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What Is Revenue Cycle Management in Healthcare?

July 17, 2025

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The fundamentals of RCM

In simple terms, revenue cycle management (RCM) in healthcare is the transactional business process that enables organizations to be paid for providing services. Today, that process is increasingly being transformed through artificial intelligence (AI), which enables smarter, faster and more accurate execution of once-manual tasks across the revenue cycle, as well as other advanced technologies like automation and analytics.  

In healthcare, an effective RCM process ensures that the full interaction with a patient from initial inquiry through final payment is effectively captured and 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 swiftly. 

Under the hood, revenue cycle management powers complex business interactions that entail many stakeholders and 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. This is where providers are looking for AI-driven tools, like machine learning (ML), natural language processing (NLP), etc., to orchestrate these interactions more intelligently, helping to flag risks, reduce human error and automate repetitive tasks. 

No matter the size of a health system, hospital or practice, poorly managed revenue cycles can hinder cashflow, increase operational risk, degrade the patient experience and create an uncertain financial future.  

The healthcare revenue cycle is generally broken down into three stages:  

  • Front-end RCM covers scheduling through check-in.  
  • Mid-cycle captures and codes the patient encounter.  
  • Back-end processes cover post-bill workflows.  

There is no shortage of point solutions that assist with healthcare RCM processes, but due to its interconnected and iterative nature, integrated solutions powered by an intelligent technology platform have a clear advantage in optimizing the revenue cycle.  

Front-end processes 

SCHEDULINGAs the front door to the patient experience, scheduling establishes the full flow of the RCM journey, so it’s important to get it right.  

PRE-REGISTRATION AND FINANCIAL CLEARANCE – Pre-registration ensures smoother check-in and financial clearance addresses key payer components, such as eligibility and prior authorizations.  

FINANCIAL COUNSELINGOptimizing financial counseling with integrated technology is a critical opportunity to get patients the support they need at the earliest stages of their patient journey. 

CHECK-IN AND ARRIVALPatient expectations for check-in and arrival have shifted as customer-focused tech innovations, such as app-enabled curbside service for retailers, have become more commonplace. 

Mid-cycle processes 

LEVEL OF CARE – When deciding level of care, physicians can reinforce RCM integrity by doing what’s in their control—accurately documenting the patient’s acuity level and medical needs that warrant hospital care and, if appropriate, inpatient admission.  

CASE MANAGEMENT AND UTILIZATION REVIEWCase management (CM) and utilization review (UR) have stepped into the spotlight recently as challenges, such as labor shortages and payer reimbursement behavior, put added pressure on earned reimbursement.  

CHARGE CAPTURE With evolving guidance and enforcement trends across many popular services, hospitals should now think more intentionally about this fundamental process, creating new roles and departments focused on revenue integrity.  

CODING AND ACUITY CAPTUREDiligence in clinical documentation, medical coding and acuity capture has become increasingly more important as payers continue to heavily scrutinize specialty procedures, including those involving pediatrics, cardiology and orthopedics.  

Back-end processes 

BILLING AND AR FOLLOW-UP With higher volumes, fewer staff and the evolving dynamics of a digitized world, experts suggest a renewed focus on operationalizing billing and follow-up workflows with a more sustainable, scalable and tech-supported process. 

DENIALSAs claim volumes and complexities increase and labor shortages remain, hospitals should rethink their approach to denials management to recover lost revenue and establish efficient post-pandemic practices. 

UNDERPAYMENTS Underpayments come in many forms, including partial, full (denial underpayments) and transfer DRG underpayments; they often go hidden yet can negatively impact revenue. Approaching underpayments directly creates opportunities to address payers directly to resolve recurrent concerns.  

CUSTOMER SERVICE As patient payments become a growing portion of health systems’ revenue, increased patient accounts receivable (AR) requires a more compassionate approach to collections. This emphasizes the expanding value of high-quality customer service. 

PATIENT PAY AND PRE-COLLECT Annual increases in bad debt for healthcare systems along with increased out-of-pocket costs and disjointed patient payment experiences, have made creating a holistic patient payment model more important than ever. 

Why is healthcare revenue cycle management so complex? 

While the focus of many healthcare organizations is on providing excellent care to their patients, they also must pay attention to their  financial resiliency  to ensure they can provide that care for years to come. But providers are challenged by the overall level of complexity in RCM, especially when it comes to regulatory compliance and improving contentious payer relationships.  

Physicians are continually faced with the challenge of providing 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 medical coding and billing processes can all significantly impact profit margins. 

Why it all matters 

The complexity of healthcare RCM arises from the unique nature of the industry. Healthcare services are often provided before payment is received, whether from insurance payers like Medicare and Medicaid or directly from patients. This delay in the claims process can result in months passing before a bill is fully paid, if at all. With increasing costs and shrinking profit margins, efficient RCM has become more critical than ever. 

Healthcare providers face the dual challenge of offering affordable care while contending with the rising costs of care delivery and administration. Effective RCM is essential in navigating these challenges. By preventing and reducing unpaid claims, improving point-of-service collections, maintaining healthy accounts receivable and streamlining coding and billing processes, healthcare organizations can significantly enhance their profit margins. 

Revenue cycle management (RCM) plays a crucial role in ensuring the financial health and sustainability of healthcare organizations. Likewise, AI is beginning to play a critical role in healthcare RCM as a necessity to remain operationally efficient and financially resilient. While the primary focus of these organizations is on delivering exceptional patient care, maintaining financial strength and stability is equally vital, as it is the mechanism ensuring providers can continue delivering quality care for years to come. 

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