Why Is Healthcare Revenue Cycle Management So Important?

Efficient healthcare revenue cycle management is essential to an organization’s financial health. While revenue cycle management (RCM) is unique to each business, the bottom line is the same for all: improving the flow of incoming payments and reducing debt and expenses, all while delivering quality patient care.

Read on to learn how revenue cycle management works, ways to improve it and how to tackle common challenges in a rapidly evolving healthcare environment.

What Is Revenue Cycle Management in Healthcare?

Revenue cycle management in healthcare is the process used to manage all financial activities involved in providing patient care. A successful healthcare RCM process helps ensure timely revenue, steady collections and financial viability for organizations, making it possible to focus on providing patient-centered care.¹

Steps for an effective healthcare revenue cycle include:²

1. Pre-registration. Gather the patient’s demographic, health and insurance information, along with any referrals. To help avoid billing delays, identify patient coverage, deductibles, copays and, for established patients, any change in insurance.
2. Data verification. Verify patient data, including full name, age, billing address, insurance eligibility and any pre-authorizations. This step can help avoid claim rejections, delays or denials due to issues like patient name misspellings.
3. Charge capture. Collect and record patient copays, document all services rendered and assign the proper diagnosis and procedure codes. Take extra care with this step, as coding errors are the most common reason claims are denied.³
4. Claim scrubbing and submission. Create and review claims for errors such as improper formatting, incorrect codes and unsupported documentation. Submit clean claims to insurance companies.
5. Remittance processing. Once the insurance company approves the claim, the practice should receive an explanation of benefits (EOB) or electronic remittance advice (ERA) that lists covered services and reasons for any unpaid services, along with appropriate payments. Ensure the EOB/ERA aligns with the agreed payments (fee schedules) in the contract and that contractual write-offs are clearly defined to help resolve denials and reduce noncontractual write-offs.
6. Denial management. In a 2024 Experian Health survey of healthcare revenue cycle staff, 38% of respondents said that at least 1 in 10 claims is denied, and 73% agreed that claim denials are increasing.⁴ Be sure to regularly review reason codes to determine why a claim was denied and make corrections to help prevent denials in the future.
7. Patient collections. Verify that insurance payments and adjustments are applied correctly to the patient’s account, then generate and send patient statements. Use automated payment reminders, emails or texts to collect the patient’s portion of the bill. Regularly monitor accounts receivable reports to identify and follow up on unpaid charges.³
8. Process review. Identify any RCM gaps to help improve operational efficiency and avoid losses.

Benefits of Revenue Cycle Management

A strategic approach to RCM provides healthcare organizations with numerous benefits. Conversely, poor management and billing practices can result in financial losses for the organization and even impact its ability to remain in business. As healthcare in America moves toward value-based reimbursement, streamlining operational procedures can help an organization remain financially viable and focused on providing a superior patient experience.⁵

Benefits of an effective revenue cycle management process can include:¹

• Reduced time commitment. RCM can help healthcare organizations save time by streamlining processes, from patient pre-registration to payment reminders to engaging payers regarding claims and denials.
• Fewer errors and redundancy. Revenue cycle management can assist healthcare businesses in the timely detection of errors, allowing them to be quickly corrected.
• Decreased costs. With a reduced time commitment and a lower likelihood of errors, healthcare organizations can reduce the costs associated with managing their revenue.
• Fewer denials. By reducing or eliminating errors in payment claims, RCM can also lower the denial rate, expediting payments to the organization.
• Reduced administrative burden and faster collection process. Effective healthcare revenue cycle management can help expedite the collection process, reducing the administrative burden around preparing bills, submitting claims and collecting payments.
• Greater price transparency. Healthcare revenue cycle teams can help patients understand the price of care, what’s included in that price and how much their care may cost after insurance pays its share.⁶
• Improved patient experience. Ultimately, the goal of RCM is to simplify and streamline the revenue process and allow healthcare providers to focus more on delivering quality care and an optimal end-to-end patient experience.

Ways to Improve Revenue Cycle Management

Healthcare practices and organizations can significantly improve their revenue collection through effective RCM. Improving and streamlining these core operational procedures emphasizes patient care as an organization’s primary responsibility while helping it remain financially viable.¹

Consider the following tips to improve revenue cycle management:¹

• Use an online patient portal that integrates the healthcare billing system into each patient’s electronic health record.
• Automate aspects of the RCM process, such as sending payment reminders and engaging insurers regarding claim denials, to reduce administrative and time burdens.²
• Set attainable benchmarks and regularly measure results. This allows providers to identify key learnings and best practices over time, along with areas that may require correction.

Additionally, invest in knowledgeable administrative staff who understand the intricacies of revenue cycle management, including the coding and processing of claims. Healthcare changes quickly, and knowledgeable staff members will be better prepared to adapt to regulation changes around billing — and to address them before they become issues that can negatively impact the organization’s ability to manage the revenue cycle management process.¹

RCM Challenges and How to Solve Them

At any step along the care continuum — from the moment the patient makes an appointment to the successful collection of payment — errors and challenges can slow or interrupt the revenue cycle, impacting an organization’s ability to receive timely payment. Human error can be a major challenge. Whether a patient inadvertently fails to submit a payment on time or a staff member miscodes a claim, errors can dramatically increase the time it takes to receive payments and can result in lost revenue.¹

Changing government requirements, healthcare regulations and insurance and reimbursement models can further complicate managing the revenue cycle. The increased demand on administrative staff to keep up with these changes while managing the patient financial experience may require additional time to process claims, work through insurance company denials and ensure timely payment. This can decrease staff efficiency, resulting in increased time and costs associated with RCM.¹

Best Practices in Revenue Cycle Management

Given the numerous challenges that can get in the way of effective RCM, time-tested best practices for healthcare providers have emerged:

Collect patient information at the outset

Fundamental to ensuring a smooth process is collecting patient information, ideally even before they arrive for their first appointment. This information is the foundation for claims that will be submitted and processed, and the care with which it is collected can impact how long it takes to receive payment.³

Collect patient payments promptly

Collecting patient payments as quickly as possible — often at or in advance of care — is critical to managing the revenue cycle. While private or government insurance plays a major role in determining the patient’s financial responsibilities, having transparent and early discussions can help patients understand the process and timeline. Not only is this an essential step to ensuring timely payment, but it also contributes to whether someone has a positive patient financial experience — and it can impact their overall healthcare journey.²

Track claims throughout their life cycle

Tracking claims throughout their life cycle can significantly reduce the likelihood of claim denials while providing a mechanism to quickly resolve issues when they arise.⁷ This means having administrative staff track claims from initial submission to payment collection. It also means learning from past experiences and looking for trends or common errors to ensure the revenue cycle is moving efficiently and revenue is not delayed or lost.

Emphasize accuracy

To maintain a focus on accuracy, provide regular training and education for administrative staff.¹ These can be formal training sessions led by experts in RCM or even gatherings among staff to discuss key learnings and best practices for improving the process.

Create a revenue integrity strategy

Revenue integrity is linked to operational efficiency, compliance and earned reimbursement. A revenue integrity strategy may help increase payment collection and improve the overall revenue capture. And by formalizing a revenue integrity program, healthcare practices can help prevent ongoing issues related to lost or delayed revenue and compliance risks at every step along the continuum of care.⁸

Streamlining the Healthcare Revenue Cycle

For healthcare providers, the goal of effective RCM is to optimize the revenue cycle and ensure payments are collected with little to no impact on the organization’s ability to provide care. By simplifying and streamlining this payment cycle, an organization can decrease the number of errors and redundant processes and lighten the burden on administrative staff, reducing the time it takes to process and collect payments. The benefits of this can be twofold: lower debt, plus more time for healthcare providers to focus on delivering quality care to patients.²

The Future of Revenue Cycle Management

Rising healthcare costs due in part to workforce shortages, a fractured supply chain and high levels of inflation present a significant burden for provider organizations.⁹ To alleviate increasing costs and help maintain financial viability in the current healthcare landscape, efficient revenue cycle management is key.

Technology solutions can streamline tasks and make the healthcare RCM process more efficient and effective. So, it’s no surprise that in a 2024 Healthcare Financial Management Association (HFMA) survey, 71.7% of healthcare executives identified revenue cycle technology as a high priority for investment in the next 12 months.¹⁰

By implementing the latest healthcare RCM software, organizations can:¹

• Standardize eligibility and prior authorization via online payer systems. In the HFMA survey, 85.8% of healthcare executives said payer challenges (i.e., denial or underpayment) are a top area of stress for their revenue cycle department, and 51.5% cited prior authorization as a top area of stress.¹⁰ RCM technology can verify patient plans, which can increase accuracy in billing claims and effectively resolve potential denials.
• Run reports to check data points such as copay collections and missing charge reports (identifying visits that don’t have a charge). In the HFMA survey, 22.4% of healthcare executives said reporting and analytics are a top area of stress for revenue cycle management.¹⁰ RCM systems make it easier to analyze data and verify that the revenue cycle is working and performing well.
• Simplify the collection process with digital payment solutions. Consider giving patients the option to pay through online patient portals or through mobile-friendly payment solutions in the office, such as through a scannable QR code. You may also want to consider offering flexible payment options such as patient financing, which can result in faster payment to the practice. The CareCredit credit card is one financing solution that allows patients to split the cost of their care into convenient monthly payments,* and it’s set up for an easy digital application and payment process using a QR code or custom link. Additionally, CareCredit integrates with some of the leading practice software systems, providing more ways to help reduce administrative burden for your staff.

When assessing an approach to RCM, organizations must remember their relationship with patients doesn't stop with the care team. A transparent and convenient financial experience is an opportunity to build loyalty while impacting the bottom line.

A Patient Financing Solution for Health and Wellness Providers

If you are looking for a way to connect your patients with flexible financing that empowers them to pay for the care they want and need, consider offering CareCredit as a financing solution. CareCredit allows cardholders to pay for out-of-pocket health and wellness expenses over time while helping enhance the payments process for your practice or business.*

When you accept CareCredit, patients can see if they prequalify with no impact to their score, and those who apply, if approved, can take advantage of special financing on qualifying purchases.* Additionally, your practice or business will be paid directly within two business days.

Learn more about the CareCredit credit card as a patient financing solution or start the provider enrollment process by filling out this form.

Author Bio

Robyn Tellefsen is a freelance writer and editor with more than 20 years of experience covering health and wellness, finance and more. Her work has appeared on sites such as LoopNet, Beachside Rehab, First Horizon Bank, SoFi, A Place for Mom, American Express, Chase and more.

Healthcare payment and financing solution

The CareCredit health and wellness credit card helps improve the payment experience for patients and clients, and your financial performance.

Get Started