RCM: Best Practices for Effectively Managing the Finances of Healthcare Organizations

Healthcare represents one of the most significant industries in the United States and is only expanding in scope, with projections from McKinsey & Company suggesting that healthcare profit pools will reach $790 billion by 2026.^[1] Healthcare systems are most profitable when they eliminate redundant expenses and streamline administrative processes, but turning these ideals into action has consistently proven challenging.

Enter revenue cycle management (RCM). Encompassing the full range of financial concerns accompanying patient visits, the claims process and general billing, RCM has long played a critical role in US healthcare, even as the technology underscoring it has evolved.

RCM has become even more important as the industry faces potentially costly challenges, such as labor shortages and an aging Baby Boomer population. Efficient RCM promises to bridge the gap, equipping providers with the tools and solutions they need to better serve patients while cutting operational expenses and boosting revenue.

As RCM solutions evolve, administration and management professionals must become more comfortable with these systems, satisfied with the knowledge that their efforts will lead to improved patient outcomes and conditions for healthcare providers.

In this guide, we will expand RCM, revealing what it involves and answering an increasingly important question: How can an organization improve its revenue cycle in management? Keep reading to learn more about RCM opportunities and how they impact healthcare management.

What Exactly Is RCM?

Revenue cycle management (RCM) is an important financial process that tracks and analyzes all sources of revenue related to patient services. The American Academy of Professional Coders (AAPC) explains that this end-to-end process “begins when a patient schedules an appointment and ends when the account balance is resolved through reconciliation of insurance payments, contractual adjustments, write-offs, or patient payment.”^[2]

The goal of RCM is to reveal areas of deficiency that stand in the way of healthcare revenue while also ensuring accuracy through the full cycle of patient scheduling, medical coding, billing and insurance claims.

Properly implemented, this complex process can limit claim denials, boost collections, and minimize time spent in accounts receivable. As a result, payments become more accurate and timely, thereby optimizing the healthcare provider’s financial performance while mitigating potential regulatory concerns.

What Makes Up an RCM Process?

RCM incorporates a variety of carefully planned and designed phases and processes to bring as much order and transparency to the revenue cycle as possible. We’ve outlined several essential components of the RCM process below:

Patient Scheduling, Pre-Registration and Registration

The early steps of the RCM process form the basis of successful relationships with patients and their insurance carriers, beginning with pre-registration when eligibility and insurance details are captured and recorded.

Pre-registration provides an excellent opportunity to inform patients of payment expectations while addressing key questions and concerns. Registration builds on this, verifying the completeness and accuracy of patient information and ensuring that co-payments are collected. This step may also involve verifying authorizations or referrals. Insurance benefits can be assigned at this point. As the AAPC explains, demographic details can also be collected.

Appointment scheduling contributes to RCM, as the scheduling process can be streamlined to drive both revenue and patient satisfaction. Strong scheduling and follow-up procedures keep patients engaged and, hopefully, reduce the risk of no-shows.

Verifying Insurance

While insurance verification is part of both the pre-registration and registration processes, it deserves its own explanation. As the AAPC explains, this step is critical for billing and reimbursements but can also be a valuable strategy for limiting claim denials.^[3] During the insurance verification process, it is important to gather details such as:

• Insurance ID
• Policy number
• Co-payment requirements
• Deductibles
• Coverage period

Patients may furnish much of this information, but advanced healthcare technology streamlines the process. By integrating electronic health records and insurance verification modules, practice management solutions can save time and limit the potential for human error.

Coding Documents

Coding forms the backbone of the modern revenue cycle, ensuring that any services delivered by the healthcare provider are accurately conveyed and enabling payers and patients to provide proper reimbursement. During the coding phase, all services, diagnoses, and procedures must be translated into universal codes.

Classification systems used to translate billable information include the International Classification of Diseases (ICD), the Healthcare Common Procedure Coding System (HCPCS) and the Current Procedural Terminology (CPT). Once this information has been compiled and translated by coders, it forms the basis of claims developed by medical billers.

Claims

Claims submission should initiate the payment process on the insurance company’s end. Delays, inaccurate coding, and incorrect patient details can all lead to denials. Claims may need to be sent to clearinghouses, which can assess claims and verify they are clean. This is a valuable solution for preventing processing errors.

Payment Collections

Strategic collection processes ensure healthcare providers are paid promptly and accurately for all services rendered. This process typically involves sending statements, which remind patients what they owe and encourage them to make necessary payment arrangements. If patients repeatedly neglect to respond to these statements, third-party collection services may be required.

Reporting and Analytics

Every RCM healthcare process must be thoroughly analyzed to ensure maximum revenue and efficiency. As MD Clarity explains, this could mean gathering metrics such as:

• Coding productivity
• Charge capture lag time
• Net collection rates
• Claim denial rates
• Referral rates
• Bad debt rates

These and other metrics can be tracked and analyzed through integrated RCM software solutions that increasingly incorporate AI tools to make better sense of high volumes of data.^[4]

How Can I Use RCM Effectively?

Although RCM solutions offer a wealth of opportunities for modern healthcare administration, their impact may be limited if they aren’t strategically implemented and carefully enforced.

Applied haphazardly, RCM systems will fail to produce significant improvements and will have a negligible return on investment. Done right, however, RCM can prove transformative. These best practices will ensure that RCM solutions reach their full potential:

Clear and Concise Policies

Every healthcare organization requires a comprehensive RCM plan and policies that dictate how various processes and procedures are carried out. Every staff member or third-party vendor involved in the process needs to be informed of expectations, including roles and responsibilities specific to the healthcare provider and any relevant compliance concerns.

Training of Staff

All staff members must be thoroughly trained in RCM processes, even if they are not technically employed as medical billers, coders, managers, or administrators. Employees should be thoroughly familiar with the full revenue cycle and the necessary software (that we will cover in more detail below). Compliance concerns must also be covered, especially as they relate to the Health Insurance Portability and Accountability Act (HIPAA).

Even clinical staff members can benefit from targeted training, as this will ultimately reduce the likelihood of coding and billing errors. After all, coders rely on clinical professionals to provide clear information that can accurately be conveyed as codes.

Among administrative employees, training will increasingly need to emphasize data-driven solutions, drawing on automated systems to produce actionable insights. Staff members will need to understand what key metrics mean and how they relate to the optimization of the revenue cycle.

Using RCM Software

RCM software streamlines critical processes that can cause increased operational expenses when accuracy or efficiency are lacking. These systems can gather a wealth of information to support data-driven insights and better problem-solving mechanisms. Common RCM software solutions include:

• Real-time eligibility. Confirming patient coverage can be a surprisingly time-intensive process. Thankfully, many of today’s best RCM software incorporates real-time eligibility confirmations, including requests for status verification sought by insurance carriers. Responses detail everything from co-pays and deductibles to out-of-pocket maximums.
• Patient estimates. Predicting the cost of care can be difficult but helpful, as this keeps patients informed on anticipated out-of-pocket expenses.  If patients understand their likely financial contributions, they can make informed decisions about their care and are also more likely to follow through with timely payments.
• Underpayment detection. Designed to pinpoint common concerns that lead to underpayments, this type of software can analyze claims data with assistance from advanced algorithms. The result is swifter detection of payment errors that might otherwise be overlooked by providers, which can, in turn, boost reimbursement efforts and increase general cash flow.

Always Monitoring and Auditing

A robust monitoring process should reveal not only whether staff members abide by RCM policies but also whether these policies provide sufficient improvements in revenue, efficiency, and patient satisfaction. Regular audits should be implemented; these will reveal regulatory compliance and identify potential risks that need to be addressed.

Outside auditing solutions provide a comprehensive overview, detailing all aspects of billing, coding and claims submission. Central areas of focus during the audit process include accounts receivable, denials, and patient contracts. These audits will ideally provide actionable steps for improvement, which should be promptly examined and followed.

Complying With Regulations and Billing Outcomes

Audits provide insight into regulatory compliance, but the right RCM policies can provide a strong framework to ensure compliance from the get-go. Common compliance concerns involve:

• Health Insurance Portability and Accountability Act (HIPAA). During pre-registration, registration and patient scheduling, privacy guidelines must be strictly upheld. HIPAA regulations also call for the careful identification of information systems used to create or transmit protected health information.
• Affordable Care Act (ACA). As RevCycle Intelligence explains, the ACA “significantly changed the healthcare revenue cycle management landscape,” sparking an increased perception of patient responsibility and general consumer-savviness.^[5] Meanwhile, ACA rules play heavily into the collections process, prohibiting many collection methods unless reasonable efforts have been made to verify eligibility for assistance.

Why Should Healthcare Providers Use RCM Solutions in Daily Practice?

RCM is a must for modern healthcare organizations. Without it, there is a strong likelihood of missteps through several areas of the revenue cycle, including everything from billing to claims submissions and collections.

A lack of RCM-oriented structure can also increase the risk of dealing with the HIPAA and ACA compliance concerns cited above. Through strategic RCM implementation, providers can gain much-needed structure through the full revenue cycle while reducing administrative burdens, improving efficiency and driving a higher return on investment.

Most Important Business Functions

RCM represents one of the most important business functions for today’s healthcare providers. It covers the full scope of financial concerns that these organizations face, encompassing both interactions with insurance carriers and the patients themselves. By identifying these functions and developing a systematic approach to navigating them, RCM solutions can direct resources to boost efficiencies via predictive analytics and proactive patient engagement.

Maintain Healthy Operating Functions

Implemented strategically, RCM solutions bring a much-needed sense of structure to many aspects of the patient experience and the revenue cycle in general. Through optimized RCM processes, everyday functions such as scheduling and claims submission can be streamlined while maintaining a patient-centric approach. RCM’s critical role cannot be underestimated; as industry resource Fierce Healthcare points out, RCM is “an operation that serves as a key touchpoint in the healthcare landscape and drives revenue for the whole system.”^[6]

Not Leaving Money Behind

From no-shows to claim denials, a variety of common concerns can lead to revenue loss. RCM processes take a proactive and preventative approach to these ROI-reducing costs, thereby reducing the likelihood of what Medical Economics refers to as money left on the table.^[7]

Success in RCM is not possible without identifying both potential sources of loss and actual financial concerns. Once these are better understood, strategic processes can be implemented to maximize cash flow.

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