Value-based Programs

# Purpose of Revenue Cycle Management in Healthcare – 2025 Updated Guide

- January 13, 2025
- Posted by Kristen Edwards

10 Feb

As the healthcare industry is much inclined towards providing healthcare to every patient, it is equally necessary to maintain a successful revenue management cycle. As technological advancements are chipping in, effective healthcare revenue cycle management has become the need of the day. Often health practitioners are of the opinion that what is the purpose of revenue cycle management in healthcare?

According to a report from Sage Growth Partners, more than a third of health systems have faced more than $10 million in bad debt annually. The situation is worsening due to unpaid bills and every year up to $125 billion is lost in unpaid and underpaid claims. This is why an increased number of healthcare providers are seeking the help of revenue cycle management providers to revamp and automate their revenue collection process, and to receive the immense benefits of revenue cycle management in healthcare.

The purpose of Healthcare Revenue Cycle Management (RCM) is to manage the entire revenue cycle of the healthcare providers and ensuring there is no delay due to redundant tasks and revenue collection leaks. The RCM process starts with the patient scheduling a visit, receiving the care and concludes with paying the care services provider. The process can be enlisted as:

- Patient eligibility check and insurance authorization
- Medical coding and billing, charge capture
- Claim preparation and scrubbing
- Claim submission
- Payment posting
- Denial management
- Account receivable follow-ups
- Patient statements
- Reporting and audit

Revenue cycle management (RCM) in healthcare serves as the central process that streamlines the processes, ensures steady collections and makes the healthcare providers financially viable.

> Here are some benefits of revenue cycle management in healthcare:

## What is Purpose of Revenue Cycle Management in Healthcare?

source:revcycleintelligence.com

### Improved Patient Experience

Effective revenue cycle management eliminates the redundant processes, simplifies the complexities, streamlines the system. This lowers the administrative burden of the care providers and they focus more on delivering quality care services. Efficient revenue cycle management with the automation of the processes improves all the touchpoints of a patient journey and concludes the process with timely payments.

### Reduced Administrative Burden

Although the RCM process runs along with the patient walkthrough but managing it is a complete job that requires focused attention of the revenue cycle management resources. This is why most of the healthcare services providers seek services of the professional RCM vendors that can effectively manage and automate their revenue cycle. By outsourcing and automating the revenue cycle, healthcare providers can set them free from different administrative tasks which include resource management, billing, and coding, managing the claim preparation and reimbursement process. More availability of time helps them focus on delivering quality care.

### Elimination of Errors and Redundancy

Mostly RCM vendors also provide medical billing and coding services. Delay in the collection process occurs due to errors in the billing documents. Medical billing solutions combined with revenue cycle handling helps in eliminating the errors and it removes the redundancy in the system. Error-free billing and collection workflow maximizes the revenues of healthcare providers.

### Fewer Denials

When the revenue cycle is optimized and eliminates the errors in the system, it automatically lowers the denial rate. Payments of the healthcare providers are denied and due to errors in the payment claims and when these errors are removed, it minimizes the denial rate.

### Simplified Processes

Revenue cycle management and automation help in simplifying the front desk and back-office processes. The automation of the system if managed with the right clinical technologies such as the electronic health record (EHR) system, can simplify the workflow. It improves the scheduling process, coding and billing, and payment processing. Removing the complexities in the workflow is a must to improve the operational efficiency of the providers and to make sure that they are meeting their revenue targets.

### Maximizes Collections and Revenue

source:revcycleintelligence.com

Effective revenue cycle management optimizes the collection process. RCM providers can handle the incumbent tasks along with backlogs such as payment denials and follow-ups, and make sure that the services providers are timely reimbursed. The process brings accuracy to the system and leaves little room for errors. The process if combined with the automation tools and software applications, all the time taking tasks such as insurance verification, coding, and claim processing takes less time than manual handling. An optimized workflow helps in maximizing the collections.

### Faster Collection Process

Revenue cycle automation expedites the collection process by automating the tasks and lowering the administrative burden. When most of the processes are automated, such as the staff is required to enter the patient demographics once, automated eligibility checks, reminders, payment follow-ups and charge entry. The automation and accuracy of the revenue cycle help in faster collections. Providers prepare their bills in less time, and time submission improves the collection process. Read this comprehensive guide to improve the RCM Process.

Healthcare providers can significantly improve their revenue collections through effective revenue cycle management. For instance, a community hospital in Illinois observed a 300 percent increase in patient collections with the automation and integration of front-end and back-end processes. This is a major leap in the right direction and sets an example for other healthcare services providers.

Managing the RCM in-house can be expensive and involves consistent effort from the management team to manage different resources. With RCM services outsourced to a professional team, providers can focus more on improving the quality of care that can dramatically increase their revenue due to reduced operational cost, elimination of errors, and maximum collections.

## Benefits of Revenue Cycle Management

1. Improved Cash Flow: Efficient RCM processes minimize the point of providing services and payment, which improves cash flow.
2. Reduced Denials and Delays: RCM identifies and reduces denied claims and delays, resulting in higher revenues.
3. Increased Operational Efficiency: Automation and optimized processes decrease administrative and operational costs.
4. Enhanced Data Analytics: RCM gives vital information about financial performance & patient demographics, which aids strategic decision-making.
5. Compliance Assurance: RCM assists healthcare firms in complying with legislation and payer obligations, hence lowering legal risks.

## Goals of Revenue Cycle Management

1. Maximize Revenue: The main objective is to maximize income by implementing effective billing and collection systems.
2. Minimize Costs: RCM seeks to reduce operating expenses related to billing, collections, and administrative tasks.
3. Increase Collection Rates: RCM strives to increase collection rates by effectively following up on claims and patient accounts.
4. Enhance Patient Satisfaction: The goal is to guarantee that billing methods are clear and understandable, enhancing the patient experience.

## Purpose of revenue cycle management in healthcare

The goal of Revenue Cycle Management (RCM) in healthcare is to improve financial procedures that help healthcare providers from the first patient encounter to the final payment. RCM strives to maximize revenue collection by assuring timely payments and eliminating claim denials through accurate coding and reporting. It improves administrative operations, increases efficiency, and reduces manual errors. Furthermore, RCM enhances the patient experience by establishing transparent billing policies and various payment choices, fostering confidence and pleasure.

Compliance with federal and state rules is a top priority, as it assists firms in adhering to best practices and avoiding legal complications. RCM also aids financial planning and budgeting with data-driven insights, while enabling the move to value-based care by tracking quality measures linked to reimbursement.

### Endnotes

Managing the RCM in-house can be expensive and involves consistent effort from the management team to manage different resources. With revenue cycle management companies, providers can focus more on improving the quality of care that can dramatically increase their revenue due to reduced operational cost, elimination of errors, and maximum collections.

Still, wondering to improve the revenue cycle management of your organization? We are here to guide you further. We ensure every possible experience you might want to have to beneficially run your revenue management cycle. So you can focus on providing the best healthcare to your patients.

## FAQs to know about the Purpose of of Revenue Cycle Management

### 1. What are the key steps in the RCM process?

The RCM process includes several steps:

- Patient registration and scheduling
- Verification of insurance
- Capture of charges
- Coding for medical
- Submission of claims
- Posting of payments
- Handling of denials
- Billing and collections for patients

### 2. What role does medical coding play in RCM?

Medical coding is critical in RCM because it ensures that healthcare services are accurately translated into standardized codes used for billing. Correct coding helps prevent claim denials and ensures proper reimbursement from insurance companies.

### 3. How can RCM help reduce claim denials?

By verifying that patient data, insurance details, and medical codes are correct before to claims submission, RCM helps lower the number of claims that are denied. Additionally, it includes rejection management procedures that monitor and address any mistakes that result in denials.

### 4. How does RCM support value-based care models?

RCM tracks and reports quality measures connected to patient outcomes in order to adjust to value-based care models. This guarantees that the quality of treatment rather than the number of services rendered by healthcare practitioners will determine their compensation.

### 5. What is the difference between RCM and medical billing?

Although it includes medical billing, RCM is a more comprehensive process. While RCM covers each financial activity from registering patients to payment posting, including rejection management and financial reporting, medical billing concentrates on filing claims to insurance carriers and collecting payments.

### 6. Can RCM help with out-of-network claims?

RCM can assist with out-of-network claims by spotting these kinds of cases early on, warning patients about possible expenses, and handling the difficulties of filing and monitoring these kinds of claims to guarantee prompt payment.

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