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Understanding Revenue Cycle Management

May 4, 2023
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Revenue cycle management in the healthcare industry is the process that helps healthcare organizations get paid for their services. There are a multitude of steps from the beginning (scheduling the appointment) to the end (account payment).

The Revenue Cycle Management Process

A well-organized revenue cycle management (RCM) process oversees an effective interaction with a patient from scheduling the appointment to rendering the final payment. This involves properly collecting and documenting patient information and only billing a patient for the services used. This will ensure payments are collected on time.

There are many touchpoints throughout the revenue cycle. If even one is not managed properly, patient and clinical satisfaction scores will drop. This can cost a healthcare organization its revenue and reputation. No matter how big or small the healthcare practice is, a strong RCM and claims processing are the keys to mitigating risks and optimizing revenue.

Revenue Cycle Management Steps

1. Scheduling

The process begins when the patient schedules their appointment. At this time, the administrative staff collects insurance information and creates the patient’s account. 

2. Pre-Registration

The pre-registration step is key to revenue optimization because the staff will create a patient account that includes medical history and insurance information. Beyond scheduling the appointment and collecting the preliminary information that’s done in the first step, this step identifies the patient’s demographics. Along with this information, they determine the patient’s financial obligations to save time, paperwork, and the possibility of the denial of a claim down the road. 

3. Verification

At this point, the appointment has been made, and the patient is in the system. Their insurance information is then verified to determine information such as whether the doctor is in the patient’s network, a co-pay, and any other details needed before the appointment. This sets the payment optimization process in motion.

4. Pre-Service Payments 

When the patient arrives for care, their insurance information should be on file. They may be asked to show it for verification purposes. This is the time when a co-payment, or pre-payment of services, is due, based on the patient’s insurance policy. This will depend on the provider, as certain specialists may require a co-pay, while others will not.

5. Charge Capture

After the patient visit is complete, the physician provides documentation for the visit and creates a claims submission. This turns the services provided into a billing invoice. 

6. Medical Coding

The coder will identify the code that correlates with the treatment and determine how much the patient’s health plan will cover and how much the patient will be charged. Making sure the right coding has been used will lower the chances of a claim being rejected. 

7. Claims Processing

Once a claim is created, the healthcare administrator will send it to the insurance for reimbursement. The insurance company reviews the claim and reimburses the healthcare provider. The healthcare organization oversees backend tasks such as payment posting, processing statements, collecting payments, and handling payment denials.

8. Patient Payments 

The patient is sent a statement of services (also called an explanation of benefits), which includes the total cost of services, the amount paid by the insurance, and the remaining amount owed by the patient. This balance stays in the patient's account and is due upon receipt. 

9. Denial Management

There are certain scenarios where a claim is denied. This could be due to incorrect coding, an incomplete patient chart, or information missing from the patient account. A patient will be notified if their claim is denied, and must be given the reasoning behind the denial. A patient has the right to an appeal, and to have their claim reviewed by a third party for any information that could cause the insurance company to reverse its decision. 

10. Reconciliation

Bills and claims in revenue cycle management typically take a long time to process from start to finish. Claims tend to go back and forth between the insurance and provider and patient for months before being fully reconciled. This could be due to denials, or the patient is unable to pay the balance in full at the time of receipt.

Maintaining Value-Based Care and Profitability 

The transition to value-based care means healthcare organizations must manage the administrative and clinical functions that come with claims processing, payment, and ultimately, revenue generation. This process ensures that healthcare providers and facilities can stay in operation to continue treating patients. Optimizing the process of revenue enables payment to be collected to maintain the facility’s expenses.

To maintain profitability and truly experience success with revenue cycle management, there are some strategies to employ:

  1. Prioritize revenue optimization from the beginning for easy patient access and to keep claims moving.
  2. Rely on digital portals for patient access to reduce error and aid in claims reimbursement.
  3. Manage claim denials by having a plan in place for resolving claim issues.
  4. Leverage analytics to manage patient information and keep track of revenue goals. Data analytics can also track the lifecycle of a claim.

The Continual Evolution of RCM in Healthcare

With healthcare’s ever-changing landscape, healthcare revenue cycle management must keep up with the changes. New goals, new regulations, new technologies, and new healthcare issues all come into play regularly. The key is to provide quality care to patients and stay on top of reimbursement for services. Explore our revenue recovery tactics for medical practices to learn about best practices & more.