As healthcare finance grows more complex, improving revenue cycle has become increasingly important to healthcare providers. The shift to value-based care, combined with receiving a greater portion of payments from high-deductible health plan members, makes revenue collection more complicated. Efficient revenue cycle management, and the advanced software that supports it, are vital to maintaining fiscal health in the changing healthcare industry.
Revenue Cycle Management in Healthcare
Revenue cycle management (RCM) in healthcare refers to the process healthcare organizations use to track patient-care episodes from registration to final payment collection. Through RCM, healthcare providers identify, collect and manage payer revenue. Those payers include patients, private insurers and public insurers such as Medicare and Medicaid.
Healthcare revenue cycle management encompasses several steps, including medical billing, collections, payer contracting, provider enrollment, coding, data analytics, management and compliance. With healthcare’s increasing focus on patient-centered care, RCM also has a patient- engagement component.
Why is Revenue Cycle Management Important in Healthcare?
As healthcare revenue cycle becomes more complex, the cost of debt collection increases. Significant changes in charging, coding, billing and reimbursement make it more difficult for healthcare organizations to maintain timely, accurate, compliant billing.
Adding to the complexity, value-based reimbursement models use a payment cycle that lasts throughout the patient’s care. That care continuum could encompass one visit or last over several months.
Efficient RCM helps healthcare organizations keep revenue strong in both value-based and fee-for-service payment models. When every part of the cycle operates well together, providers get paid in full more quickly, which improves their financial stability.
Benefits of Effective Revenue Cycle Management in Healthcare
Efficient RCM reduces the amount of bad debt, allowing for increased revenue. An optimized RCM includes:
- Simplified billing and collection processes
- More seamless interaction between electronic health records (EHRs), claims data and accounting systems
- A narrower gap between providing care and receiving full payment for that care
- Automated processes such as registration, prior authorization and payment reminders
- Patient-centric services such as online appointment scheduling and bill pay
- Fewer coding errors and claims denials
- Reports that analyze revenue goals for improved cash flow
- Improves metrics such as Accounts Receivable Days and Discharge-Not-Submitted-to-Payer (DNSP)
Challenges of Revenue Cycle Management in Healthcare
To realize the benefits of RCM, healthcare organizations must address both operational and technological challenges. The following issues disrupt RCM’s optimal flow:
- Collecting patient balances. According to a study from TransUnion Healthcare, total hospital revenue attributed to patient financial responsibility after insurance jumped 88 percent between 2012 and 2017. To expedite patient payments, many providers have implemented up-front payment policies and payment plans. However, collecting balances remains a time-consuming process.
- Technology and billing infrastructures. Managing revenue from intake to final payment requires a robust infrastructure that many healthcare providers lack. An investment in technology is necessary for more seamless integration with EHRs and to manage electronic registration, billing, payments and reporting.
- Staff training. Implementing RCM requires process change. Providers must invest in costly training and continuing education for revenue cycle staff. Coding staff should also complete the requisite training to code with as little error as possible. Other staff members also must know how to capture patient data and translate that data into accurate claims.
6 Steps to Optimized Revenue Cycle Management
Effective revenue cycle management starts with selecting the RCM software that best suits your healthcare organization’s needs. Evaluate options with IT staff and revenue cycle managers to determine the ideal RCM solution.
The RCM process itself breaks down to 6 core components:
- Prior authorization and registration. Staff must verify the patient’s insurance eligibility and benefits before the appointment. RCM software can help expedite this process by running eligibility and benefits checks in advance. Once staff determine the patient’s benefits, they can discuss advance payment and/or payment plans. The provider then collects information from the patient to obtain prior authorization from the payer for radiology, surgical and other services.
- Claims submission. After patients receive treatment, staff submit claims to the payer for services rendered. Accurate coding is a crucial part of this step, both to maximize revenue and to reduce the odds of claims denials. Practice management software supports that accuracy. Look for a solution that identifies coding inconsistencies and/or makes coding recommendations.
- Billing. With the claim submitted and reviewed and payment posted, the provider can bill the patient for any remaining charges. RCM software helps generate billing statements and provide a way for patients to pay electronically.
- Denial management. Unfortunately, not all claims proceed smoothly. Payers may deny claims for a number of reasons, from clerical and coding errors to exclusions and missing referrals. Denial management helps identify claims denial patterns and solve any ongoing issues. For example, providers may uncover a trend of denials for certain procedures, certain patients or certain staff.
- Collections. Providers must closely monitor both insurer and patient debt. For patients, setting clear expectations upfront and offering convenient payment options helps ease the collections burden.
- Reporting. Measure what’s managed to uncover and solve revenue problems early. RCM software helps staff generate custom reports to track financial data, management information and key performance indicators to ensure providers meet their goals.
Revenue cycle management in a value-based care industry is more complicated than ever. RCM helps healthcare organizations track payments and reimbursements through every stage of the patient journey.
Learn how Phreesia’s revenue cycle applications simplify payments and increase profitability.