Revenue Cycle Management: A Comprehensive Guide

Along with delivering quality care, you also need to focus on evaluating the financial health of your medical organization. That’s where revenue cycle management (RCM) comes into the picture. It enables you to streamline financial workflows and simplify medical billing processes, helping you maximize revenue. We invite you to explore the revenue cycle journey with us!

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What This Article Covers:

• What Is Revenue Cycle Management?
• Primary Benefits
• Process
• Challenges
• Best Practices
• Technology and Revenue Cycle Management
• Transitioning to Value-Based Care
• Revenue Cycle Metrics You Should Track
• Internal and External Revenue Drivers
• Next Steps

What Is Revenue Cycle Management?

Revenue cycle management is the process of managing and optimizing health care administrative and clinical functions, from patient registration and scheduling to claim submission, payment collection and financial reporting to help maintain financial viability.

Its primary goal is to identify and resolve financial issues and prevent negative cash flow. With a tight-knit strategy, you can streamline collection processes, avoid claim denials and maximize profits.

It’s crucial to communicate with health care insurance companies to verify patients’ insurance benefits. By doing so, you can avoid generating faulty bills that may cause financial stress for patients.

Primary Benefits

A well-planned revenue management strategy does more than just increase profits. It helps you streamline business operations, increase patient engagement, stay compliant and avoid fraudulent activities. We’ve highlighted these benefits in detail below.

Increase Revenue

Efficient revenue management practices streamline billing processes, enabling you to submit claims promptly and accurately. This can minimize payment delays, improve cash flow and boost reimbursement timeliness, enhancing revenue generation.

Reduce Claim Denials

Coding errors such as incorrect CPT/HCPCS and ICD-11 codes can lead to claim denials. A robust revenue cycle strategy encourages your financial department to collaborate with coding teams to ensure proper code selection and adherence to coding guidelines, helping you prevent denials.

Decrease Administrative Burdens

Manually performing tasks such as documentation, patient scheduling and insurance verification can decline productivity levels.

Revenue cycle management systems that integrate with EHR tools, EMR systems, patient scheduling software and medical billing solutions enable you to automate clinical and administrative functions, helping you deliver value-based care.

Enhance Patient Experiences

With accurate and transparent billing processes, patients receive clear statements, making it easier for them to understand their financial responsibilities. This leads to greater client satisfaction and trust in your health care organization.

According to the Beryl Institute – Ipsos PX Pulse’s Consumer Perspective on Patient Experience in the U.S. report, 87% of consumers said that a clear, understandable and respectful billing process is one of the important factors for a good patient/family experience.

With 87% of consumers placing importance on billing processes, it’s clear that a transparent revenue cycle is important to your clients as well as your organization.

Avoid Health Care Fraud

Medical organizations have to pay millions if involved in a fraud scheme. For instance, Cornerstone Healthcare Group Holding Inc. and CHG Hospital Medical Center LLC. had to pay $21,637,512 to settle allegations of Medicare billing misconduct.

Inaccurate coding and billing can lead to medical fraud investigation, resulting in revenue losses.

Because revenue management emphasizes collecting accurate information, it reduces the chances of submitting incorrect claims to insurance companies.

It also helps you stay updated about health care laws, keeping unintentional mistakes at bay.

Stay Compliant

It’s difficult to keep up with ever-changing health care regulations. Revenue cycle management helps you maintain medical compliance. It assists you in assigning precise ICD-11 and CPT/HCPCS codes. It also enables you to comply with HIPAA guidelines. Furthermore, it helps you maintain an ADA-compliant website.

Prevent Patient Fraud

By implementing a robust revenue cycle management process, you can verify insurance details before appointments, mitigating collection delays caused by patients providing misleading insurance information to avoid medical debt. This practice also helps enhance collection rates and streamline the billing process.

Medical identity theft is on the rise. According to the Federal Trade Commission’s Consumer Sentinel Network Databook 2022, consumers reported 27,820 medical identity theft cases.

Because the revenue cycle workflow starts with preregistering patients and verifying insurance eligibility, you can detect instances of identity theft at an early stage.

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Process

The medical revenue cycle consists of multiple steps. And it’s necessary to follow all the procedures to improve financial outcomes. We’ve outlined the revenue cycle process below.

Patient Preregistration

The revenue cycle starts with patient preregistration. Determine if the patient is new or recurring and assign a dedicated coordinator for new clients.

Next, you should collect the client’s demographic, medical and insurance details. You can use EHRs to avoid data entry errors. You can also encourage clients to complete intake forms via a patient portal.

Once you have the details, you’ll get an idea of the patient’s deductibles, copays and referrals. You should inform them about their financial responsibility and discuss your practice or company’s no-show and cancellation policy.

Preregistration helps you reduce paperwork and save time. We’ve highlighted some steps below to help you integrate the preregistration process into your workflow.

• Assess Current Practices: Evaluate your current registration process to identify inefficiencies. You can create a preregistration process map to gain clarity over potential workflow changes.
• Develop a Script: Generate a conversation script to help new patient coordinators collect necessary patient details on call. To save time, you should ensure that the script matches the info fields in your EHR.
• Train New Patient Coordinators: Distribute the script to new patient coordinators and train them about workflow changes.
• Roll Out the New Process: You can generate metrics to track changes before and after implementation. You can also collect patient feedback to improve procedures over time.

Patients can change their insurance providers. That’s why you should always update files of recurring patients.

Verification

From age to insurance benefits, you must confirm that the collected information is 100% accurate. You should run insurance eligibility checks to avoid claim rejections or denials.

You should also ensure that you receive prior authorizations from the patient’s health plan provider if you want to bill them for provided treatments or services.

If you fail to verify clients’ data, you might have to deal with financial repercussions. You should comb through each detail minutely to avoid collection delays.

Charge Capture

After the care delivery cycle ends, it’s time to begin the charge capture process — document performed services and treatments. You can use digital encounter forms to record information about the client’s visit.

Remember, insurance companies won’t reimburse you for delivered services if you fail to document patients’ visits.

You’re only human. So, you might forget to record a specific service. This can result in revenue leakages. You must check encounter forms thoroughly before submitting them to the billing department.

It’s challenging to detect the cause of lost revenue. To help you improve your charge capture process, below, we’ve outlined some of the hotspots you should target.

• Emergency Services: Busy emergency room periods can lead to rushed documentation and data-entry errors, such as recording staples as sutures, resulting in inaccurate billing.
• Operating Room Services: To avoid confusion and ensure consistency, we recommend you either manually assign codes or rely on digital solutions to code operating room procedures. Using a mix of manual and digital coding methods can lead to chaos, inconsistent codes and low productivity among the operating room team and billing staff.
• Pharmacy: You need to follow the National Drug Code Directory to code drugs. Errors can occur when converting dispensing units into billing units, leading to failed charge capture. Rechecking pharmacy codes helps eliminate charge entry mistakes.

Capturing charges is vital in the health care revenue cycle. Using digital tools helps you avoid missed charges, safeguarding your practice/company’s revenue stream.

Medical Coding

Incorrect bills can lead to lawsuits from patients and insurance companies. Assigning accurate ICD-11 and CPT/HCPCS codes to treatments and services is essential to avoid billing errors.

We’ve listed some things below you should avoid to stay out of legal troubles.

• Upcoding: It occurs when providers assign a high-level evaluation and management code for a low-cost treatment or service.
• Unbundling: It refers to assigning multiple CPT codes for a single service or procedure to increase the billing amount.
• Ignoring the National Correct Coding Initiative (NCCI) Edits: Insurance companies send you a list of NCCI edits before they approve your claims. Such edits outline incorrect codes and provide a replacement for those codes. If you fail to check NCCI edits, health plan organizations will deny your claims.

The Centers for Disease Control and Prevention (CDC) implemented new diagnosis codes in response to the Coronavirus outbreak. Because CDC constantly adds and updates medical codes, you should revise your coding databases regularly.

To maintain coding accuracy, you should hire coders certified by the American Association of Professional Coders (AAPC) and the American Health Information Association (AHIMA).

Claim Submission and Denial Resolution

After coding, it’s time to fill out and send claims to health plan companies. Remember, claim forms are different for certain specialties. For example, if you own a dental practice, you must follow the American Dental Association’s dental claim format to submit claims.

You can use the standard CMS-1500 format for outpatient or ambulatory services.

We recommend you scrub claims to detect coding discrepancies before sending them to payers. You can partner with clearinghouses to make claim scrubbing processes a breeze. They help detect formatting and coding errors. If everything is alright, they forward the claim to insurance companies.

There might be situations when payers deny or reject claims. Don’t feel disappointed. You can recheck, modify and resubmit the claim within the assigned deadline.

If health insurance companies still reject the claim, you have the right to appeal a health plan decision and ask a third party to review the claim.

Remittance Processing

Once health plan companies approve the claim, they’ll send you an explanation of benefits or electronic remittance advice. It explains the reasons for covered and unpaid services or treatments.

Some crucial elements in remittance processing are:

• Payment Posting: Post received remittances to track outstanding balances. Crosscheck electronic remittance advice for errors and make necessary appeals.
• Fee Schedules: Align fee schedules with contractual adjustments. You must review them annually to ensure that you’re not leaving any money on the table.
• Write-Offs: Differentiate between contractual and non-contractual write-offs. Strengthen claim submission, resolve denials and obtain prior authorizations to minimize non-contractual write-offs.

You can take the help of revenue cycle experts to tighten remittance processing.

Patient Collections

Collecting patients’ financial responsibilities isn’t an easy task. You must follow up with them regularly to ensure you get paid on time.

You can implement a billing solution to send automated payment reminders to patients via email or text. They also enable clients to pay via debit/credit cards or online wallets.

If clients dodge your calls and aren’t ready to pay, you can send their files to a collection agency as a last resort. But make sure the agency you hire follows collection guidelines.

Review

After the revenue cycle process ends, you must conduct a quality review to identify loopholes in your workflow. You should generate a report capturing vital data points and analyze them to improve operational efficiency and avoid costly mistakes.

Some of the important metrics you should look into are:

• Coding accuracy
• AR days
• Write-off percentage
• Rejection rates

This helps you identify opportunities for optimization, implement corrective measures and refine revenue cycle management strategies to enhance revenue generation and financial performance.

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Challenges

Some common challenges that health care providers face are as follows:

No Surprises Act

The No Surprises Act will impact your organization’s revenue cycle, especially if you rely on out-of-network services. You’ll need to reassess your contracting strategies, network participation and financial projections to adapt to the act’s requirements.

Take proactive steps to ensure compliance and mitigate potential revenue disruptions caused by changes in reimbursement rates and dispute resolution processes.

Regularly review your contracts, communicate with payers and monitor regulatory updates to effectively navigate the impact of the No Surprises Act on your revenue cycle management.

Prior Authorizations

Obtaining prior authorizations and pre-certifications for certain procedures and services can be time-consuming and may delay reimbursement. Managing the pre-authorization process efficiently and ensuring proper documentation can help mitigate this challenge.

Price Transparency and Patient Education

With the rising demand for price transparency, it’s your responsibility as a health care organization to actively communicate pricing information to patients. Transparently sharing details about the costs associated with their medical services enable patients to make informed decisions.

Educating patients about their financial responsibility, available payment options and potential out-of-pocket costs can be challenging yet crucial.

You need to proactively engage with them, providing clear explanations of the services they receive and the associated costs. This involves breaking down complex billing terminology into easily understandable terms, ensuring that patients are aware of what their insurance covers, and explaining any out-of-pocket expenses they may be responsible for.

Best Practices

Maintaining smooth revenue cycle operations is a tedious task. One error and all your hard work goes in vain, causing revenue leakages. That’s why accuracy is of utmost importance while performing revenue cycle tasks.

We’ve outlined some tips below to help you optimize your revenue cycle.

Prioritize Patient Access

Imagine a scenario where patients face long wait times, struggle to schedule appointments or encounter insurance coverage issues. It’s a recipe for frustration and dissatisfaction, right? By prioritizing patient access, you can turn this around and create a positive experience for patients.

Think about it — quicker service delivery means more revenue potential, resulting in a healthier financial outlook for your organization.

Effective patient access practices help you identify and address insurance coverage issues upfront. By verifying information and obtaining proper authorizations, you’re minimizing the risk of denied claims and revenue leakage. It’s a win-win situation for both patients and your bottom line.

Strengthen Front-End Processes

Front-end tasks include collecting patient details, scheduling appointments, verifying insurance benefits and registering new patients. Making even a single mistake while performing these activities can lead to inaccurate bills, resulting in collection delays.

By optimizing front-end processes, you actively boost your revenue cycle management and pave the way for financial success

Go Digital

With digital solutions, patient registration, appointment scheduling and insurance verification become a breeze. No more tedious paperwork or frustrating phone calls. Seamless integration empowers you to focus on what truly matters – providing exceptional care to your patients.

Outsource Revenue Cycle Services

By entrusting revenue cycle tasks to a specialized service provider, you can streamline your operations and achieve better financial outcomes.
Outsourcing allows you to tap into the expertise of professionals who’re well-versed in revenue cycle management, ensuring accuracy and efficiency in billing and coding processes.

It frees up your internal staff to concentrate on core clinical responsibilities and enhances overall productivity.

Our free whitepaper, The True Value of Using a Revenue Cycle Management (RCM) Service, can help you decide whether or not to make the switch from in-house billing to third-party revenue cycle services.

Harness the Power of Data Analytics

By using data analytics tools and techniques, you can analyze financial and operational data to identify trends, patterns and potential areas of optimization. This enables you to make informed decisions and take proactive measures to enhance your revenue cycle processes.

Furthermore, you can identify billing and coding errors, detect claim denial patterns, and implement targeted strategies to reduce claim rejections and improve reimbursement rates.

Additionally, it helps you track key performance indicators, such as average days in accounts receivable, collection rates and denial rates.

Educate Staff

Your revenue cycle teams should stay updated about current health care regulations and guidelines. You should conduct training sessions to help them perform their tasks without mistakes. If you switch to a new digital solution, you must design an implementation plan to help team members adapt quickly without disturbing current workflows.

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Technology and Revenue Cycle Management

In the dynamic landscape of health care revenue cycle management, technological systems have revolutionized the way organizations manage their financial processes. You can use it to your advantage and stay ahead of your competitors.

Below we’ve outlined some digital tools that you can use to manage your revenue cycle.

Digital Solutions

Digital tools help you streamline processes, improve accuracy and provide valuable data. We’ve outlined some systems that can help you strengthen your revenue cycle processes below.

Electronic Health Records

Incorporating EHRs into your daily workflow will contribute to maximizing revenue and optimizing financial outcomes for your practice.

With EHRs, you can efficiently document patient encounters, diagnoses, treatments and procedures. This ensures accurate documentation, which is essential for proper coding and billing, minimizing claim denials and maximizing revenue.

Telehealth

In the post-pandemic era, telehealth continues to be a vital component of the health care industry, offering several benefits for both patients and medical practices.

It enables patients to schedule virtual appointments, exchange information with doctors, access X-rays and lab results, and track their health care journey.

If you properly document and code telehealth services, you can capture revenue that you’d miss otherwise.

As we move forward, the continued integration and future of telehealth solutions will play a pivotal role in shaping care delivery and achieving a more efficient and patient-centric health care system.

Medical Billing

Medical billing solutions help capture all billable services accurately. They track and reconcile charges, ensuring you don’t miss any revenue opportunities.

These solutions provide coding and billing assistance, ensuring accurate code selection and appropriate documentation for each service rendered. This helps you prevent coding errors, reduce claim denials and maximize reimbursement rates, ultimately improving your revenue cycle.

Patient Engagement

By using patient engagement solutions, you can offer convenient payment options, provide transparent cost estimates, automate payment reminders, enable online self-service features, enhance patient satisfaction and establish effective communication channels.

These solutions contribute to a more efficient revenue cycle, reduced accounts receivable and improved financial outcomes for your practice.

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Artificial Intelligence

AI has evolved to support revenue cycle management in health care. By streamlining operations, boosting productivity and identifying revenue challenges, AI now helps practices and billing companies achieve revenue integrity.

According to a report published by Change Health Care, 65% of hospitals and health systems currently use AI for RCM functions.

Below, we’ve outlined some of the most common types of AI revolutionizing the medical industry.

• Machine Learning (ML): Analyze large datasets to detect similar revenue trends or patterns, helping you identify patients who can afford medical expenses and those who need alternative options like payment plans, financing or charity.
• Robotic Process Automation (RPA): Automate repetitive tasks to focus on high-priority work such as planning collection strategies and improving clinical outcomes. RPA saves time and enables more cognitive input.
• Predictive Analytics: Forecast future events to better prepare. Identify reimbursement and payment patterns and detect flaws in your revenue cycle workflows.
• Natural Language Processing (NLP): Today, NLP isn’t only used to simplify clinical documentation but also to increase profits. Predict insurance approval for specific treatments, aiding you in determining patients’ financial responsibility.

AI combined with business intelligence tools assists you in maximizing profits and improving clinical outcomes.

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Transitioning to Value-Based Care

Health care providers are transitioning from fee-for-service models to value-based care to improve care quality and reduce hospital readmissions.

According to a report published by JAMA Network, value-based care models reduced hospitalizations by 5.6% and emergency department visits by 13.4%.

Maximize the benefits of revenue cycle management systems in your transition to value-based reimbursement. These systems provide advanced analytics, giving you valuable insights into your patient population.

Gain a deeper understanding of the prevalence of chronic diseases among your patients and identify specific areas requiring focused attention.

Monitor claims data to detect anomalies or patterns that may impact reimbursement, enabling you to proactively address them.

These solutions play a crucial role in complying with the Medicare Access and CHIP Reauthorization Act (MACRA). They empower you to adapt to the changing landscape, align your practice with MACRA requirements and position yourself for success in the value-based care era.

Access real-time data insights to monitor key performance indicators (KPIs), track financial and clinical aspects, and make informed decisions to enhance your practice’s performance.

Value-based care introduces a fundamental shift in the health care reimbursement model, emphasizing quality care, better patient outcomes and cost containment.

Revenue Cycle Metrics You Should Track

Here are some KPIs you should track to improve your cash flow.

• Net Collection Rate: The average net collection rate is over 95%.
• Days in AR: Days in AR benchmarks can vary across different industries and health care specialties. Lower days in AR indicate efficient revenue cycle management, with timely payment collection. Higher days in AR suggest potential issues like delayed reimbursement, claim denials or billing inefficiencies.
• Claim Denial Rate: The average denial rate falls between 5% to 10%.

  If your denial rate is more than 10%, you need to analyze your coding, eligibility verification and credentialing functions.

• Bad Debt: The percentage of claims and bills you had to write off.
• Clean Claims Ratio: It helps you track the efficiency of your claim submission process.

Most billing systems provide revenue cycle dashboards to help you track critical financial metrics.

Internal and External Revenue Drivers

Some of the internal revenue drivers include:

• Patient volume
• Service fees
• Provider capacity

External revenue drivers include:

• Payer reimbursements
• Deductibles and self-pay
• Collections

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Next Steps

You need to follow each step of the revenue cycle process religiously if you want to maximize profits and improve clinical functions. By analyzing revenue cycle metrics, you can optimize your revenue cycle workflows.

We recommend you implement a digital solution to automate administrative tasks. Some of the medical billing solutions provide revenue cycle capabilities too. And several vendors offer revenue cycle experts to help you improve your practice’s financial health.

We know it can be challenging to evaluate several products. Don’t worry! You can use our comparison report to compare solutions and generate scorecards to make data-driven purchasing decisions.

What revenue cycle management strategies do you follow to simplify revenue cycle workflows? Please let us know in the comments below.