Revenue Cycle Management

Why is Revenue Cycle Management Important?

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A multitude of factors go into running a successful medical practice. One of the most important is revenue cycle management. Why is healthcare revenue cycle management important? With revenue cycle management (RCM), healthcare organizations ensure they’re properly and quickly reimbursed for their medical services. While this is certainly beneficial to healthcare providers, it’s equally beneficial to the patient.

Before we explore why ensuring reimbursement makes RCM so important for healthcare professionals, let’s break down what RCM entails.

What is Revenue Cycle Management?

Revenue cycle management is exactly what it sounds like—a strategy that healthcare professionals can use to manage the administrative and clinical functions in their revenue generation cycle. The revenue cycle process begins with patient registration as soon as a patient reaches out to the healthcare provider to schedule an appointment. The entire revenue cycle process ends when the final payment for the appointment and healthcare services rendered has been collected.

The goal of the revenue cycle management process is to identify any points of friction in the provider’s revenue cycle and resolve them. With proper healthcare revenue cycle management, providers can maximize their claim reimbursements and increase their patient service revenue.

The Steps in the Healthcare Revenue Cycle

The healthcare revenue cycle consists of many steps. This means that there are many opportunities for errors to occur. Any errors in the revenue cycle can delay timely payments from insurers and patients or halt reimbursement altogether.

For a better understanding of where errors can occur and how revenue cycle optimization can prevent them, let’s look at the steps included.

Pre-Authorization and Eligibility Verification

When a patient makes an appointment, the healthcare provider collects information to establish a patient account. This includes collecting the patient’s insurance information and verifying their insurance eligibility.

Revenue cycle management emphasizes accurately completing this patient intake step, even if a patient already has an account with the provider. Inaccurate information or ineligible insurance can result in claim denials later in the revenue cycle. This means a delay in the provider’s reimbursement payment. It also means more work for the provider, who must then comb through the patient’s information to correct the errors that were made.

Charge Capturing and Coding

Charge capturing is the process by which medical services are transcribed into billable charges using universally accepted medical codes. Medical coding is how insurance payers determine reimbursement amounts.

Without proper medical coding, the insurance company may deny medical claims. This results in delayed provider reimbursement. It also costs the provider time and money, as claim denials must be investigated and appealed. Effective healthcare revenue cycle management ensures entering correct medical codes so that claim denials can be avoided altogether.

Claims Processing

Once a patient’s medical services have been properly coded, the claim is sent to the insurance company for approval. Healthcare revenue cycle management ensures this claim submission happens quickly by tracking and managing the claim from the start of the process.

Payment Collections

Once the patient’s claim has been approved, the insurance company reimburses the provider based on the patient’s eligibility. If there is any remaining balance after the insurance reimbursement, the provider is responsible for reaching out and collecting patient payments.

Revenue cycle management expedites medical billing processes by streamlining claims processing. Plus, because of the increased focus that revenue cycle management puts on front-end tasks, such as insurance eligibility verification, patients will know from the start what out-of-pocket expenses they’re responsible for paying, helping improve patient satisfaction. Again, this helps to avoid any delays in collecting payments.

Medical Service Review

Thorough healthcare revenue cycle management encourages healthcare organizations to analyze clinical treatment data. Data analytics allows providers to pinpoint errors and revenue leakage in the cycle and identify ways to lower their healthcare costs. In turn, this will help increase revenue generation and improve the patient experience.

The Benefits of Healthcare Revenue Cycle Management

Effective revenue cycle management ensures that these steps are performed thoroughly and accurately to help providers avoid delayed or lost revenue. Although the main goal of healthcare revenue cycle management is to increase provider revenue, it delivers other benefits. These benefits not only serve the providers but also boosts patient satisfaction and ultimately patient outcomes, giving revenue cycle management processes even greater value.

Let’s explore some of these benefits of revenue cycle management.

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Identifying and Resolving Medical Coding Errors

By implementing healthcare revenue cycle management, many providers can more easily identify where errors are occurring within the coding and billing processes. This decreases the likelihood of future claim denials since about 90% of claim denials are due to easily preventable technical issues, like missing information in the patient’s chart or improper medical coding.1

When these medical billing errors are avoided and claims are approved after their first submission, providers quickly receive their reimbursements. Plus, they don’t have to spend extra money to investigate and appeal denied claims.

For the average hospital, claim denial prevention can result in an additional $5 million in revenue.2 This statistic alone is a good enough reason why healthcare organizations should be asking how an organization can improve their revenue cycle management.

Decreasing Administrative Burdens

Preventing claim denials also helps minimize administrative burdens. When administrative staff members don’t have to spend time and energy investigating and appealing claim denials, more time and energy is freed up for patient care.

Plus, revenue cycle management’s careful focus on front-end tasks simplifies interactions between administrative staff and patients. Appointment scheduling, intake form completion, claims processing, and coding and billing processes are streamlined to create a more satisfactory experience for all.

Avoiding Healthcare Fraud

Another significant benefit of revenue cycle management is its prevention of healthcare fraud and abuse. Healthcare fraud costs the healthcare industry billions of dollars every year. A fraud investigation can cost a healthcare organization its revenue, as well as its reputation. Whether intentional or unintentional, inaccurate medical coding can lead to healthcare fraud investigations. Some common coding issues include billing for:

  • Services that weren’t rendered
  • Medically unnecessary procedures
  • Services performed by an improperly supervised or unqualified employee
  • Low-quality procedures or tests

Providers may also upcode procedures. Upcoding means requesting a higher reimbursement rate for services that don’t necessarily merit it.

With revenue cycle management’s emphasis on accurate data collection, medical billing services, and coding, providers are much less likely to submit inaccurate information (if at all) to insurance companies. Plus, RCM software solutions can keep providers up-to-date with ever-changing healthcare regulations so that unintentional fraud is never an issue.

Avoiding Patient Fraud

Patient dishonesty can also be a source of healthcare fraud. This can happen in two ways:

  • Providing inaccurate information – A patient may lie about their insurance coverage in order to receive non-covered services they are not qualified for. However, insurance verification is one of the first steps of revenue cycle management. This means that any inaccurate insurance coverage will be quickly detected by administrative staff.
  • Engaging in medical identity theft – Medical identity theft has become a growing concern in the healthcare industry. It costs providers, as well as its victims. Since revenue cycle management starts with verifying a patient’s information, any occurrence of identity theft will be detected and addressed early in the process.

Medical providers can also take additional steps to verify a patient’s identity during the pre-authorization phase of the revenue cycle.

Increasing Healthcare Facility Revenue

By avoiding technical errors, claim denials, and fraud investigations, healthcare providers can promptly receive reimbursements for their services rendered. Plus, they can avoid spending thousands of dollars on resolving errors, appealing claim denials, and investigating fraud.

With their additional revenue, providers can invest in how to improve patient satisfaction. After all, quality patient care is any healthcare provider’s top priority.

Healthcare Revenue Cycle Management with PayrHealth

So why is revenue cycle management important? RCM’s overall goal of increasing provider revenue works to benefit patient satisfaction above everyone else. Revenue cycle management increases provider revenue while decreasing the time spent on administrative and clinical functions. This means more money and time devoted to value-based care for the patient and their treatment.

That’s why many healthcare organizations choose to trust PayrHealth. Outsourcing revenue cycle management is often the best way to allow your team to focus on patient satisfaction. With our healthcare industry experts, you’ll have all the tools you need to ensure a streamlined revenue cycle. We’re experienced, thorough, and dedicated to helping healthcare facilities provide the best patient care possible. Contact us today for a free consultation.


    1. Revcycle Intelligence. Top 4 Claims Denial Management Challenges Impacting Revenue.
    2. Revcycle Intelligence. What Is Healthcare Revenue Cycle Management?
    3. CollaborateMD. The Key Steps and Benefits of Revenue Cycle Management.
    4. Revcycle Intelligence. How Providers Can Detect, Prevent Healthcare Fraud and Abuse.
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