What is Healthcare Revenue Cycle Management?

Jul 18, 2023

While hospitals, private practices, and large-scale healthcare systems are acknowledged for their pivotal role in saving lives and treating patients, these organizations need to implement robust processes and policies for financial stability. This requirement is where the concept of healthcare revenue cycle management (RCM) becomes significant.
RCM in healthcare is a financial strategy employed by healthcare facilities to oversee administrative and clinical functions that are tied to claim processing, revenue generation, and payment. The strategy involves the identification, management, and collection of revenue generated from patient services.
The importance of this financial strategy lies in its role in maintaining the operational sustainability of healthcare organizations. The application of RCM in healthcare allows these facilities to earn revenue, which subsequently supports the management of expenses.


The RCM process in healthcare is initiated when a patient books an appointment for medical services and concludes when all the payments related to claims and patient services are collected. However, the journey of a patient’s account isn’t always simple and direct.
The process begins when a patient schedules an appointment, which triggers the administrative staff to manage the appointment scheduling, verify insurance eligibility, and set up the patient’s account.
Pre-registration forms the backbone of optimizing RCM processes. During this stage, an account is created for the patient, documenting medical histories and insurance details.
According to Sue Plank, the director of patient access at Goshen Health, “From the perspective of the hospital, our capability to input correct insurance details, verify accurate patient demographics, and collect the financial responsibility of the patient upfront, all contribute to reducing workload throughout the revenue cycle and ultimately minimizing potential denials.”
Upon completion of the patient’s visit, the healthcare provider must prepare a claims submission and accomplish charge capture tasks.
The provider or coder determines the ICD-10 code associated with the treatment, which establishes the reimbursement amount the entity will receive from the patient’s health plan. Choosing the most suitable code for services can be instrumental in avoiding claim denials.
The process of charge capture translates the documented services into billable charges.
Subsequently, a claim is created and forwarded to the private or government payer for reimbursement. However, RCM for healthcare systems does not end there. Organizations must also manage back-office tasks related to claims reimbursements, such as payment posting, statement processing, payment collections, and claim denials.
After an insurance company assesses the claim, healthcare organizations typically receive reimbursement for their services, depending on the patient’s coverage and contracts with the payer. In certain cases, claims can be rejected due to various reasons, such as incorrect coding, missing items in the patient chart, or incomplete patient accounts.
In cases where insurance does not cover certain charges, healthcare organizations are required to notify the patient and collect payments.
The aim of RCM in healthcare is to develop a process that facilitates organizations to receive full payment for services as rapidly as possible.
However, the processing of bills and claims in RCM often takes an extended period. Frequently, claims are exchanged between payers and providers for several months until all issues are resolved. During the remittance processing phase, the payer either approves the claim and compensates the provider or rejects the claim.
The RCM process may also be protracted as patients do not always possess the immediate funds to pay their medical bills.


In essence, healthcare organizations must maintain financial stability and profitability to achieve successful RCM. These entities can employ several strategies to optimize the revenue cycle and ensure prompt payments.
Prioritizing patient access and front-end optimization is crucial for successful RCM. Front-end tasks aid in progressing claims, and mistakes made at this stage can disrupt claims reimbursement. Activities such as verifying insurance eligibility are particularly significant to ensure facilities receive reimbursement from health plans.
Mistakes in front-end tasks, such as eligibility verification, registration, and authorization, remain some of the principal reasons for claim denials, especially for COVID-19 inpatient services, as per data from Hayes Management.
Some health systems have digitized their front-end workflows, which proved beneficial during the COVID-19 pandemic.
“Digitally engaging with our patients for patient intake has allowed us to offer contactless registration to our patients, which is safer for the patient and our colleagues. It allows them to verify their demographics, take a photo of their insurance card and photo ID, and read and sign their consent digitally, all at a time that is convenient to the patient,” stated Plank.
Healthcare organizations must also effectively manage claim denials and develop procedures to quickly resolve claim reimbursement issues. From incorrect ICD-10 coding to missing a signature on a patient’s charts, claims can easily be denied based on technical or clinical issues.
Claim denial rates have been consistently increasing, with hospitals experiencing a 23 percent increase in claim denials from 2016 to 2020.
Organizations can help avoid claim denials by training staff on coding and billing processes, educating patients about medical costs, and investing in software that automates coding and insurance verification. It’s important for healthcare organizations to regularly track claims and investigate the causes of denials.
As healthcare providers face an economic crisis due to the pandemic, outsourcing RCM to a third party may help organizations balance finances and patient care.
However, providers should keep their best interests in mind, as outsourcing RCM has led to higher claim denial rates for some hospitals.
Many providers also use data analytics to run successful RCM programs. As more payments are being tied to value-based care models, healthcare organizations must report on numerous measures for quality care, patient satisfaction, and healthcare costs in order to receive full reimbursement rates from payers. Data analytics have also helped health systems advance care coordination and value-based care.
Healthcare organizations can leverage data analytics to help manage large volumes of information and inform employees of RCM goals, especially through dashboards and alerts. Analytics can also help predict claim results by tracking the claim lifecycle.


With ever-evolving healthcare regulations, it can be challenging for organizations to maintain consistent RCM policies.
Collecting payments from patients at or before point-of-service is a major challenge in RCM for healthcare organizations.
Collecting payments before a patient leaves the office can save time and effort, but it may be easier said than done. InstaMed data from 2020 revealed that patient collection takes more than a month for 74 percent of healthcare providers.
Many patients cannot pay medical bills upfront due to high deductibles and financial struggles. Healthcare organizations must find a balance between successfully collecting payments on time and avoiding driving patients away.
The COVID-19 pandemic has pushed providers towards new patient collection strategies. For example, some providers have increased patient payment options or adjusted bad debt placement timing. Other providers have also allowed patients to extend payment terms or delay payments.
Coding and charge capture also pose significant challenges in RCM. Coding errors by staff members may lead to issues with claims reimbursement.
Healthcare organizations should invest in regular employee education programs that encourage proper coding techniques, comprehensive chart documentation, and reminders about financial policies. These training sessions have been linked to better return on investment, such as lowering turnover rates and reducing medical errors.
Prior authorization processes also pose a challenge for providers regarding RCM. When providers face prior authorization requirements, they and their patients must wait for the health plan to authorize a service before receiving or providing treatment.
The surprise billing rule under the No Surprises Act has also presented a challenge for RCM leaders. The policy protects patients from from surprise billing by preventing out-of-network providers from billing patients for more than their in-network cost-sharing amount. The policy also prevents balance billing.
The policy, which went into effect January 1, 2022, means providers may have to adjust their revenue cycle workflows in order to achieve compliance.


Health IT and EHR systems are instrumental in fine-tuning and optimizing healthcare revenue cycle management strategies. A multitude of organizations utilize these technological tools to monitor claims through their various stages, facilitate payment collection, and address the complications associated with claim denials. Essentially, these tech solutions ensure a consistent revenue flow.
Amid the COVID-19 pandemic, a staggering 75 percent of hospitals and health systems nationwide integrated revenue cycle management technology into their operations.
Technology, along with automation, proved invaluable as revenue cycle management operations transitioned to remote work models.
Many healthcare providers have realized the advantages of automating recurrent revenue cycle management issues. This includes improving communication between payers and providers, suggesting suitable ICD-10 codes, overseeing medical billing processes, and even coordinating patient appointments.
Healthcare providers have also begun utilizing artificial intelligence (AI) to streamline revenue cycle management processes. AI, with its ability to process massive volumes of data, can assist providers in identifying trends, such as the reasons behind a claim denial.
Joe Polaris, the Senior Vice President of Product and Technology at R1 RCM, a vendor for revenue cycle management, voiced his opinion to RevCycleIntelligence: “Whether it’s accurately matching a patient with the right provider, calculating out-of-pocket expenses, or coding the claim, all of these tasks are characterized by long lists of variables. AI is exceptionally proficient at evaluating these variables and consistently improving the success rate of achieving the right outcome against any of these process steps.”
AI and automation also hold promise in aiding providers with meeting prior authorization requirements.
The domain of healthcare revenue cycle management continues to adapt and evolve in response to the dynamic changes within the healthcare landscape, including the advent of value-based care, technological innovations, and a global health crisis. It’s crucial for healthcare professionals to stay updated on the status of their revenue cycle to ensure appropriate patient care and receive adequate compensation for services rendered.


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