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Healthcare Revenue Cycle Management

There are many factors that contribute to the success of a healthcare organization like a hospital or ASC. One is the ability to attract patients. Without patients, there are no services to provide. Another is the capacity to provide safe, high-quality care. Failures there will harm an organization's reputation (deterring future patients) and potentially invite lawsuits and regulatory sanctions. A third and just as critical factor is the capability to receive payment for the quality services it provides to patients.

But getting paid — and paid in full — isn't easy. In fact, it's a rather complex process, and one where even small mistakes can cause delays, reductions in payment, or even legal scrutiny if the payment is incorrect. And that's where an effective revenue cycle management program comes in.

Chapter One

What is Revenue Cycle Management?

What is Revenue Cycle Management?

Revenue cycle management (RCM) is a term so widely used in the healthcare industry that its full meaning and importance can often become lost. There are many definitions of RCM, but let’s use the following: Revenue cycle management in healthcare simply means all of the activities that ensure that an ambulatory surgery center (ASC), hospital or other healthcare services provider receives the full and appropriate revenue for a patient’s encounter, from when their appointment is booked through when the balance is paid. 

As healthcare technology continues to evolve, administrators require tools that can leverage analytics and create revenue cycle solutions. A few areas that have a considerable impact on RCM include case costing, payor mix, contracts, and workflow automation. Being aware of each of these areas throughout the RCM process is crucial to ensure success.

In this guide, we’ll navigate how patients are involved in RCM, internal processes, key performance indicators (KPIs), how revenue cycles work within a hospital or ASC, how software plays a key role, and what you should look for in an RCM solution.

First, let’s consider RCM and the patient experience.

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Chapter Two

How Revenue Cycle Management and Patient Experience Intersect

The importance of patient engagement with providers will only increase in the future, which requires the revenue cycle process to be as painless as possible. While talking about payments can be a sensitive topic for patients, it’s crucial that providers have a communication plan in place. It should cover communications with patients before they enter your facility, while they are present, and after they leave. 

The more engagement you have with patients, the better. This not only ensures the payment process will be as smooth as possible but will also help ensure patients have an overall positive experience, which includes confidence in the value of care they received.

Just as the patient’s experience with the RCM process is important, evolving your processes is equally important.

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Chapter Three

Evolving Revenue Cycle Processes

When moving toward value-based model, there are several areas for organizations to consider for their RCM processes.

first2First, regulations can influence how you run your business as well as the revenue cycle process. Make sure you have the means to keep abreast of news and developments likely to affect your organization. You can do so by monitoring industry publications, attending conferences, and being an active participant in state and national associations.

second2Second, your facility should focus on the services you excel in, rather than promoting many services in which you might not have as much experience. Understand what you do well, and then do it as well as you can. While expanding services can be an effective —and fast — means to grow, proceed carefully. Provide new services slowly, allocating time to assess, improve, and come as close to perfecting your performance before ramping up operations.

third2Third, make sure your facility is communicating its value and collaborating within your community. There are many methods of accomplishing these objectives. Make sure value is a key component of any marketing efforts, which includes the content on your website and in brochures. Participate in community events, such as festivals and charity walks/runs. Consider holding an open house and inviting the public to see the inside your organization (when they're not patients) and meet with staff (when they're not providing care).

last2Lastly, understand your costs so that you can be proactive about your RCM process. Make sure you are factoring in all expenses, including fixed and variable. Examples of fixed costs include staff salaries and benefits, building expenses (e.g., rent, utilities, maintenance), and capital equipment. Examples of variable costs include supplies and medications.

By following each of these industry best practices, you will help ensure that your revenue cycle processes are evolving to meet the needs of your patients and facility.

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Chapter Four

Keep an Eye on KPIs

Keep an Eye on KPIs

A vital area to focus on for success with RCM at your facility is KPIs. By examining your KPIs, you will gain an understanding of how your facility is performing on a monthly basis. If you’re unsure about where to begin, here are three major KPIs to start with.

Cash Collections as Percent of Net Revenue 

Essentially this means you would evaluate whether your facility is collecting as much cash as possible. If not, it might be time to review net revenue monthly and look for areas for improvement. 

Days to Bill

Depending on how long it takes your facility to send a bill, this may be another factor preventing you from achieving a healthy revenue cycle. Ensure you’re meeting your goals consistently.

Age of Accounts Receivable

While you want to receive payment as quickly as possible, there are oftentimes when you will have aging accounts receivable (A/R). Much like determining how many days you have to send a bill, also determine how many days signifies an old account. Typical measures might be 60 or 90 days.

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Chapter Five

Revenue Cycle Processes for Hospitals and ASCs

Revenue cycle processes can vary greatly between hospitals and ASCs. In addition, the areas an individual organization should focus on can vary from another similar organization. That's why it's critical to take the time to understand your organization's revenue cycle process strengths and weaknesses. Perform a comprehensive analysis of your revenue cycle, looking for areas of poor performance and growth. Consider performing internal and external benchmarking to help identify these areas and then measure the success of improvement efforts. 

Below, we examine best practices for improving your revenue cycle in either type of facility.

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Hospitals

You don’t need to make major changes to see improvements with your hospital’s revenue cycle management. Steps to consider include the following:

  • Acting on your data — Data collection is a valuable exercise. But it will be nothing more than an exercise unless you do something with the data. Examine your data, looking for, as previously mentioned, red flags and growth opportunities. Implement changes, and then collect and analyze new data to determine the effectiveness of those changes.
  • Audit denials — It's not unusual to experience a claims denial. But when denials become a more regular occurrence, this should set off alarm bells. Look to see if there is a pattern to denials. Are they connected to a specific service? An individual payer? A member of your team? If you can spot a trend, it will be easier to identify the cause of the denials and implement fixes.
  • Focus more on patient collections — Patient financial responsibility has been on the rise for several years and shows little sign of slowing down. As a 2017 survey by the Kaiser Family Foundation noted, annual premiums for employer-sponsored family health coverage reached $18,764, up 3% from the previous year. And the average deductible for people with employer-provided health coverage rose from $303 to $1,505 between 2006 and 2017, according to the Peterson-Kaiser Health System Tracker. Invest time and resources into collecting patient payments or you risk leaving a lot of money on the table.
  • Involve staff — Looking for revenue cycle improvement opportunities? Ask your staff for ideas. They may be able to offer tremendous insight into what's working well and what isn't. After all, they're helping drive your revenue cycle performance every day. Ask for their thoughts and invite them to share recommendations. You may be surprised by what you learn.

Most importantly, you shouldn’t take these steps and only act on them once. They should be examined on a regular basis, using what you learn from them to implement continual changes to your processes over time.

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AMBULATORY SURGERY CENTERS

Every ASC has payment and collections risks. It’s important to adjust your processes as needed to ensure you’re meeting regulatory changes and addressing increased patient responsibility.

A few best practices to consider:

Streamlining Patient Financial Clearance 

Due to the increase in patient financial responsibility, ASCs must be sure to go beyond eligibility verification. This requires providers to be transparent with patients, which includes providing payment estimates, collecting payments before a patient leaves the building, and obtaining prior authorization when needed.

Proactively Address Denials and Rejections

Since 10 to 20 percent of revenue for healthcare providers is often tied up in denials, it’s crucial for providers to determine benefit eligibility, obtain medical necessity paperwork, and take other steps to decrease chances that a claim could be denied. 

Intelligently Collect Payments

To reduce the risk of delayed payments or even non-payment, ASCs should communicate with patients and payers on how they would like to receive and send information. It may also help to provide patients with multiple ways to pay, whether it’s online, by phone, or in person. Many patients prefer managing payments online, so this is one area you can’t afford to ignore.

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Chapter Six

Revenue Cycle Software: Data and Software Solutions to Meet Your Needs

Data Integrity, Security, and Transparency

securityWhen seeking a software solution for RCM, you probably have many requirements to help ensure it will work for your facility. One area we know is essential is data integrity, security, and transparency.

With the ability to capture and analyze a large amount of information, providers can understand and communicate with patients on a greater level than ever before.

However, ensuring the integrity of your data is a key step in being able to rely on the information you capture. In this area, receiving data in a timely manner is essential. For example, if you’re acting on data that is 30 days old, it might be too late to rely on the data to make decisions for improvements or you may have already lost money. 

Since patient information is incredibly sensitive, your software must be protected. This means putting a multilayered identity verification solution in place.

Another critical area is transparency for patients, payers, and providers. Patients in particular need access to their information, allowing them to be more involved with their care. For payers and providers, access to this information is helpful for collaboration.

Finding a Software Solution That Meets Your Revenue Cycle Management Needs 

You are likely to encounter challenges with managing your revenue cycle occur on a weekly, if not daily, basis. The good news is that there are solutions to improve your overall performance.

Many facilities can solve their greatest problems, such as verifying patient insurance coverage, collecting patient payments, incomplete or inaccurate charges, and billing staff turnover and disruptions, by using a revenue cycle management solution.

A few software solutions that can help your revenue cycle process include:

  • Patient Management
  • Claim Preparation and Submission
  • Claim Management
  • A/R Management
  • Follow-Up

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Chapter Seven

What to Look for in Revenue Cycle Management

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While everything we’ve shared so far is applicable for hospitals and ASCs, many lack the resources to achieve these recommendations or desire reducing the amount of in-house management required. Fortunately, you have the option to outsource your revenue cycle management to a consulting firm.

Outsourcing provides many benefits. It is less expensive than in-house RCM and can allow an organization to reduce its staffing or reassign staff to other responsibilities. Outsourcing your RCM improves transparency and delivers enhanced consistency. It's also helpful to organizations working to grow as RCM consulting firms can extend their support easier (and cheaper) than an organization can recruit and train new RCM personnel.

Once you identify that your facility might require assistance from a RCM firm, what are some qualities you should look for

The right consulting firm will, at a minimum:

  • Provide revenue cycle assessment and optimization strategies;
  • Provide constant monitoring and adjustments to RCM processes;
  • Hold and maintain relevant certifications;
  • Share positive references; and
  • Demonstrate experience working with similar organizations.


Revenue cycle management is a crucial part of your facility’s operations. Failure to give your RCM the attention and support (internal and/or external) it requires will likely cause short-term harm to your bottom line.

If these issues are not addressed promptly, they can quickly cause significant and potentially irreparable damage. Frequently evaluate processes and implement changes over time. By keeping a watchful eye on your RCM and exploring a potential partnership with a consulting firm if you determine outside support is warranted, you will help ensure your organization remains on the path for sustainable, long-term financial success.

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