rcm glossary


Payment is the act of transferring funds from a patient or insurance company to a healthcare provider as compensation for services rendered.

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What is Payment in Healthcare Revenue Cycle Management (RCM)?

In the realm of healthcare revenue cycle management (RCM), payment refers to the financial transaction that occurs between a patient or their insurance provider and a healthcare organization for the services rendered. It is the culmination of the entire billing and collection process, where the healthcare provider receives the agreed-upon compensation for the services provided.

Understanding the Payment Process in Healthcare RCM

The payment process in healthcare RCM involves several steps, starting from the submission of a claim to the final reimbursement. Let's delve into each stage to gain a comprehensive understanding:

1. Claim Submission: After a patient receives medical services, the healthcare provider generates a claim that includes all the necessary information, such as patient demographics, diagnosis codes, procedure codes, and the cost of services provided. This claim is then submitted to the patient's insurance company or payer for reimbursement.

2. Adjudication: Once the claim is received by the insurance company, it undergoes a process called adjudication. During this stage, the payer reviews the claim for accuracy, verifies the patient's eligibility, and determines the coverage and benefits applicable to the services provided. The claim is then either accepted or rejected based on the payer's assessment.

3. Payment Determination: If the claim is accepted, the payer determines the payment amount based on the contracted rates between the healthcare provider and the insurance company. This payment determination takes into account factors such as deductibles, co-pays, co-insurance, and any applicable out-of-pocket expenses.

4. Payment Posting: After the payment amount is determined, it is posted to the patient's account in the healthcare provider's financial system. This step involves recording the payment details, including the amount received, the date of payment, and any adjustments made.

5. Reconciliation: Reconciliation is a crucial step in the payment process, where the healthcare provider compares the payment received from the payer with the expected reimbursement. Any discrepancies or underpayments are identified and addressed during this stage.

6. Denial Management: In cases where a claim is rejected or denied by the payer, the healthcare provider must initiate the denial management process. This involves investigating the reason for denial, correcting any errors or missing information, and resubmitting the claim for reconsideration.7. Patient Responsibility: After the insurance payment is applied, the patient is responsible for any remaining balance as per their insurance plan. This balance may include deductibles, co-pays, co-insurance, or any non-covered services. The healthcare provider communicates this responsibility to the patient and collects the outstanding amount.

Payment vs. Reimbursement: Understanding the Difference

While payment and reimbursement are often used interchangeably, they have distinct meanings within the context of healthcare RCM. Let's explore the difference between these two terms:

Payment: Payment refers to the actual transfer of funds from the payer (insurance company or patient) to the healthcare provider for the services rendered. It is the financial transaction that completes the revenue cycle.

Reimbursement: Reimbursement, on the other hand, specifically refers to the amount of money that the healthcare provider receives from the payer as compensation for the services provided. It represents the portion of the total billed charges that the payer agrees to cover based on the contractual agreement.In essence, payment encompasses the entire financial transaction, including the reimbursement received by the healthcare provider.

Examples of Payment in Healthcare RCM

To provide a clearer picture, here are a few examples illustrating the payment process in healthcare RCM:

Example 1: A patient visits a healthcare provider for a routine check-up. The provider generates a claim and submits it to the patient's insurance company. After adjudication, the insurance company determines that the patient's plan covers 80% of the charges. The provider receives a payment of $80 from the insurance company, and the patient is responsible for the remaining $20 as their co-insurance.

Example 2: A patient undergoes a surgical procedure at a hospital. The hospital submits a claim to the patient's insurance company, which determines that the patient has a $500 deductible. The insurance company pays the hospital $2,000 for the procedure, but the patient must first pay the $500 deductible out of pocket. The patient then receives an explanation of benefits (EOB) detailing the payment and their remaining financial responsibility.

Example 3: A patient receives physical therapy sessions for a sports injury. The healthcare provider submits a claim to the patient's insurance company, which denies the claim due to missing documentation. The provider rectifies the issue, resubmits the claim, and receives the payment from the insurance company after approval.

These examples highlight the various scenarios that can occur during the payment process in healthcare RCM, including insurance coverage, patient responsibility, and the resolution of claim denials.


Payment is a critical component of healthcare revenue cycle management (RCM), representing the financial transaction between a patient or their insurance provider and a healthcare organization. Understanding the payment process, including claim submission, adjudication, payment determination, posting, reconciliation, denial management, and patient responsibility, is essential for effective RCM. Additionally, distinguishing between payment and reimbursement helps clarify their respective roles within the revenue cycle. By comprehending the intricacies of payment in healthcare RCM, healthcare organizations can optimize their financial operations and ensure timely and accurate compensation for the services they provide.

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