What Is Healthcare Revenue Cycle Management?

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What Is Healthcare Revenue Cycle Management?    

From the moment you make an appointment to see your physician, the provider is tracking the financial elements of your care. Medical billing software, for instance, enables staff members to quickly accomplish a variety of key tasks. It can verify insurance coverage and determine copayments before you arrive; send claims with specific treatment codes to insurers once your care protocol is determined; and bill you for any remaining balance following the appointment.

Revenue cycle management (RCM) describes the combined administration of these essential financial processes. The field is one of the core components of health information management (HIM), which also covers electronic health records (EHR) and patient privacy management methodologies.

To run a successful medical practice, healthcare providers must implement accurate and efficient billing processes. Establishing core accounting protocols is especially important as healthcare reimbursements shift away from fee-for-service payments toward value-based care.

Those who are considering a career in the financial aspects of healthcare may want to explore an advanced degree. The online Master of Science in Health Information Management program at the University of Illinois is designed to help health professionals achieve a rewarding career in healthcare revenue cycle management and related fields.

Defining Healthcare Revenue Cycle Management

Healthcare revenue cycle management is the financial process of collecting payments for medical bills to generate revenue for a healthcare organization. RCM combines administrative data, such as a patient’s personal information, insurer name and treatment codes, with financial billing information. Health organizations use a centralized billing and coding system to enable reliable reimbursement, compliance and clinical processes.

Revenue Cycle Steps

Without effective, predictable RCM processes, medical facilities are unable to provide quality patient care and sustain their financial solvency. The steps of the revenue cycle may include the following.

  • Charge capture: Information recorded by physicians about an episode of care is translated into a medical claims system for billing purposes. Charge capture systems may communicate with EHR systems.
  • Coding: Universally accepted medical codes are applied to a patient’s record by coding specialists. Once a claim is submitted, insurers use the codes to determine reimbursement amounts.
  • Claims submission: Providers send a claim requesting payment from insurers based on set rates for each medical procedure code. Accuracy is essential to avoid rejected claims.
  • Insurer communications: Billing managers must communicate regularly with insurers to determine patient coverage levels and collect reimbursements without errors or denials. Providers also go through periods of rate and contract negotiations with insurers.
  • Payment collections: After insurance reimbursements are received, healthcare facilities bill patients for any remaining balance. This often involves helping patients understand charges and setting up payment plans.
  • Medical service review: Providers often analyze clinical treatment data to find ways to lower expenses, maximize resources and improve health outcomes. The medical necessity of treatments is considered, along with the best course of care for the patient.

Challenges of Healthcare Revenue Cycle Management

Healthcare providers must receive insurer and patient payments in a timely fashion to maintain profits. This means keeping up with changing government regulations and insurer reimbursement policies, and making sure that claims are filed and paid efficiently. The complexity of revenue cycle management—there can be about a dozen stages in the cycle—make it difficult to keep errors and delays out of the process.

Claims submission is reliant on the accurate input of preregistration, charge capture and medical coding data. If claims are submitted with wrong procedure codes or inaccurate patient data, reimbursements may be delayed or denied. Average hospitals experience about a 10% claim denial rate, according to Becker’s Hospital Review. Prior authorization, missing information and eligibility errors were the leading causes of claim denials and delays in a recent survey from the Medical Group Management Association. If an error does occur, providers must be able to quickly identify the source of the problem, and staff must be trained to accurately input and update patient data.

Collecting payments from patients also comes with challenges. As the cost of care has risen, patients are shouldering greater payment responsibilities, especially when they have high-deductible health plans or lack insurance coverage altogether. As a result, patients are sometimes unable to manage copayments and deductibles at the time of service, which can lead to delayed payments or outstanding receivables.

Regulatory Challenges

Regulations in the healthcare industry are constantly changing as government agencies work to lower medical costs. Changes in revenue generation policies can make it difficult for organizations to establish consistent financial practices.

The U.S. Centers for Medicare and Medicaid Services (CMS) is shifting payment policies to focus on the value of care, meaning that reimbursements are increasingly tied to patient outcome measurements and not on traditional fee-for-service models. Commercial insurers are following suit by enacting pay-for-performance standards in reimbursement policies.

Benefits of Healthcare Revenue Cycle Management

With an effective RCM system, healthcare organizations can keep costs down and focus on improving patient outcomes. When an integrated billing and coding system is employed, care providers can achieve higher rates of clean (error-free) claims and fewer past-due patient payments, resulting in higher revenue and profits. They can also lower expenses through automation of billing tasks.

To reduce human error in claims submission processes, healthcare data professionals can program practice management software to automatically scan for mistakes and send error alerts. RCM can also be used to uncover patterns in denied claims and help recover lost revenue.

About 90% of claim denials are preventable, and effective prevention of claim denial can result in more than $5 million in additional revenue for an average hospital, according to Becker’s Hospital Review. In addition to reduced claim denials and payment delays, RCM tools can be used to generate reports that provide detailed insight into an organization’s finances and performance indicators.

RCM software can also help facilitate patient payments by sending billing reminders via email and text messages. These messages can include a direct link to payment portals by using electronic data interchange tools. When combined with patient health record systems, financial management tools can help simplify all patient interactions—from scheduling and intake forms to insurance eligibility and billing. This results in a streamlined process that improves patient satisfaction and speeds revenue recognition.

Finally, RCM programs can help providers transition to value-based reimbursement practices. By analyzing data generated through integrated records and billing systems, providers can recognize trends in patient populations and identify areas of need. Through improved tracking and reporting of patient satisfaction and cost control measures, providers are eligible for top reimbursement rates from insurers.

Developing Skills for Health Information Management

To achieve successful health information management, an organization must employ knowledgeable data specialists who understand the importance of integrated recordkeeping systems. The quality of patient care commonly depends on the efficiency of a provider’s electronic health records, billing software and data privacy standards.

As healthcare data becomes increasingly digitized, medical organizations rely on professionals who can operate and manage complex technology and software systems, including programs involved in revenue cycle management. Individuals who are interested in pursuing health information management careers will need skills in healthcare revenue cycle management, electronic health records (EHRs) and other healthcare data management systems.

Those who pursue a master’s degree in health information management will take coursework designed to prepare them for IT-related careers, including Executive Healthcare Financial Management, Healthcare Revenue Cycle and Compliance, and Health Information Systems Analysis and Design.

Contribute to Healthcare Finance With a Degree in Health Information Management

Students who have developed skills in revenue cycle management can become valued leaders in healthcare organizations, contributing to improved operational efficiencies, revenue generation and patient outcomes.

Learn more about how an advanced degree such as the University of Illinois at Chicago’s online Master of Science in Health Information Management can help you pursue your professional goals in healthcare revenue cycle management and related fields.

Recommended Readings

What Is Patient Information, and How Is It Protected?

Is a Career as a Director of Health Information Management Right for Me?

How to Begin a Career in Health Information Management


Advanced Data Systems Corporation, A Complete Walkthrough of the Healthcare Revenue Cycle Management Steps

Afia, Understanding the Healthcare Practice Revenue Cycle

Becker’s Hospital Review, “Best Practice Strategies to Protect Earned Revenue Through Effective Denials Prevention”

Healthcare Innovation, “Four Ways RCM Must Transform for the Shift to Value-Based RCM”

HealthStream, “What Is Revenue Cycle in Healthcare?”

Medical Group Management Association, Strategies for Avoiding Common Insurance Denials

Medcor, Why Healthcare Revenue Cycle Management Is Important

Med Data, “Healthcare Revenue Cycle Management 101: The Patient Is Paramount”

Tech Target, “Revenue Cycle Management (RCM)”