Revenue cycle management (RCM) is an important, financially-driven process in healthcare that allows providers to receive reimbursement for care in a timely and efficient manner.
- Healthcare revenue cycle management is the step-by-step lifecycle from when a patient books an appointment until the practice receives full reimbursement for the claim.
- The cycle begins with setting the patient’s appointment, getting the patient’s demographics (insurance information, date of birth, etc.), and verifying benefits and claim submission requirements.
- The insurer (commercial or government payer) advises if the services require prior authorizations. The payer also verifies service limitations or disclaimers.
- The back end of the cycle includes rejections, payment posting, denials and appeals, analysis of over- and under-payments, patient billing and patient follow-up.
Why Is RCM Important?
Lost and delayed claim reimbursements can have a cascading effect on care quality.
Revenue cycle management ensures providers have the resources to deliver quality care and achieve the quality care metrics required by commercial and government payers. Those resources include staffing, finances, policies and procedures and electronic health record (EHR) systems to handle the healthcare insurance cycle.
A lack of resources poses many risks for providers, including fewer administrative staff to handle new and returning patients. With lower patient volumes, the practice earns less revenue. Furthermore, a strain on administrative resources means fewer people are managing office conditions and safety measures, which could lead to non-compliance issues.
A streamlined revenue cycle is crucial to quality care, just as quality care is at the center of a successful practice. Therefore, it’s critically important for healthcare providers and their administrative teams to understand all steps in the medical billing and reimbursement cycle.
Revenue Cycle Steps
Managing the healthcare insurance model requires staff and providers to follow a consistent, 10-step cycle. The revenue cycle management workflow is made up of two parts: front end and back end.
- The front end of the revenue cycle consists of all steps before the claim is submitted.
- The back end includes steps after the claim is submitted.
10 Steps of the Revenue Cycle Management Workflow
New or returning patient scheduling and registration includes scheduling, pre-registration and registration. Pre-registration entails collecting patient demographic information (including insurance info) and verifying eligibility.
- Data entry accuracy
- Identifying proper payers
- Coordinating benefits of additional patient policies
The patient attends appointments (also called an encounter) and the clinician documents the visit in the electronic health record (EHR). The documentation includes patient history, encounter notes, diagnosis codes, follow-up information, orders, prescriptions, assessments and labs.
The medical coding team notes the current procedural terminology (CPT), healthcare common procedure coding system (HCPCS) and diagnosis (DX) codes based on clinician documentation. The coder may also add a modifier based on the payer and type of procedure (CPT code). It is important to know payer guidelines and claim requirements to ensure reimbursement for the service or encounter.
- Improper documentation of the encounter
- Patient policy unawareness
- High costs of care
- Identifying proper CPT or HCPCS to coincide with provider requirements
The billing team enters the charges for the claim in a medical billing system or on a CMS-1500/UB-04 form. Then, in the provider’s EHR, the team creates the claim and sends it electronically or via paper to the clearinghouse (insurance may be government or commercial payers). The clearinghouse sends the claim to the payer, which may result in a rejection. If the clearinghouse rejects the claim, the billing team may identify and resolve the root cause of the rejection. When they find the cause, the team can reprocess the claim and resend to the payer.
- Identifying clearinghouse and payer rejections on time
4. Claim Status Inquiry
The back-end team (including billing specialists and accounts receivable) will track the date the practice submitted the claim and follow up on the claim status. There should be a minimum follow-up of once every 30 days until the payer reimburses the claim. In some cases, the practice may need to increase the frequency of its claim follow-up process.
- Identifying the timeframe a payer processes claims is critical to ensuring the medical billing team resolves claim denials
- Noting the claim appropriately with as much detail as needed is important
- Following up on claims is less time-consuming if the team notes as much detail as possible
5. Remittance Advice
The payer receives the claims and reimburses or denies the claim. The payer sends details of the amount billed and/or disallowed, and additional information, such as copayments, deductibles, and reimbursements.
- Understating the remittance advice (RA) or explanation of benefits (EOB) and identifying issues and resolutions
The billing team will resolve denials by identifying the root cause and submitting a corrected claim, reconsideration or appeal. Then, the billing team will follow up on the denial status. If the insurer overturns its claim denial, the insurer will post payment. If the payer still denies the claim, the appeals process starts over. If, after all this process, the payer doesn’t change its decision, the healthcare provider may decide to write off the claim as a loss.
- Most payers process claims within 7-21 days.
- Medicare claims: 7-14 days
- Commercial claims: 14-21 days
- Deciding if a claim can be recovered or is a write-off
- Determining if medical documentation supports the codes billed or if another code is more suited for the encounter
7. Payment Posting
The billing team will post the payers’ reimbursement into medical billing software. This provides a snapshot of financial health for healthcare providers.
- Entering payments efficiently and identifying payment discrepancies
After the information is logged in the medical billing software, medical bills are prepared and sent to the patient. Modern billing software can make this step automatic. The medical bill includes all expenses for which the patient is deemed liable.
When sending patient statements, consider the patient’s preferred channel: text, email or paper. Finding the right channel can help improve patient financial engagement and increase the likelihood they pay their invoices in a timely manner.
- The administrative cost of sending patient statements electronically or by mail
- Patients don’t always pay their bills after receiving a statement
- Patients don’t know what the statement is for and call the provider’s office for an explanation
9. Patient Follow-Up
Many patients are unable or unwilling to pay the balance of their medical bills when they receive a statement. This is largely due to a misunderstanding of benefits, denied claims, high cost of services or other financial hardships.
When a patient doesn’t pay a balance, the healthcare provider must contact the patient and collect the outstanding balance.
- Lack of financing options for the patient to settle their debts
- Healthcare providers aren’t adequately staffed or trained to play the role of debt collector
Once you’ve followed up with patients and completed the insurance reimbursement process, you’ll receive payments for your services.
What Happens if the Claim is Denied?
Managing claim denials is a time-consuming process. If a claim comes back as denied, the denial management process entails:
- Identifying and analyzing the denial reason
- Correcting the denial
- Resubmitting the claim to the payer
- Tracking denials and making process improvements to avoid them in the future
According to the American Academy of Family Physicians, a 5-10% denial rate is the industry average. Having a target denial rate below 8% ensures you are managing your revenue effectively and maintaining a consistent cash flow.
Revenue Cycle Management Analytics and Goals
The primary goal of the revenue cycle management process is to get paid on time for patient care. Receiving payments on time allows for more consistent cash flow.
Two metrics used to measure the likeliness that a claim will be immediately reimbursable are the clean claim Rate (CCR) and first pass rate (FPR).
- CCR identifies how many initial claims were sent to the payer without rejection.
- FPR demonstrates how effective the practice’s RCM process is
According to the Healthcare Financial Management Association (HFMA), a high CCR suggests the data collected and processed within the electronic health record (EHR) are high quality, which may mean claims are highly accurate. According to Gentem standards, a quality CCR is anything over 95%; anything less is sub-par.
In addition to CCR and FPR, there are other crucial key performance indicators (KPIs) you should track throughout the RCM process to ensure you’re getting paid on time:
- Total accounts receivable (A/R)
- Average days in A/R
- Bad debt rate
- Cash collection
- Charge lag
- Clean claims rate or first acceptance rate
- Denial rate
- Rejection rate
Using a billing and RCM software is the best way to stay on top of these revenue cycle metrics. Ideally, the software will integrate with your electronic health record (EHR), so you can seamlessly track data from appointments to claims to payments.
Automating Revenue Cycle Management
Maintaining a healthy revenue cycle can be challenging, especially for practices with limited staff and a large patient roster.
Recently, automation has become a bigger player in the revenue cycle space, and automating parts of the insurance billing process have been critical for practices and hospitals of all sizes.
With automated revenue cycle technology, you can:
- Streamline insurance payments and maintain a more reliable revenue stream
- Reduce burnout caused by administrative work
- Improve patient satisfaction with modern billing practices
Practices can apply automation throughout the revenue cycle, including:
- Prior authorizations
- Insurance eligibility checks
- Patient estimates
- Claim processing and scrubbing
- Patient collections
While it may not be possible to automate the entire revenue cycle process, practices can stand to benefit from some automated RCM workflows. Learn more about revenue cycle automation in this blog post.
How Gentem Can Help Manage Your Revenue Cycle
With technology built in Silicon Valley, Gentem leverages automation, data science and medical billing experts to support your staff. Our team understands various state and payer policies specific to your practice and region.
We assist providers by ensuring claims are submitted accurately and on time. We understand the administrative burden healthcare providers face, so our staff has specialty-specific experience.
Our team also offers real-time performance analytics and timely alerts to ensure no claim is left behind. Using machine learning/AI, we help providers understand how to identify missing funding by finding root causes, denial patterns and insurance underpayments, while providing actionable insights to correct the issues.
Ready to learn more? Book a short intro call with our team today!
Editor’s note: This post was updated on August 18, 2023. It was originally published in December 2021.