Revenue Cycle Management (RCM) Glossary of Terms

Revenue cycle management (RCM) is the process healthcare providers use to collect revenue from patient services. It touches many important operational areas: patient registration, clinical documentation, medical coding, claim submissions, patient billing, patient communications, and more.

To better understand the healthcare revenue cycle, here is a glossary of medical billing, coding, and RCM terms:

Accounts Receivable (A/R)

The outstanding balance owed to a healthcare provider for services rendered. Days spent in A/R is an important revenue cycle management KPI The fewer days spent in A/R, the faster an organization is converting patient services into revenue.

Related Term → Days Sales Outstanding (DSO)

Adjudication

The process by which an insurance payer decides whether to accept, deny, or reject a claim.

Adjustment

An amount the provider subtracts from the total charges because they have agreed to discount or charge a lower amount for that service. Adjustments play a major role in calculating total expected collections and net collections.

Adjustments can be made for several reasons:

• Contractual agreements: The provider has a billing agreement with the patient's insurance company that requires them to write off a portion of the bill.
• Payer error: The insurance company did not abide by the contracted rates or agreements
• Billing error: There was an error on the claim.
• Patient liability: The patient is responsible for the amount.

Advance Beneficiary Notice (ABN)

A form that advises a patient that certain services may not be covered by Medicare, also known as an Advance Beneficiary Notice of Noncoverage (ABN).

Amount Not Covered

What the patient’s insurer does not pay, including deductibles, co-insurance, and charges for non-covered services.

Related Term → Patient Responsibility

Appeal

A process a patient or their provider can use to object to a health plan’s decision to deny payment for care.

Applied to Deductible (ATD)

The amount the patient must pay before the insurance company will start paying.

Related Terms → Deductible, Patient Responsibility

Assignment of Benefits (AOB)

The legal agreement between the patient and the provider that allows the provider to receive payment directly from the insurer on the patient’s behalf—rather than the patient paying the provider and seeking reimbursement from their insurer.

Related Term → Reimbursement

Attribution

The process of assigning financial responsibility for healthcare services to the appropriate payer to ensure accurate reimbursement.

Bad Debt

Refers to unpaid patient balances that are deemed uncollectible after all attempts to recover them have been made.

Related Terms → Patient Collections, Write-off

Balance Billing

The practice of a healthcare provider billing a patient for the difference between the provider's charge and the amount paid by the patient's insurance.

Related Term → Medical Billing

Base Payment Rate

The predetermined amount established by payers for specific healthcare services, serving as the starting point for reimbursement calculations.

Beneficiary

An individual or entity who receives healthcare services and is eligible to receive benefits from a health insurance plan or government program.

Billing Reconciliation

The process of comparing and verifying billing records against payments received to ensure accuracy and completeness.

Bundled Payments

Reimbursement model where healthcare providers receive a single payment for multiple services related to a specific episode of care. Bundling is designed to encourage strategic relationships among healthcare providers.

Case Mix

A way to quantify the type and severity of patients’ conditions in a given healthcare facility to understand the complexity and diversity of patient cases in that facility. This helps providers understand the resources required for treatment and forecast the reimbursements due for healthcare services. This is sometimes expressed as a numerical value called Case-Mix Index (CMI).

Case-Mix Group (CMG)

A classification system used to group patients with similar clinical characteristics and resource needs. For example, Inpatient Rehabilitation Facilities (IRF) are a CMG under the Centers for Medicare & Medicaid Services (CMS) framework.

Case Rate Reimbursement

A payment model that pays providers a set amount for each patient visit or episode of care. It is often used for services with relatively well-defined treatment protocols and predictable resource use.

Related Term → Bundled Payments

Cash Flow

The amount of cash flowing in and out of a healthcare organization. Cash flow consists of cash inflows, which is revenue generated from patient payments and insurance reimbursements, and cash outflows, which is money spent on operational expenses like salaries, medical supplies, rent, and utilities.

Charge Capture

The process of accurately capturing and recording all billable services provided to a patient for proper reimbursement.

Charge Code

A unique alphanumeric identifier assigned to a specific medical service used for billing and reimbursement purposes.

Charge Description Master (CDM)

A comprehensive listing of items billable to a patient or health insurance provider.

Charge Status Indicator

A code used to identify the status of a charge, e.g. billed, denied, or pending.

Chief Financial Officer (CFO)

The senior executive responsible for managing the financial actions of a healthcare organization. Healthcare CFOs oversee financial planning, risk management, financial reporting, and more.

Related Term → Revenue Cycle Director

Claim

A formal request submitted by a healthcare provider to an insurance company or payer for reimbursement of services rendered to a patient.

Claim Adjustment

A change to a healthcare claim to correct an error, add more information, or account for contractual agreements between payers and providers. Adjustments can increase or decrease the original amount paid on a claim, and providers can request adjustments when deemed necessary to ensure accurate reimbursement.

Claim adjustments are communicated using Claim Adjustment Reason Codes (CARC). CARC is a standardized way to communicate why a particular line item/charge was adjusted on the Electronic Remittance Advice (ERA).

Related Term → Electronic Remittance Advice (ERA)

Claim Denial

When an insurer denies a claim for reimbursement. Clinical denials are due to a discrepancy between the clinical documentation and the billed services, while administrative denials are due to missing info, incorrect coding, or other non-medical reasons.

The percentage of billing that’s denied when sent to the payer is called claim denial rate. The strategies and processes healthcare providers use to manage denied claims and secure reimbursement are known as denial management.

Claim Rejection

When a payer rejects the claim and returns it for further review and follow-up by the provider. This is not a claim denial (yet).

Claim Submission

The act of sending claims to insurance companies or payers for reimbursement. Different situations call for different methods of submitting claims. Examples include Claim Form HCFA/CMS-1500 for non-institutional providers (physicians, nurse practitioners, etc.); Claim Form UB-04 for hospitals, inpatient, and outpatient services; and CMS 1500 for submitting claims to Medicare and Medicaid.

Clean Claim

A claim that is error-free and can be processed without additional information. The occurrence of clean claims is measured by the key performance indicator (KPI) clean claim rate.

Clearinghouse

A third-party organization that acts as an intermediary between healthcare providers and insurance payers. Providers use a clearinghouse to prescreen claim submissions for errors and submit them to the right payer(s) electronically.

Clinical Documentation Integrity (CDI)

The process of ensuring accurate and complete clinical documentation to support high-quality patient care, accurate coding, and timely patient billing. CDI involves collecting accurate clinical information in one place, like an electronic health record (EHR), to enable better collaboration and communication in patient care.

Coding

The process of translating healthcare services into universal alphanumeric codes. Medical coding requires a trained coder to turn medical information (e.g. diagnoses, procedures, medical equipment) into codes that determine the cost of services.

Related Terms → CPT Codes, ICD Codes

Coding Compliance Plan

A healthcare organization’s strategy to ensure accurate and compliant medical coding practices. This often involves tracking claims denied due to coding errors, monitoring data for common types of fraud, and using automated tools to review large volumes of medical coding data.

Coding Management

The process of overseeing and optimizing the accurate assignment of medical codes to healthcare services and procedures.

Coinsurance

The percentage of costs of a covered healthcare service paid by the patient.

Related Term → Patient Responsibility

Collections

The process of collecting payment from patients for the healthcare services they received. Effective patient collections requires providers to set expectations about patient costs, communicate proactively, set up easy patient billing, and monitor revenue cycle KPIs to find opportunities for improvement.

Related Term → Net Collections

Conversion Factor (CF)

A numerical value used to convert relative value units (RVUs) into dollar payment amounts for healthcare services. For Medicare purposes, the annual Physician Fee Schedule sets the Conversion Factor values — and therefore the Medicare payment allowed for a specific service — per geographic area.

Copayment

A fixed amount paid by the patient for a covered healthcare service.

Related Term → Patient Responsibility

Cost to Collect

The total cost of operating the revenue cycle and patient financial services functions of a healthcare organization divided by income from patient services. A lower cost to collect indicates more efficient revenue operations.

Covered Service

A medical procedure, treatment, or healthcare service eligible for reimbursement by a patient's insurance plan or government program.

CPT Codes

Current Procedural Terminology (CPT) codes used to describe medical services and procedures. There are Category I, II, and III CPT Codes.

Related Term → Healthcare Common Procedure Coding System (HCPCS)

Days Sales Outstanding (DSO)

The average number of days it takes to receive payment for services rendered and an important KPI for the healthcare revenue cycle.

Related Term → Accounts Receivable (A/R)

Deductible

The amount a patient must pay for healthcare services before insurance begins to pay. When deductibles reset at the beginning of the year, patient responsibility increases, affecting RCM.

Denial Overturned

Any previously denied claim or charge that, after further review by the payer, has been reconsidered or allowed for payment.

Related Term → Appeal

Diagnosis-Related Group (DRG) Codes

A system that groups similar conditions to determine reimbursement rates. Cases are classified based on the patient’s diagnosis, treatment, age, length of stay, and other factors.

DRGs are overarching categories that help classify a part of a patient’s care plan. CPT and ICD codes, on the other hand, are specific ways to code an individual procedure or diagnosis.

Related Terms → CPT Codes, ICD codes

Discharged Not Final Billed (DNFB)

Revenue cycle KPI that tracks when a patient has been discharged but has not received a final bill from the healthcare facility. An increase in DNFB accounts may mean inefficient medical billing and coding, poor internal reviews, or other operational issues.

Down-Coding

When a claim is submitted without supporting documents or information, the insurer will reduce the code to the closest matching code, which reduces the payment.

Related Term → Upcoding

Electronic Data Interchange (EDI) 835

ANSI-specified files for healthcare data communication. EDI 835 is the standard transaction used to make electronic payments to healthcare providers based on adjudicated claims.

Electronic Funds Transfer (EFT)

A digital method of transferring funds between patients, providers, and payers.

Electronic Remittance Advice (ERA)

Also known as an 835 file, the ERA describes the payer, payee, payment amount, and other identifying information about the payment. It may include other information about the adjudication process, like claim denial information, claim adjustment reason codes (CARC), and more.

ERA is delivered via EDI in ANSI X12 5010 format, a HIPAA compliant electronic format that streamlines communication between providers and payers.

Encoder

A software tool used to assign appropriate codes to medical procedures and diagnoses.

Explanation of Benefits (EOB)

A statement from the insurance company explaining what was covered for a claim.

Fee Schedule

A list of prices for specific medical services or procedures.

Good Faith Estimate

A provider's best estimate of the expected charges for a scheduled or requested item or service, including related costs like tests or medications.

Grouper

A software tool used to assign diagnosis-related groups (DRGs) for accurate billing and reimbursement.

Guarantor

An individual or entity legally responsible for paying a patient's medical expenses, typically the patient themselves or their insurance provider.

Healthcare Common Procedure Coding System (HCPCS)

Coding system used for products, supplies, and services not included in CPT codes.

Healthcare Finance Management

The management of an organization's financial resources to provide high-quality patient care while maintaining financial viability.

Related Terms → Revenue Cycle Management (RCM), RCM KPIs

Healthcare Operations Management

The administration of business practices to create the highest level of efficiency possible within a healthcare organization.

Healthcare Price Transparency

The availability of provider-specific information on the price for specific health care services that is readily accessible to patients and other payers.

Healthcare Revenue Cycle

All administrative and clinical functions that contribute to capturing, managing, and collecting patient service revenue.

Health Information Exchange (HIE)

Refers to the electronic sharing of health information among different healthcare organizations.

Health Insurance Portability and Accountability Act (HIPAA)

A U.S. federal law that sets standards for protecting patient health information.

ICD Codes

ICD-10 refers to International Classification of Diseases (ICD), 10th revision, used for diagnostic coding. The healthcare industry transitioned from ICD-9 to ICD-10 codes on October 1, 2015.

When there is not an applicable category in ICD codes, it is marked Not Elsewhere Classifiable (NEC). An unspecified diagnosis in ICD is Not Otherwise Specified (NOS).

Improper Payment Review

The process of examining healthcare claims and payments to identify and rectify any errors, fraud, or abuse in billing and reimbursement.

Insurance Verification

Initial step to confirm a patient has valid insurance for that network or location, also known as an eligibility check.

Related Term → Prior Authorization

Integrated Revenue Cycle (IRC)

A comprehensive approach that ensures efficient and streamlined financial process at all stages of RCM, from patient registration to claim reimbursement.

Itemized Bill

A detailed list of services, procedures, and supplies provided in a patient’s care, along with the cost of each item.

Related Term → Superbill

Labor-Related Share

The portion of healthcare revenue cycle management costs directly attributed to labor expenses, e.g. salaries, benefits, training.

Related Term → Cost to Collect

Medical Billing

The process of generating and submitting health insurance claims and patient bills to be reimbursed for services rendered by a healthcare provider.

It is a multi-step process that includes translating medical procedures and diagnoses into medical codes, preparing and submitting claims, and resolving issues or claim denials to ensure timely reimbursement. Healthcare providers are increasingly looking to AI-enhanced patient billing and other technologies to support billing and revenue cycle management.

Medical Billing Software

Digital systems used to manage and streamline medical billing processes and other financial tasks. Billing software may help enter charges, process patient payments, submit insurance claims, generate patient statements, analyze billing data and other financial KPIs, post payments, track Accounts Receivable (A/R) and more.

Medical Payment Data

Information related to healthcare payments, including claims data, reimbursement rates, and patient payment history. Medical Payment Data is also the label used for medical collections on third-party credit reports.

Medicare Code Editor (MCE)

A software tool is used in healthcare revenue cycle management to validate Medicare claims based on coding guidelines.

Medicare Summary Notice (MSN)

Detailed summary of services billed to Medicare beneficiaries, including payments made and any financial responsibility.

Net Collections

The total amount collected from all payers (including patients) divided by the total amount allowed by payers.

Related Term → Revenue Cycle Management KPIs

No Surprises Act

A U.S. federal law that reduces instances in which patients face unexpected medical bills due to receiving care from out-of-network facilities or providers during emergency situations.

Related Term → Surprise Billing

Omnichannel

A business strategy that seeks to provide a seamless patient experience across all channels, including in the practice, online, and via mobile devices. Omnichannel can refer to payments, scheduling, and other aspects of healthcare operations.

Patient Centered Care

An approach to healthcare that focuses on the individual patient's needs, preferences, and values in all clinical decisions and administrative processes. Also known as person-centered care.

Patient Collections

The process of collecting unpaid balances from patients for healthcare services they received. Also known as patient payment collection, this is a crucial part of managing the healthcare revenue cycle and ensuring financial stability.

Related Term → Patient Responsibility

Patient Engagement

Strategies and actions taken by patients, caregivers, and healthcare providers to facilitate and encourage active patient involvement in their care.

Patient Payment Plans

A structured approach allowing patients to spread out their healthcare payments over time.

Patient Responsibility

The portion of the medical bill that the patient is responsible for paying. This may include the patient’s coinsurance, copay, deductible, or self-pay obligations.

Related Term → Amount Not Covered

Patient Statement

A document sent to patients outlining services received, payments made, and any remaining balances due.

Related Term → Superbill

Payer or Payor

An entity that assumes the risk of paying for medical treatments, such as insurance carriers, third-party payers, or government programs like Medicare.

Payer Mix

The percentage breakdown of a healthcare organization’s revenue from different payers: Medicare, Medicaid, private insurers, self-pay, etc.

Payment Posting

The process of applying payments received from insurance companies and patients to the appropriate patient accounts.

Point-of-Service (POS) Collections

The practice of collecting payments from patients at the time medical services are rendered.

Related Terms → Deductible, Patient Responsibility

Prior Authorization

Approval from an insurance company before a healthcare service is provided, also known as insurance preauthorization.

Reimbursement

The process of receiving payment for healthcare services provided to patients.

Remittance

The payment received from insurance companies or patients for services rendered.

Revenue Cycle

All the steps involved in the capture, management, and collection of patient service revenue. This includes administrative and clinical functions throughout the patient journey, from the moment a patient account is created through payment for services received.

Revenue Cycle Director

Responsible for overseeing all aspects of the revenue cycle process within a healthcare organization. They may be supported by Revenue Cycle Managers and other staff who oversee day-to-day billing, collections, financial reporting, and other aspects of RCM.

Revenue Cycle Management (RCM)

The process used to track revenue from patient services and manage overall healthcare financial operations. Revenue cycle management is a critical part of healthcare administration and plays a key role in medical billing, coding, data analytics, cash flow management, and operational efficiency.

Revenue Cycle Management KPIs

Metrics used to measure the effectiveness of an organization’s revenue cycle management activities. Common revenue cycle KPIs include Days in Accounts Receivable (A/R), Net Collection Rate, Cost to Collect, and Cash Collection Percentage.

Revenue Leakage

The loss of potential revenue due to inefficiencies, coding errors, or claim denials in the revenue cycle process. Addressing revenue leakage is essential for healthy cash flow and overall revenue cycle management.

Revenue Integrity

Ensuring compliance, accuracy, and effectiveness of RCM processes to capture optimal revenue from clinical services. Also known as revenue cycle integrity, it depends on accurate billing and coding, effective use of RCM technology, and efficient revenue capture.

Self-Pay

Refers to patients who are responsible for paying their medical bills without assistance from insurance.

Superbill

A detailed invoice for healthcare services provided to a patient.

Surprise Billing

Unexpected charges for healthcare services, often resulting from out-of-network care that a patient was unaware of.

Related Term → No Surprises Act

Upcoding

A form of fraud where someone submits codes for more serious (and more expensive) diagnoses or procedures than the ones actually diagnosed or performed.

Related Term → Down-Coding

Write-off

The portion of a charge that is removed from accounts receivable as uncollectible.

Related Term → Bad Debt

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