Healthcare Revenue Cycle Management (RCM) 101

Revenue cycle management is an important business function for any healthcare provider. Read on to learn more about managing the healthcare revenue cycle, the challenges organizations face, and how to use technology to improve revenue cycle management.

What is Revenue Cycle Management (RCM) in Healthcare?

Revenue cycle management (RCM) is the process healthcare organizations use to get paid for patient services.

It is the end-to-end procedure a provider uses to capture, track, manage, and collect revenue. Managing the healthcare revenue cycle involves administrative and clinical activities at every stage of the patient journey: pre-service registration and eligibility verification, point-of-service charge capture, and post-service billing, claims submissions, and payment collections.

Goals of RCM in Healthcare

The overarching goals of RCM in healthcare are to maximize revenue capture while maintaining patient satisfaction, operational efficiency, and regulatory compliance.

Specifically, healthcare organizations use RCM to:

• Maximize revenue collection by ensuring accurate charge capture, minimizing claim denials, and reducing days in accounts receivable (A/R).
• Improve the patient financial experience by streamlining the registration process, providing transparent cost estimates, and offering convenient payment options.
• Maintain compliance with regulatory requirements, payer contracts, and information security requirements related to patient information.
• Maintain compliance with regulatory requirements, payer contracts, and information security requirements related to patient information.
• Improve operational efficiency by automating manual processes, reducing administrative burden, and optimizing workflows.

Challenges of RCM in Healthcare

The modern healthcare landscape presents plenty of challenges for RCM, including high claim volumes and Medicare reimbursement issues. Some of the biggest challenges include:

• Accurate medical coding and medical billing requires extensive knowledge of medical codes, frequent updates to coding systems, and accurate clinical documentation. Even minor errors can lead to claim denials or compliance issues.
• Compliance requirements are significant and ever-evolving. Healthcare organizations must uphold the requirements of HIPAA, Medicare and Medicaid, payer contracts, state-specific regulations, “No Surprises” rules, and more. Provider credentialing must also stay up-to-date.
• Payer relations requires managing different contracts, requirements, and payment terms. The more payers involved, the more challenging this becomes for finance and A/R teams.
• Data management and analysis is essential for modern healthcare organizations. Patient services generate vast amounts of data that must be accurately captured, stored, and analyzed. Organizations need robust systems to track revenue cycle KPIs, identify trends and revenue leakage, and make decisions based on data.
• Technology integration is important in an age of many healthcare technologies — and many organizations relying on legacy systems. A lack of interoperability creates inefficiencies and increases the risk of errors in the revenue cycle.

While the exact approach varies among healthcare providers, leading organizations invest in technology, track important KPIs, and prioritize patient education and staff training to overcome these RCM challenges.

Steps in the Healthcare Revenue Cycle

Managing the revenue cycle starts before a patient walks through the door and continues well after they leave the facility. The following steps and activities are essential to healthcare RCM:

Pre-Registration

• Capture insurance and patient demographic information before arrival
• Verify insurance eligibility, coverage, and benefits
• Obtain necessary pre-authorizations from payers
• Discuss patient financial expectations and policies
• Schedule appointments strategically to optimize resource utilization

Registration

• Ensure the accuracy of patient information and insurance coverage
• Collect copayments and deductibles at time of service
• Ensure referral or authorization is in place if needed

Charge Capture

• Document all billable services, procedures, and supplies
• Ensure proper clinical documentation to support coding
• Apply appropriate CPT, HCPCS, and ICD-10 codes
• Validate coding accuracy and medical necessity
• Review charge capture completeness against clinical documentation
• Use integrated technologies to feed practice management data into billing system

Claims Submission

• Submit clean claims within 24-48 hours of service
• Ensure compliance with payer-specific requirements
• Monitor claim status and track submission deadlines
• Validate claims against LCD/NCD guidelines
• Use claim scrubbing or other automations to reduce errors

Remittance Processing and Payment Posting

• Review EOBs/ERAs and reconcile with expected reimbursement
• Post payments accurately to patient accounts and automate where possible
• Apply contractual adjustments correctly
• Process refunds when necessary

Insurance Follow-Up

• Appeal denials within payer timeframes and track appeal outcomes
• Analyze denial patterns and root causes to reduce common denials
• Identify and resolve payment variances
• Review fee schedules to ensure alignment with allowables, contracts, and rates

Patient Billing and Collections

• Generate accurate patient statements
• Create a frictionless, no-login-needed payment process
• Offer digital billing, secure online bill pay, and text to pay
• Offer payment plans and other flexible options for larger balances
• Communicate proactively about balances
• Address patient billing questions promptly
• Segment accounts and prioritize outreach based on payment risk
• Use multiple communication channels
• Maintain compliance with collection regulations
• Monitor collection agency performance

In addition to the steps above, reviewing performance is an important part of the RCM process. Consider the revenue cycle KPIs, like days in A/R and claim denial rate, most important to your organization. Analyze revenue leakage points, provider productivity, and clinical documentation patterns to boost cash flow.

Benefits of RCM for Healthcare Organizations

Effective RCM means more timely and consistent payments, fewer claim denials, and lower bad debt write-off rates. It is an essential part of maximizing reimbursement for patient services and maintaining overall financial health. Specific benefits of RCM include:

Fewer coding errors

Precise medical coding requires well-trained staff and highly accurate record-keeping. Without the knowledge to apply the right codes or the right clinical documentation, mistakes like undercoding, overcoding, or missing charges cause denials and delays down the line.

RCM helps reduce the number of claim denials due to preventable technical issues, like incorrect patient information or improper coding. Managing the revenue cycle starts with gathering and validating patient information—an important step for accurate coding. Automation and AI-assisted coding tools help reduce errors, accelerate the process, and reduce coding backlogs for already-strained healthcare organizations. This makes it easier for skilled coders to make the most of their time, and it speeds up the billing process for healthcare payers.

Lower claim denial rates

Claim denials can be a major challenge. Payers have complex criteria for medical necessity and claims submissions, and they increasingly use algorithms to review claims submissions. Approximately 11% of claims submitted are denied, and the dollar value of those denials is going up, too.

RCM systems help by validating claims before submission, identifying errors like missing patient information or incorrect codes. By addressing these issues pre-submission, organizations can improve the number of clean claim submissions, minimize rejections, and speed up reimbursements. Healthcare providers can also use automated claims tracking and status updates to notify staff of payer feedback and allow them to address issues proactively.

More streamlined administrative work

RCM workflows and technology decrease the admin work associated with patient billing and collections. Healthcare providers are already using a range of tech to improve RCM and support their staff:

• Artificial intelligence (AI) and machine learning can flag issues with eligibility and prior authorizations, track claim status, and assign tasks to the best-equipped staff to handle them.
• Automation can handle repetitive and recurring tasks to increase accuracy and free up staff time for other work.
• Data exchange platforms allow finance teams to quickly share information across EMRs, payers, clearinghouses, and other sources.
• Data aggregation and analytics show revenue cycle metrics in a unified dashboard or scorecard view, with the ability to segment data by payer, claim status, and other factors.
• Digital billing and payment platforms allow patients to pay with 1-2 clicks, access health records in a secure platform, and get answers to common billing questions, reducing call volumes.

These workflow improvements and technology enhancements improve staff productivity and improve the employee experience—two major goals amid ongoing industry-wide staffing shortages.

Increased revenue and accelerated cash flow

It’s important to minimize the gap between delivering patient services and receiving payment—especially when providers have less cash on hand and high out-of-pocket costs are driving down patient collection rates.

Better patient experience

Many patients find medical bills confusing, and one-third of working adults report being burdened by medical or dental debt. Paying for medical care is inherently stressful for many patients, and providers can take meaningful steps to improve the patient financial experience.

Effective RCM workflows speed up reimbursements, patient billing, and related tasks. Offering omni-channel payment options (e.g. credit cards, ACH, financing plans) and a frictionless payment experience improves collection rates by meeting patients where they are.

• Improve patient understanding of financial obligations – set accurate expectations regarding copayments, coinsurance, deductibles, and other payments due via patient billing support and online resources.
• Reduce patients repeating information – collect and confirm patient information during preregistration and registration, and integrate key systems for secure data-sharing.
• Increase billing speed and accuracy – provide accurate cost estimates, streamline administrative processes, and use anomaly detection to spot errors so billing is quick and accurate.

Improved compliance and decreased fraud

Fraudulent overpayments total anywhere from $230-700+ billion every year in the U.S. This includes common types of fraud like double billing, phantom billing, unbundling, and upcoding.

RCM technology is often equipped with automatic detection systems to flag duplicate claims, unusual codes, or unexpectedly high or low charges. Providers can use auditing tools, role-based access control, and real-time alerts, and data entry standards to track anomalies and improve compliance with healthcare regulations.

How Collectly Improves Healthcare RCM

Collectly’s AI-powered software improves the financial experience for patients and improves RCM for providers. Collectly is HITRUST i1 certified for information security and works with any EHR or PM software system.

Collectly offers a virtual check-in process, point-of-service payment technology, post-service billing workflows, and comprehensive patient billing support. The Collectly AI assistant answers real-time billing questions from patients, allowing providers to focus on insurance follow-ups and more complex patient interactions.

See how Collectly helped CleanSlate collect over 1,600 outstanding patient payments within one month and increase patient revenue by 250% overall.