in infosearch BPO
Olga Melnichenko
Revenue Cycle Manager

If you work in healthcare and have anything to do with revenue cycle management (RCM), the word audit might strike fear into your heart.

And it’s true. For those who are unprepared and don’t have good systems in place, an RCM audit can be incredibly stressful.

From gathering the requested data to compiling it in the correct format and understanding how to interpret and respond to the results, there is a lot that goes into a revenue cycle audit.

Fortunately, whether you’re preparing for an internal review from your organization or an external audit from a regulatory body or payer, having a solid understanding of what is involved in an audit can make the entire process run more smoothly. 

In this article, we’ll cover every step of an RCM audit, from the pre-audit phase to developing a strategic plan based on the results. Furthermore, we’ll explain how your organization can implement regular activities to be fully prepared for scheduled and unexpected audits whenever they occur.

Like most things to do with compliance in healthcare, there can be significant staffing expenses involved in keeping up with standards and regulations related to revenue cycle audits. 

At Pharmbills, we help organizations reduce the costs involved in healthcare compliance by providing affordable business process outsourcing (BPO) and staff augmentation solutions

To find out how our team of experts can help with all aspects of RCM, including prior authorizations, data analysis, managing accounts, and more, contact us today.

The Anatomy of a Revenue Cycle Management Audit

The first step to being prepared for a revenue cycle management audit is becoming familiar with each step of the process.

Broadly speaking, an RCM audit involves 3 steps:

  1. The pre-audit phase
  2. Conducting the actual audit
  3. A post-audit phase

To help you understand RCM audit meaning, we’ll cover these 3 steps below.

  1. Pre-Audit Phase: Setting the Stage for Success

The first step of an RCM audit is to get clear on the purpose of the audit. This will help you prepare your team to approach the task in the right way, increasing the chances of a positive outcome.

Common reasons for a revenue cycle audit include:

  • An insurer, payer, or funding body has requested a review of RCM in audit
  • A hospital or health service is conducting an internal audit to review its entire revenue cycle
  • Due to an identified problem (such as high rates of claim denials), an organization is attempting to improve its financial health through RCM audits

During the pre-audit phase, leaders need to define the scope, criteria, and objectives of the audit. 

This usually includes selecting the data that will be analyzed, deciding on the sample size to be assessed, setting a timeline for the audit, and identifying any additional tools or resources that might be required.

Once all of the above has been clarified, it’s time to assemble an audit team. Try to give each member of the team specific responsibilities with a clear goal. For example, one person might be responsible for analyzing medical billing, with another looking at accounts payable.

  1. Conducting the Audit: A Step-by-Step Guide

With clear goals and the project team in place, the next step is to audit RCM data.

Data must first be collected. This can be thought of as gathering the essential pieces for the audit. 

Depending on the scope, data sources might include:

With all the required data on hand, the RCM audit team now needs to move to the analysis stage. 

By analyzing data against relevant KPIs (such as denials rates, time to payment of accounts, under/over coding errors, etc) it’s possible to identify bottlenecks and areas for revenue cycle management improvements. 

To streamline the data analysis stage, it can be helpful to create a revenue cycle audit checklist. 

This will help members of the audit team systematically review the data against KPIs, turning the collected data into powerful revenue-enhancing insights. A formal report of audit findings is also usually required, so the checklist and related insights can be incorporated into the report.

  1. Post-Audit Phase: Beyond the Findings

Specific post-audit actions will vary according to the nature of the audit and the findings.

For example, an external audit by a payer might identify coding errors, where a percentage of services provided didn’t match reimbursement. In this case, the healthcare organization may be liable to pay back money for any instances of overbilling. To maintain the contract, the payer might also ask for details about how the provider plans to avoid coding errors in the future.

Another example is that an internal review might identify an unusually high rate of late payment and collections challenges. In this scenario, managers in the organization would likely meet with key stakeholders to create a plan to reduce the time to payment of patient invoices.

Even when a RCM audit does not identify major issues of concern, there will always be useful information that can be utilized to develop a strategic action plan to enhance revenue. This is because a good revenue cycle audit will identify areas with scope for optimization, not just those with sub-par performance.

Finally, once changes have been made, it’s essential to regularly monitor the progress of implemented changes. While a full revenue cycle management audit won’t always be required, the audit process is an effective, repeatable, and objective way to benchmark progress.

Key Components of an RCM Audit

When looking at how to perform an RCM audit, it can be helpful to consider each component of the revenue cycle.

What RCM stands for in audit includes all aspects of revenue cycle management, such as:

  • Intake and prior authorizations
  • Medical coding and charge capture
  • Claims submission and tracking reimbursement
  • Denial rates
  • Payment collections

Below is a table outlining the key components of an RCM audit, with examples of what data might be collected and analyzed for each.

Audit component
Key features
Audit component
Patient Registration and Data Accuracy
Key features

Intake and patient registration are the first steps of the revenue cycle. As a result, this is often the beginning point of revenue leaks, as any errors here can impact all steps down the line.

The most important components of patient registration are:

  • Collecting accurate demographic and financial information
  • Verifying insurance coverage
  • Pre-authorization for any planned treatment

These steps outline the parameters of financial arrangements between provider, patient, and insurer. By the end of intake and registration, a patient should have a clear idea of any out of pocket costs for treatment.

The audit RCM focus here is on measuring the accuracy and efficiency of intake and registration processes. The aim is to identify where errors or inefficiencies might occur, so plans can be put in place to rectify them.

Audit component
Charge Capture and Reconciliation Processes
Key features

Charge capture refers to the process of documenting services provided, so that an accurate claim can be submitted to an insurer for reimbursement. Reconciliation occurs when reimbursement is received after a claim is submitted.

Sources of data involved in charge capture and reconciliation include:

  • Clinical documentation
  • Medical coding reports
  • Billing software

By far, the most common problems picked up in a revenue cycle audit involve insufficient or inaccurate clinical documentation and coding errors. When clinical documentation is lacking, there is a risk that coding may not accurately reflect the services provided. This greatly increases the risk of undercoding or overcoding.

Audit component
Coding Accuracy and Compliance
Key features

Once a service has been provided, clinical documentation must be translated into the relevant medical codes to claim reimbursement. 

While revenue is obviously the main focus of audit RCM procedures, it’s important to note that coding is also a component of legal record keeping. Coding should accurately reflect the level and complexity of care not just to ensure adequate reimbursement, but also to comply with legal regulations around clinical documentation.

The two biggest coding problems identified with RCM in audit are:

  • Undercoding - When the code(s) used result in a reimbursement lower than is appropriate for the care delivered
  • Overcoding - When coding errors result in reimbursement above the agreed-upon cost for care documented in the patient record
Audit component
Billing and Claims Processing
Key features

With care delivered and coding recorded, the next step in the revenue cycle is submitting a claim for reimbursement.

Considering that one of the main reasons for an audit is a request from a payer/insurer, looking at billing and claims processing is part of most revenue cycle audit checklists.

Data collected in this area is likely to include:

  • Time from care delivery to claim submission
  • Accurate (clean) claims rate
  • Error rate on claims
  • Compliance with payer requirements (such as using the right format and supporting documentation)

Because problems with claims can significantly impact cash flow, some providers use a medical billing specialist or clearinghouse to “scrub” each claim before submission. This can identify and rectify any claims errors before they are submitted, making the entire process more efficient and less resource-intensive.

Audit component
Payment Posting and Reconciliation
Key features

Payment posting describes the time when the healthcare provider records payments received into their billing system. Payments are said to be reconciled once details of each payment (amount and payer) are allocated to individual services.

Insights gleaned from analyzing this data is one of the main benefits of RCM audit, as it allows providers to gain a true and accurate picture of their costs vs. revenue.

For payment posting and reconciliation, a revenue cycle management audit aims to identify data on:

  • Unreconciled accounts
  • Discrepancies in payments (such as under or over payments)
  • Congruence between estimated and actual out-of-pocket costs for patients
Audit component
Denial Management and Appeals Process
Key features

Having some claims for reimbursement denied is an unavoidable part of doing business as a healthcare provider. However, considering the negative impact denials have on cash flow and staffing resources, it’s wise to take steps to minimize them.

An RCM audit usually focuses on three components of denials:

  • Overall denials rate
  • Time to follow up a denial
  • Percentage of denials successfully appealed

Professional RCM audit services should be able to tell you where results from the above measures sit regarding industry averages, which can be helpful in identifying which areas to focus on.

For example, a provider may not have a high denials rate, but could have longer than average time to follow up and a low success rate with appeals.

Audit component
Patient Financial Responsibility and Collections
Key features

The final step in the healthcare revenue cycle is patient collections. Patient collections refers to the range of tasks involved in collecting payments from patients for care provided.

A revenue cycle management audit checklist should include things like:

  • Time from reimbursement to patient invoice
  • Error rate in invoices sent
  • Number of overdue accounts
  • Overview of bad debts
  • Time to follow up late payments

An internal review might also consider factors such as payment options offered, processes for dealing with overdue accounts, and trends in promptly paid vs. difficult to collect accounts.

The Impact of RCM Audit on Healthcare Providers

If we take a step back from the review process to consider what is RCM in audit, it’s easy to see some of the benefits of a revenue cycle audit.

In short, the audit process involves systematically reviewing every aspect of revenue cycle management. Therefore, if the review is approached with a business improvement mindset, it’s clear that organizations can improve financial health through RCM audits.

To explore this topic further, let’s look at the 4 main benefits of RCM audit.

  1. Financial Health: Boosting Revenue and Reducing Leaks

At an overarching level, audits help healthcare organizations achieve revenue cycle enhancements and improve overall financial health. This is done by identifying opportunities to ensure providers are being paid completely and on time for care that is delivered.

Ways an RCM audit can improve financial health include:

  • Achieving maximum levels of reimbursement
  • Ensuring a healthy cash flow and revenue stream
  • Reducing revenue “leaks,” such as claims denials and unreconciled accounts
  • Enabling clear insights into all relevant financial data

While it’s tempting to avoid audits when finances are tight, this is often when providers can benefit the most.

For example, with nursing homes currently facing an unprecedented amount of financial challenges, revenue cycle audit tools can be invaluable for identifying opportunities to maximize cash flow in a difficult environment. 

  1. Compliance and Regulatory Adherence: Navigating the Legal Maze

For several years, providers have been warning that compliance costs are becoming excessive. In fact, a recent American Hospitals Association report found that providers spend nearly $39 billion USD each year solely on non-clinical regulatory requirements.

The challenge is that there is no way to avoid operating within the legal maze that healthcare has become. 

The best hope for providers is to become more efficient with compliance-related activities. And, one of the strategies organizations are increasingly employing is the use of business process outsourcing (BPO) partners.

BPO partners enable healthcare providers to utilize affordable, yet highly-skilled offshore contractors to manage the many back-office tasks involved in compliance and regulatory adherence. 

For example, a US-based healthcare company may hire BPO contractors to assist with things like:

  • Prior authorizations
  • Managing accounts receivable and accounts payable
  • Medical billing and coding
  • Bookkeeping and accounting
  • Data tracking and analysis

The best part is, by partnering with an organization experienced in healthcare, like Pharmbills, the staffing costs involved in compliance and regulatory adherence are significantly reduced compared to hiring local staff.

  1. Operational Efficiency: Streamlining Processes for Better Outcomes

With reimbursement denials and delays worsening, and no relief from the increased cost of providing care in sight, improving operational efficiency is one of the few levers left that providers can pull to improve their finances.

Far from being simply a compliance-based activity to appease management or payers, RCM audit services can be a powerful tool to identify opportunities for operational efficiencies. This is because an RCM audit doesn’t just look for lost revenue, it also explores ways existing processes can operate more efficiently.

With recent advances in medical software and BPO services, many providers are successfully reducing the administrative burden involved in a wide variety of RCM tasks. A well-produced audit RCM report will identify where scope exists for efficiencies in such tasks. Plus, it will quantify the likely cost savings to help you calculate how changes will affect your budget.

  1. Patient Satisfaction: The Ultimate Goal

While a lot of what is assessed when reviewing RCM in audit is financial data, it’s important to keep the ultimate goal of audit in mind—to improve patient satisfaction.

Without exception, the greatest benefits of RCM audit are achieved when the review identifies changes that are good for both patients and providers. Such strategies can improve health service profitability and provide a tangible benefit to consumers.

To illustrate this point, here are two examples:

  • A health service streamlines its intake and prior authorizations process. 

This benefits the health service by reducing staffing costs and minimizing billing errors that can lead to claim denials. For patients, it results in a faster and easier intake process, with prompt and accurate information about treatment-related costs 

  • Extra administrative support is provided for clinical documentation and coding.

With the added support, error rates in coding decrease and clinicians have more billable time. This additional capacity can go toward servicing more patients, helping to ease pressures around access to care.

In terms of RCM audit best practices, ensuring that patient satisfaction remains the key focus should be the top priority. The health services that take this approach can achieve a significant competitive advantage in the market, as they create service models that are both highly profitable and in demand from consumers.

Technology's Role in RCM Audit

It might seem like tech has only recently become a big part of healthcare. However, the first electronic medical record (EMR) was developed way back in 1972!

Since then, technology adoption by healthcare providers has increased in waves. 

Typically, a new tech product (such as EHRs or telehealth) will be used by a small portion of providers. Then, upon seeing the benefits, its use becomes widespread. Once mass adoption has taken place, technology providers iterate and improve the product, often with many new players entering the market and increasing competition.

Perhaps the two biggest recent advancements in healthcare technology have been medical software and AI. We’ll explore both of these in more detail below.

Leveraging Software for Efficient Audits

Electronic health record (EHR) software has transformed how healthcare businesses utilize data.

While EHRs started as relatively simple digital record keeping software, they have expanded far beyond this scope.

Now, comprehensive and integrated EHRs are utilized for virtually all of a healthcare organization’s clinical and non-clinical activities. They are also involved in the entire revenue cycle, from pre-registration to charge capture and patient collections.

This is good news for providers undertaking an RCM audit because it means the most time-consuming task of audit, collecting data, can now be automated.

With the click of a button, a high-quality integrated EHR can gather data on most of the KPIs covered in a revenue cycle audit checklist, such as:

  • Patient registration details
  • Coding errors
  • Clean claims rates
  • Denials and denial appeals rates
  • Reconciled vs. unreconciled accounts
  • Time to payment for services rendered

If you aren’t familiar with how to use software to gather this data, an RCM audit services provider can help, or your EHR customer service representative may also be able to assist.

The Future of RCM Audits: AI and Machine Learning

We’re still waiting to see exactly how the integration of AI and machine learning into healthcare data management will unfold. 

At this stage, the two primary benefits for RCM in audit processes are enhanced data analysis techniques and real-time data monitoring.

Enhanced data analysis involves using AI and machine learning to analyze massive data sets to generate insights that were not previously available to most providers.

Examples include:

  • Large providers with more than one site of operation uniting several data sources to conduct a whole-of-operations RCM audit
  • Utilizing large national data sets to benchmark an organization’s profit margins compared to the industry average
  • Easily projecting how changes in compliance or regulatory requirements are likely to impact revenue
  • Rapidly modeling changes suggested post-audit to calculate their expected impact on revenue

Real-time data monitoring has the potential to change how we see the entire RCM in audit.

Typically, audits are big, time-consuming events that are done infrequently due to the staffing resources involved. However, with tech-enabled real-time data monitoring, systems can be set up to continuously evaluate RCM data. 

For example, following a formal audit, an organization could set parameters around data monitoring for coding errors and denials rates. An automated report on each could be provided daily or weekly, with immediate alerts for any trends that are out of the norm. This would allow the organization to identify and address any problems before they negatively impact revenue. 

Challenges and Best Practices in RCM Audit

While the needs of each provider will vary, there are several challenges and RCM audit best practices that apply to most healthcare services. We’ll cover them all below.

Common Pitfalls and How to Avoid Them

Three of the most common pitfalls with RCM audit are:

  1. Failing to get buy-in from staff. Conducting a revenue cycle audit involves the participation of staff from all areas of a healthcare service. Just some of the people likely to be involved include receptionists and data-entry clerks, clinical staff of various backgrounds, and accounting and finance professionals. Start early by emphasizing that this is a team effort. Also, be open to any support your staff may need to perform audit tasks that go above and beyond their regular duties.
  1. Only conducting audits when in crisis. Deciding to audit RCM data is common during crisis periods. However, the best results tend to come when revenue cycle audit tools are used regularly. This is because outside of crisis times, teams are more likely to identify opportunities for process enhancements, not just revenue leaks. In this situation, revenue cycle management improvements can be implemented in a more sustainable fashion, rather than a rapid reaction to financial stress.
  1. Not considering the patient experience. We’ve already covered this point, but it bears repeating. The most effective revenue cycle interventions are those that improve patient satisfaction in addition to profit margins. When this mindset is embraced, organizations can avoid the short-term thinking which results in initiatives that might boost revenue immediately, yet harm it in the long run through a decline in patient satisfaction.

Best Practices for a Successful RCM Audit

To round up, here is a list of our 10 top tips for how to perform an RCM audit.

  1. Clearly define relevant KPIs
  2. Leverage technology to streamline the process
  3. Develop a clear scope and goals
  4. Target high-value, high-risk steps in the revenue cycle
  5. Clearly communicate the purpose of the audit to team members
  6. Engage professional RCM audit services for guidance and support
  7. Set realistic timeframes for each stage (pre-audit, conducting the audit, post-audit review)
  8. Use a developmental lens, where staff are encouraged to upskill throughout the process
  9. Hire additional temporary staff (eg., BPO services) to fill any resource gaps
  10. Develop a revenue cycle process improvement plan from audit results


A well-functioning revenue cycle is essential to any healthcare organization that wants to stay competitive in the current market. One of the most effective tools to uncover revenue leaks, identify inefficiencies, and find lost revenue opportunities is an RCM audit. 

However, many organizations see audits as a compliance-based activity to be done only when absolutely necessary, not as an opportunity for process improvement.

The fact is, conducting regular RCM audits can be of tremendous strategic value for forward-thinking healthcare businesses.

When done correctly, an RCM audit examines each step of the revenue cycle, providing valuable data that can be used to both enhance profit margins and improve patient satisfaction.

If you would like reliable, affordable, and efficient support to conduct an RCM audit, the business process outsourcing services available through Pharmbills can help. 

Our offshore teams can assist with reviewing, analyzing, and enhancing almost every step of your revenue cycle, at a fraction of the cost of hiring local talent.

To find out more, contact us to see how you can get started today.

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Mariia Treibitch
Reuven Kogan
Sia Malyshenko
Customer Success Manager
Peter Druchkov
Onboarding Specialist

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