Ensuring a steady flow of revenue is paramount for healthy healthcare organizations. It’s no longer enough to provide exceptional patient care; healthcare providers also need to be savvy about their financial processes. This is where a robust revenue cycle management process, often shortened to RCM, comes into play.
You might be surprised to learn just how much goes into getting a healthcare organization paid. So, if you’re ready to unlock the mysteries of this critical system and see how a smooth revenue cycle management process keeps the lights on at your doctor’s office, read on.
There are many benefits to figuring out how to improve the healthcare revenue cycle. First, denied claims cause delays in the system, but all too often end with the denial. The average cost to rework a denied claim is $25, and approximately 65% of denied claims are never reworked.
Lost productivity is another big reason to figure out how to improve your healthcare revenue cycle cleaned up. Automating revenue cycle management can reduce administrative costs by up to 75% and as of now, healthcare providers lose an estimated 3-5% of net revenue due to inefficient revenue cycle processes
Revenue cycle management (RCM) is the intricate dance of managing patient financial information, insurance claims, and payments for services rendered in a healthcare setting.
Demystifying the RCM Process: A Step-by-Step Breakdown
Now, the real work begins—understanding the nuts and bolts of the revenue cycle management process. A typical healthcare RCM cycle, like many processes in the medical world, can be broken down into several interconnected steps:
1. Patient Scheduling and Registration
This first step, much like a first impression, can set the tone for the entire process. Efficiently gathering patient details is crucial—things like demographic information, insurance coverage, and even prior medical history all play a role.
A smooth registration minimizes hiccups further down the line, making things easier for both the patient and the healthcare provider. For example, during patient registration, you can verify insurance eligibility to avoid issues later.
2. Insurance Verification and Pre-Authorization
A crucial, and sometimes dreaded, part of the RCM process. In simple terms, this involves confirming the patient’s insurance details and ensuring the services they need are actually covered by their insurance plan.
It’s about avoiding those surprise “not covered” bills that can be frustrating for everyone. Some healthcare services might also require pre-authorization— basically, getting the green light from the insurance provider before carrying out the service.
3. Charge Capture and Medical Coding
This is where things get a little more technical. After a patient receives medical services, these services have to be documented and translated into billable fees.
Healthcare providers rely on standardized codes (like ICD-10 and CPT codes) to represent the diagnoses and procedures performed during the patient visit. This coding process, similar to speaking a secret medical billing language, allows for uniform communication between healthcare providers and insurance companies.
Accurate medical coding is important for receiving the correct reimbursement from insurance companies. Mistakes in medical coding can lead to claim denials or delays in payment.
4. Claims Submission
Remember that insurance verification we talked about? This is where it really comes in handy.
After the encounter is properly coded, the healthcare provider creates a claim for reimbursement. These claims act as official requests sent to the patient’s insurance company for payment for the provided healthcare services.
These claims must be meticulously prepared to increase the chance of quick and accurate processing. Errors at this stage? You guessed it, those dreaded claim denials and delays (which can be eliminated with more accurate records using AI tools like Magical).
To streamline the process, electronic data interchange (EDI) systems are often used. Imagine it like this: instead of a doctor hand-delivering a bill on horseback, they’re now using email. Much faster.
5. Claims Adjudication and Payment
Here, the insurance company takes center stage, carefully reviewing the claim to determine its liability. They check the fine print - is the service covered under the patient’s plan? Are the billed charges accurate? Was that pre-authorization obtained?
It’s all about making sure the i’s are dotted and the t’s are crossed before any money exchanges hands. This phase can be relatively quick and painless for clean claims, but a single coding error or missing piece of information can trigger a lengthy back-and-forth process between the healthcare provider and the insurance payer.
Remember those potential compliance risks highlighted by Revcycle Intelligence? This is where those come into sharp focus. Navigating them efficiently is essential to prevent revenue loss.
6. Payment Posting & Patient Billing
Once the insurance company makes its decision on a claim (paying in full or partially, denying the claim, or demanding further investigation), this information must be carefully documented within the healthcare provider’s system. The patient’s account then needs to be updated.
If there’s any remaining balance— maybe a copayment, deductible, or charges not covered by insurance - it becomes the patient’s responsibility. The healthcare provider issues a bill, marking the beginning of (hopefully) a quick and seamless payment collection process.
7. Collections
No one enjoys playing debt collector, especially not healthcare providers. Unfortunately, unpaid patient bills are a reality.
The collection process involves sending gentle reminders (or not-so-gentle ones, if needed) about outstanding payments. The provider’s financial team might negotiate payment plans or use debt recovery services as a last resort.
While providers hope for swift and voluntary payments from patients, efficient collection practices are crucial to minimize bad debt and ensure consistent cash flow. This process often involves managing patient accounts, sending out invoices and statements, and following up on past-due accounts.
8. Reporting & Analysis
Much like reviewing your bank statements, keeping tabs on the health of a revenue cycle management process requires careful monitoring. Providers should routinely examine key indicators - how long does it typically take to collect payments? How many claims are being denied and for what reasons?
These insights provide valuable opportunities to identify problem areas and continuously streamline their revenue cycle. It’s all about finding the perfect balance—ensuring a healthy bottom line while keeping patients happy.
And if those denials keep piling up because of preventable errors? That’s a pretty good sign some team members need a refresher on coding protocols or insurance verification processes.
In addition to identifying areas for improvement, data analytics can also be used to track financial performance, measure the effectiveness of RCM processes, and identify trends in healthcare utilization.
That, in a nutshell, is the rollercoaster ride that is the healthcare revenue cycle management process. It can seem complex and overwhelming, and rightly so, there are a lot of moving parts.
FAQs about revenue cycle management process
FAQ 1: What are the steps of revenue cycle management?
The revenue cycle management process has several interconnected steps. Some experts recognize only 7, while others claim it is comprised of 17 or more, it all depends on how granular you choose to get.
However, a few key steps will always be present in one form or another: pre-service, charge capture, claims processing, payment, and collections. Each one represents an essential aspect of managing the financial side of healthcare and when well-executed, ensures the financial health of medical organizations.
FAQ 2: What are the first 7 standard steps for the revenue cycle?
Most sources generally agree that the first 7 “standard” steps of a robust revenue cycle include: (1) Patient scheduling and pre-registration, (2) Insurance verification and pre-authorization, (3) Patient check-in and arrival, (4) Charge capture, (5) Claims submission, (6) Claims adjudication and payment, and finally (7) Payment posting and reconciliation.
You’ll find some variations across various sources, but these are by and large the backbone of a healthy and optimized revenue cycle management process.
FAQ 3: What are the 4 P’s of revenue cycle management?
While often overlooked, the often referred to as “4 P’s” within the greater system that is healthcare revenue cycle management (RCM) are:
- People: The lifeblood of RCM - skilled administrative personnel, coders, and billers all ensure efficient processes.
- Processes: The nuts and bolts - streamlined procedures from patient check-in to payment collections are what hold the RCM system together.
- Performance: How effective is the RCM system, and what metrics do you use to gauge that? The answer involves tracking denial rates, turnaround times, and revenue flow.
- Persistence: It takes continuous improvement. Keeping current with medical billing regulations and utilizing cutting-edge technology like automation to stay ahead of the curve are essential in this day and age.
FAQ 4: What is revenue lifecycle management?
It seems that revenue “lifecycle” management is basically synonymous with the better-known and often-used revenue *cycle* management. Both describe the financial procedures a company uses for recording and processing revenue transactions related to products or services offered to clients.
Magical Helps Healthcare Organizations Stay Efficient
An effective revenue cycle management process is challenging but crucial. It requires vigilance, flexibility, and continuous learning. Success hinges on accuracy and compliance across all aspects of healthcare, from front desk to insurance, billing, and IT. AI is extremely powerful for improving healthcare revenue management cycles: about 46% of hospitals and health systems now use AI in their RCM operations already. It's quickly spreading as part of healthcare revenue cycle best practices.
Integrating artificial intelligence (AI) and automated workflows have significant potential to improve health care operations, particularly in revenue-cycle management (RCM). And with third-party payer denials and the rising cost of collections, providers increasingly are exploring solutions.
-American Hospital Association
Remember: A streamlined revenue cycle not only boosts business but also enhances patient care. Part of that is maintaining accurate data entry of patient records.
Magical helps healthcare organizations eliminate repetitive tasks like auto filling EMR data and securely moving data across systems with one click. Join the more than 50,000 companies like United Healthcare, Dignity Health, and Nuance and save 7 hours a week on average.
