Revenue Cycle Management

Revenue Cycle Management

Revenue cycle management (RCM) is the process a healthcare provider uses to track patient service revenue from the time of account creation to the final payment.

The revenue cycle process consists of several steps:

  • Payor contract management is key to the RCM process because it dictates the total dollars allowed per patient service. To ensure providers are getting optimal reimbursement for the services they provide, it is essential for them to negotiate their contracts annually. By negotiating administrative tasks associated with submitting a claim and the value of each service, healthcare providers will receive the correct amount each time a claim is submitted. "Many provider organizations have failed to implement comprehensive payor contract management practices because of the complexity associated with negotiating and managing multiple contracts,"1 explained Tracy Watrous, Vice President Member Services and Organizational Content at Medical Group Management Association (MGMA).

  • Key front-end functions will dictate how quickly reimbursement is received:
    • Scheduling a patient appointment—scheduling an appointment for a patient to be seen by a provider
    • Patient registration—ensuring all demographic information is obtained correctly, e.g., insurance information, birth date, etc.
    • Eligibility verification—confirming a patient's insurance eligibility
    • Authorizations and referrals—some payors require an authorization or referral from a patient's primary care provider before certain services are rendered2

The challenge is getting correct demographic information from the patient and ensuring an authorization or referral is received before the patient is seen by the provider.

  • Claims submission and management process comes next in the cycle. The billing portion of the process begins when a provider renders treatment and documents a patient's visit. The patient's visit converts into a claim. The claim is submitted to a payor. The payor evaluates the claim and determines if it will reimburse the provider. The challenge in this step is ensuring claims are clean as they are submitted to the payors. If the claim is not clean, the practice will receive a denial for reimbursement. The uncollected cash will sit on the practice's accounts receivable (A/R) while they work against the payor's clock of timely submissions. If time runs out, the cash will unfortunately convert to a write-off or bad debt.

  • Accounts Receivable Management is the core process in RCM that can expedite cash collections. A/R is the heartbeat of the cycle because the longer cash sits uncollected on your A/R, your overall financial health will be negatively affected due to the lack of cash flow into the practice. In addition, significant overhead is usually allocated to unmanaged account receivables.

  • Last—but equally important—is analytics. It is vital to be aware of your revenue cycle performance in order to provide better care services and receive reimbursement. The Healthcare Financial Management Association defines revenue cycle in healthcare as all administrative and clinical functions that contribute to the capture, management and collection of patient services revenue.3 Key performance indicator (KPI) data provides insight into clinical, financial and operational health. Such data supports informed decision-making. KPI examples include:

Revenue Cycle Management Dashboard

Reimbursement Performance Indicators

Leading Operation Indicators

Claims Processing Days

Front-end Edits

Edit Rate

Office Charge Lag

Denial Rate (in claims and cash)

Hospital and Dialysis Charge Lag

Net Collection Rate

Co-pay Collection Rate

Days in A/R

Time-of-Service Payments

Bad Debt Expense

Percentage of Daily Schedules Filled

Charge Lag Days

Percentage of Daily Cancellation or No-Show

The revenue cycle process touches every aspect of an organization's operations. Some will argue that successfully managing the RCM process is vital to the health and success of an organization but maintaining a high-performing revenue cycle for healthcare providers is not easy. It requires an intense focus on products, people, and processes.


In the age of continuously volatile regulation changes and increasing demands from patients, payors, and providers, automation technology and innovative tools play a critical role in improving efficiency.4 A significant number of administrative tasks can be automated using standardized electronic transactions. A practice management system (PMS) allows providers to automate most of the RCM process.

Embracing an integrated practice management system is key to strengthening RCM. Because RCM is so intricate, it is a very difficult process to manage, measure and improve, so using a comprehensive PMS can minimize the burdens associated with RCM.

PMS typically can:

  • Capture patient demographics
  • Schedule appointments
  • Preregister patients (including insurance eligibility and benefit checks)
  • Determine patient financial responsibility for collections at the point of care
  • Maintain insurance payor lists
  • Perform billing
  • Generate reports2

System implementation is not as difficult as system optimization for best performance.


Many formerly manual, time-intensive administrative tasks can be automated using standardized electronic transactions.5 However, an effective revenue cycle management team (RCMT) can incorporate processes and workflows designed around the patient and streamline operations throughout the process by optimizing the PMS.

A well-trained staff can reduce billing errors and make the whole RCM process efficient and effective. Consistent monitoring of the process at every point of the RCM's life cycle can minimize reimbursement delays.


RCM performance typically improves when all billing functions follow common guiding principles. Providers must constantly modify processes to ensure continuous improvement and respond to ever-changing government regulations. Although there is no set formula for making improvements, many providers are refining processes in similar ways:

  • Enhancing the patient's experience
  • Optimizing RCM processes
  • Implementing time-of-service collections

Although providers pursue a variety of strategies to attain revenue cycle excellence, high-performing RCM practices don’t just happen. Practices that use patient-focused and value-driven revenue cycle processes have done so by leveraging integrated technology and dynamic RCM teams and committing to their policies, procedures, and protocols (PPP).

Brian Paradis, Senior Partner at C-Suite Solutions, a healthcare advisory firm, provides this list of the four most important steps of sound RCM strategy:

  1. Engaging the broader organization to get on board and put RCM at the forefront, not on the backburner.
  2. Investing in technology. RCM can be improved through products and software that add value to the process.
  3. Focusing on retention and referrals. As healthcare moves to new modes of payment under value based care, healthcare organizations will have to be more strategic about attracting and keeping patients.
  4. Engaging new payment models. Patients are becoming more digital and mobile, and paper bills and statements are becoming outdated.6

RCM is the process by which a healthcare provider tracks patient service revenue from the time of account creation to the final payment. RCM is critical to the financial health of any healthcare provider.


  1. RevCycleIntelligence. "Maximizing Provider Revenue with Payor Contract Management." RevCycleIntelligence. December 17, 2018.
  2. Goyal, Arun. "Revenue Cycle Management Software — Development Cost, Benefits, Features." Octal IT Solution. June 22, 2018.
  3. Healthcare Financial Management Association. 2013. Tool: Sample Revenue Cycle Governance Council Charter.
  4. Shill, Steven, CPA, and John Blakey, CPA. The World of Revenue Recognition, ASC 606. Navigating the Challenges of Capitation Payments and Risk Sharing Agreements. BDO USA, 2018.
  5. Murphy, Brian. 2017 Healthcare Analytics; Market Trend Results. Special Excerpt Prepared for IBM Watson Health. Report. Chilmark Research. 2017. 3-28.
  6. Rosenfeld, Jordan. "Cracking the Code behind the Patient Revenue Cycle." Medical Economics. December 27, 2018.

Insights You Might Like



Katya Cook Fosters Professional Growth for FMCNA Emplyees



Benifits of Replacing Your Old Central DIalysis Water System



What Is the AquA RO System? | Dialysis Water Treatment