A Comprehensive Guide on Healthcare Revenue Cycle Management

Running a medical practice is not an easy FEAT – a lot of effort goes into it. One of these is most important for your practice’s financial health, i.e., healthcare revenue cycle management (RCM).

Therefore, all healthcare facilities must understand it and learn to optimize it. If you are a trusted healthcare provider struggling to stay on top of your finances, we have penned down this comprehensive guide for you.

This guide will discuss the effective revenue cycle management process, its benefits, challenges, and top strategies to make it work for your practice.

So, without delay, let’s get started!

Overview of Healthcare Revenue Cycle Management 

Healthcare revenue cycle management involves monitoring and assessing the income generated by patients from the moment they schedule their first appointments until they clear their outstanding bills. Simply put, it covers the entire financial journey of a patient’s care process.

Similar to how businesses approach accounting, healthcare revenue cycle management considers various factors, such as the cost of care provided to patients. Through these elements, healthcare facilities can determine which procedures or techniques are most effective in generating revenue during the cycle.

After obtaining this information, hospital administrators and other individuals in charge of making decisions at a healthcare facility can utilize it to determine the best allocation of funds and devise strategies to generate more revenue. This will enable them to offer a wider range of services to cater to the diverse needs of their patients.

Fundamentals of Healthcare Management

Since the healthcare sector is constantly in a state of flux, it is essential to keep abreast of developments and ensure that your healthcare facility is up to date in every way. 

Strategic planning, decision-making, problem-solving, communication, leadership, motivation, teamwork, and ethics, must be applied by healthcare administrators to succeed in this competitive landscape.

Some fundamentals of healthcare management are listed below:

• Organizing, leading, and arranging non-clinical activities in the relevant healthcare facility.
• Administration of the healthcare organization’s overall finances and budget.
• Planning of recruitment and the design of work schedules for every employee.
• Supervision of distinct departments to guarantee productivity and efficiency.
• Proactive risk assessment and quality assurance while preserving patient happiness. 

Major Steps in Healthcare Revenue Cycle Management

The entire healthcare revenue cycle management process can be divided into front-end and back-end operations. The front end of RCM contains all the steps before the claim is submitted. Whereas, the backend of the RCM process includes steps after the claim is submitted.

The RCM process involves the following nine steps:

Step 1: Pre-Registration

It is an initial step that not all practices follow but can help you in the long run. It involves collecting patient information when the patient first schedules an appointment. 

By collecting insurance information details in advance, it becomes easier to educate patients on their financial responsibility. They get a better understanding of their co-pay and deductible status. 

During this step, you can collect the following data:

• Patient’s name
• Billing details
• Insurance details
• Demographic information
• Patient’s medical history and reason for visit

Besides, it helps you comply with the ‘No Surprise Act‘ that protects patients from receiving surprise medical bills. Additionally, this act emphasizes that providers furnish a good-faith estimate of amounts for the care services scheduled in advance. 

The data you collect in this step will help you estimate and communicate it to patients under group and individual health plans.

Step 2: Registration

This step starts when the patient comes in for the appointment, or it may have been completed by the patient online. In this step, you can verify the patient’s medical history, insurance coverage, contact details, and date of birth or ask them to fill out any necessary forms. 

This will also enable your staff to identify and rectify any errors resulting from the pre-registration.

Step 3: Charge Capture

After every patient encounter, you must record on a claim the charges for anticipated treatments. You then send this claim to the patient’s insurance provider or health plan. It is an important step that verifies the charges’ accuracy and the method, by allowing your healthcare organization to receive reimbursements.

Step 4: Utilization Review

The patient’s insurance provider or health plan takes this action if needed. They review a particular service’s medical necessity. After deciding whether to pay for these services for this patient, the insurance company will provide the data back to you.

Step 5: Coding

The procedure or treatments must be categorized into billable charges after the insurance provider has verified its coverage and the procedure has occurred. 

Certified coders convert the documented procedures from the patient’s treatment record into billable codes. Each procedure has a billing code. The patient’s bills and payment claims are subsequently generated using the codes.

Step 6: Claim Submission

The next step in the healthcare revenue cycle management is to send the prepared and coded claims to the payers. Upon reviewing the claim, the payer will check for any inconsistencies or discrepancies with the previously approved procedures.

Step 7: Remittance Process

After claim submission, the payer notifies you of the amount to be paid after processing it. In case of mistakes or discrepancies, you will be required to resubmit the claim after making the necessary amendments. 

Reworking and resubmitting will result in delayed payment by the insurance company. Since not all amount gets reimbursed, sometimes the patient needs to pay the remaining balance on account. As a result, a delay in the payer’s payment will halter your ability to bill the patient for any remaining amount they are responsible for. Therefore, you should regularly check your remittances for errors.

Step 8: Insurance Follow-up

At this stage of the healthcare revenue cycle management, you can expect to receive payment from the payer. However, you could run into problems with underpayment, overpayment, nonpayment, or claim denials.

As a result, insurance follow-up becomes a necessary step to ensure you get paid rightfully for the rendered services.

Step 9: Patient Collections

Once the insurance payer clears the payment, you need to figure out how much remains on the account and whether there are any outstanding patient obligations. 

This is one of the most challenging tasks for some healthcare facilities to finish. Send statements as soon as possible; the earlier you send the statement, the sooner you will get paid.

Another aspect of this step is monitoring outstanding accounts to get payments from patients who still owe money. The importance of this step is growing as patient deductibles rise. 

Today, patients are bearing a large chunk of the costs associated with the rendered care services. Giving the patient enough notice of when payments are due will make them more likely to pay their account in full.

Benefits of Revenue Cycle Management in Healthcare

Providers should anticipate notable improvements in both the financial performance and service quality of their medical practices by correctly completing the revenue cycle processes. 

Here are some of the most significant advantages of healthcare revenue cycle management. 

Improved Claim First-Pass Rate

Accurately executing front-end duties is crucial to successful revenue cycle management because it guarantees that claims get reimbursed on the first submission. These front-end responsibilities include correct coding, insurance verification, and patient data collection. 

After first filing, 5-10% of claims are typically rejected. However, the majority of these denials are the result of technological issues and human error. These include coding errors, insurance verification problems, and missing or inaccurate information.

Reduced Administrative Burden

Administrative personnel are in charge of setting up or updating patient records, scheduling appointments, and confirming insurance when a patient schedules an appointment. Administrative workers can work more efficiently since these front-end responsibilities are streamlined when a healthcare revenue cycle management system is in place. 

Besides, RCM ensures that these administrative duties are done correctly to prevent future claim denials. When claims are accepted on the first try, administrative workers save time and effort reworking claim denials and rejections.

Enhanced Patient Satisfaction

Effective revenue cycle management leads to improvements in the overall patient experience by placing a stronger emphasis on patient outcomes. To lower their chance of readmission, patients can anticipate receiving more thorough and focused care. 

RCM also streamlines administrative staff and patient experiences by streamlining procedures like scheduling, completing intake forms, and billing. Patients will also have a better understanding of their insurance eligibility from the outset because healthcare revenue cycle management places a strong emphasis on comprehensive insurance verification upfront. In this manner, future out-of-pocket costs won’t take them by surprise. 

Transition to Value-based Care Delivery

A practice that uses healthcare revenue cycle management saves time and money by not having to pay for error correction and claim appeals. As a result, practices can invest more time and resources into providing high-quality treatment. 

Even the shift from conventional fee-for-service reimbursement methods to value-based reimbursement methods can be facilitated by revenue cycle management for providers. 

Value-based reimbursement policies were developed by the Centers for Medicare & Medicaid Services (CMS) to improve patient care by emphasizing service quality above quantity. It reimburses healthcare providers based on the health outcomes. 

Increased Patient Collections and Reimbursements

Healthcare facilities must budget for a wide range of costs. They are required to pay their employees and bear the costs of the services they render to patients. Payments to the healthcare facility are withheld when patients cannot pay for treatments up in advance or when claims are rejected. This makes the practice’s expense management difficult.

With healthcare revenue cycle management practices you can prevent claim denials in the future and ensure timely reimbursement.

Challenges in Healthcare Revenue Cycle Management

The healthcare revenue cycle is a dynamic process. Because of this, healthcare workers who work in revenue cycle management can encounter various difficulties, from incorrect billing to a lack of established procedures and guidelines. 

The top five most prevalent challenges associated with healthcare revenue cycle management are discussed below:

Billing and Collection Errors

Ignorance of a billing procedure can cost hospitals tens of millions of dollars, not to mention scare people with unmanageable debt.  

Therefore, healthcare facilities must ensure they aren’t losing revenue as patients bear a greater portion of the expense of their care out of their own pockets. Besides, they must make sure they aren’t pressuring patients to go elsewhere for care.Health IT Challenges

While not all providers are experts at obtaining the most money possible at the point of treatment, a survey revealed that 85% of organizations find it extremely challenging to get payment from patients after they leave the facility.

Health IT Challenges

Revenue cycle management requires clinicians to use information technology to track claims throughout their life cycle. It enables you to receive payment and handle unfulfilled claims efficiently. 

However, some healthcare facilities find it difficult to set up their billing department and robust IT infrastructure or invest in advanced technology to manage outpatient networks and claims. Efficient health information technology is critical in today’s healthcare setting.

When faced with this challenge, most practices opt for outsourcing, while others wind up closing their facility’s doors permanently.

Lack of Staff Training

Ineffective training could result in inaccurate billing or patient data collection by healthcare staff workers. Billing personnel in the healthcare industry must be proficient in both gathering patient demographic data upfront and converting it into valid insurance claims later on.

Training can save a healthcare organization money, even though it may be expensive and time-consuming. Errors in coding have the same consequences as medical errors in terms of needless expenses. For instance, according to research, twenty-three hospitals in New Jersey were penalized $500,000 in 2015 alone for medical blunders.

Failure to Monitor The Entire Claim Process

At every stage of the claims process, close supervision is needed. It is another important aspect of any practice’s revenue cycle management procedures. Healthcare workers won’t be able to identify errors if they don’t keep a keen eye on claims. This results in revenue leakage.

Practices to Improve Healthcare Revenue Cycle Management 

Medical practices now have a greater obligation to optimize payment collections and all other facets of healthcare RCM due to the constantly evolving healthcare rules and reimbursement models. Even though there are a lot of important obstacles, following best practices maximizes collecting. Additionally, it lowers expenses throughout the revenue cycle and aids small practices in better understanding, measuring, and managing their financial aspects.

Automate Prior Authorization

Verifying insurance eligibility automatically benefits patients as well as the practice. It enables practices to keep claims accurate while alerting patients to their financial obligations early on. 

As a result, patients are better able to budget for out-of-pocket expenses and respond more quickly when front desk employees collect these payments.

Train Front-Desk Staff

Teach your front desk employees to ask about the patient’s insurance and demographics when setting up an appointment. Utilize “communication scripts” to assist staff in explaining to patients the available payment options or plans and the co-pay collecting process. Patient happiness and revenue optimization are both enhanced by a well-trained front desk team.

Leverage Technology

Make use of technology to automate important steps in the claim filing process. To expedite the processing of payments, use electronic remittance. Besides, you should also provide an online payment interface so that patients can make payments easily.

Proactively Monitor Claims

It’s crucial to determine the causes of claims denials in addition to finding solutions. The first step in ensuring correct invoicing is confirming insurance eligibility. The ability to follow claims from submission to payment is also crucial. Document all payer denials and examine for patterns or frequent mistakes that you can fix to break the loop of lost income.

Invest in Employee Training

Healthcare facilities should create and implement ongoing education programs for staff members that cover accurate coding practices, thorough charting, and financial policy reminders, given how quickly the healthcare industry is changing. Remember, training not only lowers medical errors but also lowers employee turnover.

Why Is Revenue Cycle Management Important in Healthcare?

By precisely registering, assigning, scheduling, and processing payments, a well-designed and executed RCM system reduces the duration of the billing and collection cycles.

It links administrative information to the care a patient receives, including the patient’s name, insurance plan, and other relevant patient attributes.

By reducing the amount of rejected claims and enabling online patient payments, it helps practitioners save time and money. It also establishes a link between the clinical and business sides of healthcare.

Healthcare organizations store and manage patient billing data using RCM systems. Besides, it decreases administrative costs and expedites the time between rendering a service and being paid for it by linking electronic health records (EHR) and billing systems. RCM makes it easier for accounting and EHR systems to link and communicate.

Moreover, healthcare revenue cycle management is responsible for all administrative duties. These include informing patients of upcoming appointments, reminding payers and patients of unpaid balances, and connecting with the insurance company if a claim is rejected.

Bottom Line

Technology, reimbursement models, and healthcare laws have all been evolving at an accelerating rate. For healthcare institutions, maintaining their financial viability presents difficult obstacles. A strong and well-planned healthcare revenue cycle management strategy can make the difference between practices that are struggling to make ends meet and those that are prospering.

Practices that automate when appropriate and streamline when needed are going to thrive in this competitive healthcare space. They have an advantage over those bogged down in time-consuming, repetitive operations that don’t yield the desired result.

Therefore, practices must evaluate their requirement for strong and dependable revenue cycle management systems now more than ever. MediBillMD offers tailored medical billing solutions to meet a practice’s unique requirements.

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