What Is Revenue Cycle Management in Healthcare?

February 11, 2023

Revenue cycle management (RCM) in healthcare is the business process that enables organizations to be paid for providing services. There are 17 unique steps in the revenue cycle, which begins with patient scheduling and ends with payment reconciliation.

We can view the revenue cycle in three different phases: 1) order to intake; 2) care to claim; and 3) claim to payment.  Here are the steps in the full revenue cycle, presented within the three primary revenue cycle phases:

Order to intake

1 . Scheduling

2 . Pre-registration

3 . Clearance

4.  Financial counseling

5. Online/in-person arrival

6.  Pre-service payments

Care to claim 

7 . Level of care

8 . Case management

9 . Utilization review

10.  Charge optimization

11.  Coding

12.  Acuity capture

Claim to payment

13.  Billing

14.  Patient payments

15.  Denials management

16.  Customer service 

17. Reconciliation

What is the purpose of RCM?

In healthcare, an effective RCM process ensures that the full interaction with a patient from initial inquiry through final payment is effectively managed. This means that appropriate information is collected and documented, patients are only billed for services provided,  third-party payers are contacted in a timely manner and payments are collected.

At its core, the revenue cycle represents a complex business interaction with patients that entails many touchpoints. Mismanagement of these functions can lower patient and clinical satisfaction scores and damage the reputation of the organization through avoidable denials and bad debts.

No matter the size of a practice, hospital or health system, failure to optimally prioritize RCM and revenue collection efforts can halt growth, increase operational risk and create an uncertain financial future.

Why is healthcare revenue cycle management so complex?

While the focus of many healthcare organizations is on providing excellent care to their patient population, attention must be paid to the financial resiliency of the business to ensure a hospital or medical practice will be able to provide that care for years to come.

Physicians are continually faced with the challenge to provide affordable care to patients while facing annual increases in care delivery and administrative costs. Preventing and reducing unpaid claims, improving point-of-service collections, maintaining healthy accounts receivable and reducing inefficient coding and billing processes can all significantly impact profit margins.

However, how does one prevent and reduce unpaid claims to see the greatest profit margins? This task seems especially difficult considering the nature of healthcare.

Specifically, the business of healthcare is complex because the cost to provide services is shouldered by the organization before those services are paid for by either insurance payers (including Medicare and Medicaid) or the patient themselves. Because of the length of the claims process, it could be months before a bill is paid in full–if it is paid at all.

More than 95%of medical practice leaders reported inefficient billing processes, with the majority needing to implement backend efforts to reconcile bills by the end of the year.

With rising costs and shrinking margins, effective RCM has never been more important

Struggling financial conditions for hospitals and small practices alike and changes in legislation and regulatory compliance have made it more difficult for healthcare providers to manage certain functions internally.

That’s why more and more healthcare organizations are turning to RCM outsourcing and finding top-quality partners like R1 who can manage their revenue cycles for them (and more effectively than most organizations can do on their own).

The shift in the last decade from commercial payer reimbursement to direct patient responsibility with high deductible health plans, in addition to the larger influence of government payers, reinforces the idea that healthcare organizations and practices must take a closer look at their revenue cycle management and evaluate what methods can be implemented to realize the most benefits for all parties involved.

Learn more about revenue cycle management:


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