Published: Feb 28, 2024
Revenue Cycle Management

Revenue Cycle Audit: How to Prepare For & Crush It

Suzanne Delzio
Suzanne Delzio
8 minute read
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The word "audit" scares not only American taxpayers but revenue cycle managers and healthcare CFOs as well. 

Revenue cycle audits can unearth challenges, missteps, and even poor planning or a lack of skill. From uncovering inaccuracies in billing processes to identifying compliance risks, staff worry that the audit will reveal problems that point a finger at them. 

When laboring during a dire staffing shortage, most healthcare organizations understand that their revenue cycle will never be perfect. A revenue cycle audit gets it closer.

If an audit is on your calendar, preparing helps you look good to management and the C-suite, even with faulty numbers and processes. Here, you’ll learn just what your auditor will be looking for and discover the standard industry benchmarks you can aim for. 

What is a revenue cycle audit?

A revenue cycle audit is part of a comprehensive revenue cycle management strategy to ensure compliance, optimize revenue, and enhance operational efficiency. It identifies and addresses workflow breakdowns and leaking revenue, enabling healthcare organizations to improve their financial performance and reduce the risk of compliance-related penalties. 

Revenue cycle audits can be performed internally by the organization's audit team or externally by specialized audit firms. Below, we cover 6 entities that may audit your revenue cycle. Regardless of who conducts the audit, however, it should be a comprehensive process that includes a review of policies and procedures, interviews with staff, analysis of data, and monitoring of key performance indicators (KPIs).

Two types of audits help organizations remain on track. 

First,  proactive audits take place before any issues are identified. They often target high-dollar procedures and your most popular services. Conduct them to understand where improved workflows can stop revenue loss. Reactive audits, on the other hand, address errors after they have been identified. Overpayments and denials stemming from lack of eligibility are just two common triggers that prompt a reactive audit. 

Who conducts the revenue cycle audit?

Revenue cycle audits can be conducted by various entities depending on the size, complexity, and specific needs of the healthcare organization. Here are the primary parties involved in conducting revenue cycle audits:

 Internal Audit Teams

Larger healthcare organizations often have in-house revenue cycle audit teams dedicated to reviewing and assessing various aspects of the revenue cycle.  Your own revenue cycle management team may audit the revenue cycle. These teams identify areas of non-compliance, inefficiency, or lost revenue within the organization's billing and coding practices, patient access processes, charge capture, and other revenue cycle management functions.

Your CFO most likely will not act as the RCM auditor. Instead, this individual relies on reports and analyses from the internal audit department and the revenue cycle management team to make informed decisions. 

Another possible internal auditor is your compliance officer or department. This entity works closely with the revenue cycle team and the internal audit department to ensure that the revenue cycle processes adhere to applicable laws, such as HIPAA, and billing regulations. They may conduct or oversee specific audits focused on compliance aspects of the revenue cycle.

External audit firms or specialists

Healthcare organizations may also hire external audit firms or individuals who specialize in auditing healthcare organization revenue cycles. This objective third-party brings specialized knowledge of healthcare regulations, payer requirements, and industry best practices – all valuable in identifying issues that internal teams might overlook. 

If your organization struggles most with one area of the revenue cycle such as coding audits, compliance reviews, or process improvement, your organization may bring in someone who specializes. The deep expertise of these entities can render the best recommendations and outcomes. 

Regulatory bodies or payers

In some cases, audits may be initiated by regulatory bodies (such as the Centers for Medicare & Medicaid Services for compliance reviews) or by payers seeking to verify the accuracy of claims submitted for reimbursement. While not conducted by the healthcare organization itself, these audits require the organization's cooperation.

Revenue cycle management software vendors

 Some healthcare organizations may ask their RCM software vendors to conduct audits, especially those related to the software's functionality, data integrity, and the optimization of automated processes within the revenue cycle. These vendors have extensive RCM knowledge. 

Professional associations or peer groups

Participating in peer review audits or benchmarking studies conducted by professional associations (such as HFMA or MGMA) can also be a form of revenue cycle audit. These opportunities allow for comparison against industry standards and best practices.

Each of the auditors above help to determine whether a healthcare organization's revenue cycle is efficient, compliant with regulations, and optimized for maximum revenue capture. The choice of who conducts the audit often depends on the specific goals of the audit, the resources available, and the areas of the revenue cycle that require examination.

A successful revenue cycle audit can propel your career

Delivering or conquering an RCM audit can enhance an RCM professional’s career trajectory in many ways.

Establishes expertise

The expertise demonstrated by a robust RCM audit can position the manager as a valuable asset within the organization and in the broader healthcare finance industry.

Improves financial performance

A successful audit leads to improved financial performance for the healthcare organization. Better revenue gets the attention of the C-suite, setting you up for recognition, promotions, and opportunities.

Enhances compliance knowledge

Revenue cycle audits often focus on compliance with federal, state, and payer regulations. An RCM professional who effectively navigates these regulations and reduces compliance risks for their organization establishes themselves as a compliance expert – a skill highly valued by your organization. After all, non-compliance can lead to penalties and bad press.

Develops leadership and management skills

Leading the audit process typically requires cross-departmental collaboration and the ability to bring teams through a long, arduous process. Those who manage an audit well establish their leadership and project management skills, achievements that management will recognize.

Encourages continuous improvement

Does your organization have a continuous improvement goal or guideline? Crushing the revenue cycle audit shows you are dedicated to this principle. 

Expands professional network

Engaging with external auditors, consultants, and industry experts during the audit process expands your professional network. These connections can provide valuable insights, mentorship opportunities, and potentially open doors to new career opportunities.

Creates speaking and publication opportunities

Revenue cycle managers who lead successful audits sometimes share their experiences and insights through speaking engagements at industry conferences or publications in industry journals. Raising your profile in the field is always a positive career move. 

Recognition and awards

Organizations and industry groups often recognize individuals who make significant contributions to financial performance and efficiency through awards and acknowledgments. Get one of these for yourself!

These benefits should reveal all you stand to gain from your upcoming revenue cycle audit. 

 Key components of the revenue cycle audit

Hopefully, the above benefits fuel your drive to excel on the revenue cycle audit. Now the work begins. These healthcare industry benchmarks let you know what results the C-suite or your manager may expect. 

Patient access and registration

 This initial phase involves reviewing how patient information is collected and verified, ensuring accuracy in demographic and insurance data – crucial for billing and reimbursement.  


Healthcare organizations should aim for 80 percent of their patients to complete pre-registrations before their appointments.  

Benefits of improving pre-registrations: 

An 80 percent or higher pre-registration rate benefits providers because it:

  • verifies coverage and obtains authorizations before services are rendered, reducing the likelihood of claim denials and delays in payment​.
  • creates a smoother patient flow on the day of the appointment, as much of the necessary paperwork is completed in advance. Wait times are a common patient complaint. 
  • reduces wait times and administrative hassles for patients, leading to a better overall experience. An Accenture study revealed that healthcare organizations that provide superior patient experiences achieve 50 percent higher margins than those delivering average experiences. Further, satisfied patients are more likely to return for future services and recommend the healthcare provider to others.
  • helps with organization resource allocation. By knowing in advance who is coming into the office, their needs, and the estimated time required for their visit, healthcare providers can more effectively schedule appointments and allocate resources, leading to improved operational efficiency and patient care

Pre-registration benefits for patients:

  •  Reduces wait times: Patients spend less time in the waiting room filling out paperwork, leading to a more efficient and pleasant visit. 
  • Creates enhanced access to care: When pre-registration processes include pre-visit screenings, patient needs get identified early on, ensuring that they receive the appropriate care promptly. 
  • Increased transparency: Pre-registration allows for better financial counseling and transparency regarding the cost of care. Patients can be informed about their insurance coverage, out-of-pocket costs, and payment options upfront, reducing financial surprises and stress post-treatment​​​​.
  • Enhanced communication: Establishing patient/ provider communication early on gets patients in the habit of using the organization’s portal. When patients can raise concerns before the day of the appointment, their anxiety abates.  

NAHAM recommends using automated reporting systems to track and report pre-registration completion rates. 

Patient eligibility verification

Research reveals that broken or incomplete patient eligibility verification is the leading cause of denials. Common triggers for eligibility denials include expired coverage, incorrect patient information, and lack of pre-authorization for services.  Particularly during the pandemic, some practices were so overwhelmed, they provided services without even checking insurance eligibility.  


Healthcare organizations should verify insurance coverage for at least 90 percent of their patients prior to their appointment or service.

Other benchmarks include: 

  • high accuracy rate in verifying patient coverage
  • minimized denied claims due to eligibility issues
  • timeliness of eligibility checks, preferably before the point of service

Prior authorization

Eighty-eight percent of physicians reported prior authorization burden as being either high or extremely high, taking two days of staff time each week. 


In January of 2024, legislation passed that mandates insurers provide prior authorization decisions within 72 hours for urgent requests and seven calendar days for non-urgent requests. If your organization isn’t getting answers within three days, you can pressure your payers using this legislation. 

Physicians report that, overall, 72 percent of PA requests are approved on initial request. An additional 7% are approved on appeal. Of all prior authorizations submitted to Medicare and Medicaid, healthcare organizations appealed just 11 percent. If your numbers are lower, you need to take a look at your prior authorization process. 

Benefits of an efficient prior authorization process

  • Patient satisfaction - Patients don’t like hearing that the treatment you’re proposing has been denied. They want quick resolutions to their health issues. 
  • Better revenue and cash flow: The prior authorization appeal process saps staff time and your revenue. Prior authorizations accepted on first submittal keeps payments from insurers on track.

Charge capture 

Thorough charge capture is vital for compliance and maximizing reimbursement from payers. 


Healthcare industry experts claim that to remain financially healthy, organizations must capture at least 95 percent of all charges for services provided. A lower charge capture rate may be a warning sign that you’re missing charges, which leads to significant lost revenue. Unfortunately, providers miss charges totaling $21 billion each year according to the American Medical Association.  

Benefits of improving charge capture

Raising charge capture rates improves net revenues and operational efficiency. By accurately documenting and billing for all services provided, you reduce the risk of audits and penalties associated with underbilling or overbilling. This compliance not only protects against financial risks but also upholds the organization's reputation. 

Coding accuracy

Increased coding accuracy lowers your denials and prevents frustration for staff and patients. Still, given that the AMA made 230 additions, 49 deletions, and 70 revisions in 2024’s CPT codes, staying accurate can be a challenge. 


 The HFMA encourages healthcare organizations to maintain a coding inaccuracy rate of five percent or less. Currently, the average Medicare coding error rate is 7.38 percent, giving it an accuracy rate of 92.62 percent, which isn’t bad. Still, many providers’ coding inaccuracies can reach 10 percent or more. 

Benefits of improving coding accuracy:

  • Optimized net revenue
  • Compliance risk reduction
  • Enhanced operational efficiency
  • Improved patient care
  • Data integrity and management
  • Professional development
  • Financial stability

Claim submission and processing

Timely and accurate claim submission reduces delays in payments as well as denials. 


Healthcare leaders encourage organizations to achieve 95% clean claims rate.  When it costs you $25 per reworked claim, according to MGMA, and you have 100 claims requiring rework, you’re losing $2,500 a month and $30,000 a year. 

Benefits of clean claims:

  • Optimized net revenue
  • Reduced compliance risk
  • Enhanced operational efficiency
  • Improved patient care
  • Data integrity and management
  • Professional development
  • Financial stability

Payment posting and reconciliation 

Reviews in this area ensure that payments are accurately posted to patient accounts and reconciled, identifying any discrepancies between expected and actual payments. 


Industry experts put the standard payment posting time at three to five business days. Failing to meet this benchmark can prompt delayed payments, increased accounts receivable, and decreased cash flow. It can also lead to errors and inaccuracies in financial reporting, which can have serious consequences for healthcare providers. 

Benefits of prompt payment posting

  • Improved cash flow
  • Reduced financial discrepancies
  • Improved patient satisfaction
  • Improved RCM metrics
  • Accurate, real-time financial reports

Patient financial services

Your auditor will assess how effectively the organization communicates with patients about their financial responsibilities, and how efficiently it collects outstanding balances.

Benefits of streamlined patient financial services

Robust, modern patient financial services includes: pre-service, patient pay estimates, a patient portal, and acceptance of multiple payment methods.

While at this time, US law mandates patient pay estimates or “good faith estimates” for only self-pay and uninsured patients, some providers  are providing them to all. And for good reasons. Research shows that patients are more likely to pay more at the point of service if they receive a cost estimate upfront. For example, when The Health First hospital system provided all their patients with estimates in advance it achieved a 27% increase in upfront collections and 2.7% net revenue in point-of-service increase. This new process also secured over $2 million in upfront collections. This approach also reduces the administrative burden on staff who would otherwise spend time contacting patients for payment. 

Offering a variety of payment methods including Google Pay, Apple Pay, PayPal, Zelle, and Venmo in addition to credit and debit cards demonstrates your flexibility and willingness to simplify payments. 

What RCM auditors are looking for in every area

Here's an overview of the areas that typically get audited:

Prior authorizations

Yes, prior authorizations can be audited. Your auditor will examine whether the correct, documented procedures were followed before services were provided. Audits will also review whether authorizations were obtained for all necessary services and if they were accurately documented and matched with the services delivered. The goal is to ensure compliance and minimize denials due to lack of authorization.

Patient access

When auditing healthcare organizations' patient registration and scheduling, auditors focus on the efficiency and accuracy of these processes. They check for streamlined scheduling systems, proper patient information capture, and the minimization of scheduling errors.

 A good benchmark for healthcare patient registration and scheduling includes:

  •  quick access for patients to see providers 
  • reasonable wait times 
  •  a high level of accuracy in patient data to prevent denials and improve patient satisfaction

Centralized scheduling systems are often recommended to support these goals, allowing for better management of patient flow and resource allocation.

Patient eligibility verification

Healthcare industry auditors, when evaluating an organization's eligibility verifications, look for a comprehensive understanding and adherence to coding accuracy, policies, and procedures. They aim to ensure that the organization is running efficiently and free from liability.

Auditors identify incorrect coding and prevent its repetition, as habitual claims errors can invite federal scrutiny. The key aspects auditors focus on include reducing claims denials caused by inappropriate coding or insufficient documentation, determining outliers before payers request internal audits, and ensuring documentation supports reported services and procedures.

Moreover, auditors pay attention to how the revenue cycle department communicates with and impacts other departments within the organization. This process includes conducting assessments to determine risk levels, understanding applicable laws and regulations, and educating staff on policies and procedures. 

Coding and billing: 

Coding audits can identify instances of undercoding, overcoding, or incorrect coding, all of which impact reimbursement.

When auditors examine healthcare organizations' coding and billing, they primarily focus on ensuring compliance with regulations and maximizing revenue. They scrutinize several key areas to prevent penalties due to noncompliance, which can be severe, including recovery of up to three times the amount of damages plus penalties per false claim filed. 

Audits aim to identify errors in provider documentation, incorrect usage of medical codes, and uncover areas where medical practices might have billed inappropriately. 

They also look for fraudulent billing practices, either intentional or unintentional, and deficiencies in claims software utilized by the medical practice. In essence, audits are designed to highlight areas of risk, correct undercoding or overcoding, and ensure adherence to payer rules and regulations. 

Good billing and coding practices include:

  • ensuring the accuracy of provider documentation
  •  efficient payer reimbursement
  • adherence to coding guidelines

Practices should aim for a low denial rate, high accuracy in coding, and compliance with current coding standards and regulations. Regular training and education for coding staff and healthcare providers are critical to maintaining these benchmarks, as well as implementing quality assurance processes to monitor and improve coding accuracy over time. 

Eligibility verification

When auditing healthcare organizations' patient eligibility verification, auditors primarily look for accuracy, efficiency, and compliance with regulatory standards. They check if the organization has robust processes in place to verify patient eligibility and benefits accurately before services are rendered. 

Charge capture

As missing charges or discrepancies lead to revenue loss, auditors examine whether all rendered services are accurately captured and billed. 

They look for: 

  • an updated and accurate chargemaster that reflects current coding standards and pricing strategies that are competitive yet fair. Auditors check that charge capture codes match established code sets like CPT, ICD-10, and HCPCS and that descriptions are clear and understandable for clinician use.
  • A streamlined process for updating codes and prices in the chargemaster, ensuring that all services provided are correctly billed and reimbursed.
  • competitive and compliant charges, focusing on the accurate pricing of services based on what local competitors charge for similar services. 
  • clinician engagement in the charge capture process 

As with most aspects of the revenue cycle, automation plays a significant role in maintaining an accurate chargemaster, helping to reduce the chances of human error and ensuring quick updates to codes and charges. 

Claims submission and denial management

Claims submission audits review the efficiency and accuracy of the claims submission process and how denials are managed and appealed. Goals prioritize reducing the denial rate and improving the speed of revenue collection.

When auditing a healthcare organization's claims management, auditors look for common reasons for denials such as:

  •  registration/eligibility errors
  •  services not covered
  •  missing data/invalid claims 

Auditors push providers to optimize reimbursement by addressing these issues upfront to prevent denials, which can significantly impact cash flow and margins. 

Payment posting and reconciliation

Auditors review how payments are posted to patient accounts and how adjustments are handled. This ensures that payments are accurately recorded and reconciled.

When auditors examine a healthcare organization's payment posting processes, they look for:

  • accuracy in the allocation of payments, adjustments, and denials to patient accounts. the high accuracy rate in posting, minimal unapplied cash, quick resolution of discrepancies, and efficient processing of denials. 
  • the percentage of electronic remittance advice (ERA) adoption versus manual posting. Higher ERA adoption rates typically lead to more efficient and accurate payment posting processes.

Patient pay estimates

When auditing a healthcare organization's good faith estimate process, auditors typically look for:

  • compliance with regulations
  • accuracy in the estimates provided to patients
  • your process's transparency
  • the percentage of estimates delivered within the required timeframe
  • accuracy of the estimates compared to actual charges
  • patient satisfaction with the information provided. 

Contract management

Auditors examining a healthcare organization's contract management process focus on:

  • compliance with terms
  • accuracy in the application of rates 
  •  adherence to payment terms
  • effectiveness in contract negotiation
  • contract expiration date tracking and adherence and renewal management

The extent to which an organization leverages contract management software for automation and compliance tracking can be a key benchmark for assessing the maturity and effectiveness of the process.

While not every area may be audited simultaneously or with the same frequency, all critical areas of the revenue cycle are subject to audits at different points in time. The scope and focus of audits can vary based on organizational priorities, regulatory requirements, and identified risk areas. It's common for healthcare organizations to have a scheduled audit plan that covers various aspects of the revenue cycle over a specific period.

Your revenue cycle audit works wonders for you AND your organization

Don’t fear it. Embrace it!

A revenue cycle audit ensures healthcare organizations effectively manage the complex processes involved in patient access and eligibility verification, charge capture, and healthcare billing and collections. Regular audits lead to significant improvements in financial performance, compliance, operational efficiency, and patient satisfaction. 

And if you start now, you’ll be ahead of your competitors. 

 A Dec. 12, 2023 MGMA Stat poll found that most medical group leaders (41%) examine their organization’s revenue cycle data versus external data annually. Nearly one in four (24%) benchmark at least monthly and another 15% benchmark quarterly. Another 15% noted they never benchmark versus external sources. 

Across the healthcare horizon, leaders are encouraging providers to use automation to improve the accuracy in their numbers and improve their processes. Dedicated to optimizing the provider revenue cycle, MD Clarity has developed Clarity Flow, a patient eligibility verification and patient pay or good faith estimate solution. Clarity Flow not only generates the estimate, it sends it to the patient upon scheduling. MD Clarity works with you to create a variety of estimate letters, each of which targets a particular patient segment. RevFind, MD Clarity’s contract management software, ingests, digitizes and analyzes payer contracts. It uses that data to find underpayments and denials, alerting staff to revenue leakage. To see these products in action, schedule a demo today.  

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