Medical practices, health systems and hospitals’ primary goals are to provide life-saving care and keep patients healthy. Like any other business, however, these healthcare organizations must also focus on their own financial health to stay afloat. Strong financial performance is the foundation of a sustainable healthcare system, making effective revenue cycle management (RCM) essential. Revenue cycle management is the process used to manage the financial aspects of the healthcare journey, from the initial appointment to registration to the final payment.
Revenue cycle management includes identifying, managing and tracking all patient revenue as well as optimizing revenue collection and minimizing payment delays or denials.
The essential steps of revenue cycle management
To have an effective RCM strategy, it's important to understand the key steps throughout the process. Typical RCM processes may differ between healthcare organizations, but most revenue cycles follow a similar path:
Front-end
- Patient engagement
From scheduling to appointment reminders and virtual intake, staff can capture important patient demographic and insurance information prior to a visit.
- Pre-authorization and eligibility
In pre-visit workflows, a patient’s insurance eligibility and benefits must be verified to determine coverage and any out-of-pocket expenses. This allows patients to better understand their financial responsibility for care before their appointment. Plus, it enables staff to identify potential claim denials ahead of time.
- Patient financial engagement
With a better understanding of their financial responsibility for an upcoming appointment, patients can be prompted to pay for these services at the visit to accelerate revenue.
Mid-cycle
- Encounter coding and charge capture
During each patient encounter, staff capture charges, including procedures, tests, medications and other billable items. This involves accurately recording the services provided, including the appropriate diagnostic and procedural codes to ensure proper reimbursement and compliance with coding guidelines.
Back-end
- Claims submission
Following the charge capture process, healthcare facilities submit claims to insurance companies or government payers for reimbursement. Should a claim be denied, it’s during this step that staff work to rectify any denials in order to successfully resubmit a claim and receive reimbursement.
- Patient payment and billing
Once the insurance company reimburses a claim, any outstanding dues fall on the patient. Patients receive paper or electronic statements, which detail services provided, the amount owed and any remaining balances to be paid to the healthcare facility.
- Financial reporting and analysis
Finally, any RCM process should include measurement of key performance indicators (KPIs), such as collection rates, A/R days, denial rates and more, so leaders can accurately assess their organization’s financial health.
Benefits of revenue cycle management
As the healthcare industry moves toward a valued-based reimbursement model, a strategic approach to revenue cycle management can provide various benefits to hospitals and medical groups, including:
- Increased cash flow
Recent research found that 89% of hospitals and health systems have experienced an increase in claims denial rates and that 86% of claim denials are potentially avoidable. A strong RCM process helps improve claims accuracy and reduces claim denials. As a result, healthcare organizations can accelerate their claims processing and reduce the time it takes to receive payment. With greater cash flow, providers can meet financial obligations and invest in resources to enhance patient care.
- Upgraded operational efficiency
Streamlined RCM processes reduce administrative burdens, manual tasks and paperwork. Automation and end-to-end RCM solutions can be implemented to eliminate redundant workflows, decrease manual errors and increase efficiencies in many critical tasks, such as claims submissions, payment processing, insurance verification and denial management.
- Enhanced regulatory compliance
Revenue cycle management can help organizations remain compliant with price transparency laws, coding guidelines, billing regulations and other government mandates. By addressing compliance issues proactively, providers can deliver a better revenue experience.
- Improved patient experience
Revenue cycle management helps build trust and satisfaction among patients by streamlining the billing process and promoting greater transparency and accuracy at every step of the patient journey.
- Decreased expenses
With an optimized RCM process, healthcare organizations can save costs associated with denied claims, reduce administrative inefficiencies, and recover more patient payments.
How to improve healthcare revenue cycle management
An ineffective RCM process can jeopardize the success of any healthcare organization and create an uncertain financial future, no matter the size. Here are some tips to ensure your organization’s RCM process is top-notch:
- Workflow automation
Automating key tasks throughout the patient journey and RCM process can save significant time for staff and enhance the overall patient experience. Revenue cycle management solutions can simplify patient access, insurance verification, claims submission and management, and patient billing.
- Transparency and communication
Keeping patients in the dark about their fiscal responsibility is a great way to lose business. Providing upfront, consistent, and clear communication to patients throughout the RCM process is imperative. As a result, your patients have a better understanding of what they owe, are happier and are thus better positioned to submit payment for services rendered.
- Vendor consolidation
Nearly 70% of healthcare organizations use multiple vendors to manage their revenue cycle, which leads to various issues, such as wasteful expenses, revenue leakage, data silos, and higher cost of ownership. To avoid this widespread problem, consider end-to-end RCM solutions that possess capabilities across the entire financial journey. Using a single vendor for all your RCM needs, rather than multiple third-party companies, helps create a seamless revenue management experience for staff and patients alike.
Unsure if your healthcare organization’s RCM strategy needs an overhaul? Read our checklist to learn the seven key signs that it may be time to rethink your approach to revenue management.