What is Revenue Cycle Management and Why is it so Important in Healthcare?
June 9, 2023
Medical practices are busy enough looking after patients’ health as it is, but they have to take care of their own financial health too. Revenue Cycle Management, or RCM, refers to the process medical practices employ to handle all of their financial payments. Experienced healthcare professionals advocate Revenue Cycle Management best practices for any facility looking to streamline their medical billing process.
Some medical practices outsource revenue cycle management to third-party companies, while others keep it in house. This post will break down the key steps and best practices for revenue cycle management, as well as weighing the pros and cons of outsourcing RCM to a third party.
What is Revenue Cycle Management in healthcare?
Healthcare Revenue Cycle Management is the financial process that healthcare facilities use to manage all aspects of patient service revenue, from scheduling and registration to the final payment of a balance. RCM begins as soon as a patient is authorized for medical care, and continues until payments have been collected by all involved parties. Although it’s simple in theory, the path from point A to point B can get a bit confusing.
In the middle of a revenue cycle, there are various back-and-forths between insurance payers and healthcare providers that can go on for months. For example, a single medical claim can get stuck in a cycle of denials, letters of appeal, and resubmissions that becomes increasingly difficult to resolve. A well-managed revenue cycle helps healthcare providers avoid bottlenecks and missed payments that can slow a busy practice down.
On the whole, effective Revenue Cycle Management is the most critical factor in any medical practice’s financial health. It involves multiple steps, requires accuracy, and compliance with various regulatory requirements. Due to its complexity, many healthcare providers utilize RCM software or outsource this function to specialized service providers. But revenue cycle management consulting can be costly. If you’re considering outsourcing your RCM, keep reading to learn more about the components of RCM and why it’s so important.
Why is Revenue Cycle Management important?
Revenue Cycle Management is critical in the healthcare industry for several reasons:
- Financial Stability: RCM is essentially the lifeline of a healthcare provider's financial health. By efficiently managing each step of the process, from patient scheduling and registration to billing and collections, RCM ensures a steady flow of revenue. Budgeting for a regular, on-time flow of payments is much easier than accounting for sporadic bursts.
- Patient Satisfaction: A transparent and efficient RCM process can enhance patient satisfaction. Patients appreciate understanding their financial responsibilities upfront, which can also speed up collections and reduce disputes.
- Regulatory Compliance: The RCM process involves complex regulatory requirements like coding standards and privacy laws. Proper RCM helps ensure that these requirements are met, reducing the risk of non-compliance penalties.
- Reduction of Errors and Denials: Efficient RCM helps reduce errors in billing and coding, leading to fewer claim denials from insurance companies. This in turn leads to faster payments and improved cash flow.
- Data for Decision-Making: The data collected and analyzed during the RCM process provides valuable insights into a healthcare organization's financial performance. It can help identify inefficiencies, trends, and opportunities for improvement.
- Efficiency and Productivity: An effective RCM process, whether in-house or outsourced, can streamline administrative tasks, leading to improved efficiency and productivity. During remittance processing, the insurance payer decides whether to approve or deny the claim. Unfortunately for both patients and providers, this remittance processing phase can extend over a long period of time. Claims sometimes go back and forth between insurance payers and healthcare providers for months.
- Resource Allocation: By automating and streamlining revenue cycle processes, healthcare providers can free up staff to focus on patient care or other aspects of medical billing, resulting in a higher quality of care.
Overall, effective RCM is essential to the financial success of healthcare organizations, compliance with regulations, and delivering high-quality patient care. If you run a relatively small private practice, RCM is even more important, because patients expect a quicker and more personalized healthcare experience.
The 13 steps of Revenue Cycle Management
The steps of Revenue Cycle Management in healthcare can be broken down into several stages. Often, healthcare professionals break RCM down into 13 specific steps. Here is the 13-step process:
- Patient Pre-authorization: This first step involves checking the patient's insurance coverage and obtaining any necessary authorization for procedures.
- Insurance Verification: Confirming the details of a patient's insurance coverage, including the scope and limitations, and ensuring the patient's policy is currently active.
- Patient Registration: Involves recording patient demographics, insurance details, and other pertinent information necessary for the administrative process.
- Patient Financial Responsibility: Identifying the patient's financial obligations beyond insurance coverage, including co-pays, deductibles, and non-covered services.
- Charge Capture: Recording the services provided to the patient that are billable, including procedures, tests, medications, and equipment used.
- Medical Coding: Translating the services provided into standardized medical codes using systems like the International Classification of Diseases (ICD) and Current Procedural Terminology (CPT). For a list of best practices, read our post on CPT and ICD-10 Coding Tips.
- Claims Creation: The creation of a comprehensive medical bill (claim), based on the coded services, which will be sent to the patient's insurance company.
- Claims Submission: The claim is then submitted to the patient's insurance company electronically or via mail.
- Claims Monitoring: Tracking the submitted claim to ensure it is processed in a timely manner and not rejected due to errors or omissions.
- Reimbursement and Payment Posting: The insurance company processes the claim and sends payment to the healthcare provider, which is then posted to the patient's account.
- Denial Management: If a claim is denied, the provider must manage the denial by investigating the reasons, correcting any errors, and resubmitting the claim.
- Accounts Receivable Follow-Up: Follow-up efforts are made to collect any outstanding payments from the insurance company.
- Patient Collections: Lastly, any remaining balance after insurance reimbursement is collected from the patient. This could include copayments, deductibles, or any services not covered by insurance.
These 13 steps repeat for every patient visit. Proper management of this cycle ensures the financial health of the healthcare facility and helps to maintain quality patient care.
Revenue cycle management best practices
Implementing best practices in Revenue Cycle Management (RCM) can significantly improve the efficiency, accuracy, and productivity of the process. Here are some of the most common best practices:
- Implement Automation and Technology: Automation can significantly reduce manual tasks, minimize errors, and increase the speed of processes like eligibility verification, claim submission, and payment processing. Investing in advanced RCM software can improve efficiency and accuracy.
- Prioritize Training and Education: Regular training is essential to keep up with changes in medical coding, regulatory requirements, and insurance policies. Informed and well-trained staff can reduce errors and improve the speed and efficiency of the RCM process.
- Ensure Accurate Patient Registration: Errors at the initial stage can lead to claim denials or delays later. Make sure to collect and verify patient demographics, insurance details, and other necessary information accurately.
- Perform Insurance Eligibility Verification: Verify patient insurance eligibility before each service to confirm coverage details, avoid unnecessary services, and inform patients about their financial responsibilities.
- Optimize Medical Coding: Accurate medical coding is crucial for claim approvals. Regularly review and update your coding practices and ensure your staff is trained on the latest ICD and CPT codes.
- Streamline the Claims Process: Submit claims as quickly as possible to expedite reimbursement. Regularly check for and address any errors that lead to claim denials or delays.
- Implement a Proactive Denial Management Strategy: Track and analyze claim denials to identify common reasons for denials. Implement strategies to prevent these issues from occurring in the future, rather than approaching each denial as a case-by-case occurrence.
- Adopt a Patient-Centric Approach: Provide clear, timely, and accurate billing information to patients. Offer flexible payment options, such as online payments or payment plans, to improve collection rates.
- Regular Auditing: Regular audits can help identify areas of concern, inefficiencies, and opportunities for improvement in the RCM process.
- Monitor Key Performance Indicators (KPIs): KPIs like Days in Accounts Receivable (DAR), denial rates, and collection rates can help track performance and highlight areas needing improvement.
By applying these best practices, healthcare providers can improve their revenue cycle efficiency, reduce claim denials, increase patient satisfaction, and ultimately improve their bottom line.
Is outsourcing revenue cycle management right for my organization?
While it does mean a healthcare facility or practice maintains less control over their finances, outsourcing revenue cycle management has its advantages for several reasons:
- Focus on Patient Care: Outsourcing RCM allows healthcare providers to focus on their core competency: providing medical care. It frees up time and resources that can be better spent on patients rather than administrative tasks.
- Expertise and Experience: RCM involves a complex set of tasks that require specialized knowledge, such as medical coding and billing. Outsourcing companies typically have teams of experts who are up-to-date with the latest industry standards, codes, and regulations, ensuring more accurate and efficient billing processes.
- Reduced Errors: Experienced RCM providers work solely on RCM around the clock. Their expertise can often reduce billing and coding errors, resulting in fewer claim denials and faster payments.
- Cost Savings: Maintaining an in-house RCM team can be expensive when you consider salaries, benefits, training, software, and hardware costs. An outsourcing firm can often provide these services at a lower cost.
- Access to Advanced Technology: Many RCM providers utilize the latest technology and software, which can improve efficiency, reduce errors, and provide valuable analytics and reporting.
- Consistent Cash Flow: Outsourced RCM services can help maintain a consistent revenue stream, as they aren't affected by staff turnover or leaves of absence. They also can often reduce the cycle time from patient service to payment receipt.
- 24/7 Operation: Some outsourced RCM companies provide round-the-clock services, allowing for quicker turnaround times and continuous follow-ups on claims, which may not be feasible with an in-house team.
- Regulatory Compliance: RCM companies stay updated on healthcare regulations, coding changes, and payer requirements, ensuring compliance and reducing the risk of penalties or fines.
- Scalability: Outsourced RCM services can easily scale with the growth of the healthcare practice, whereas expanding an in-house team might be more challenging and time-consuming.
While outsourcing RCM has these potential benefits, it's important for each healthcare provider to carefully consider their specific needs, resources, and goals before making a decision. If keeping your practice’s finances close to home is especially important for you, RCM outsourcing might not be ideal. But leaving it to trained professionals and freeing up your staff to focus on patient care often brings considerable peace of mind.
If you'd like an easy and affordable way to optimize your revenue cycle management, try SuperBill for insurance. SuperBill handles all of your practice's RCM needs, from pre-authorization to payments. We'll make sure you get your payments on schedule, so you can keep focusing on providing quality care.