I recently had a discussion with a provider (who will remain anonymous for now) at a conference about the benefits of outsourcing revenue cycle management and used a few case examples to illustrate my point. His facial expression changed, and he halted me midway in.
“Are you talking about billing and coding?” He asked.
Surprised, to put it politely, was how I felt about his comment. Even now, as we are going into 2024, there’s still uncertainty about the role of Revenue Cycle Management (RCM) within a healthcare organization, and often, people mistake RCM for billing and coding. That’s why I decided to write this article. To shine more light on RCM and the benefits of outsourcing RCM, regardless of their size.
Table of Contents
What is Revenue Cycle Management?
Revenue cycle management (RCM) is a crucial process for healthcare practices. It involves the tracking and management of patient financial information, from appointment scheduling and registration to insurance verification and billing, all the way through to payment processing and collections.
RCM is not just another term for billing and coding, although billing and coding are essential steps within the revenue cycle. But more about that later.
RCM is essential for healthcare organizations to ensure they are accurately and promptly reimbursed for their services. Revenue cycle management optimization will improve a healthcare organization’s financial health and the overall patient experience, which is pivotal to boosting online reviews, testimonials, and, of course, word of mouth— essential elements that spur growth and future growth prosperity.
The video below showcases the 4 major differences between RCM and Medical Billing.
Why Should Healthcare Organizations Extend Their Focus from Billing to RCM as a Whole?
After watching the video above, you realized that a comprehensive RCM strategy involves managing the entire financial cycle of a healthcare practice.
While billing and coding are essential aspects of the revenue cycle management process, they are just one piece of the puzzle.
According to a recent survey of 141 healthcare executives that included CEOs, CFOs, COOs of larger healthcare organization, 77% saw labor shortage as one of the biggest concerns for 2024.
What does that have to do with RCM?
Well, in the context of RCM, Patient Access plays a vital role as it’s situated at the start of the cycle. When labor shortages become problematic, healthcare organizations can outsource patient access to vendors to prevent a negative effect on the patient experience.
In addition, Robotic Process Automation (RPA) can replace rule-based, repetitive processes to reduce errors and the need for additional human resources to manage these tasks.
Let’s use another example: 31% of respondents were concerned about payor contract negotiations.
Again, reimbursements are the end-product of the revenue cycle. The fees payors pay for services could be renegotiated to improve reimbursements. However, not all healthcare organizations have the capacity or knowledge to do so. Expert RCM companies have the resources to renegotiate these contracts successfully.
These are just some examples to illustrate the role of RCM in addressing macroeconomic and microeconomic challenges. Overall, by focusing on the entire revenue cycle, healthcare practices can realize the following benefits:
- Improving cash flow
Effective RCM can help a practice to improve its cash flow by reducing the time it takes to receive payment for services rendered. By streamlining the medical billing process and collections process, practices can ensure they are paid promptly and avoid cash flow issues.
- Reducing Denials and Rejections
By managing the entire revenue cycle, practices can reduce the number of denied or rejected claims. This can be achieved by ensuring that claims are submitted accurately and on time and that errors or issues are addressed promptly.
- Increasing Revenue
By optimizing the revenue cycle, practices can increase their revenue and profitability. This can be achieved by identifying areas where revenue is lost or not captured and implementing strategies to address these issues.
- Enhancing Patient Satisfaction
A well-managed revenue cycle can also lead to higher patient satisfaction. By streamlining the billing and collections process and providing clear and accurate information about insurance coverage and costs, practices can improve the patient experience.
- Meeting Regulatory Requirements
Healthcare organizations must comply with various regulatory requirements, including HIPAA, No Surprises Act, etc. By prioritizing RCM, procedures can ensure they meet these requirements and avoid costly penalties and fines.
A comprehensive RCM strategy can help practices achieve these goals and long-term financial stability.
Can Revenue Increase Through Revenue Cycle Management Optimization?
A while back, I delved into the projections of RCM and discovered research that projected that the global healthcare RCM outsourcing market would grow at a compound annual growth rate (CAGR) of 9% between 2022 and 2030.
The report cited the cost savings and operational efficiency benefits of outsourcing RCM as critical factors driving this growth.
Now, at the end at the end of 2023, the numbers are looking even more favorable. Research predictions for 2023–2030, according to Databridge, suggest that growth will continue at a CAGR of 15.2%.
These data points speak for themselves. The value of RCM and especially the outsourcing of the function to experts in the field are becoming clearer. One of the value drivers of RCM is the increase in reimbursement revenue.
Healthcare organizations can reduce claim denials, improve collections, and accelerate the revenue cycle by improving key RCM processes such as patient registration, eligibility verification, charge capture, coding, and billing.
The percentage of revenue increase with proper Revenue Cycle Management service improvements can vary depending on the following:
- Healthcare Organization (HO) current state of RCM
- HO size
- Specialty of HO
- Level of RCM optimization
- Level of expertise of the outsourced RCM vendor
However, in our experience, on average, healthcare organizations implementing effective RCM practices and technologies can achieve a 5% to 10% revenue increase.
Healthcare organizations can reduce claim denials, improve collections, and accelerate the revenue cycle by improving key RCM processes such as patient registration, eligibility verification, charge capture, coding, and billing.
It’s worth noting that the exact percentage of revenue increase may vary based on various factors and individual situations and that revenue growth is not guaranteed by implementing RCM solutions. However, proper RCM can help healthcare organizations improve their financial performance and achieve sustainable development over time.
Can RCM Reduce Operational Costs?
RCM holds the potential to significantly reduce operational costs for healthcare organizations. The bottom line benefits from streamlined processes and increased efficiency achieved through advancing technology in RCM solutions. These technologies (such as RPA) automate time-consuming tasks, such as billing and claim processing, leading to faster turnaround times and minimizing manual errors.
One critical aspect contributing to cost reduction is denial management. RCM systems equipped with advanced analytics can identify trends and root causes of claim denials. By addressing these issues proactively, healthcare providers can mitigate denials, optimize revenue streams, and avoid the costly process of reworking denied claims.
Moreover, outsourcing RCM to specialized companies brings about cost savings. Outsourcing allows healthcare organizations to leverage the expertise and resources of external providers, reducing the burden on in-house staff and avoiding the need for extensive training and infrastructure investments.
This strategic approach to RCM not only enhances operational efficiency but also provides a cost-effective solution for navigating the complexities of revenue management in the healthcare industry.
The percentage of operational cost reduction when outsourcing Revenue Cycle Management (RCM) can vary depending on several factors (similar to what we mentioned in the previous section. In case you skipped the previous section, here they are again:
- Healthcare Organization (HO) current state of RCM
- HO size
- Specialty of HO
- Level of RCM optimization
- Level of expertise of the outsourced RCM vendor
Over time, healthcare organizations can see a gradual cost reduction happening and we’ve observed cost savings from 15% upward.
Of course, macro variables can still have a massive impact that could reduce the effect of RCM optimization, like a spike in inflation for instance. However one also needs to ask the question: Where would this healthcare organization be if they did not have all the processes optimized during the time of impact?
Understanding Revenue Cycle Management: A Holistic Approach to Financial Health
From the moment a patient schedules an appointment to the final payment collection, the revenue cycle in healthcare involves various steps that ensure accurate and timely reimbursements. Understanding revenue cycle management is essential for healthcare providers to improve their financial health and enhance patient experiences.
Optimizing the Revenue Cycle Process
So far, we’ve seen that the revenue cycle process includes patient registration, insurance verification, charge capture, coding, billing, and collections. Each step plays a vital role in ensuring that healthcare providers receive proper compensation for their services. By optimizing these processes, healthcare organizations can reduce claim denials, accelerate cash flow, and improve overall efficiency.
The Role of Technology in Revenue Cycle Management
Advanced revenue cycle management technology is transforming the way healthcare organizations manage their financial processes. Automation tools, such as Robotic Process Automation (RPA), can handle repetitive tasks, reduce errors, and free up staff to focus on more critical activities. By integrating revenue cycle management systems, healthcare providers can streamline operations and improve financial outcomes.
The Importance of a Comprehensive RCM Strategy
A comprehensive revenue optimization cycle strategy involves more than just billing and coding. It includes managing patient access, negotiating payor contracts, and leveraging data analytics to make informed decisions. The importance of revenue cycle management in healthcare cannot be overstated, as it directly impacts the financial stability and growth of healthcare organizations.
By focusing on the entire healthcare revenue cycle, healthcare providers can achieve significant benefits like the ones we mentioned earlier.
So, in this context, what is the healthcare revenue cycle? Healthcare revenue cycle management is a multifaceted process that requires a strategic approach. By leveraging technology, optimizing processes, and focusing on patient satisfaction, healthcare organizations can achieve long-term financial success.
What’s the Cost of Outsourcing Revenue Cycle Management?
The cost of outsourcing revenue cycle management services can vary widely depending on the specific needs and services required and the RCM vendor chosen. RCM vendors can charge a percentage of the amount collected or a flat fee per claim or service. The exact percentage or fee structure can depend on the following:
- the specific vendor,
- the size of the healthcare organization
- the types of services required
- Specific agreement between vendor and provider
If you are looking for a team of experts to reduce insurance claims denials and underpayments, engage in proper billing practices, improve your practice’s patient experience, and more, Neolytix has the answer.
After 12 years of helping healthcare organizations optimize their revenue cycles nationwide, we have built the expertise and technology to enhance your future financial prosperity.
Learn more about the benefits and costs associated with outsourcing revenue cycle management, by scheduling a free demo today.
Frequently Asked Questions (FAQ) about Revenue Cycle Management
Revenue management improves profitability by optimizing the revenue cycle management healthcare process to ensure timely and accurate reimbursements. By reducing claim denials, streamlining billing, and improving collections, healthcare organizations can increase their revenue and reduce operational costs. Efficient health care revenue cycle management minimizes the time it takes to receive payments, thereby enhancing cash flow and overall financial performance.
Managing the revenue cycle in healthcare is crucial for maintaining the financial health of a healthcare organization. Rev cycle healthcare practices ensure that all aspects of the financial process are optimized, from patient registration to final payment collection. It ensures that providers receive appropriate compensation for their services, reduces the risk of financial losses, and enhances overall operational efficiency. The importance of revenue cycle management in healthcare lies in its ability to support sustainable growth and high-quality patient care.
In essence, by understanding what is revenue cycle management and why is revenue cycle management important, healthcare organizations can implement effective strategies to optimize their health revenue cycle management.
The primary objectives of revenue management include optimizing cash flow, reducing claim denials, improving patient satisfaction, and ensuring compliance with regulatory requirements. By focusing on these goals, healthcare organizations can achieve financial stability and support their mission of providing excellent patient care. Understanding what is revenue cycle management in healthcare and its objectives helps healthcare providers streamline their operations and improve financial outcomes.
The significance of revenue management in healthcare cannot be overstated. It is essential for ensuring that healthcare providers are reimbursed accurately and promptly, which is critical for maintaining financial health. Efficient revenue cycle management in healthcare supports the sustainability and growth of healthcare organizations, enabling them to invest in better patient care and advanced technologies. In revenue cycle management in hospitals, this process is particularly vital for managing large volumes of patient data and ensuring efficient financial operations.
Revenue management enhances financial performance by improving the efficiency of the revenue cycle mgmt process. By utilizing revenue cycle management systems and revenue cycle management technology, healthcare providers can automate tasks, reduce errors, and accelerate the billing and collections process. This leads to better cash flow, higher revenues, and improved financial outcomes.
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