Revenue Cycle Management (RCM) has revolutionized the way organizations manage their financial performance in the healthcare industry. It's a complex system that touches every corner of healthcare, from patient registration to claims processing all the way through to reimbursement. The end goal of RCM is to improve cash flow and perfectly coordinate revenue integrity.
Research shows that the revenue cycle management market size was valued at $97.29 billion in 2020 and is projected to reach $329.71 billion by 2030, registering a CAGR of 12.7%. This growth can be attributed to increasing demand for cost-effective healthcare services, the rising adoption of electronic health records (EHRs), and growing expectations for patient experiences.
Early adoption of RCM processes has proven beneficial to administrative operations and efficiency. An effective RCM strategy could have far-reaching positive effects on patient outcomes. This article delves further into the role of RCM in modern healthcare settings and how it can help ensure that organizations remain profitable and provide quality services.
What Is Revenue Cycle Management?
RCM, short for revenue cycle management, encompasses all of the administrative and clinical activities involved in claims processing, payment, and revenue generation. The goal of a healthcare organization with RCM is to identify, manage and collect patient service revenue. Besides collecting profits that keep facilities afloat, hospital administrators use RCM to minimize expenses while accounting for risk management.
Healthcare revenue cycle management begins at the start of patient care at a healthcare facility and concludes when all claims have been collected and payments received. The process involves multiple steps to ensure accuracy, compliance, increased revenue, and patient satisfaction.
At a minimum, healthcare providers must manage scheduling, insurance eligibility verification, patient account establishment, claim submissions, charge capture, reimbursement calculations, denial management, collections processes, and accounts receivable supervision. Pre-registration activities, such as collecting correct information and verifying patient coverage upfront, are integral components of ensuring timely reimbursements.
The Primary Stages of Revenue Cycle Management
Healthcare revenue cycle management involves several stages. Understanding these processes can help medical offices streamline their operations, reduce costs, and improve patient satisfaction. Let's take a look at the primary stages of RCM.
The front-end stage of RCM involves the very first steps a patient takes before treatment. These include scheduling, pre-registration, registration, intake, and financial counseling. Here is what each of those steps involves:
Scheduling and Pre-registration
The RCM process begins with the scheduling of patient appointments and pre-registration.
In the pre-registration process, the provider gathers basic demographic information such as name, address, phone number, date of birth, and insurance information. Pre-registration can help reduce unpaid claims by verifying eligibility upfront and ensuring that all required documents are properly collected before service delivery.
Preregistering should also clearly communicate to the patient their financial responsibilities prior to the appointment. This ensures that payments are collected promptly, which leads to improved cash flow throughout your organization's revenue cycle process. Pre-registration can reduce unpaid claims by verifying eligibility upfront and ensuring that all required documents are properly collected before service delivery.
The prior authorization process, also known as pre-certification or pre-approval, is when a healthcare provider requests approval from a patient's health insurance company before providing medical services. This is important because if the health insurance company does not approve the request, then the healthcare provider may end up having to pay for the cost of those services.
Healthcare providers benefit from prior authorization because it prevents them from having to provide services without any assurance of reimbursement. In addition, prior authorization helps prevent fraud by making sure that only necessary treatments are approved for coverage.
Patient Registration and Intake
Patient registration comes after preauthorization. The purpose of patient registration is to ensure the patient's information is 100% accurate from start to finish, including address, phone number, date of birth, guarantors, and insurance information.
During registration, providers also collect co-payments and check if there are any referrals or authorizations in place for specialist visits. The patient signs financial forms so that the provider knows what reimbursement they'll receive from the payer or insurer upfront.
During patient intake, a staff member will ask questions about the patient's medical history to get an overall picture of their health status. This includes questions about past illnesses or injuries as well as current medications or allergies they may have.
Hospitals often employ financial counselors to identify and assist patients who are unable to afford their estimated liability before treatments or who have large existing balances. They also help patients explore payment options such as grants, discounts, payment plans, and more.
The middle part of the RCM process takes place after service delivery. This involves charge capture and coding.
Charge capture is the practice of capturing all relevant information related to patient care and billing for those services. Charge capture strategies vary from facility to facility and may include computerized provider order entry (CPOE), barcoding, and/or a charge description master (CDM).
CPOE is a program that allows providers to enter orders electronically rather than manually writing them out on paper. Barcoding allows for quick identification of charges. CDMs are databases that contain all possible charges for a given facility. Using all or a combination of these three strategies helps to ensure accuracy in the charge capture process.
Coding- Diagnosis and Procedure
Once all services have been charged appropriately, it is important to accurately code each service so that insurance companies can properly reimburse the provider for those services provided. This process involves assigning codes to each service provided during the appointment. Each code correspond with the diagnosis and procedure associated with each service.
Providers use a combination of coding systems to report the services given to the patient. The codes that are assigned to specific procedures and services are called the Current Procedural Terminology (CPT) codes. The Healthcare Common Procedure Coding System (HCPCS) Level I and HCPCS Level II describe any supplies and equipment that were required for the procedure. The International Classification of Diseases (ICD) codes describe diagnoses and other health conditions encountered by patients. Accurate coding involves reporting codes from each of these systems in order to provide a full description of the treatment the patient received.
Coding- Facilities and Professionals
After providing care, the facility typically sends two claims to a payer for reimbursement: one for supplies and services provided by the facility and one for the services provided by the healthcare professionals.
However, you can also take advantage of a newer system called single path coding, in which a coding process assigns codes for facilities and professionals at the same time. This removes the need for two different coding teams. Single path coding has been shown to benefit productivity and accuracy while mitigating variances.
The backend process of the RCM involves numerous steps, from claims production to patient collections.
Claims production is the process of creating and submitting insurance claims for each service provided to the patient. A claim includes patient information and billing details. The goal of claims production is to accurately bill for the services provided, ensure timely payment from insurance companies, and minimize denied or delayed claims.
Claims submission is the process of sending insurance claims to the relevant insurance company for payment. The submitted claim should clearly communicate the patient information, the services provided, and the costs associated with those services. The goal of claims submission is to ensure that the insurance company receives all necessary information to process the claim and pay the healthcare provider for the services they have provided.
Calculating Expected Reimbursement
Calculating expected reimbursement involves estimating the payment a healthcare provider will likely receive from an insurance company for a service or treatment. This involves reviewing the patient's insurance policy, the healthcare provider's fee schedule, and any relevant regulations and laws.
The goal of calculating expected reimbursement is to help the healthcare provider estimate their revenue, plan their finances accordingly, and ensure that patients understand their financial responsibility.
Adjudication involves determining whether a claim submitted by the hospital is valid and should be paid out by the insurance company or other payer. This involves verifying that the diagnosis codes and procedure codes provided on the claim are accurate, as well as checking if any other conditions, such as prior authorization, have been met.
Explanation of Benefits (EOB) Statements
An explanation of benefits (EOB) statement is a document provided by the insurance company or other payer that outlines what services were covered under the policy, how much was paid for each service, and any remaining balance due from either party. EOB statements are invaluable for tracking payments, ensuring accuracy in billing, and identifying areas where adjustments need to be made.
Claims reconciliation involves comparing the amount charged on a bill against the amount actually paid by an insurance company or other payer. This step helps identify discrepancies between what was billed versus what was actually paid so that hospitals can take any necessary steps to rectify them. For example, if a bill for $100 was submitted, but only $80 was paid by an insurer, then it's up to hospital staff to determine why there's a discrepancy.
Patient collections refer to the process of collecting any remaining payments due from patients after their claims have been processed by their insurers or other payers. The facility contacts the patient regarding outstanding balances on their bills and collects those payments to maximize their revenue potential. In some cases, this may involve setting up payment plans with patients so they can make regular payments over time.
How Revenue Cycle Management Has Changed
Healthcare revenue cycle management has evolved and improved considerably in recent years. Due to technological advancements such as electronic health records, billing automation, and cloud computing, efficiency has increased and costs are decreasing. Data is collected more quickly and accurately with the implementation of these computerized systems.
Revenue cycle automation has cut down on manual labor and associated errors, providing greater accuracy and efficiency when managing accounts receivable and collections.
By facilitating a smoother workflow, automation has improved timely payments and reduced denials arising from incomplete or inaccurate data entry. Additionally, healthcare organizations are able to access valuable analytics from this automated data that would be difficult to obtain with manual systems.
Electronic Health Records (EHRs) and other digital tools have generated vast amounts of data about medical practices and patients. Healthcare facilities can analyze this data to identify potential inefficiencies and areas for improvement in the RCM process. This data-driven approach enables organizations to make smarter decisions and reduce costs as they are able to identify discrepancies, eliminate redundant tasks, and streamline processes.
Compliance With Regulations
The healthcare industry is more heavily regulated following the implementation of the Affordable Care Act (ACA), HIPAA regulations, and, most recently, the No Surprises Act. To remain compliant with these regulations and keep patient information secure, facilities must update their RCM.
This requires understanding the nuances of each regulation to ensure no gaps exist in patient care, data collection, or security. Healthcare organizations must also keep systems and processes up-to-date to ensure that financial data is accurate and patients are receiving the health services they need.
Emphasis on Patient Experience
With healthcare shifting to a focus on value-based care and consumerism, the patient experience is more important than ever. RCM processes that directly impact the patient experience include billing and collections, which can make or break a customer's perception of a particular healthcare provider. To ensure maximum patient satisfaction, many providers are taking steps to streamline their RCM practices and provide flawless service.
How Healthcare Organizations Can Improve Their Revenue Cycle Management in 2023
As the healthcare industry continues to grow rapidly, healthcare organizations must keep up with the changing economic and technological landscape. One way they can do this is by improving their revenue cycle management.
These organizations must make strategic decisions to position themselves for success both financially and operationally. From using data-driven insights to streamlining end-to-end processes, healthcare organizations must consider several new methods to gain an edge over their competitors. Let's discuss some key strategies that healthcare organizations can utilize in 2023 to effectively manage their RCM.
Healthcare organizations can shore up their revenue cycle management by leveraging technology. Real-time eligibility verification can catch errors and speed up the claims process.
Real-time eligibility verification reduces instances of incorrect or delayed payments by retrieving patient information from the payer immediately on request. Some healthcare organizations are implementing insurance verification software to automatically check payer information in real-time, cutting out manual paperwork and saving time.
Adding real-time eligibility verification to the RCM process simplifies compliance and allows providers to collect their active funds quickly and efficiently.
Providing Cost Estimates for All Patients
Healthcare organizations can significantly improve their revenue cycle management by providing patient cost estimates. One way they can do this is by implementing patient cost estimate software that eliminates manual calculations and automatically provides comprehensive estimates to patients. A high-quality patient cost estimate software will seamlessly integrate with a healthcare organization's existing systems.
This software can take into account various factors like a patient's insurance coverage, doctor consultation costs, procedure charges, and estimated total overall costs. This efficiently clarifies how much treatment will actually cost the patient.
When easy-to-understand cost estimates are available to them up front, the patients generally appreciate the transparency and are more likely to stick with the services offered. This helps organizations increase their bottom line.
All too often, denials or rejections are simply attributed to an insurance company's computer program rather than a systemic issue within the organization. The denial management process involves analyzing and understanding rejection patterns, seeking and utilizing feedback from front-line workers, and continuously evaluating procedures.
Addressing the root cause of an increase in denials and taking comprehensive steps to rectify it is integral for gaining mastery of an organization's revenue cycles. To simplify these processes, healthcare organizations can utilize denial management software. Denial management software is an automated system that reduces paperwork and administrative workloads by managing both inpatient and outpatient claims denied by insurance companies.
In most cases, this software can also create detailed analytics reports that allow practice managers to identify the origins of rejected claims, address any issues quickly, and implement process improvements. An efficient denial management software ensures that even the most complex medical denials are handled correctly, on time, and with minimal additional cost or resources so that health organizations can free up their staff for higher-value activities.
Complying With Good Faith Estimates Regulations
Healthcare organizations can significantly improve their revenue cycle management by understanding and complying with strict good faith estimates regulations. Good faith estimates are documents provided to patients in advance of services rendered that detail the expected cost for those services.
The proactive implementation of good faith estimates allows healthcare organizations to build transparency with patients on their care costs and establish clear expectations from the outset. Enforcing compliance with these regulations can boost patient satisfaction, thereby increasing cash flow for healthcare organizations.
In addition, providers also benefit from greater confidence that charges have been coded correctly, since billing staff members have access to the documents created when providing service. Healthcare organizations should proactively focus on understanding the GFE Requirements of the No Surprises Act and ensure they abide by all regulations.
Payment Variance and Underpayment Detection
Healthcare organizations can improve their revenue cycle management by using payment variance software and underpayment detection to ensure they are receiving full payment from insurers. With the increasingly complex healthcare reimbursement process, facilities often don't realize that they have been underpaid for services rendered.
Payment variance is an analytical process in which facilities review invoice payment amounts against usual and customary rates as well as Medicare rates. The organization can use this analysis to identify overpayments and underpayments. Payment variance software can complete this analysis process through automation.
Automated scanning tools allow providers to automatically flag potential areas of lost revenue, allowing staff to quickly identify discrepancies with the insurance company. By taking advantage of these systems, healthcare organizations can effectively boost their bottom line by recovering revenue from underpayments due to inaccurate reimbursements.
Payer Contract Analytics and Optimization
Healthcare organizations can increase their revenue cycle management with the help of payer contract analytics and optimization. By gathering data on past claims and negotiations, providers can identify areas with potential for increased dispute resolution success or areas that could benefit from a change in procedure.
This analytics and optimization practice should also include regularly examining payment trends to adjust processes if needed and work out potential disputes early on. Making use of these payer contract measures can maximize a facility's revenue cycle while creating an efficient system overall. With this insight at hand, organizations can make strategic decisions to maximize rates and ensure optimal payment by taking advantage of high-value contracts.
Maximizing Upfront and Point-Of-Service Collections
Maximizing upfront and point-of-service collections is one of the most effective ways healthcare organizations can improve their revenue cycle management. It's especially important for staff to understand the importance of point-of-service collections and how this process can substantially impact the organization's overall financial health.
To maximize this, they should ensure that all relevant information used to initiate billing processes is entered accurately and promptly—especially when dealing with insurance. This will reduce the number of follow-up requests and denials by payers, resulting in quick payment resolution. Healthcare organizations should offer multiple options for making payments at the time of service so that patients are not discouraged or unable to pay their bills.
The Two Types of Revenue Cycle Management Companies and How They Can Assist You
Revenue cycle management is an important part of any healthcare organization. If an organization is struggling to keep up with their RCM, software and outsourcing may be vital options for improvement.
Revenue Cycle Management Software
Revenue cycle management software can automate a healthcare organization's in-house revenue cycle management tasks. This type of software helps optimize an organization's financial performance by automatically performing core functions such as denial management, underpayment detection, contract analytics, and patient cost estimates.
MD Clarity is an example of this type of software. MD Clarity assists providers with data organization and brings real-time visibility to the entire revenue cycle process. With its intuitive data dashboard, users can view denials and payment trends across multiple sources in real time.
Overall, RCM software helps providers get back much-needed valuable time so they can focus on what matters most: providing excellent patient care.
Outsourcing Revenue Cycle Management
Revenue cycle management companies can significantly simplify your organization's revenue process. Companies like R1RCM provide revenue cycle management as an outsourced service, meaning they work closely with your team to ensure you maximize your potential profitability.
A professional firm can provide ongoing support for maintaining and improving the performance of your organization's revenue cycle processes. With their expertise in data analytics and regulatory compliance, these dedicated experts can help bring significant improvements in terms of overall process efficiency and accuracy, ultimately helping you maximize your bottom line.
Common KPIs To Measure Your Revenue Cycle Management Performance (Or That Of Your RCM Company)
Key performance indicators (KPIs) are a great way to measure the success of your revenue cycle management performance. Lasting profitability is impossible without effectively tracking and measuring certain key performance indicators (KPIs) to define the success of your revenue cycle management process.
Some of the most common KPIs include 0-60 percentage, 0-60 benchmark, aged accounts receivable (A/R) rate, and bad debt rate. The 0-60 Percentage measures the time it takes for claims to go from submission through payment issued in days. The 0-60 Benchmark is an industry standard comparing the average time it takes for specific services to go from submission through payment issued. The aged accounts receivable (A/R) rate provides an indication of how quickly accounts receivables are paid within 30, 60, or 90 days. The bad debt rate shows how often collections efforts do not result in payment.
By monitoring these indicators, you can gain insight into how efficiently your revenue cycle management process is being managed and make adjustments when needed.
Outcomes You Should Expect From Optimal Revenue Cycle Management
When revenue cycle management is optimized, the outcomes can be immediately noticeable. For example, in a hospital setting, optimized revenue cycle management leads to improved accuracy and efficiency in financial operations, resulting in accelerated cash flow and higher net income. Here are more things to expect.
You Get Paid Faster
Optimal revenue cycle management allows you to reduce your A/R days, submit claims faster, and increase upfront and point-of-service collections. These improvements directly result in faster payments for you and keep cash flowing.
You Get Paid More
With optimal revenue cycle management, you can expect to see significant increases in cash flow. By better managing denials and rejections, monitoring payer trends in timely filing limits and non-payment policies, and accelerating receivables management, more money will come back to your practice.
Not only that, but bad debt expenses should also drop dramatically after implementing improved guidelines. In the end, more of your net collections will be repatriated back to you, providing a healthier financial outlook for you and your business.
Enhanced Patient Experience and Loyalty
Providing patients with accurate price estimates can make all the difference in showing them how much you value them as customers. Price estimates are not common among competing providers, so implementing a price estimate system will make your organization stand out. Price estimates eliminate surprise costs for patients and show them that you are putting their interests first, making them more likely to stay with you instead of switching to another provider.
Revenue cycle management FAQs
What's the Difference Between Revenue Cycle Management and Revenue Integrity?
Revenue cycle management and revenue integrity are closely linked concepts, but their end goals are different.
Revenue cycle management is an end-to-end process that supports administrative and clinical functions to ensure accurate payment of healthcare claims. It focuses on the financial aspects of patients' care and optimizing the flow of information between providers and payers.
Revenue integrity goes beyond this to encompass problem identification, analytics, workflow, and organizational design. Revenue integrity is a more comprehensive approach to managing financial operations in healthcare. The focus of revenue integrity is operational efficiency, accuracy, compliance, and the overall growth of an organization's earned revenue.
What Is Fullstack Revenue Cycle Management?
Fullstack revenue cycle management is the process of consolidating patient enrollment, billing, and collections into one integrated system. It is an all-encompassing solution that enables practices to quickly and easily manage their business operations on a single platform. It also allows healthcare providers to streamline workflow processes while keeping accurate records of all data in order to monitor performance and maximize financial success.
Companies offering complete fullstack revenue cycle management solutions will provide centralized billing processing, complete automation of approval processes, payment auditing, patient statements, and invoicing, as well as comprehensive reporting capabilities.
How Much Does a Revenue Cycle Manager Make?
A well-established professional with experience in the field can expect to earn in a range of $87,630 and $119,895 as of January 2023. This expected salary can vary depending on a number of factors such as years of experience, job location, and the type of organization for which they are working. Revenue Cycle Manager is a role that carries a lot of responsibility, but it can be very rewarding.
What's the Best Way to Hire a Revenue Cycle Analyst?
Before hiring a revenue cycle analyst, make sure they have the skills and knowledge to adequately manage your organization's revenue cycle. A qualified analyst should be familiar with insurance billing processes and have experience using various software programs. Highlighting an understanding of coding standards, ICD-10, quality assurance, and systems implementation would also be beneficial for the role.
Additionally, previous work experience in managing complex accounts receivable cycles would lend itself to better management. Once you've identified the ideal candidate, utilize technology tools or assessments during the interviewing process to ensure comprehensive coverage of all details.