Revenue Cycle Management

Top 8 Important Terms in Revenue Cycle Management

Browse All Blogs

Blog Contents

As a healthcare provider, revenue cycle managementf (RCM) has to be at the top of your priority list—right after caring for your patients and improving their health outcomes.

Properly optimized RCM is what maintains the health and prosperity of your practice’s finances.

“Properly optimized,” however, is the key—RCM presents a complex system, with complicated terminology to match, which is why figuring out what to look for in an RCM partner becomes a must. To understand how to assess, improve, and maintain a fully functioning revenue cycle, you first need to learn the key individual RCM terms and concepts that form the building blocks of more advanced discussions such as how to increase revenue.

Let’s discuss 8 important revenue cycle management steps and terminology.

#1 Fee-Based vs. Value-Based Reimbursement

Currently, these are the two primary payment models in the American healthcare system: fee-based (also known as fee-for-service) and value-based.

Many practices and providers are moving toward value-based reimbursement but it’s still important to recognize the key differences:

  • Fee-for-service – Under this traditional payment model, insurance companies will reimburse providers for the number of services they perform, including appointments, prescriptions, tests, treatments, and so on. This one-to-one reimbursement model is simpler, but can also lead to lower-quality care, as physicians order tests and treatments that may be more expensive, invasive, and not all that necessary.
  • Value-based – Under this emerging reimbursement method, payment is based on the quality—or value—of care provided as determined by patient health outcomes. This system incentivizes effective treatments and long-term patient satisfaction, although it can be much more difficult to track and quantify.

In some ways, hospitals operating under these two varied systems are in direct opposition. For example, a value-based provider may be rewarded when a patient doesn’t return for subsequent care, whereas a fee-for-service hospital benefits every time they check back in.

What it means for you: The differences between these reimbursement models are stark and the transition can be difficult to navigate. As you negotiate upcoming payer contracts, it’s imperative to communicate clearly about:

  • Which model you’re operating under
  • If there are any exceptions or additional incentives for value-based care
  • How you can both benefit from certain adjustments to your payment model
  • How you intend to provide high-quality, cost-efficient care—something that benefits both providers and payers long-term

#2 Accountable Care Organization (ACO)

ACOs are organized collectives of hospitals, doctors, and independent providers working together to provide high-quality care to Medicare patients and generally push the industry towards a value-based payment model.

The various partner members provide coordinated care that cuts down on unnecessary or redundant tests, maximizes efficiency and cost-effectiveness, and generally provides more holistic medical service. Think of it like buying a ready-to-use television set from a company like Sony, rather than purchasing each component individually and assembling it yourself.1

What this means for you: ACOs are not governed by one standardized assessment of “value.” Each payer can define the quality of care according to their own metrics, which may not always align with your medical practice. Providers with a diverse payer mix—the percentage of patients under government versus private insurance plans—must carefully navigate each payer’s expectations of quality care2 to maximize revenue while maintaining high standards of patient outcomes.

#3 Medicare Shared Savings Program

The Shared Savings Program (or MSSP) is an alternative payment model specifically for ACOs. The initiative emphasizes teamwork above all else to create better patient outcomes and reward providers for these efforts.

To benefit from the Shared Savings Program, eligible ACOs must:3

  • Recommend evidence-based treatment and care options
  • Engage and empower Medicare beneficiaries through educational resources and transparent communication
  • Provide internal quality and cost reports
  • Commit to coordinated care across the entire ACO network, from primary physicians to specialists and beyond

What this means for you: If your practice is committed to providing quality care, enrolling in MSSP or first joining an ACO can increase your revenue cycle for things you’re already doing.

#4 Bundled Payments

Bundled payments are thought to be the best way forward in balancing high-quality, value-based care with financial responsibility and risk mitigation. While the fee-for-service model sets monetary reimbursement amounts for each individual test or treatment, bundled payments—also called episode-of-care-based payments—have a set price for the holistic treatment of one entire medical condition.4

Rather than paying separately for the screening tests, surgical procedures, post-operative care, and prescription antibiotics required to treat a hernia, for example, the insurance company would pay one lump sum that covers all of the necessary elements of successful treatment.

What this means for you: Under this model, if your medical practice manages to provide the same high-quality care with fewer tests, procedures, and appointments, you’ll still earn the predetermined reimbursement rate from the insurance payer. This can bolster your revenue stream if you’re able to provide effective, cost-efficient care.

#5 Charge Capture

This is the third step in revenue cycle management when the charge—the medical services rendered and their associated costs—is captured as an itemized bill to be submitted to and eventually paid by the insurance company. The healthcare providers record various details about the treatment to create an accurate account.

What this means for you: This integral procedure affects several important steps down the line, all of which could negatively affect your revenue cycle. You’ll want to ensure your charge capture process is fully standardized and optimized to avoid unnecessary revenue loss:

  • Create a well-defined workflow, including whose responsibility it is, the preferred timeline for charge capture entry, a system for correcting inaccurate or incomplete entries, and an audit process.
  • Use the simplest charge capture software to alleviate the administrative burden placed on busy doctors and nurses.
  • Train all employees in best practices to avoid the most common charge capture errors, which include:5
  • Missing charges
  • Administrative delay
  • Inefficient processing
  • Poor systems integration with EHRs
  • Coding inaccuracies
  • Over-coding or under-coding
  • Non-compliant charges or charge entry

#6 Medicare Access and CHIP Reauthorization Act (MACRA)

The Medicare Access and CHIP Reauthorization Act of 2015 was a piece of legislation signed into law that got rid of the Sustainable Growth Rate formula and instituted a new incentive program called the Quality Payment Program (QPP). It promotes the adoption of quality, value-based care models and practices through two fundamental payment programs

What this means for you: As a Medicare provider, you can adopt one or both of the following physician payment systems to capitalize on providing value-based care to your patients.

#7 Alternative Payment Models (APMs)

Alternative Payment Models are value-based reimbursement methods, as opposed to fee-for-service care, that rewards healthcare providers for achieving certain benchmarks of high-quality, cost-effective care. These payment models can apply specifically to certain medical conditions, care episodes, or patient populations.

Popular APMs include:6

  • Accountable Care Organizations
  • Medicare Shared Savings Programs
  • Bundled or episode-based payment models
  • Patient-centered medical homes

What this means for you: As more and more incentive programs emerge, it’s increasingly clear that we’re moving towards value-based revenue cycles. If you’re not yet participating in any such initiatives, your next payer contract renegotiation could be the perfect time to start.

#8 Merit-Based Incentive Payment System (MIPS)

In an attempt to incentivize providers to follow a performance-based, rather than volume-based, reimbursement system, MIPS combined three existing Medicare payment programs into one streamlined rewards system.

Those three programs are:

  • The Physician Quality Reporting System – The PQRS uses payment incentives to reward eligible healthcare providers for reporting on quality measures, such as care coordination, patient safety, effectiveness of care, and general population health.
  • The Value-Based Payment Modifier – This program rewards physicians for providing low-cost, high-quality care with a financial bonus and penalizes physicians who fail to meet these standards with a monetary fine.
  • The Medicare Electronic Health Record Incentive Program – Providers can receive incentive payments for meaningfully using EHRs to improve patient health and quality of care.

What this means for you: While the word “incentive” is in the title, MIPS can also be a punishment for some providers. Eligible clinicians who failed to participate in MIPS in 2019 face up to a negative 7% financial adjustment for Medicare Part B Services in 2021. Next year, the maximum penalty increases to a negative 9% adjustment.

Healthcents: Navigating RCM Terminology with Ease

If the ins and outs of payment models, charge captures, Medicare incentives, and value-based care reimbursements have you feeling a bit out of your element, that’s perfectly normal.

While you’re working your magic in the doctor’s office or operating room, Healthcents can effortlessly and effectively navigate your revenue cycle management and payer contract negotiations. That way, you earn the outcomes you want—and deserve—including favorable fee schedules, financial incentives, and updated reimbursement conditions.

If you’re considering outsourcing revenue cycle management, contact us at Healthcents today.


  1. MASC Medical Recruitment Firm. Things to Consider When Creating a Compensation Package for ACO Positions.
  3. RevCycle Intelligence. The Role of Accountable Care Organization in Value-Based Care.
  4. Continuum. What is the Medicare Shared Savings Program (MSSP)?
  5. RevCycle Intelligence. 40% of Revenue Cycle Leaders Don’t Discuss Charge Capture Regularly.
  6. Harvard Business Review. How to Pay for Health Care.
  7. AAPC. Alternative Payment Models (APMs).
  8. American Medical Association. MIPS 2019: Not too late to avert future Medicare pay penalties.

Revenue Cycle Management

Why is Revenue Cycle Management Important?

View Blog Post
Revenue Cycle Management

How to Improve Your Accounts Receivable (AR) in Healthcare?

View Blog Post
Revenue Cycle Management

What is Revenue Cycle Management?

View Blog Post