6 Stages of Revenue Cycle Management to Make Your Hospital Financially Sound

6 Stages of Revenue Cycle Management to Make Your Hospital Financially Sound

Healthcare organizations serving patients have a fundamental agenda of maintaining the system of patient care in an organization. Hospitals, today, introduce various patient care services in an organization to stay financially fit in the system and one of those services is RCM. A Revenue Cycle Management (RCM) is a financial administration which helps hospitals to be efficient with their finances and patient service.

A Revenue Cycle management manages revenue vital for hospitals by providing patient care services through outstanding payment management with the help of medical billing software and insurance companies.

An RCM cycle starts when a patient communicates for an appointment in a hospital and ends when all the claims and services have been fulfilled. The healthcare organization holds the responsibility of putting up with all the variations in an RCM cycle. The process needs to be precise in all the aspects of the cycle so as to effectively handle the finances of the organization which at times can be a big burden. 

Financially clearing a patient is an outline, inside which hospitals work because clearing the payment swiftly eliminate the organization from the burden of debt compilation in the future. For a better value-based reimbursement, revenue cycle incorporates both the administrative as well as the clinical function into one. The aim behind is to make sure that healthcare providers (practitioners and professionals) can get paid for the services furnished as early as possible.

How does a Healthcare Revenue Cycle Work?

Before diving into what’s and how’s of the RCM plan, one must be aware of the various phases it takes to reach those answers. The process of submission of a claim and reimbursement can be quite complex if any of the following steps are ignored, to the extent that of full denial of the payment can incur. 

# Stage 1 – In-house RCM software VS Outsourcing Medical Billing

The RCM cycle is evidence of acceptance and development of technology in the healthcare industry.  To begin with, you must be aware of the fact that every hospital has its own revenue cycle plan. Based on the size, capacity, and services provides, etc., an organization develops its Revenue Cycle Management plan on whether to go for an In-house plan or outsource the management of the medical billing and verification on the IT professionals by outsourcing to reliable IT companies.

It is always advisable for the big healthcare organizations to opt for a third-party expert as it gives them more time to focus on patient care.

# Stage 2 – Pre-authorization

After selecting the type of medical billing service, a biller now is responsible for pre-authorization and verification of medical plans, procedures, and equipment as well as patient’s details. 

A good revenue cycle is identified by how well the front-end RCM is managed. This includes instantaneous steps taken by the medical staff. The staff must ensure proper arrangement of a patient’s appointment, his insurance eligibility, scheduling and setting up of his account.

The front-end carries the most crucial responsibility in the RCM. It is the first step of recording and scheduling a patient’s details which later on becomes the groundwork for billing and claim submission by the insurance companies.

# Stage 3 – Proper Coding of ICD-10

To code, every detail of the patient visit in the ICD-10 codes properly is a job requiring accuracy.  Any error in the codes can lead to over/under billing. Inappropriate coding can easily result in claims denial or even failing an audit if scrutinized.

A proper medical billing and coding system helps the organization to stay away from denials of claims while also conducting a smooth revenue cycle for easy reimbursements. 

# Stage 4 – Claim Submission and Patient Collection

The patient collection starts after the doctor has examined the patient and the service has been rendered. The next step is for the patient to pay any co-pay or co-insured fixed deductible amount due before leaving the hospital. The exact deductible amount needs to be paid by the patient so as to make the reimbursement process smooth and effective. 

Earlier, submitting a healthcare claim used to be a cumbersome job for the providers. The manual process of filing claims, mailing it to the insurance companies via clearinghouses or billing services and then waiting for days for the response. It was an extensive process altogether.  

But since the time of Practice Management Software (PMS), all this work is now just a click away. The electronic claim submission has made the process of claim submission time-savvy, less expensive and also the elimination of the human errors for timely reimbursement.

# Stage 5 – Reimbursement and Denial Management

After the successful submission of claims, it is now upon the insurance company to pay the calculated outstanding amount. The payers calculate the amount on the premises of a patient’s coverage plan.  It is the responsibility of a healthcare organization to send claims to any suitable private or government company. 

Recent use of RCM software has made the reimbursement process quite easy as it can be done via Electronic Data Interchange (EDI). But there is a probability of interruption in the process resulting in claims denial by a payer. The reason behind denying a claim can be improper coding, incomplete patient charts or account.

Managing a denial is not as hunky-dory as it seems. The whole process of revenue cycle is done for a single aim – zero claims denial. But a claim can be denied on any minuscule technical or clinical reason. And to resubmit the corrected claims, the billing department works closely with the payers and fixes all the coding errors and the patient data. 

# Stage 6 – Patient Collection and Billing Reports

The health plan does not always cover all the services. Many a time, the patient has to further pay for the outstanding services as they were not covered in the insurance plan. It is the duty of the billers to rigorously follow-up with the patent and assists them to pay the outstanding payment.

Finally, a good RCM plan works when appropriate reporting and evaluation is done by the providers. For this, a team of skilled individuals is grouped to report the whole process of the revenue cycle.

Since billing and reporting the services can be a tedious job, many hospitals appoint experienced account managers who act as a liaison for the providers to aid the patients readily.


  • According to a recent projection, RCM outsourcing marketing is estimated to cross $22100 million by 2024. This recent increase in revenue has happened due to the increasing competition among healthcare organizations. This means that companies are compelled to provide a quality care environment for patients and their families.
  • An efficient internet-based medical billing is all the industry is aiming to reach. The structure of data entry, report analysis or workflow tool, everything has been easily embraced by technology. And therefore, it is important to educate and update your staff incessantly. Because, all a patient wants is the convenience in paying, registering and understanding the complex process of RCM.

Regularly updating your process and worksheet is a must. Despite an RCM cycle being in process, one has to constantly review the previous workflow and procedures to ensure that everything is according to the latest updates which in return will help the cycle to work more smoothly.

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