Revenue cycle management (RCM) is the process through which payments flow for most healthcare organizations—from the point a patient makes an appointment up through co-pays, deductibles, and insurance company payments. Whether you’re new to RCM or a seasoned veteran looking for a refresher, we’re heading back to the basics with an overview of the healthcare revenue lifecycle and its importance to the bottom line of any organization.

Whether you’re a physician practice, hospital, or healthcare system, RCM is the lifeblood of your organization because it is through RCM that you generate revenue. A streamlined revenue cycle process in medical billing generates successful claims, minimizes denials, and increases patient payments. Without solid RCM, healthcare organizations will fail to thrive and may even shrink up and die. RCM is essential to creating a steady flow of healthcare revenue.

What Is Revenue Cycle Management in Healthcare?

Revenue cycle management in healthcare includes all the elements that must be managed successfully to gain proper reimbursement and revenue for the healthcare organization. These functions include both front-office—also known as patient access—and back-office—also referred to as merely RCM.

Front-office (patient access) functions include:

  • Insurance verification
  • Patient pay estimates
  • Preauthorizations

Back-office (RCM) functions include:

  • Medical coding
  • Medical billing, comprising:
    • Charge entry
    • Payment posting
    • Accounts receivables management
    • Denials management
    • Credit balance resolution
    • Payer contract management
    • Analytics

Knowing how these functions link together, and employing a comprehensive RCM system to manage them, is the best way to control revenue from the moment a patient schedules an appointment to successful claim reimbursement. When you manage each function, you gain insights gather data you can use to strengthen your reimbursement system and become more profitable. Without data and analysis, you’re losing valuable insights into the procedures, steps, and processes behind revenue losses.

How Should the Healthcare Revenue Cycle Process Work?

Revenue cycle management begins the moment a patient calls to schedule an appointment. Also known as pre-registration, this first step opens the door for money to flow into the practice by documenting information that will lead to successful claims. At the point of pre-registration, savvy doctors, practices, and hospitals will conduct three key steps:

Insurance verification: Medical insurance verification confirms patient coverage details, even before the patient walks in the door. Once you know the third-party payer, you can determine if the patient is in or out of network and whether you can get paid for your services.

Patient pay estimates: Once insurance is verified you can begin to determine patient pay estimates. The percentage of patient pay is increasing with high-deductible insurance plans. Informing patients of their financial responsibilities and engaging them in payment plans is the most successful way to collect that revenue. If staff has this information from the time the patient schedules an appointment, the patient can be fully prepared to pay when they arrive.

Preauthorizations: The ability to preauthorize necessary patient procedures will save you time and money. Whether required tests and treatments are known at the time of scheduling or occur during the office visit, the ability to determine coverage is essential for payment. The best systems can evaluate coverage for STAT procedures in as little as 20 minutes.

These are the most critical first steps in the revenue cycle function. They lay down the groundwork and gather the data required for successful claims.

Internal Revenue Cycle Management Functions

Once your team has addressed patient access functions, it’s time to flow the information into internal RCM functions. These are the bridge between patient care and revenue, passing the information documented while caring for the patient on to coding and billing functions, which result in reimbursement and revenue.

Medical coding: Coding is the DNA of successful billing. There are nearly 144,000 code sets. Imagine the opportunities for error and missed revenue! Getting it right is either money in your pocket or out the door. It’s critical to implement an automated system and expert healthcare business services for coding. Only medical coding experts can generate the right codes and close documentation gaps.

Medical billing: This is a complex function made up of many moving parts. If you are new to RCM, this is a good place to enlist a revenue cycle expert. Medical bills need to be accurate, complete and submitted on a timely basis. You need to submit claims on the right form required by each payer. You also need to track your claims and communicate regularly with each payer to address any issues before they turn into denials. Each specialty is different and requires different knowledge of different billing and claims details. When it comes to medical billing, the devil is in the details and can lead to successful reimbursement or delayed or denied revenue.

You must be aware of and manage the following key medical billing functions:

Charge entry: This is a specialized function that involves charge capture and the input of accurate data. It requires the entry of patient demographic data, the assignment of relevant medical codes and calculation of the services rendered. Charge entry is essential for accurate billing and clean claims.

Payment posting: This seems like a simple function: checks in the door, money in the bank. However, checks can pile up, which delays when they post. As a result, revenue seems sluggish despite robust patient volume. When payment posting is delayed, it’s difficult to obtain accurate accounts receivable (AR) information and optimize revenue. Timely and efficient medical payment posting provides a window into practice operations.

Accounts receivable (AR) management: Staff can quickly become overwhelmed with this function. When productivity slows, accounts receivables grow, catching revenue in a bottleneck.

Denials management: You must appeal your denied claims. Each payer will have its own window for appeals, and when it closes, you’ve lost your revenue permanently. Managing denials means managing money. Each denial represents revenue lost to your practice.

Credit balance resolution: This is an essential issue within revenue cycle management. Law regulates credit balances. They must be resolved and cannot linger. You do not want unresolved credit balances in your accounts receivable reports, or you risk misstating your revenues. Worse, public payers are regulated by law on overpayments, and they want their money back. If you fail to reimburse it, you will receive a fine. Several fines may result in your facility falling out of financial compliance. Credit balance resolution needs to occur regularly and appropriately.

Payer contract management: Approximately one-third of practices do not review their payer contracts unless there is an issue. That means that one-third of practices don’t know if they are being reimbursed the full contracted amount for treatments. Payments need to be tracked and compared to the terms of the contract. Discrepancies need to be detected, noted and resolved.

Analytics: When all these systems are in place, only analytics can tell you how they are performing. The right dashboard will give you a report card one each function and deliver predictive data as well. When you have the right analytics system, you can remove delays and speed improvements to your bottom line.


It’s an understatement to say that healthcare revenue cycle management is a complex function. Yet it is the most important function for the fiscal health and well-being of any healthcare organization. Whether you’re involved in front-office patient access issues, or back-office coding, billing, and AR, you need to understand how each part fits into the puzzle to truly make the most efficient and healthy revenue lifecycle. If you are new to RCM, enlist the support of experts or seasoned professionals who can integrate an automated, advanced RCM system into practice operations. Your bottom line will thank you.