Blog Contents
A multitude of factors go into running a successful medical practice. One of the most important is revenue cycle management. So why is healthcare revenue cycle management important? With revenue cycle management (RCM), healthcare organizations ensure they are properly and quickly reimbursed for their medical services. While a healthcare provider's revenue cycle is certainly beneficial to providers, it is equally beneficial to the patient. In fact, revenue cycle management benefits healthcare operations more than anything else.
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 providers 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 a healthcare provider to schedule an initial 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. Ultimately, your cycle management approach affects revenue significantly. With proper healthcare revenue cycle management, providers can maximize their claim reimbursements, reduce billing errors, and increase their patient service revenue.
The Steps in the Healthcare Revenue Cycle
The healthcare revenue cycle consists of many steps, which means 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. Providers who understand each step can make meaningful process improvements that strengthen financial performance across the board.
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 Insurance Eligibility Verification
When a patient makes an appointment, the healthcare provider collects information to establish patient accounts. This includes collecting the patient's insurance coverage details and completing insurance eligibility verification.
Revenue cycle management emphasizes accurately completing this patient registration step, even if a patient already has an account with the provider. Inaccurate patient data or ineligible insurance coverage can result in claim denials later in the revenue cycle, delaying the provider's reimbursement and requiring staff to investigate and correct errors. Validating patient eligibility upfront is one of the most effective ways to protect financial stability and avoid a denied claim down the line.
Charge Capture and Medical Coding
Charge capture is the process by which medical services are transcribed into billable charges using universally accepted medical codes. Medical coding is how insurance payors determine reimbursement amounts, making accurate billing at this stage critical to financial outcomes.
Without proper medical coding, the insurance company may deny medical claims, resulting in delayed provider reimbursement. It also costs the provider time and money, since claim denials must be investigated and appealed through denial management. Effective healthcare revenue cycle management ensures correct medical codes are entered so that claim denials can be avoided altogether. Skilled medical coders and a strong denial management process are essential to keeping the billing process on track.
Claims Processing and Claim Submission
Once a patient's medical services have been properly coded, the claim is submitted to the insurance company for approval. Timely claim submission is a key part of healthcare revenue cycle management, and tracking insurance claims from the start of the process helps prevent delays and supports accurate claims throughout.
Payment Posting and Collections
Once the patient's claim has been approved, the insurance company reimburses the provider based on patient eligibility. If there is any remaining balance after insurance reimbursement, the provider is responsible for reaching out and collecting payments. Payment posting, the process of recording those payments against patient accounts, keeps the revenue cycle accurate and up to date.
Revenue cycle management expedites the billing process by streamlining claims processing. 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 are responsible for, including available payment plans. This improves patient satisfaction and helps avoid delays in collecting payments.
Medical Service Review and Data Analytics
Thorough healthcare revenue cycle management encourages healthcare organizations to analyze clinical documentation and treatment data. Data analytics allows providers to pinpoint coding errors, revenue leakage, and other sources of lost revenue in the cycle, and identify ways to lower healthcare costs. In turn, this will help increase revenue generation, improve financial performance, and enhance the overall patient experience.
Healthcare Revenue Cycle Management Benefits
Effective revenue cycle management ensures that these steps are performed thoroughly and accurately, helping providers avoid delayed or lost revenue. Although the main goal of healthcare revenue cycle management is to increase provider revenue, it delivers other benefits that serve both providers and patients, and that ultimately improve patient care and patient outcomes. Here are some of the ways the revenue cycle management process affects your practice.
Identifying and Resolving Medical Coding Errors
By implementing best practices for revenue cycle management, many providers can more easily identify where coding 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 billing errors are avoided and claims are approved after their first submission, providers quickly receive their reimbursements without having to spend extra money investigating and appealing denied claims. Accurate claims also support maintaining compliance with healthcare regulations, reducing exposure to audits and penalties.
For the average hospital, claim denial prevention can result in an additional $5 million in revenue.[^2] This statistic alone is a strong reason why healthcare organizations should be asking how they can improve their revenue cycle management.
Decreasing Administrative Burdens
Preventing claim denials also helps minimize administrative burdens. When revenue cycle teams do not have to spend time and energy on denial management and appeals, more time is freed up for patient care.
Revenue cycle management's careful focus on front-end tasks also simplifies interactions between administrative staff and patients. Appointment scheduling, patient billing, 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, and a fraud investigation can cost a healthcare organization both revenue and reputation. Whether intentional or unintentional, inaccurate medical coding can lead to fraud investigations. Some common coding issues include billing for:
- Services that were not rendered
- Medically unnecessary procedures
- Services performed by an improperly supervised or unqualified employee
- Low-quality procedures or tests
Providers may also upcode procedures, meaning they request a higher reimbursement rate for services that do not necessarily merit it.
With revenue cycle management's emphasis on accurate data collection, medical billing, and coding, providers are much less likely to submit inaccurate information to insurance companies. RCM systems can also 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 and create significant challenges in healthcare revenue cycle management. This can happen in two ways:
- Providing inaccurate information A patient may misrepresent their insurance coverage in order to receive services they are not qualified for. However, insurance verification is one of the first steps of revenue cycle management, meaning 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. Since revenue cycle management starts with verifying patient data and reviewing medical history against patient records, any occurrence of identity theft can 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. They can also avoid spending thousands of dollars resolving errors, appealing denied claims, and investigating fraud, all of which helps fulfill patients' financial obligations without unnecessary friction.
With their additional revenue, providers can invest in improving patient satisfaction and delivering higher quality care. 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 (RCM) 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 is 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 care. With our healthcare industry experts, you will have all the tools you need to ensure a streamlined revenue cycle. We are experienced, thorough, and dedicated to helping healthcare facilities provide the best patient care possible. Contact us today for a free consultation.
Sources:
- Revcycle Intelligence. Top 4 Claims Denial Management Challenges Impacting Revenue.https://revcycleintelligence.com/news/top-4-claims-denial-management-challenges-impacting-revenue
- Revcycle Intelligence. What Is Healthcare Revenue Cycle Management?https://revcycleintelligence.com/features/what-is-healthcare-revenue-cycle-management
- CollaborateMD. The Key Steps and Benefits of Revenue Cycle Management. https://www.collaboratemd.com/blog/the-steps-and-benefits-of-revenue-cycle-management/
- Revcycle Intelligence. How Providers Can Detect, Prevent Healthcare Fraud and Abuse.https://revcycleintelligence.com/features/how-providers-can-detect-prevent-healthcare-fraud-and-abuse
How to Improve Your Accounts Receivable (AR) in Healthcare?
What is Revenue Cycle Management?
[^1]: Approximately 90% of claim denials are due to easily preventable technical issues. [^2]: Average additional $5 million revenue per hospital by preventing claim denials.
