Blog Feature

By: Stephen O'Connor

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August 9th, 2017

What is Healthcare Revenue Cycle Management?

Medical Billing / RCM

You may have many years of experience in the healthcare industry already, but lately you have come to realize that despite what you know about the medical field, you would like to become more familiar with the healthcare revenue cycle. That’s a good idea, because successful revenue cycle management (RCM) is the key to any successful medical practice’s growth and development.

As you consider how your healthcare career has been progressing so far, you can arm yourself with knowledge about healthcare RCM and how to succeed despite its challenges.

To begin, it’s useful to be reminded of what the revenue cycle is and the nature of revenue cycle management, in particular its importance as it relates to healthcare in this country.


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Revenue Cycle Management, put simply, is a financial process that has to do with managing and administering the claims you need to process, the resulting payments, and the structure of the revenue collection process. RCM involves identifying, managing, and collecting revenue based on the patient services we provide.

Why is it important in healthcare? While we must do our best to focus on providing the best possible patient outcomes, it’s also worth keeping in mind the financial aspects of healthcare, where a reliable income is essential for keeping the lights on and continuing to diagnose and treat all the patients in your pool.

Understanding the Revenue Cycle Process and Becoming More Familiar With its Terms

It’s useful when looking at the RCM process in healthcare to realize that at its heart, RCM serves to unify the clinical side of your practice with the business end, noted a report from SearchHealthIT.

The financial process of RCM relies on specialized medical billing software that your organization uses to keep track of all aspects of patient care being delivered. This process begins from the moment of patient registration, through setting appointments and finally receiving payment for the balance due.

Before deploying an RCM solution, it’s best to go with a software provider or services provider (when outsourcing RCM) that you know you can trust and rely on for the long haul, as industry best practices and governmental policies can affect how software is updated and improved in a major way.

In order to understand the revenue cycle, you’ll need to become more familiar with major terms of this process. With so many acronyms and other official jargon, keeping them in one handy place will help you learn. As noted by a report from RevCycle Intelligence, here are 10 key terms that you should keep in mind:

  • Accountable Care Organization: Doctors, hospitals and other professionals comprise an ACO, which is typically defined by the type of coordinated care being delivered. See the related Medicare Shared Savings Program below.

  • Alternative Payment Models: As the nation slowly begins to transition to a system that is based on quality of care over quantity of care, the alternative payment models are designed to motivate practitioners to focus on service quality instead of, for example, ordering an unnecessary lab test.

  • Bundled Payments: This works using a flat pricing structure and is designed to make it smoother to deliver services to patients being treated for acute conditions, such as having an organ transplanted or getting your knee replaced.

  • Concierge Medicine: Family physicians in particular find this method quite appealing, as concierge medicine, which operates as a type of retainer medicine, has patients paying an annual fee (membership fee or as an actual retainer), giving access to a range of services not typically covered by their insurance plan.

  • MACRA: The Medicare Access and CHIP Reauthorization Act of 2015 was signed into our nation’s law by President Obama. Designed to replace the Medicare Part B Sustainable Growth Formula or SGR reimbursement formula, it highlights the commitment to focusing on value-based reimbursements. MACRA also introduced the Merit-Based Incentive Payments System or MIPS.

  • Medicare Shared Savings Program: To cut costs while boosting the quality of healthcare being delivered, this new program lets hospitals, suppliers, and healthcare providers to band together to form an ACO or join an existing one.

  • MIPS: This is the Merit-based Incentive Payment System, which is due to begin in 2019. It consolidates older programs based on payment for performance, including the EHR Incentive and Value Based Modifier or VM Programs and the Physician Quality Reporting System or PQRS.

  • Price Transparency: Consumers have long grown weary of being unable to clearly see prices and how they differ from one provider to the next. With price transparency, healthcare consumers will have a clearer view of what their dollars are actually purchasing.

  • Supply Chain Management: As in any major industry, maintaining and improving excellent supply chains is essential for our nation’s healthcare sector. Major components include hospitals and practices, insurance companies, and regulatory bodies.

    • Some elements in the supply chain will focus on meeting needs (perhaps by stockpiling supplies) while other players will focus on cutting waste and redundancy, which creates a dynamic tension of need, desire and logistics, which you can anticipate will lead to healthy debate about priorities.

  • Value-based Reimbursement: This refers to payments that the government now ties to patient outcomes and the quality of care being provided. Medicare and Medicaid are tasked with cutting costs, and value based reimbursements are seen as driving value up while keeping expenses lower.

Challenges of Revenue Cycle Management

Given that it is a fairly complex aspect of healthcare, there are some challenges of Revenue Cycle Management that you should take into account.

For example, a recent report from RevCycle Intelligence noted that “the front-end of the revenue cycle must be diligent with determining Medicaid eligibility and (help) uninsured patients understand their coverage options with the insurance exchanges,” according to Derek Bang, CPA, CGMA, Chief Innovation Officer at Crowe Horwath.

Bang also noted that organizations will need to focus on collecting fees at the point of service, since patients are becoming increasingly responsible for their payments.

Another challenge that is still stymieing some medical organizations has to do with the latest version of the International Classification of Diseases code base, ICD-10.

While the majority of practices, hospitals, and other providers managed to increase staff training in ICD-10 to the point that they could estimate its impact on their reimbursement, 26% of Xtelligent Media readers being surveyed declared that they could not estimate the impact of ICD-10 on revenue stream. Clearly, in some cases, additional training is required.

How to Succeed in Revenue Cycle Management

You have two fundamental ways to achieve success in Revenue Cycle Management. One involves you installing RCM software at your facility’s local data servers. The other has you outsourcing your RCM processes to third party experts.

RCM Software

Using RCM software in your organization, your staff can instantly determine a patient’s insurance status online, instead of wasting time hanging on the phone with insurers. To speed up the money collection process, your staff can use the RCM software to obtain copays before the patient leaves the premises.

RCM software also lets you add the payment information details following each encounter with a patient. At the heart of any good RCM application is error-detection that helps you quickly find out why a claim was declined so you can fix it on the spot and then immediately resubmit for payment.

Being able to keep track of all unpaid claims helps you generate reports on revenue shortfalls for your weekly staff meetings.

The RCM software must also include a feature to convert older ICD-9 codes into the new ICD-10 codes.

Outsource Your RCM

Large and growing practices often find that all things being considered, it’s advantageous to stop handling Revenue Cycle Management in-house, and instead, outsource it to third-party professionals.

Fee increases can be quite problematic and complicated, and reducing employee levels will only make things tougher for staff and patients. To save costs, practices, hospitals, and clinics will turn to outsourcing their RCM.

This way, you can rest assured that the third party RCM experts will stay on top of industry best practices and will have thorough knowledge of the latest ICD-10 codes.

They will be able to process claims and solve problems with denied claims much faster and more accurately than your staff, which you may not be able to afford to train as much as the RCM company can. Cash aside, it’s a good idea to let professionals handle your RCM, while you double down on your efforts to improve quality of care over quantity.

Whether your practice decides to go with RCM software that you deploy on local servers, hosting the solution yourself, or you wind up determining that it’s best for your practice to outsource RCM, when you have a solid system in place, you can begin to count on a more reliable stream of revenue. This is essential for planning the growth of your practice, such as adding new specialists or bringing in more support staff to fill out your team.

Key Takeaways:

  • Revenue Cycle Management or RCM in healthcare involves the financial processes that come with managing and administering claims for each patient you treat.
  • RCM professionals spend their days identifying, managing, and collecting revenue, based on the services being provided.
  • RCM is important in healthcare because it ensures that the structures we have built to support patients in this country will remain intact as we streamline healthcare delivery, focusing more on quality than quantity of care.
  • Your practice has the option to deploy RCM software for use on your own servers.
  • For practices that have grown too busy to properly manage their RCM duties without adding on more staff (an unpredictable process to make sure you get personnel levels right), outsourcing RCM is an ideal option.

Of course, for busy medical professionals who already have their hands full keeping the office humming along, sorting out all the details comprising healthcare revenue cycle management can sometimes be a little daunting, depending on your level of experience. For those who would like to experience a little fun while continuing in their learning, please click here to take our quiz, “Is Outsourced RCM Right for You?” and feel free to forward this quiz to your colleagues.

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About Stephen O'Connor

As a Director of Digital Marketing at Advanced Data Systems Corporation, Stephen spends his days planning, writing, & designing resources for the modern healthcare professional. He has a strong affinity for snow crab legs, the ocean and Rutgers Football.

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