A variety of things contribute to the success of medical practice. Revenue cycle management is one of the most crucial. What is the significance of revenue cycle management in healthcare? Healthcare organizations may ensure that they are properly and quickly compensated for their services by using revenue cycle management, or RCM. While this is obviously advantageous to the physician, it is also advantageous to the patient.
Before we get into why securing reimbursement makes RCM so vital, let’s define RCM.
What is Revenue Cycle Management (RCM)?
Revenue cycle management is exactly what it sounds like a technique that healthcare providers can employ to manage their revenue cycle’s administrative and clinical duties. The revenue cycle begins when a patient contacts a healthcare practitioner to plan an appointment. The cycle is completed when the final payment for the appointment and treatment is received.
The purpose of revenue cycle management is to identify and resolve any areas of friction in the provider’s revenue cycle. Care providers can maximize claim reimbursements and improve patient service revenue through proper revenue cycle management.
Benefits of Healthcare Revenue Cycle Management
Effective revenue cycle management ensures that these processes are completed thoroughly and precisely, allowing providers to prevent revenue delays or loss. Although the primary purpose of RCM is to enhance provider revenue, it also provides additional benefits. These benefits benefit both providers and patients, increasing the value of revenue cycle management processes.
Let’s look at some of the advantages of revenue cycle management.
#1. Detecting and Correcting Coding Errors
Many providers can more quickly detect where errors occur in the medical billing process by utilizing RCM. This reduces the chance of future denials because over 90% of claim denials are due to easily avoidable technical errors, such as missing information in the patient’s chart or incorrect coding.
When these medical billing problems are avoided and claims are cleared on the first attempt, providers receive their payments swiftly. They also save money by not having to investigate and appeal disallowed claims.
Claim denial prevention can result in an additional $5 million in revenue for the average hospital. This statistic alone is incentive enough for healthcare businesses to consider how they can enhance their revenue cycle management.
#2. Reduced Administrative Burden
Preventing claim denials also reduces the administrative load. Administrative staff members have more time and energy for patient care when they do not have to spend time and energy investigating and appealing refused claims.
Furthermore, RCM’s particular attention to front-end activities improves interactions between administrative personnel and patients. Appointment scheduling, intake form completion, claim submission, and medical billing are all optimized to provide a more pleasant experience for all.
#3. Preventing Healthcare Fraud
Another key advantage of RCM is its ability to prevent healthcare fraud and misuse. Every year, healthcare fraud costs the healthcare business billions of dollars. A fraud investigation can cost a healthcare firm both revenue and reputation.
Incorrect medical coding, whether deliberate or unintentional, can lead to healthcare fraud investigations. Some examples of common coding errors include invoicing for:
- Services that were not provided
- Procedures that are medically unnecessary
- Services rendered by an unqualified or badly supervised employee
- Procedures or tests of poor quality
Procedures can also be upcoded by providers. Upcoding means asking for a higher reimbursement rate for services that do not necessarily warrant it.
With the emphasis on correct data collection, medical billing, and coding in revenue cycle management, providers are far less likely to send faulty information (if at all) to insurance companies. Furthermore, RCM can keep providers up to date on ever-changing healthcare rules, ensuring that unintended fraud is never a problem.
#4. Preventing Patient Fraud
Patient deception can also contribute to healthcare fraud. This can occur in two ways:
- Incorrect information – A patient may lie about their insurance coverage in order to acquire non-covered services for which they are not eligible. However, one of the first tasks in revenue cycle management is insurance verification. This means that any incorrect insurance coverage will be recognized swiftly by administrative employees.
- Medical identity theft – Medical identity theft is a developing threat in the healthcare business. It costs both providers and victims. Because revenue cycle management begins with the verification of a patient’s information, any instances of identity theft will be discovered and addressed early in the process.
During the pre-authorization phase of the revenue cycle, medical providers might additionally take further steps to verify a patient’s identity.
#5. Increasing the Revenue of Healthcare Facilities
Healthcare providers can rapidly get payments for their services by minimizing technical problems, claim denials, and fraud investigations. Furthermore, they can save thousands of dollars on correcting problems, appealing claims, and detecting fraud.
Providers might invest their excess revenue in patient care. After all, the primary goal of any healthcare professional is to deliver high-quality patient care.
11 Revenue Cycle Management Steps
So, what does revenue cycle management entail? The following phases outline the Revenue Cycle Management Process from beginning to end:
#1. Patient Routing
Revenue Cycle Management begins with a “patient encounter” that, in an ideal world, the patient schedules ahead of time. Exceptions to this rule include Urgent Care and Hospital Emergency Departments.
#2. Verification of Benefits and Eligibility
The patient’s insurance information is collected at the time of scheduling so that the provider can check benefits and determine insurance coverage. As a result, if necessary, a financial planning engagement can be scheduled ahead of time, and appropriate patient payments can be collected at the time of service.
Pre-authorization Substep
During the Benefit and Eligibility verification, the patient’s insurance company may notify the provider that a pre-authorization is required to provide and be reimbursed for services to the patient. The Authorization entails submitting a request with accompanying Medical Records to the Insurance company in order for the company to guarantee reimbursement for a number of visits for the patient.
#3. Patient Interaction
The patient encounter is the time when the physician and the patient discuss the patient’s healthcare requirements, devise a treatment plan, and administer treatment. The contents of this encounter are recorded in the patient’s chart, either electronically or on paper, using an electronic health record (EHR).
When the patient arrives, the encounter begins. The administrative team of the provider then conducts a patient intake. This includes verifying all patient demographic, insurance, and medical history information. If the interaction is face-to-face, they may also make copies of insurance cards and driver’s licenses at this time.
#4. Optional Medical Transcription
Rather than immediately capturing information in the patient’s chart, the physician dictates notes that are forwarded to a third party that transcribes these notes into a medical record that can be uploaded or saved to the patient’s chart.
#5. Medical Records Coding
Coding entails examining patient encounter paperwork and turning it into Procedure Codes and Diagnosis Codes. Procedure Codes (CPT) are five-digit medical codes that represent the services that a medical professional can give. Diagnosis Codes (ICD10) – are disease categories that reflect the ailments or illnesses that led the patient to the doctor. Many healthcare practices will outsource this stage to medical coders.
#6. The capture of Charges / Claims Generation & Submission
This is the most important part of the Revenue Cycle. All services given are converted into the proper CPT and ICD10 codes and combined with patient demographic and insurance information, as well as rendering provider and facility information, to build a claim that is sent to an insurance company for reimbursement.
#7. Cash and payment posting
Payment posting is a medical billing mechanism that records communication of insurance decisions on a claim-by-claim basis. If there is a patient share of the cost after the payment is posted, these monies will be transferred to the patient, and patient statements will be mailed to collect this money.
#8. Billing for Extra Services
If a patient has several insurances, the balance is transferred to the secondary insurance for payment once the original insurance has adjudicated the claim. Many insurance companies will also automatically transfer the debt to a secondary or tertiary payer provided the information is available in their system.
#9. Patients Billing
If the claim adjudication ends in a denial, it is displayed on the claim, allowing a medical billing expert to evaluate the reasons for non-payment and take the required steps to appeal and re-process the claim if needed. If this is due to non-covered services, the remaining balance is passed to the patient in order to request patient payment. It is also known as Patient Billing or Statement Processing.
#10. Accounts Payable
Accounts Receivable (AR) refers to the sum owed to a provider for services done in the past that has yet to be collected. It is a measurement of uncollected charges. The AR team’s mission is to collect partially/inadequately paid pending or declined insurance claims.
Follow-up is the key to accounts receivables, and it can take two forms: a) insurance follow-up, which is to collect payment from the insurance company, and b) patient follow-up, which is to collect any outstanding payment that is the patient’s financial responsibility (copays, coinsurance, or other out-of-pocket medical costs).
#11. Denial Management
Denial Management occurs when a claim is denied because it was underpaid or had incorrect coding.
It comes after payment/cash posting. It is accomplished by investigating the reason for the denial/underpayment and following up with the carrier/patient over the phone.
Some or all of the stages listed above may be completed by medical billers as part of the Revenue Cycle Management process.
RCM Metrics to Pay Attention To
Proper Revenue Cycle Management means achieving or exceeding the baseline in numerous key RCM criteria. Medical billers should take care of the following metrics:
- Total weekly medical claim reimbursement
- Average days to get payment
- The rate of denial
- Accounts receivable from insurance and patients that are more than 60 days old
Dashboards for RCM
Proper RCM dashboards can supplement KPIs by allowing you to visualize the performance of your health organization’s RCM process. RCM Dashboards are essential for monitoring your RCM’s performance in real-time. Different dashboard displays, such as by doctor, date, or insurance, can help you maximize insurance reimbursement for your healthcare business.
Revenue Cycle Management Challenges
We’ve talked about how critical it is to verify an arriving patient’s medical information and insurance eligibility ahead of time. But what about revenue cycle management aftercare?
To obtain payments on schedule, it is vital to communicate frequently and efficiently with health insurance companies. The claims procedure is a key aspect of that communication. A health insurance company will not pay a medical practice until a claim outlining the patient’s care is submitted correctly.
What are Some of the Causes of Claim Denials or Outstanding Payments?
To facilitate reimbursement, the claim should include all relevant information and use globally accepted medical codes so that insurers can categorize the services provided.
A financially viable practice must have a system or software in place that can create data on claim statuses and smooth out revenue returns. It can also reduce human mistakes caused by manual data entry.
In quarterly reports, an increase in denied or contested claims may indicate that your claims management system is ineffective. If you’re experiencing this, it’s time to start thinking about how your company might enhance its revenue cycle management.
Identify issue points and bottlenecks in the revenue cycle to do this. Examine potential pitfalls carefully, such as:
- Claims that have been misfiled due to medical billing problems, missing patient data, or simply typos.
- Charge captures that are incomplete and do not adequately summarize the care provided.
- Outstanding invoices from patients who may not grasp their responsibility are collected slowly and inefficiently.
- An administrative backlog of unfiled claims results in late or unpaid payments.
So, what is the significance of revenue cycle management? According to Becker’s Hospital Review, 90% of claim denials are avoidable, and 67% can be converted into recovered revenue. By reducing the number of errors in the claims process, a healthcare practice’s revenue reports can more accurately reflect the services it offers and its financial viability.
Healthcare Regulations are Changing
Regulations in the healthcare sector are constantly evolving to reflect new government initiatives. As a result, healthcare providers must be adaptable in their practice and processes.
Keeping up to date on constantly changing legislation ensures that the practice not only provides the best possible patient care but also that its financial operations work efficiently and payments are collected without unnecessary delay.
New laws requiring practitioners to adopt one of two payment structures are one example of legislation that directly influences healthcare reimbursements:
- The classic fee-for-service paradigm, in which providers are paid based on the services they offer.
- A pay-for-performance model emphasizes care quality and incentivizes best practices, patient satisfaction, and other elements that the fee-for-service model does not consider.
While the fee-for-service model still accounts for a substantial portion of healthcare income, the rising shift to pay for performance drives clinicians to explore new aspects of their performances and how they may affect compensation. Keeping your practice’s rules up to speed with the shifting scenario can guarantee that a reimbursement issue never surprises you.
How Outsourcing Revenue Cycle Management Can Help You
A revenue cycle’s numerous complicated moving elements might be difficult to navigate. Having a good revenue cycle management system in place is like using an automatic GPS that guides you to the next step in the reimbursement process. Furthermore, incorporating elements into your payor contracts that ensure you’re paid what you’re worth—and paid on time—can significantly reduce the number of claim denials you face.
Conclusion
So, what is the significance of revenue cycle management? RCM’s overarching goal of improving provider revenue prioritizes the patient over all else. Revenue cycle management boosts provider revenue while reducing time spent on administrative and clinical tasks. This means allocating more resources and time to value-based care for the patient and their treatment.
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