Revenue cycle management (RCM) is a financial process used by healthcare providers to bill, track, and collect incoming payments. RCM encompasses patient registration, insurance verification, claims submissions, patient billing, and collections. The total value of the RCM market is projected to exceed $238 billion by 2030​​.

Below, we’ll discuss what the RCM process entails, common challenges, and best practices for improving financial outcomes.

What’s in this article?

• How revenue cycle management benefits healthcare operations
  
• Components and stages of the healthcare revenue cycle
  
• Best practices for revenue cycle management
  
• How to submit insurance claims
  
• How the revenue cycle management process affects revenue
  
• Challenges in healthcare revenue cycle management
  
• How technology can help with revenue cycle management
  
• How Stripe Billing can help
  

How revenue cycle management benefits healthcare operations

Healthcare businesses rely on RCM to achieve financial stability, efficiency, and better patient care. Here’s a closer look:

• Financial stability: RCM helps create a steady flow of income for healthcare providers by promptly capturing and collecting payment for services rendered.

• Efficiency and reduced costs: The RCM process saves time and resources spent on administrative tasks such as billing and coding. This lets staff focus on patient care.

• Improved patient experience: A well-managed RCM system facilitates accurate billing and easier payment processes, minimizing confusion and improving the overall patient experience.

Components and stages of the healthcare revenue cycle

The healthcare revenue cycle has several stages that ensure healthcare providers are compensated for the services they deliver:

• Preregistration: Collecting a patient’s demographic and insurance information before their visit.

• Patient registration: Collecting further patient information such as personal details and medical history.

• Insurance verification and authorization: Checking insurance coverage and obtaining necessary authorizations for procedures.

• Charge capture and coding: Documenting all services and procedures performed and translating them into billing codes for insurance claims. These ICD-10 and CPT codes are standardized numbers that categorize medical services across the industry and determine how much the healthcare provider will be reimbursed.

• Claim submission: Submitting coded claims to insurance companies for payment. The payer will evaluate a claim’s compliance with the payment policies and agreements and decide whether to pay in full, pay in part, or deny or reject the claim.

• Denial management: Managing and appealing denied insurance claims.

• Payment posting: Posting payment to the patient’s account once the insurance company pays the healthcare provider.

• Patient billing: Billing patients for any balance that insurance didn’t cover. This can include copayments, deductibles, or charges for uncovered services.

• Collections: Following up on unpaid balances. This might include sending reminder bills, setting up payment plans, or escalating to collections.

• Reporting: Analyzing data and key performance indicators and reporting on the overall health of a healthcare provider’s revenue cycle to reveal potential areas of improvement.

Best practices for revenue cycle management

Implementing an efficient RCM process involves comprehensive data collection, transparent patient communications, and regular performance monitoring. Here are some best practices for RCM:

• Collect complete, accurate patient information at first contact: At the initial point of contact, collect comprehensive patient information including personal details, demographic details, contact information, health status, and insurance details. Use digital tools to capture this data accurately and securely. Accurate data collection minimizes billing errors and claim denials later.

• Verify insurance eligibility and authorization prior to service: Confirm the accuracy of the collected information, especially insurance details. Use real-time verification systems to check the patient’s coverage, benefits, and any preauthorization requirements. Confirming eligibility and obtaining preauthorizations before you provide services clarifies insurance payment responsibilities up front. It can also decrease claim rejections because of coverage issues and subsequent billing surprises for patients.

• Maintain accurate, up-to-date patient records: Regularly update and validate patient information. Changes in insurance, contact details, or medical history should be promptly reflected in the patient’s records. Inform patients about the registration process, what information they need to provide, and why it’s important. This ensures claims are completed with accurate, up-to-date information.

• Ensure regulatory compliance in registration and data handling: Reference all relevant regulations such as patient privacy laws and data security standards to develop a compliant registration process. This prevents legal or regulatory penalties from affecting revenue later.

• Invest in team training and customer support infrastructure: Invest in ongoing staff education and training in current coding standards and updates. Maintain a knowledgeable, accessible customer service team to handle patient inquiries about registration, billing, and insurance. Reducing patient confusion and using precise, accurate coding maximizes payment compliance and reimbursement and reduces the likelihood of denied claims.

• Claim submission and scrubbing: Develop a systematic process for submitting complete, accurate claims to insurance providers in a timely manner. Use automated claim scrubbing tools to detect and correct errors that could lead to denials or delays. Investing in claim submission and scrubbing efficiency can accelerate reimbursements and decrease the number of claims denied because of data entry errors.

• Claim tracking and denial management: Implement a strong denial management strategy, including a tracking system for submitted claims. Promptly address any denials or requests for additional information to minimize interruptions to the revenue stream. Analyze denials and identify any patterns that could be addressed to reduce occurrences and expedite the appeal process.

• Enhance patient communication and invoicing: Engage patients early and often about their financial responsibilities. Improve patient collections by providing them with easy-to-understand bills, explanations of charges, and various payment options. Transparent communication about costs, billing procedures, and payment expectations can increase patient satisfaction and decrease collection issues.

• Reinforce your payment processing system: Establish a system for how and when to process payments, post them to patient accounts, and reconcile accounts to ensure revenue is collected and recorded as quickly as possible.

• Use technology to simplify and monitor performance: Consider software and technology solutions that can simplify RCM processes, reduce manual errors, and provide real-time insight into the revenue cycle. Regularly review key performance indicators (KPIs) and metrics (e.g., net collection rate, claim denial rate) to monitor the health of the revenue cycle. Use this insight to make informed decisions and continual improvements.

How to submit insurance claims

After a patient receives healthcare services, the provider assembles and submits an insurance claim for reimbursement. Once the claim is accepted, the provider updates the balance owed on the patient’s account and bills the patient for the remaining balance. If the claim is denied, the healthcare provider might need to resubmit an amended claim or file an appeal.

These are the steps to the submission process:

• Document the patient encounter and create a billable claim: Healthcare providers document the patient visit and translate it into billable charges using appropriate medical codes that communicate the visit’s nature and the services provided. These include diagnostic codes (e.g., ICD-10) and procedural codes (e.g., CPT, HCPCS).

• Review and scrub the claim for errors before submission: Claims undergo a thorough review process known as scrubbing to identify and correct any errors or inconsistencies. This step reduces the likelihood of claim rejections or denials because of issues such as incorrect patient information, coding errors, and missing details.

• Submit clean claims electronically and promptly: The claim is submitted to the appropriate insurance company. This is typically done using electronic data interchange (EDI) systems, which enable quicker submission and response times compared with manual processes.

• Wait for adjudication and claim verification: The insurance company reviews the claim to determine its liability, verifying coverage and checking whether the services billed align with the patient’s policy. The insurer will decide whether to pay in full, pay a partial amount, or deny the claim. This decision is based on factors such as service coverage, network agreements, and patient eligibility at the time of service.

• Review the payment and explanation of benefits (EOB): The insurer issues payment to the healthcare provider accompanied by an EOB, which details what services were covered, the amounts paid, and any patient responsibility such as deductibles and copayments.

• Verify the payment was posted: The healthcare provider posts the payment to the patient’s account, adjusting the account balance to reflect the payment and any remaining patient responsibility.

• Issue a bill to the patient: The provider issues a bill to the patient for any remaining unpaid balance.

• Review denials and implement denial management strategies: If a claim is denied, the provider reviews the reason for denial and corrects any issues. It might resubmit the claim or appeal the decision, depending on the circumstances.

• Analyze claim data and processing to identify trends: Providers regularly review their claim processes to identify trends such as common reasons for denials or delays in payment. This data informs process improvements to boost the success rate of future claims.

How the revenue cycle management process affects revenue

Each step of RCM functions to ensure timely, accurate payment collection and generate revenue for the healthcare provider. Here’s how each step of the process facilitates smooth revenue collection.

Challenges in healthcare revenue cycle management

From maintaining compliance with developing healthcare regulations to balancing the patient experience, here are the challenges the RCM process can present:

• Billing and coding complexity: The healthcare industry has complex billing and coding processes, with thousands of codes for diagnoses and procedures that are frequently updated and changed. Staying up-to-date on proper coding practices requires ongoing education and adaptation.

• Developing healthcare regulations: Healthcare regulations frequently change, affecting various aspects of RCM such as billing practices, patient privacy, and data security. Providers must be vigilant in keeping up with these changes.

• Payer variability: Billing and reimbursement require working through the distinct rules, coverage policies, and reimbursement rates of numerous insurance payers, complicating the claim creation, submission, and dispute process.

• Growing patient responsibility: With the rise of high-deductible healthcare plans, patients are increasingly responsible for a larger portion of their healthcare costs. Collecting payments from patients can be more challenging than working with insurers because of their relatively limited resources.

• Resource-intensive technology integration: Integrating various technology systems (e.g., EHRs, billing software, patient portals) can be complex and costly. A failure to integrate properly can lead to data silos and hinder the RCM process.

• Denial management: Managing and reducing claim denials is a persistent challenge. Each denied claim requires additional resources to investigate, appeal, or resubmit.

• Staff training and turnover: The ongoing evolution of billing practices, coding, and regulations requires continual staff training. High turnover rates in RCM roles can disrupt the revenue cycle and create inconsistencies in processing.

• Cybersecurity threats: As healthcare organizations increasingly rely on digital systems for RCM, they become more vulnerable to cybersecurity threats such as data breaches, which can lead to major financial losses and reputational damage.

• Data analysis burden: Collecting, integrating, and interpreting large volumes of data can be difficult. Organizations might struggle to effectively use this data for decision-making.

• Balancing the patient experience: Balancing the financial aspects of RCM with a positive patient experience can be challenging. Issues such as billing errors, lack of transparency, and poor communication can lead to patient dissatisfaction and affect an organization’s reputation.

How technology can help with revenue cycle management

Technology can make RCM more accurate and easier to keep up with, improving financial outcomes and reducing the administrative burden on healthcare providers.

For in-house RCM teams that want to maintain control and oversight over patient claims, these platforms can minimize the administrative burden. For outsourced RCM, technology platforms and dashboards can provide insight into how the revenue cycle is being managed.

These technology tools can improve the RCM process:

• Electronic health records (EHRs): EHRs integrate patient data across different healthcare settings, enabling widespread access to patient information that helps providers correctly document and bill patient encounters. By integrating EHRs with your RCM, you can unify your practice’s clinical and financial workflows.

• Automated eligibility verification: Automated systems can verify patient insurance coverage and benefits in real time before services are rendered, reducing the likelihood of billing errors and denials because of coverage issues.

• Medical coding software: Advanced coding software helps coders assign the correct codes for procedures and diagnoses. Some systems incorporate AI and machine learning to suggest codes, reducing the risk of human error.

• Claim management systems: These systems check claims for errors and automate the submission process. They can flag common issues that lead to denials, enabling corrections before the claim is sent to the insurer.

• Electronic billing and payment processing: Technology can electronically send patient bills and permit online payments, speeding up these processes.

• Data analytics and reporting: Advanced analytics tools can scan financial data for trends, bottlenecks, and opportunities for improvement in the revenue cycle. This insight can inform key decisions and operational adjustments.

• Patient engagement platforms: These platforms communicate with patients about their financial responsibilities, offer online billing and payment options, and provide educational resources, improving the patient experience and compliance with payments.

• Denial management tools: Technology can track and analyze denied claims, identifying patterns and root causes so providers can address systemic issues and refine their billing practices.

• Automation of routine tasks: Automating routine administrative tasks such as appointment scheduling, insurance verification, and payment reminders can decrease the workload for staff members and let them focus on more complex aspects of RCM. This is where the impact of AI and machine learning on RCM is most apparent.

How Stripe Billing can help

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