REVENUE CYCLE: Benefits and Best Practices

revenue cycle

Healthcare practices have been altered in a variety of ways as a result of current government policies affecting the healthcare business. Certain third-party payers of health insurance have negotiated fee-for-service contracts with providers, resulting in decreased reimbursement. HIPAA, or the Healthcare Insurance Portability and Accountability Act, has also had an impact by tightening claim data filing standards. And, as the healthcare system shifts from a fee-for-service reimbursement model to a value-based reimbursement one, healthcare practices and providers have had to change the way they bill for care provided. Because of these regulatory developments, establishing a sustainable revenue cycle is more critical than ever.

What is a Revenue Cycle?

All administrative and clinical processes that contribute to the capture, management, and collection of patient service revenue are referred to as the revenue cycle. throughput it simply, this is the complete life of a patient account, from creation through payment.

A healthy revenue cycle should adhere to best practices in billing and collection to ensure that bills are issued in compliance with payor standards and that all services provided are billed. The last thing a healthcare institution needs is to give services without being compensated.

How Does the Revenue Cycle Function in Various Industries?

#1. In the Manufacturing Sector

The logistics department arranges transportation and ships goods to a consumer, who then receives the goods and pays. It keeps products ready for dispatch before beginning billing, preparing an invoice, and sending it to a customer. It begins when a company gets a client order and the relevant department processes the order. When an organization gets money and registers the transaction in the system, the process is complete.

#2. Work in the Service Industry

This cycle is shorter than that of the manufacturing sector. It begins when they get service orders when the organization engages in an agreement with the client when the relevant department performs service, and when the organization receives money from a customer. It could be the situation of continuous service in the service business, in which case the process will operate in accordance with the customer’s agreement.

#3. In the Healthcare Sector

When compared to other businesses, the healthcare industry’s revenue cycle is the most intricate. The process in this market begins when patients register at hospitals that provide treatment to a consumer. In most cases, health insurance companies are involved because of significant medical treatment costs. They may have to recover money from an insurance company, which may be full payment or a portion of the bill from the patient.

Revenue Cycle Process

  • Receive a customer’s order
  • Processing the order by preparing the products for delivery
  • Billing and invoice preparation
  • Customer delivery of products and bills
  • A customer received a delivery.
  • Accounts receivable must be reported.
  • The customer pays

The Importance of the Revenue Cycle

The revenue cycle is maintained and utilized to monitor the cash flow of the company by analyzing its profit-making operations. It assists management in deciding on feasible changes by comparing the organization’s cycle to any available cycle of competitors. It simply checks the employees involved in the process to reduce errors. The firm can also provide fast and effective customer service by automating the repetitious procedure.

Revenue cycle management reduces the credit term for obtaining payments from customers and reduces the cases or probability of bad debts. It is critical in the proper billing and receiving of a healthcare institution by offering facilities for tracking patient registration, administering personal data and insurance-related information, scheduling appointments and billing, and bill receipt. Before implementing the cycle properly, the business should assess its fixed costs and cost-effectiveness, as well as if it would be more beneficial to use this system.

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 Error

Many providers can more quickly detect where errors occur in the medical billing process by utilizing RCM. This reduces the likelihood 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 number alone is incentive enough for healthcare firms to consider how they may improve 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 is the practice of demanding a higher payment rate for services that may not always justify 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:

  • Giving incorrect information – A patient may lie about their insurance coverage in order to obtain non-covered services for which they are ineligible. 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.
  • Committing medical identity theft – Medical identity theft is becoming increasingly prevalent in the healthcare industry. 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.

Points of Revenue Cycle Leakage

There are numerous leakage sites in the revenue cycle, but the following are the most common:

  • There will be no referral.
  • Errors in registration, coding, or billing
  • Insurance that has not been validated
  • Claims unpaid
  • Appeals were denied.

Billing and Collections Best Practices

There are several best practices that your healthcare business may implement to ensure a healthy revenue cycle. Organizations can understand leakage spots and chances for development by comparing data to these “standards.” Among the finest practices are:

  • Conduct Financial clearance – This entails keeping and confirming patient information before the patient’s arrival for their appointment. Insurance eligibility is verified, and authorizations are kept track of. Outstanding balances are communicated to patients, and immediate payment is recommended.
  • Streamlined Check-In and Check-Out Procedures – Patient information is confirmed and verified, eligibility is determined, and past and new balances are gathered.
  • Charge Capture – A charge capture method is used; specific coding conditions are addressed; and documentation audits are undertaken.
  • Charge Entry – Fee schedules are produced and handled during this phase; charges are entered; charges are reviewed and audited; and the person responsible for revising charges is strictly controlled.
  • Proper Claims Management – Electronic claims are submitted and status updates are provided on a regular basis; secondary claim processing occurs; attention is paid to maintaining compliance with the insurance carrier’s claim format requirements; multi-tiered claim editing checks are performed; assistance with edit tracking and error resolution occurs; a system for easy rebilling or corrected claim processing is implemented; and an overall analysis of billing process delay times is performed.
Read Also: Practice Management Software: Definition & Top Picks
  • Patient Statements – Cycle billing occurs throughout the patient statements phase; statements are clear and succinct; there are remarks and automated holds on patient statements where applicable; and final notices are sent out.
  • Payment & Denial Posting – This step comprises entering payments, managing contractual write-offs, processing insurance reversals, revolving credit balances, reviewing denials and adjustments, and controlling who can edit payments.
  • Insurance Follow-Up – Verification that insurance carriers are receiving claims and processing them; accounts receivable are prioritized; staff collection actions are audited; your practice’s average days in accounts receivable and net collection rates are known.
  • Denial Management – During denial management, you’ll know if your claims denials rate is high; you’ll have a better knowledge of the claims denials received; your common denial causes will be evaluated to enhance processes; and denied claims will be resubmitted if payment can still be collected.
  • Patient Collections – During the patient collections phase, patient billing occurs; collection letters are written; general collections occur; payment plans are offered; patient balances are reviewed prior to appointments; and collector productivity is evaluated.
  • Payor Management – Payor management focuses on fee schedules, carrier provider numbers and NPI, benefit assignments, carrier communications, contract dates, documentation to support claims, and carrier analysis.


Employee training is required for efficient revenue cycle management adoption. If any portion of the cycle makes a mistake, it has the potential to disrupt the entire cycle. Proper implementation necessitates accounting knowledge, which may increase the company’s costs.

As previously said, the healthcare industry’s cycle is complex. This cycle will require your organization to assign different departments to separate persons so that one person does not dominate the entire process. This necessitates the hiring of human resources, which may increase the company’s fixed costs. In this industry, there is a risk of overlooking some critical areas of revenue recording.

How Technology Aids In Healthcare Revenue Management

Health IT and EHR systems have aided in the simplification and refinement of healthcare revenue cycle management techniques. Many businesses rely on technology to track claims throughout their lifecycles, collect payments, and resolve claim denials. Finally, these technologies enable a consistent supply of revenue.

During the COVID-19 pandemic, revenue cycle management technology was used by 75% of hospitals and health systems across the country.

As revenue cycle management processes have transitioned to remote work, technology, and automation have also come in useful.

Many providers have benefited from the automation of basic healthcare revenue cycle management challenges, such as payer-provider communications, recommending suitable ICD-10 codes, monitoring medical billing processes, and even scheduling patient appointments.
Providers have also begun to use artificial intelligence (AI) to aid in revenue cycle management operations.

Artificial intelligence can monitor massive amounts of data and guide providers to specific indicators, such as why a claim was denied.


It is an accounting procedure that varies by industry. The revenue cycle in the service business is short, whereas it is slightly longer in the manufacturing industry. It is critical to follow the cycle so that a company can track all revenue and debtor receivables as well as non-payment from debtors. However, before building a proper revenue cycle system, the firm should examine its costs.


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