehensive and streamlined Revenue Cycle Management process.

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