Revenue Cycle Management in Healthcare


Ensuring that enough revenue is generated to cover expenses is necessary for organizations in every industry. This also holds true for the healthcare industry.

Unfortunately, many healthcare organizations struggle with collecting reimbursements on time, which may harm the quality of care they provide to their patients.

The fact is that many hospitals and clinics run with minimal resources and time. Moreover, many employees have to perform several roles, which makes it almost impossible to stay on top of all the tasks without making mistakes.

healthcare revenue cycle management

The most common billing problems are due to human error, such as data entry mistakes because many hospitals handle billing using inefficient manual processes.

This is why successful medical practices use a revenue cycle management (RCM) program, which is another name for a streamlined billing process. Healthcare organizations use rules-based software to ensure they generate the amount of revenue to which they are entitled, in as timely a manner as possible.

Managing the Revenue Cycle

In order to increase revenue and focus on value-based care, many hospitals and clinics are turning to effective revenue cycle management tools for answers.

The revenue cycle management process begins when a patient makes an appointment or visits a clinic. The healthcare provider then tracks the financial aspects of the patient's treatment using powerful revenue cycle management tools.

For instance, RCM software enables the administration staff to verify insurance coverage, submit claims to insurers, and follow up on any outstanding debt.

What is Healthcare Revenue Cycle Management?

Healthcare revenue cycle management (RCM) describes the entire process of handling reimbursements and payment processing. RCM joins administrative information, patient's personal information, clinical data, insurer names, and medical codes with billing information.

Proper revenue cycle management is one of the building blocks of health information management.

The Importance of Revenue Cycle Services For Healthcare Organizations

It's apparent why RCM is important to the sustainability of any healthcare organization. Let's take a more detailed look at the typical revenue cycle for a health provider.

The revenue cycle is made up of the following steps:

  • Claim Preparation: Before a healthcare facility can make a claim, they need to collect the patient’s information. Also referred to as charge capture, this step is necessary to determine the patient's coverage. Also, the doctor's notes on the prescribed treatment are translated into codes for invoicing purposes. The health insurance provider uses the codes to determine reimbursement amounts.
  • Claim Submission: Once the fees are added and coded, the insurance claim is then sent to the patient’s insurance company.
  • Managing the Claim: During this step, the hospital or clinic communicates with the insurance company to establish levels of coverage to help avoid mistakes or denials.
  • Collecting Payment: Once payments from the insurers are received, the hospital or clinic will send an invoice to the patient (if necessary) for any outstanding debt. Sometimes this entails setting up payment plans. Payment schedules are closely tied to patient schedules, as accurate and timely billing depends on capturing all services rendered during each visit and ensuring payment is received in a timely manner based on the patient's insurance coverage and payment obligations. Often the provider will use billing software to make sure that payments are made to optimize cash flow.
  • Assessment & Review: Healthcare providers evaluate the treatment data to look for ways to improve treatments while lowering costs. The necessity of a particular treatment is factored in along with the best type of care for the patient.

Therefore, it is quite evident that the entire process of patient service revenue, from initial visit to full reimbursement, is complicated and filled with many time-consuming tasks.

Medical Codes

Medical codes represent reports from physicians that may include a diagnosis, a treatment, or even a surgical procedure performed by the healthcare provider.

In a field reliant on accurate data, medical coding makes the transfer of large amounts of information possible and efficient. Medical codes also provide uniform documentation between healthcare providers. So, for example, the code for pneumonia is the same in Florida as it is in Alaska.

As a result, uniform data makes research and analysis much more efficient.

Medical coding is also used to determine costs, which is why it plays an important role in the reimbursement process.

Revenue Cycle Management Challenges

There are several stages throughout the patient's healthcare journey that can potentially become problematic if healthcare providers don't use appropriate tools and processes.

Patient Payments

Pre-registration is necessary for collecting the most precise details regarding a patient's medical history, maximum allowable visits, financial responsibility, and any additional insurance information.

Many healthcare providers are missing out on revenue by not offering payment plans to patients — many patients aren't offered plans.

Surveys show that patients who choose a payment plan to pay their share of medical bills are much more likely to pay off the entire cost on time.

Disconnected Processes

Hospital staff very often have different responsibilities, which means that data must be shared to avoid possible claims rejections and denials. Enhancing communication when collecting information on patients to determine coverage eligibility helps with payer coordination, claims reimbursement, and may improve payment collections.

Also, many healthcare providers make the mistake of not reevaluating the patient's insurance information after subsequent visits. Neglecting to do so could result in eligibility denials.

Insurance Eligibility Problems

Maintaining an open line of communication with health insurance companies is critically important. Ignoring the process after submission can potentially lead to pending, denied, or rejected applications.

Manual Processes Are Still Prevalent

Manual processes are one of the main reasons why hospitals suffer from the inefficient collection of payments.

The challenges posed by manual processes are compounded by the fact that insurance companies make frequent changes to their terms. This makes prior authorization a very lengthy and drawn-out affair.

As a result, it should come as no surprise that staff sometimes overlook important steps in revenue cycle management such as verifying patient insurance coverage.

What Are the Benefits of a Healthcare Revenue Cycle Management Tool?

Without well-configured RCM processes, healthcare facilities cannot provide quality services while maintaining their financial liquidity. The following are some of the most significant benefits of using rules-based revenue cycle management tools.

Consistent Revenue

Certainly one of the most meaningful advantages of rules-based health systems robust is that medical groups will have an optimized revenue cycle. In other words, the financial performance improves because reimbursements come in quickly and regularly while costs are cut.


RCM software boosts revenue cycle visibility, which gives the staff the ability to analyze revenue decreases and identify tasks and processes that need to be optimized. For example, checking whether the medical codes are updated can help reduce the rate of claim denials.

Streamlined Processes

Revenue cycle solutions offer a simple and intuitive solution to physicians, administrative staff, and others that can assist in driving revenue for healthcare providers.

The ever-evolving healthcare regulations and reimbursement insurance plans can make it challenging for clinics to receive timely payments. The only way for healthcare organizations to manage administrative processes with increased efficiency is by using revenue cycle management software.

Ways to Improve Revenue Cycle Management in Healthcare

Rules-based compliance software fixes applications that may result in denied claims before they are submitted to insurance companies.

revenue cycle management

These platforms provide medical facilities the ability to submit well-documented claims the first time, reducing the rate of claim denials.

An Overview of Denied Claims

A rejected claim is not the same as a denied claim. While rejected claims are typically hopeless cases unless the account is entirely redrafted, some denied claims can be easily fixed. For instance, it could be the case that the insurer may just need updated medical coding or more information.

Time is an important factor when working on denied claims. Hospitals significantly increase the likelihood that the denied claim ends up going through if changes are made within 24 hours of receipt.

Rules engines automate and perform repetitive tasks — such as prior authorizations, medical code review, or reviewing the status of a claim — instantly, and without error.

Improving the Patient Experience with Payment Plans

Over 50% of acute care clinics lack the ability to offer price estimates for routine clinical procedures to patients.

Medical groups can improve payment collections by offering pre-service payment options. So, healthcare organizations should start by offering financial estimates by entering patients' data into a revenue cycle management software before or at the point of service.

Establish Eligibility with Automation

Many healthcare providers require authorization for tests, procedures, medications, and other medical services because insurance companies regularly second-guess the decisions of doctors.

Rules-based healthcare systems can perform prior authorization and coverage eligibility analyses in an instant. This results in a drastic reduction in time spent on repetitive administrative tasks and more time spent treating patients.

The costs of administrative tasks exponentially grow when healthcare organizations rely on manual processes to perform authorization and eligibility. According to recent studies, prior authorizations performed manually cost clinics around $7.50 per transaction. On the other hand, automated electronic prior authorizations only cost an average of $1.89.

Rules-Based Healthcare Revenue Cycle Management Services

To make sure that patients get the treatment they need while receiving reimbursement for their services, healthcare organizations should turn to automated RCM solutions that use Higson.

Higson is the business rules engine behind powerful RCM platforms that provide a smooth healthcare journey by automating repetitive and long processes while bringing down healthcare costs. By shortening the amount of time it takes for them to complete prior authorization and eligibility screening, healthcare providers can focus on other critical tasks, such as payment collections.

Healthcare facilities use Higson to prevent rejections and claim denials and speed up compensations while improving the patient experience.

Benefits of Optimizing Your Revenue Cycle Management Solution with Higson

Higson streamlines critical revenue cycle management such as managing patient financial records while cutting down on time between seeing the patient, billing, and reimbursement by interacting with other systems.

Healthcare providers use Higson to:

  • Save valuable time by automating tasks like insurance eligibility screening, appointment reminders, and communicating with insurance companies about coverage and reimbursement issues
  • Set up rules that show why a claim was rejected
  • Include prompts to fill in the necessary fields to time on future claim revisions
  • Make sure that Medicare and Medicaid patients are adequately reimbursed
  • Establish a patient’s insurance status and levels of coverage. This way both the healthcare provider and the patient understand how much the patient has to pay out of pocket
  • Implement error detection features that help in following up on unpaid claims

Properly designed automation frees up valuable resources and allows medical facilities to focus on offering the best care possible.

If you would like to learn more about how you can optimize both your administrative and clinical functions with Higson, then get in touch with us today.

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