What is Revenue Cycle Management?
Revenue cycle management (or RCM) might sound like jargon for the basic billing and payment processes of a healthcare business. However, it actually involves a series of complex stages and actions needed for effective financial operations. Yes, it is primarily about issuing a bill and getting paid, but it also covers the initial patient engagement and registration, insurance coverage verification, claims submission process, patient billing, and last but not least, collections. Each step of the healthcare revenue management cycle can have hiccups that can be avoided so providers can be properly reimbursed for services in a fair, timely, and efficient manner. Below we explore these steps as well as the benefits, challenges, how outside expertise can aid in the process, and the future of revenue cycle management.Why Focus on Effective Revenue Cycle Management? The Benefits are Multiple
It’s a recurring situation in the healthcare industry: complex and onerous tasks that need to be handled correctly often get derailed. There are lots of moving parts and many parties involved in the field. There’s not much that can be done about that. However, when healthcare providers, such as clinics, hospitals, and private practices, take the time and effort to create systems that make these tasks manageable, there are many benefits. Tasks such as those delineated in the revenue cycle and cited as “effective RCM” offer operational efficiencies, promote financial stability, and lead to better patient care and outcomes. When administrative tasks are streamlined in RCM, the time and resources saved give burdened staff the room to focus on the high-touch points in healthcare – direct patient care. For instance, with a well-managed RCM system, many repetitive and routine tasks can be automated. This might include things like insurance verification and claims submission. Well-run RCM systems can give businesses more accurate billing and easier payment processes. This will reduce errors and minimize confusion on the part of the patient. So, as part of RCM, when patients receive a clear, itemized bill with various options for payment, customer satisfaction increases. Another key benefit is the operational efficiency that come from effective RCM methods. With today’s business managers more preoccupied with leveraging data and data analytics to improve their performance, RCM can be another tool for process improvement. For one, RCM offers managers ways to quantify their actions and create key performance indicators (or KPIs) to track the organization’s progress. Some key healthcare KPIs include point-of-service (or POS) cash collections, the number of days in accounts receivable, the number of days in total discharged (but not billed), clean claim rates, and bad debt or uncollectible accounts expenses. And again, while it may sound jargony, without KPIs or the ability to track and measure things, it’s challenging to identify areas for improvement. As the saying goes: “What gets measured, gets managed.” For example, an urgent care clinic was seeing an increased number of claims being denied by insurance reimbursers. Via a thorough and regular review of its RCM data, the managers were able to spot how coding errors (a common KPI used) were an issue. Only then could the clinic address the problem and get back to increasing revenue and profits.Challenges in Healthcare Revenue Cycle Management
As is often the case, while there are benefits in having a structured RCM system, there can also be challenges. The revenue cycle can be hampered by things such as the above-mentioned coding problems, complex billing procedures, the ever-changing regulatory environment in healthcare, and payer variability issues. Claim tracking and denial management are other areas often filled with glitches. Having endless follow-ups with insurance providers can eat up a lot of mental bandwidth (and time) of healthcare staff. Yet, when a healthcare business formally creates and implements a “tracking and denial management system,” denied claims can be automatically flagged, and staff can be given actionable info to resolve issues. Other challenges facing healthcare companies are staff turnover and training. Making sure that your staff is well-trained in RCM steps…and keeping up with the newest regulations and technologies that can affect these steps is crucial for efficient revenue management cycles. Management has to commit to ongoing training investments. It’s a way for staff to feel more secure, more engaged, and to lessen attrition rates. It’s also useful to delineate a set of best practices and to have KPIs in place to measure effectiveness, and to check for changes in regulatory requirements. (Training is also good for setting these expectations. We discussed the importance of training in a recent article on Healthcare Compliance. LINK) A final challenge (at least to mention in this article) is how technology can be both a serious help as well as a burden in RCM. First, integrating technology can be complex and costly. Issues often arise in healthcare due to the industry’s proclivity to use multiple software systems for different steps in the RCM process. For instance, you could have a wholly separate platform for patient registration, a different program for the billing step, and another one for issuing reports. So, either consolidating or making these systems work together seamlessly is key. How? Healthcare managers should work closely with their IT departments (or solicit outside expertise) to integrate RCM software into other main healthcare platforms, such as the patient electronic health record (EHR) system. This will help prevent the siloing of data, which is often the case in healthcare.Components of the Revenue Cycle
So, what are the specific parts of RCM? Below, we lay out each step that must be done well to ensure healthcare providers are reimbursed for their services.Registering the Patient
First, collecting accurate demographic and insurance information from patients is necessary so all claims ultimately submitted are processed correctly.Verifying Insurance Authorization
Next, make sure the services rendered are covered by the patient’s insurance. This is a given to avoid any time-consuming and frustrating claim denials and subsequent delays in payment.Coding the Services and Charges Correctly
Healthcare staff must then “translate” the services provided into standardized billing codes. This often is an area that gets confusing without adequate training, particularly if billing codes change over time. It’s essential to get this step right for claim processing and reimbursement.Submitting Healthcare Claims
It’s time to send the claims to the insurance companies. Doing this on a timely basis is vital so the business maintains a steady cash flow and an overall healthy financial state.Denial Management
Quickly respond to claims that are denied by using a robust tracking system. By having a more proactive approach to “denial management,” healthcare providers can react faster so as to increase revenue and profits.Payment Posting
After insurance payments are received, it is important to reconcile them with the original amounts billed. Processing this step in a timely manner gives businesses a better snapshot of their financial status.Patient Billing
Who likes to receive a “surprise” bill from a healthcare provider many months after services are rendered? Bill patients immediately for any remaining balances after insurance payments are received; otherwise, it can be more difficult to collect. Avoiding delayed billing procedures can reduce unpaid balances and lead to improved patient satisfaction.Collections
Hopefully, the collection step can be avoided altogether. But in the real world, it’s not always the case. Follow up on unpaid balances right away, and if needed, decide with the customer if more time is necessary to close out their balance. Having a collections process that is timely and fair goes a long way.Reporting
You are creating and collecting a lot of data throughout the revenue management cycle. Why not use data analytics and refer to your KPIs to understand how well the revenue cycle is working? Through ongoing reporting, healthcare providers can see which areas need improvement so better financial performance can be realized.Strategy for Revenue Cycle Management Success: Outside Expertise
As mentioned, a healthy revenue cycle management system can help providers streamline their processes and improve performance. These goals may be clear, but the path to getting there may not be. At times, using outsourced RCM expertise is useful. By partnering with an accounting firm, for instance, a healthcare firm can benefit from expert knowledge and make its RCM processes more efficient. These relationships can also ensure compliance with any relevant regulations and regulatory changes. Take the small orthopedic clinic that decided to outsource its billing process and its even more laborious audit practices. They turned to an outside accounting firm for help. Why? It freed up their staff, who could instead focus on patient care. This gave them peace of mind in knowing that experts were handling these tasks accurately and promptly.Best Practices for Healthcare Providers
To summarize revenue cycle management tips, healthcare services providers should:- Collect all patient information such as personal, demographics, contact info, health status, and insurance details
- Check the accuracy of the collected information – especially insurance details – to prevent any claim denials
- Invest in ongoing staff training, particularly in regard to current coding standards
- Offer patients easy-to-understand bills with detailed explanations of charges incurred
- Use outside RCM expertise, such as provided by an accounting firm, as needed
