The financial management of a healthcare practice or medical facility involves a deep understanding of the revenue cycle. The entire system, known as revenue cycle management (RCM), aims to streamline medical billing, ensure faster reimbursement collection, and minimize revenue leakage through effective denial management.
According to AAPC data, claim denials are on the rise. On average, between 10% and 15% of the time, claims are denied, depending on the practice and payer mix. This rejection means financial losses and strain on healthcare providers or medical facilities.
Furthermore, to reverse denials, healthcare providers must complete lengthy appeals processes or dedicate resources to claim rework and resubmission. More importantly, healthcare practices have to spend an average of $25 per claim, and hospitals spend $181 per claim, to reverse the denial.
That’s why understanding each stage of the revenue cycle can help healthcare organizations enhance precision, minimize processing time, and strengthen financial outcomes.
Key Healthcare Revenue Cycle Management Processes & Phases
The healthcare revenue cycle comprises a total of seven steps or phases, which include:
- Patient Registration and Scheduling
- Insurance Verification and Eligibility
- Medical Coding and Charge Entry
- Medical Claim Submission and Processing
- Payment Posting and Reconciliation
- Claims Denial Management and Appeals (if required)
- Patient Billing and Collections
Let’s look into each of these steps in further detail.
1. Patient Registration and Scheduling
The revenue cycle in healthcare begins with patient registration or updating an established patient’s medical records. This stage is also known as patient intake. The patient is then scheduled for services from the healthcare provider. So, in simple words, a physician’s appointment is scheduled.
This step ensures the provider has precise and up-to-date patient information, which is necessary for both treatment and medical billing.
Patients can register and schedule an appointment with the help of a front desk officer or through an online scheduling software (depending on what the medical facility or provider offers). Scheduling is the foundation of revenue cycle management, and errors in this phase may disrupt the rest of the process.
Moreover, a pre-planned schedule enables physicians to manage incoming patients efficiently and cater to as many patients as possible without going beyond working hours. Scheduling patients also optimizes the process, increasing revenue opportunities.
2. Insurance Verification and Eligibility
The next step providers must perform is to check the patient’s medical insurance coverage. They must check the:
- Covered services and benefits
- Allowed amount for the covered service
- Coverage terms
- Out-of-pocket amount
The claim cycle in medical billing becomes much smoother once the healthcare practitioner has the information required. Next, the patient can be informed about it in advance, since this information is available before the services are rendered, to avoid discrepancies later on.
However, note that this insurance eligibility and coverage check is a detailed process. If you do not have trained staff for this task, our insurance verification services can help ensure accuracy.
3. Medical Coding and Charge Entry
Did you know that certain coding errors may raise compliance concerns and, if intentional, could be classified as fraud or abuse, according to the American Medical Association? One mistake can launch a detailed audit or even compromise a practitioner or facility’s reputation.
Once the healthcare provider has delivered clinical care, they must code it. The coding process involves translating medical interventions, services, and diagnoses into standardized codes for reimbursement purposes. Ideally, healthcare providers should have trained coding teams to handle this process.
Since medical codes are updated annually, billing teams should be up-to-date regarding changes. Once all the coding pre-requisites are complete, the billing team can proceed with charge entry.
Charge entry is the process of adding the correct service charges into the billing system for the next step of the revenue cycle.
Note: Using incorrect or outdated codes and undercharging or overcharging patients significantly increases the likelihood of claim denial. You can learn more about the best practices to reduce claim denials here.
4. Medical Claim Submission and Processing
Billing teams share the medical claim with the relevant insurance payer once the coding and charge entry are complete. This is usually done digitally through a service or an RCM platform.
If the billing teams have fulfilled all requirements, such as proving medical necessity, following payer-specific guidelines, and using accurate medical codes, the claim is accepted on the first attempt.
In such cases, the revenue cycle is shorter and reduces the additional steps required otherwise.
5. Payment Posting and Reconciliation
For the next step, medical billing experts must post and reconcile payments from the patients and the insurance payers. They also need to compare expected and received payments. In the case of errors or discrepancies, the revenue cycle has an additional step for claim denial management.
With reconciliation and posting, billing teams can collect all payments and ensure accurate financial records. Medical practitioners and healthcare facilities do not necessarily have to perform the posting and reconciliation in-house. These tasks can be outsourced to third-party billing companies for a smoother experience.
6. Claim Denial Management and Appeal
The primary objective of any medical billing team is to avoid errors, delays, and denials in reimbursements. However, if any of these incidents still occur, the billing teams can choose to rework the claim or submit an appeal against the denial.
Claim resubmission and appealing are part of claim denial management and the only ways to recover accurate reimbursement for the rendered services. Before submitting an appeal, the billing team reviews claims and corrects issues for resubmission. If, however, no mistakes are found in the original claim, the team files an appeal with the payer to reverse the denial decision. During denial management, the team also analyzes denial reason codes and strategizes to avoid similar incidents in the future.
However, if your internal team is unable to rectify errors, our denial management services can help address complex claim issues. We understand every claim error, delay, or denial is unique. That’s why we tailor the steps and solutions to ensure quicker resolution.
7. Patient Billing and Collections
Every medical insurance policy and payer has its own terms, and it is necessary to account for them while billing. An insurance company may not necessarily provide 100% coverage for the rendered services. Therefore, billing professionals should bill and collect precisely.
They must consider the deductibles, coinsurance, or copayments, as per the insurance terms, to accurately bill the payer. Here, the verification step can help with the collection and recovery of a part of the revenue, as it allows practices to collect copays at the time of service.
Note: The revenue cycle typically includes six core steps, with denial management as an additional step when required.
Claim Cycle in Medical Billing vs. RCM
You might have seen the claim cycle in medical billing and RCM being used interchangeably, but does it mean they are the same thing? The short answer: No. There is a clear difference between the two, which we have discussed in the table below:
| Aspect | Claim Cycle | RCM |
|---|---|---|
| Definition | Process of creating, submitting, and tracking a reimbursement claim. | End-to-end financial process from initial patient registration to payment posting. |
| Starting Point | Coding stage, or after the patient’s visit. | Before the patient’s visit, during the appointment, and upon verification. |
| End Point | Claim denial, acceptance, or rejection. | Payment collection and account settlement. |
| Focus | Claim submission, processing, and reimbursement. | The entire revenue cycle flow and financial performance. |
| Goal | Correct claim payment. | Increased revenue, minimized losses. |
Type of Health Insurance Claim Forms
The following are the types of health insurance claim forms to remember:
Printed and Digital Forms
Health insurance claim forms can be submitted in paper or electronic formats, depending on the insurance payer’s policy. However, paper-based forms are now considered outdated as most payers rely on digital form submissions for billing and reimbursement.
CMS-1500
Individual practitioners and outpatient service providers use this form for physician billing. Appropriate ICD, CPT, and HCPCS codes must be mentioned on this form for accurate claims processing and reimbursement.
UB-04
The UB-04 claim form, also known as CMS-1450, is used for institutional claims by medical facilities. It requires the reporting of correct revenue codes and HCPCS codes for billing.
Note: The electronic format of CMS-1500 is available as 837P, whereas the electronic version of CMS-1450 is referred to as the 837I form.
Streamline Your Revenue Cycle with MediBillMD
Optimizing the healthcare revenue cycle is a six-step process (if claim denial management and appeal are not applicable). However, mastering all these steps is necessary for successful claim processing and an increased bottom line.
To recap, revenue cycle management includes everything, from accurate patient registration and insurance coverage verification to payment reconciliation and patient billing.
The medical billing revenue cycle can be complex and resource-intensive. So, if your practice is struggling with workflow inefficiencies, partnering with an experienced RCM solutions provider can help improve accuracy and cash flow. Consider exploring MediBillMD’s healthcare RCM services for robust RCM.
