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What is revenue cycle management in medical billing?



cycle management

Every industry needs financial support to keep running and expanding. In the same way, the healthcare system sustains its existence through the revenues they get by serving myriad patients. So, a healthcare organization rolls around providers, patients, and insurance providers. Whereas, medical billing outsourcing companies bear the load of connecting these people throughout. We call this process revenue cycle management (RCM). It requires the active collaboration of all these related entities for the collection of reimbursement payments in a healthcare organization.

Here in this blog, we will go through the detailed introduction of RCM. Along with this, we will also examine the role of medical billing companies in the whole process.

RCM | The Revenue Collection Process

It is a system in healthcare for getting payment from payers for the provider’s services rendered to a patient. Every organization gives equal importance to its revenue cycle as its patient care services. Mainly, this process contains main components that when managed in synchronization, are an RCM cycle completes. As a result, the organization gets reimbursement payments. These payments then utilize for running the overall system such as giving pay to employees and providers, buying new equipment, etc.

The four major components of a revenue cycle management process are given as follows with a little description. We will discuss them in depth later in the blog.

a) Charge Capture

This includes all the minor steps, performed for turning all rendered medical services into billable charges.

b) Billing and Coding

It’s a complex process of assigning specific codes to services performed by providers. We usually have separate codes for every diagnostic condition.

c) Claim Submission

A fully coded bill after complete rechecking is passed down to the clearing house. Here, a clearing house is a payer or insurance company that facilitates the patients for their medical coverage by paying the whole or some percentage of their bill.

d) Revenue Collection

The clearing house clears the patient’s dues if the rendered services are included in the patient’s insurance program.

RCM is Different from Medical Billing

We customarily confuse both terms – revenue cycle management and medical billing. However, they are systematically related to some extent.

The RCM is the whole process that medical Billing outsourcing companies or any health organization use for getting their service payments. On the other side, we consider medical billing as a crucial process for a successful RCM process.

Medical billing and coding services are the core process in any claim processing. Any mistake in this process can lead to claim rejection/denial and overall failure of revenue cycle management.

Essential KPIs for Effective Revenue Cycle Management

Effective revenue cycle management requires many key RCM KPIs to operate at or above baseline. Medical billers should be concerned about the following metrics:

  • Weekly totals for medical claims reimbursement
  • Average days to get payment
  • Denial rate, and
  • Overdue Accounts Receivable from Patients and Insurance for 60 days

The Whole RCM Process in a few Easy Steps

What does revenue cycle management entail? Here we will outline all the phases of the entire RCM process from beginning to end:

1. Patient Scheduling

It is the first step that requires it to be done in advance to avoid any hassle. However, we just skip this step for any Urgent Care or Hospital Emergency Department settings.

2. Patient’s Eligibility Verification

This step requires information about the insurance company. As soon as a patient provides an insurance number, the person dealing with them will check their insurance coverage. This step has the foremost priority as it lays the foundation of financial planning engagement and arrangements for the future. Only then, we can get the expected patient contribution at the time of service.

3. Pre-authorization Phase

It is a preceding form of a patient’s insurance carrier. They ask providers to provide patients’ medical records (reports) and reimbursed them for services they do. Resultantly, the payer approves the reimbursement for several visits of a patient.

4. Patient Encounter

After completing the pre-authorization step, a provider examines the patient when they visit. Later, they develop a treatment plan for subsequent encounters. Otherwise, they continue with the delivered treatment details and update it in the EHR. The electronic health record is an advanced but digitized version of paper medical records.

Usually, providers have hectic daily routines. So, they do not have sufficient time for direct documentation. That’s where medical billing outsourcing companies find their role. They act as a third party for transcribing patients’ medical records into patient charts in EHR.

5. Medical Coding

Usually, medical billing and coding services are mentioned side by side. Anyhow, both are different. Medical coding is specifically about assigning codes to the treatment done by the provider. All medical billing outsourcing companies have expert coders. They translate rendered services into several procedural and diagnostic codes.

Procedure Codes (CPT) are five-digit medical codes that describe the services that a medical professional may offer. In contrast, diagnosis codes (ICD10) are the disease categories that list the ailments or symptoms that led the patient to talk to a professional. We frequently depend on medical billing outsourcing companies for their professional coding services.

6. Charge Capture for Claim Generation

At this stage, we bind fully coded documents/information with patient demographic and insurance information. Afterward, we create a claim for submitting to payers.

7. Medical Payment Posting

It is a step in the medical billing process that essentially records insurance decisions against a claim line by line. Any patient share of costs that remain after the payment has been deposited will be passed to the patient so that patient statements may be sent out to collect this money.

8. Secondary Billing (When primary insurance has adjudicated the claim)

Sometimes, patients have more than one insurance. In this scenario, when primary insurance adjudicates the claim, we switch to secondary insurance for the collection of revenue. If we get a claim denial for claim adjudication, then we might take assistance from healthcare billing services. By this, an expert medical biller finds out the reasons for non-payment. Afterward, they do a re-processing of a claim.

9. Accounts Receivables and Denial Management

An account receivable (AR) is mainly the amount still pending for rendered services to a patient. It requires active follow-up with patients and insurance companies. In addition to this, different medical billing outsourcing companies have a myriad of ways to claim denial.


To make a long story short, revenue cycle management is a necessary process for any health facility. It provides financial stability to an organization if done effectively. For this purpose, we usually rely on medical billing outsourcing companies. They manage every phase of RCM through their medical billing and coding services when patient data is provided to them.

Also Read: Top 5 Reasons to Hire Medical Billing Services

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