rcm glossary


Reimbursement is the process of compensating healthcare providers for services rendered, typically by insurance companies or government payers.

Accelerate your revenue cycle

Boost patient experience and your bottom line by automating patient cost estimates, payer underpayment detection, and contract optimization in one place.

Get a Demo

What is Reimbursement?

Reimbursement is a crucial concept in healthcare revenue cycle management (RCM) that refers to the process of receiving payment for healthcare services rendered. It involves the transfer of funds from payers, such as insurance companies or government programs, to healthcare providers, including hospitals, physicians, and other healthcare organizations. Reimbursement ensures that healthcare providers are compensated for the services they provide, allowing them to sustain their operations and continue delivering quality care to patients.

Importance of Reimbursement in Healthcare RCM

Reimbursement plays a vital role in the financial stability and sustainability of healthcare organizations. Without proper reimbursement, healthcare providers would struggle to cover their operational costs, invest in new technologies, and retain skilled staff members. It is through reimbursement that healthcare providers can maintain their facilities, purchase necessary medical equipment, and offer competitive salaries to attract and retain talented healthcare professionals.

Moreover, reimbursement also impacts patient access to healthcare services. Adequate reimbursement rates are essential to ensure that healthcare providers can continue to offer a wide range of services and maintain their capacity to treat patients. Insufficient reimbursement rates may lead to reduced access to care, longer wait times, and limited availability of specialized services, particularly in underserved areas.

Difference between Reimbursement and Payment

While reimbursement and payment are often used interchangeably, there is a subtle difference between the two terms in the context of healthcare RCM.

Reimbursement refers specifically to the process of receiving payment for healthcare services from payers, such as insurance companies or government programs. It involves the submission of claims, review and processing by payers, and the eventual transfer of funds to healthcare providers. Reimbursement encompasses the entire cycle of activities involved in securing payment for services rendered.

On the other hand, payment refers to the actual transfer of funds from payers to healthcare providers. It is the final step in the reimbursement process, where the healthcare provider receives the financial compensation for the services provided. Payment can be made through various methods, including electronic funds transfer (EFT), checks, or credit card transactions.

In summary, reimbursement encompasses the entire process of securing payment, while payment specifically refers to the transfer of funds.

Examples of Reimbursement in Healthcare RCM

To better understand the concept of reimbursement, let's consider a few examples:

1. Private Insurance Reimbursement: A patient undergoes a surgical procedure at a hospital and has private health insurance coverage. The hospital submits a claim to the insurance company, detailing the services provided and the associated costs. The insurance company reviews the claim, verifies the coverage, and reimburses the hospital for the approved amount. The reimbursement received by the hospital helps cover the costs incurred during the patient's treatment.

2. Medicare Reimbursement: A physician provides a consultation to a Medicare beneficiary. The physician's office submits a claim to Medicare, including the necessary documentation and coding for the services rendered. Medicare reviews the claim, applies the appropriate reimbursement rates based on the Medicare fee schedule, and reimburses the physician's office accordingly. The reimbursement received from Medicare contributes to the physician's revenue and helps support the practice's operations.

3. Out-of-Pocket Reimbursement: A patient visits a physical therapy clinic for a series of sessions to rehabilitate a sports injury. The patient pays for each session out-of-pocket and requests reimbursement from their health insurance plan. The patient submits the necessary documentation, such as receipts and proof of payment, to the insurance company. After reviewing the claim, the insurance company reimburses the patient for the eligible expenses. In this case, reimbursement occurs directly to the patient, who then recovers a portion of their out-of-pocket expenses.

These examples illustrate the diverse scenarios in which reimbursement occurs, involving different payers, healthcare providers, and payment methods. The reimbursement process may vary depending on factors such as the type of healthcare service, the payer's policies, and the specific contractual agreements between the payer and the provider.


Reimbursement is a fundamental concept in healthcare revenue cycle management, ensuring that healthcare providers receive payment for the services they provide. It is through reimbursement that healthcare organizations can sustain their operations, invest in quality care, and maintain financial stability. Understanding the intricacies of reimbursement is essential for healthcare professionals, administrators, and anyone involved in healthcare RCM to effectively navigate the complex landscape of healthcare financing.

Get paid in full by bringing clarity to your revenue cycle

Full Page Background