Strategies for Healthcare Revenue Cycle Optimization in 2025

Maximizing Profits: Strategies for Healthcare Revenue Cycle Optimization in 2025

Olga Melnichenko

Revenue Cycle Manager

Maximizing Profits: Strategies for Healthcare Revenue Cycle Optimization in 2025

With the cost of delivering medical care projected to increase by 7% in 2025, the pressure is on for healthcare organizations of all types to find sustainable ways to maintain profitability.

‍

Many providers have already made significant systemic changes to deal with labor shortages and inflation. And while this has resulted in some improvements, the fact is, health-system margins are still lagging compared to pre-pandemic levels.

‍

Fortunately, with recent advancements in healthcare services and technology, most providers still have scope to improve profitability through healthcare revenue cycle optimization.

‍

In short, revenue cycle optimization involves systematically analyzing each step of the revenue cycle to identify avenues for improvement. This process can also be referred to as revenue cycle management optimization.

‍

The challenge is, that in the current environment of soaring labor costs, increasing revenue is incredibly difficult to achieve through hiring local talent to assist with the process. This is because the additional staffing costs quickly eat up any additional funds, sometimes even making the healthcare organization’s situation worse.

‍

For the businesses that succeed, the solution usually involves a partnership that enables a combination of outsourced staff augmentation strategies and using technology to streamline revenue cycle workflows.

‍

In this article, we’ll provide an overview of how healthcare providers can partner with a business process outsourcing company like Pharmbills to maximize profits.

‍

Keep reading to find out more. Or, if you would like to discuss how we can assist your organization to improve revenue, contact the Pharmbills team today.

Understanding Revenue Cycle Optimization

The first step to understanding revenue cycle optimization in healthcare is getting clear on what is involved in the revenue cycle (commonly referred to as revenue cycle management and why it`s important).

For most organizations, the revenue cycle follows the following broad pattern:

Payment policies
Intake and prior authorization
Charge creation and medical coding
Claims monitoring and denial management
Invoicing and tracking accounts receivable
Financial reporting and analysis

‍

In combination, each of these steps governs how healthcare providers are reimbursed by insurers and patients for the care they provide.

‍

When everything is working well, healthcare organizations reliably receive payment that reflects the cost of treatment. However, if any step of the revenue cycle breaks down or is running inefficiently, the financial health and budget of the business can suffer greatly.

‍

Looking at some of the problems often faced by healthcare providers can help to illustrate the importance of revenue cycle efficiency and optimization.

Common Revenue Cycle Problems

The most common issues that affect financial sustainability in healthcare are:

High claims denials rates. This is often due to insufficient or inaccurate documentation during intake, leading to delayed and unpaid claims from insurers
Inadequate reimbursement for services provided. If proper attention is not given to medical coding and billing, the payment received from insurers and patients may not be adequate to cover the costs of delivering care
Inefficient collections processes. Collections refers to the processes involved in receiving payment from insurers and patients. When collections processes are inefficient, healthcare organizations can experience cash flow and budget problems from payment delays and lost/missing payment.

‍

There are other revenue cycle problems experienced by healthcare organizations, but the examples above are the most common and have the largest impact on finances.

What is Revenue Cycle Optimization?

Now that we’ve explained the revenue cycle and common problems that can impact financial stability, understanding what is revenue cycle optimization is a little easier.

‍

In short, revenue cycle optimization involves deliberate actions to enhance one or more steps in the revenue cycle.

‍

The specific actions will vary by organization, but might include things like:

Becoming more efficient with coding and charge capture
Implementing new collections policies and processes to reduce delays in payments
Automating and improving workflows around claims monitoring
Streamlining patient invoicing and payment processes

‍

Overall, the best approach to improving financial performance in healthcare is to regularly analyze data to create an ongoing revenue optimization cycle. That way, areas of concern can be identified and addressed early before they substantially affect the financial health of an organization.

The Importance of Revenue Cycle Optimization in Healthcare

Revenue cycle management optimization is sometimes mistakenly seen as being only about increasing profits for healthcare providers. However, it is important to remember that a financially stable and sustainable healthcare system benefits everyone.

‍

For a recent example of the negative outcomes of financially unsustainable healthcare systems, we only need to look at the state of the nursing home sector in the U.S.

‍

Having arguably been hit harder by the COVID-19 pandemic than other healthcare sectors, a massive 579 nursing homes have closed their doors since the pandemic. This isn’t just bad news for business owners and investors in the sector, it’s a terrible outcome for society as a whole.

‍

When hospitals and healthcare systems are financially strong, just some of the benefits include:

More choice for consumers, as a greater range of providers can enter the market
Healthcare costs can start to come down, due to reduced operational costs and improved efficiency
Enhanced patient satisfaction and experience, because care is delivered in a more affordable and transparent way
Healthcare organizations can devote more resources to research and development to improve care

‍

After that overview of the importance of revenue cycle process improvement, let’s take a look at some practical strategies for revenue cycle optimization for healthcare providers.

Key Components of Revenue Cycle Management Optimization

Below is a list of the key components of revenue cycle management optimization that apply to healthcare organizations of all types. We cover the main features and best practices in each area, along with practical optimization tips.

‍

Keep in mind, some of the recommendations for revenue cycle process improvement do involve additional staffing resources and/or purchasing services offered by a revenue cycle management (RCM) vendor.

Where possible, most organizations will achieve the best results in enhancing healthcare revenue by partnering with an experienced business process outsourcing company, like Pharmbills. This is because such an arrangement enables the use of skilled offshore labor, which is available at a fraction of the cost of local talent.

‍

RCM Component

Features and Best Practices

RCM Component

Patient Registration and Data Collection

Features and Best Practices

Having good patient registration processes is important because this is where most of the essential payment-related information is gathered, such as demographic and insurance details. Any errors in these areas can result in costly and time-consuming delays with insurance claims and collecting payments from patients.

‍

Efficient prior authorization processes are also essential to ensure that before any treatment occurs, patients and providers can be clear on reimbursement rates and out-of-pocket costs. This enables informed choices to be made about the most efficient and affordable way to deliver care. It’s also crucial to avoid payment disputes and to comply with the No Surprises Act.These days, high-quality electronic health record (EHR) software can streamline many of the tasks related to patient registration and data collection. However, you will need to ensure staff are adequately trained in the use of the software and there are processes in place for identifying and addressing any errors.

RCM Component

Charge Capture and Coding

Features and Best Practices

Once intake and prior authorization have been completed, providers can go ahead and deliver care. However, waiting until after an episode of care is delivered to attend to coding and capturing a charge is a highly inefficient process, which is prone to errors from insufficient documentation and poor memory recall.

‍

Best results in charge capture and coding tend to come from when clinicians and medical billing specialists work together to accurately document each step of the care journey as it unfolds. This way, codes that provide maximum reimbursement for services rendered can be used.

‍

This approach doesn’t just benefit providers. Good coding and charge capture processes also result in improved patient financial experience through transparent billing and reduced out-of-pocket costs.

RCM Component

Claim Submission and Management

Features and Best Practices

When it comes time to submit a claim to an insurer for reimbursement, the claim must be generated then checked carefully for errors. If there are any mistakes on a claim it will either be returned for clarification or denied. Rectifying this is costly both from the staffing resources involved and delays in cash flow.

‍

Providers should have a clear process for claims submission, which involves not only creating the claim but checking it for errors before being submitted. Providers with high volumes of claims might choose to partner with a clearinghouse that will “scrub” the claim before submitting to increase the “clean claims” rate (percentage of claims fully reimbursed on first submission).

‍

Having some insurance claim denials and rejections is inevitable. The best way to mitigate costs associated with this is to have dedicated staff and/or software to check on the status of pending claims to address denials as soon as possible.

RCM Component

Payment Posting and Reconciliation

Features and Best Practices

Recording completed payments is known as payment posting. This is an essential part of revenue cycle optimization, as once insurance payments are posted, providers can move on to collecting any remaining payments from patients.

‍

With multiple ongoing claims at once, denials and rejections to manage, and staying on top of new claims being submitted promptly and accurately, payment posting can easily be neglected. This results in a large number of accounts still needing reconciliation. And, the longer reconciliation takes, the more likely it is there will be problems collecting payment.

‍

The best strategy for payment posting and reconciliation is to use good EHR and billing software in combination with staff oversight. While software does a reasonable job of identifying payments still to be posted and reconciled, addressing any issues still requires human intervention.

RCM Component

Payment Collections

Features and Best Practices

With a payment posted, there are still several steps that must be undertaken for collecting from patients. Firstly, an invoice must be generated. Invoices should be delivered in plain, easily understood language, with all of the information a patient needs to understand the status of their account.

‍

While software looks after much of this process, it’s best practice to have some human oversight to ensure payment requests are communicated to patients sensitively. At a minimum, this would include crafting a polite message to go along with automated requests for payment and reminders. It can also be helpful to flag any amounts outstanding for an extended period for a phone call to discuss the patient’s situation.

‍

Finally, offering flexible options like credit card payments, payment plans, and a patient portal where customers can manage their account can all help improve payment collections.

3 Advanced Strategies for Revenue Cycle Optimization

In addition to the points above, there are several advanced healthcare financial management strategies that organizations can utilize to further optimize revenue.

‍

The 3 strategies for revenue cycle optimization detailed below can be integrated with (or used alongside) most of the key components of revenue cycle management. The key to success is recognizing that these are methods to enhance the fundamentals of healthcare revenue cycle optimization, not stand-alone strategies.

Leveraging Technology and Automation
Over the past few decades, technology has woven its way into every aspect of healthcare delivery.

Now, even outside of high-tech environments like medical imaging and operating rooms, patients and clinicians are regularly engaging with software platforms, smart devices, and virtual care solutions.

The push to utilize technology to drive down healthcare costs and improve quality of care has become so strong that the Whitehouse recently confirmed its commitment to Delivering on the Promise of AI to Improve Health Outcomes.

At the heart of leveraging technology for the revenue optimization cycle is automation. Basically, if tasks can be shifted from overburdened clinicians and support staff to software and technology, the entire healthcare system can operate more efficiently and affordably.

Examples of tasks that can be automated for revenue cycle management optimization include:
‍
‍
The best part is that automating tasks such as those above doesn’t just reduce administrative costs. It also minimizes errors in areas such as insurance and billing, which improves patient financial experience.
- Intake and prior authorization processes
- Appointment booking and rescheduling
- Billing, invoicing, and collections
- Identifying errors in claims before submission
- Providing additional data to rectify claims denials
  
  The best part is that automating tasks such as those above doesn’t just reduce administrative costs. It also minimizes errors in areas such as insurance and billing, which improves patient financial experience.

Data Analytics and Reporting
Healthcare finance is incredibly complex, so it’s nearly impossible to achieve revenue cycle optimization for healthcare providers without adequate data.

Comprehensive reporting and data analytics enable a data-driven approach to addressing lagging indicators in the revenue cycle.

By analyzing data from sources such as electronic health records, billing information, customer feedback, and consumer behavior, organizations can identify the areas that are most likely to result in enhancing healthcare revenue. Furthermore, any revenue cycle optimization strategies that are implemented can be properly evaluated and adjusted to ensure success.

Some of the key metrics to monitor for revenue cycle efficiency include:
- Clean claim rate
- Days in accounts receivable
- Number of unpaid or bad debts
- Denial rate
- Payment rates for payer contracts
  
  Collecting and analyzing data on the metrics above allows healthcare organizations to make strategic decisions about finances, leading to revenue cycle process improvement.

Integration of Clinical and Financial Systems
To achieve optimum financial performance in healthcare, clinical and financial systems must be aligned.

In the modern healthcare environment, most data is captured electronically in a clinical system (such as an electronic health record). Then, once care is complete, clinical data is manually removed and transferred to a financial system for processing (like medical billing software).

While this separated arrangement can work, it results in a tremendous amount of costly errors. Most of the problems arise from human error, where mistakes are made as data is transferred from clinical to financial systems.

Fortunately, there are now several high-quality all-in-one software solutions that can assist with the integration of clinical and financial systems. It can be daunting to take the leap and change software providers. But the fact is, if the financial sustainability of your organization is suffering, it can be well worth making the change.

In terms of strategies for successful implementation, carefully vetting RCM vendors and software providers, along with allowing adequate time and resources for staff training in new systems will help ease the transition. For those not willing to look at an all-in-one solution, some providers of clinical and financial software offer products that can integrate with other brands. Just be sure to check on compatibility before purchasing.

Revenue Cycle Optimization for Healthcare Providers

Healthcare is a broad field made up of many different specialties and care delivery environments. Therefore, it follows that revenue cycle optimization for healthcare providers may vary depending on the setting.

‍

Furthermore, it’s important to remember the patient experience in revenue cycle optimization. By far, the organizations that are most successful at enhancing healthcare revenue do so in a way that is mutually beneficial for care providers and patients

‍

Tailoring Strategies to Different Healthcare Settings

While there is some overlap, the needs of hospitals vs. outpatient clinics when it comes to revenue cycle process improvement tend to vary.

‍

For hospitals, maximizing efficiencies with intake, prior authorization, and costs capture tends to yield the biggest results. Whereas for outpatient clinics, ensuring efficient scheduling (to reduce no-shows) and streamlining billing and payment processes are usually effective for revenue cycle management optimization.

‍

Two other settings that require unique strategies for revenue cycle optimization in healthcare are behavioral health and nursing homes. You can read our full guides to pain points in these industries in the articles below:

‍

Patient-Centric Revenue Cycle Management

Patient experience, defined as the range of experiences consumers have with their healthcare system, is increasingly recognized as a key indicator of high-quality care.

‍

However, data is now showing that patient experience isn’t just good for improving satisfaction and outcomes—it can also be beneficial for the financial growth and success of healthcare organizations.

‍

Patient-centric revenue cycle optimization refers to strategies that both improve a provider's bottom line and improve patient experience. Wherever possible, changes such as this should be the priority of any organization.

‍

Examples of patient-centric revenue cycle optimization are:

Transparent and easily understood bills
Giving consumers the option of online appointment scheduling
Patient portals where customers can manage their account, access test results, make payments, and more
Online intake and prior authorization procedures that patients can complete from the comfort of their own home

‍

All of the examples above are proven to help improve patient engagement and satisfaction. With the move to an increasingly consumer-centric healthcare system, organizations that implement these measures are likely to be rewarded with more loyal and engaged customers.

Challenges and Solutions in Revenue Cycle Optimization

Despite its benefits, revenue cycle optimization in healthcare isn’t without its challenges.

‍

Common challenges faced by healthcare providers include:

High rates of healthcare worker burnout make it difficult to ask existing staff to take on new revenue cycle optimization duties
Increased labor costs reduce the return on investment from hiring additional staff to assist with revenue cycle optimization
Rising costs of delivering care in an environment of stagnating reimbursement rates
Increasing complexity of insurance billing requirements
Evolving models of care (such as value-based care and at-home care) with uncertain financial incentives

‍

In terms of practical solutions to overcome these challenges, the one with the most promise is tech-enabled business process outsourcing (BPO).

‍

In a nutshell, with cross-border digital work now becoming the norm, healthcare organizations from countries with high labor costs can now engage quality offshore talent at only a fraction of the cost of local staff.

‍

With a partner like Pharmbills it’s simple, fast, and affordable to engage administrative and technical staff on a short, medium, or long-term basis to assist with any of your revenue cycle optimization needs.

Conclusion

In the current environment of increasing costs and decreasing reimbursement, it’s never been more important for healthcare organizations to find creative strategies for revenue cycle optimization.

‍

When done correctly, healthcare revenue cycle optimization benefits providers, patients, and the wider community. It ensures healthcare organizations can grow and expand, offering more choice and increased availability of care for consumers.

‍

The future of revenue cycle optimization in healthcare will center on enhancing strategies that are mutually beneficial for providers and patients. Organizations that embrace these now can experience significant gains in revenue now, with increased growth in volume and profit margins in the future.

‍

If you would like to discuss the affordable and effective outsourced revenue cycle optimization services available through Pharmbills, please contact us today.

Do you want to develop your custom solution?

Book a Call →

Table of Contents