What is Revenue Cycle Management (RCM) and Why Is It Important for Healthcare?

The main job of a healthcare provider is to treat patients and save lives. But in addition to this patient responsibility, performing administrative and clinical functions efficiently is equally important for a provider or healthcare organization's financial health. Proper revenue cycle management is critical for healthcare facilities that want to provide excellent patient care while keeping healthcare costs down and staying on top of payment collections.

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Please continue reading to learn more about the revenue cycle management process. This revenue cycle management explanation will help you understand how RCM can benefit the healthcare industry in general and your practice in particular.

What is revenue cycle management?

Revenue cycle management means a series of steps in a financially driven process that allows health care providers to receive patient payments and insurance reimbursement in an efficient and timely manner. The goal and meaning of revenue cycle management is to streamline the entire process, starting with patient scheduling and ending with collecting payments for medical services.

What is an RCM?

The 7 basic steps in RCM include:

• Registration and setting of patient schedules (patient intake).
• Verifying the patient's insurance information, including eligibility verification and pre-authorization requirements.
• Ensuring awareness of the patient's financial responsibility versus insurance coverage through patient statements.
• Providing efficient care delivery and clinical documentation of the visit.
• Capturing the charge and completing proper medical coding.
• Verifying claim submission requirements, submitting the claim, posting payment, and reconciling accounts receivable.
• Completing back office functions such as patient billing, posting the final payment to the patient account, handling claim rejections, denials, and appeals, and analysing under and over payments.

Revenue Cycle Management Challenges and Solutions

Revenue cycle management starts the minute the patient arrives at a healthcare facility. The following are the steps in revenue cycle management and the challenges commonly encountered during a patient's journey while receiving care from a healthcare provider.

Pre-registration and registration

• Data entry of patient demographic information and medical history by the healthcare organization.
• Identifying the proper health insurance companies.
• Finding out insurance company preauthorization requirements and policy limitations.

Patient encounter

• Documenting the encounter in the electronic health record to avoid delayed payment by the insurance provider.
• Ensuring the patient population is aware of their financial responsibility.

Charge capture

• Entering the correct CPT or HCPCS code into the medical billing software to avoid rejections or delays from insurance payers due to improper coding.

Claim scrubbing

• Identifying claim denials in a timely manner.
• Denial management, such as submitting adequate details for denied claims to complete the patient payment process.

Financial process analysis

• Analysing the remittance advice (RA) and explanation of benefits (EOB) after payment posting to understand underpayment and overpayment issues.
• Determining if a denied claim can be recovered or should be written off.

It can be challenging for healthcare systems to manage both the business and clinical sides of caring for patients. Outsourcing the revenue cycle management process to a healthcare financial management association such as Pharmbills can overcome these challenges. This can ensure not only that medical bills are paid in time, but also that patient satisfaction remains high even in the face of increasing patient volume at a healthcare practice. Moreover, outsourced revenue cycle management can help healthcare organizations stay on top of ever changing healthcare regulations.

Factors That Can Affect RCM Processes

Collecting Payments

When patients are responsible for paying health systems, it can be a tightrope walk to ensure medical bills are paid on time without being overly pushy, which can lead patients to seek care elsewhere. The solution is a healthcare revenue cycle management system that educates staff and patients about financial obligations, timelines, payment methods, and payment plans.

Capturing and Sharing Information

If the front office of a medical practice does not capture correct patient information, including insurance coverage and eligibility, it can lead to delays in payment from the insurance company. An efficient healthcare revenue cycle management system can streamline front end administrative tasks to not only expedite claims processing but also help uninsured patients understand the financial process and their obligations.

Tracking Claims

One of the key revenue cycle management goals is collecting patient payments. This is heavily dependent on timely and comprehensive communication of insurance information with the insurance provider. It includes following up claims after they are submitted to keep track of paid, pending, rejected, and denied claims. Analysis of the billing processes can further reduce recurrences in the future.

Acquiring Healthcare IT Infrastructure

Healthcare organizations that do not use good healthcare IT infrastructure are at risk of developing severe revenue cycle complications. On the other hand, an electronic workflow that coordinates front and back office operations can ensure healthcare providers get paid on time and can focus on patient care.

Benefits of Outsourcing Revenue Cycle Management

Outsourced revenue cycle management has several advantages, such as:

Preventing Claim Denials

At most healthcare practices, 9 out of 10 claims are denied due to easily fixable technical issues like wrong healthcare data or improper medical coding. Revenue cycle management (RCM) can identify errors, resolve them, and prevent them from occurring in the future. In the long run, this saves both time and money on investigating and appealing denied or rejected claims. A large healthcare organization can potentially save millions of dollars by reducing repeated errors in medical billing.

Increasing Focus on Medical Services

Healthcare revenue cycle management can help free up staff from administrative tasks like following up claim denials. This ensures that the staff's time and energy remains focused on providing the best possible patient care. Ultimately, this results in highly satisfied patients, word of mouth publicity, increasing patient volumes, and more revenue for the practice.

Preventing Healthcare Fraud

A healthcare fraud investigation is not only expensive but can cost healthcare providers their reputation. Healthcare fraud includes providing poor quality procedures and services, doing medically unnecessary procedures, allowing unqualified or unsupervised staff to offer services, billing for services that were never rendered, or billing procedures at higher reimbursement rates (upcoding). Healthcare revenue cycle management can ensures accurate medical billing to avoid healthcare fraud.

Avoiding Patient Fraud

Patients sometimes engage in fraud by providing inaccurate insurance information or engaging in medical identity theft to receive medical services for which they are not entitled. An efficient RCM process includes verifying the patient's insurance information and confirming the patient's identity during the pre-registration step.

Increasing Revenues

A healthcare facility can significantly increase their revenue through revenue cycle management. RCM ensures accurate medical billing, timely payment collections, and fewer technical errors, claim denials, and fraud investigations.

Why is Revenue Cycle Management Important?

Healthcare RCM is important to ensure that every step of the financial process is performed accurately and thoroughly. This helps to prevent lost revenue and delayed payments. But the benefits of healthcare revenue cycle management are not limited to financial gains alone. Healthcare providers and their staff who run financially efficient practices are able to focus more on patient care and less on administrative tasks. Ultimately, this translates to happy patients, more patients, and more revenue.

Revenue Cycle Management Best Practices

Here are some key best practices in healthcare revenue cycle management that can help healthcare organizations maximize collections, retain old patients, and garner new patients, while maintaining high levels of medical care and satisfaction among patients.

Educate Front Office Staff

Staff education on front office collections and processes is key to ensuring that RCM takes off on the right foot. The front office staff gather patient healthcare and insurance data during registration and appointment booking. These individuals should therefore be well-trained in not only collecting data accurately but also ensuring that patients understand their financial obligations. Staff can be given communication scripts to ensure complete information is provided to patients. This is a key step to ensure timely revenue collection and satisfied patients.

Streamline Insurance Eligibility Verification

There is nothing worse than an unexpected medical bill. Using automated systems for insurance eligibility verification can prevent errors in claim submission and increase transparency in informing patients about their out-of-pocket costs upfront before healthcare services are provided. This not only speeds up claims processing but also earns goodwill for healthcare providers for being transparent.

Use Customized Templates

Using customized EHR/EMR templates is a step in the RCM process that ensures complete and accurate patient data is captured during every encounter with a healthcare provider. Review of claim denials further helps identify areas of improvement and leads to the development of even better templates over time.

Invest in Integrated Software

The use of integrated practice management and EHR software can save time and reduce errors through the exchange of data between systems.

Enhance Back Office Best Practices

• The use of automated claim submissions and e-remittances can reduce payment turnaround time. The usual payment timeline for Medicare patients is 7-14 days and for patients with a commercial insurance company is 14-21 days.
• Offering online payment methods to patients increases collections and improve satisfaction in the patient population due to convenience.
• Develop a follow-up system for billing processes to track claim denials.
• Analyse revenue goals and identify areas of improvement.
• Implement hardware and software solutions necessary for proper revenue cycle management.
• Outsource RCM to a vendor for hassle-free revenue cycle management.