A jargon-free overview for healthcare executives, administrators, and practitioners
If you tell someone you work in the healthcare industry, they assume you’re a doctor, nurse, or pharmacist.
Then, you tell them you work in Revenue Cycle Management (RCM), and they respond with a confused, blank look as if to say, “Huh?”
You can’t blame them. While the name accurately describes the high-level process, it’s abstract and certainly doesn’t roll off the tongue.
This article aims to demystify the healthcare revenue cycle and explain its key concepts in a relatable yet informative manner.
While revenue cycle team members don’t directly save lives, their roles and responsibilities are crucial to a healthcare organization’s financial health.
Effective revenue cycle management enables healthcare providers to improve cash flow and profitability–allowing hospitals to expand and evolve their services to patients.
Healthcare RCM is a growth industry.
Believe it or not, the healthcare revenue cycle is a booming industry and shows no signs of slowing down.
A research report predicts that the revenue cycle market will reach $329.1 billion in 2030. This tremendous growth is due to government regulations, increased healthcare spending and shrinking hospital profit margins.
Unfortunately, RCM is anything but simple.
The U.S. healthcare industry has a unique payment structure that relies on a complex mix of government subsidies, private insurance reimbursements, and individual out-of-pocket expenses. In addition, the government heavily regulates hospitals and healthcare institutions.
This type of complexity requires significant investment in hiring, training and retaining knowledgeable revenue cycle resources.
As a result, many healthcare organizations have hired third-party vendors, like Advantum Health, to manage small or large portions of their revenue cycle process. Some healthcare providers have even outsourced their entire revenue cycle department to achieve financial objectives.
What is healthcare revenue cycle management?
Healthcare Revenue Cycle Management (RCM) refers to the management of the processes, people and technology required for healthcare providers to get paid quickly and accurately for their services–from patient scheduling to billing and collections.
Often, RCM gets categorized into three stages: Front End, Middle and Back End.
All three parts of the revenue cycle play a critical role in the financial health of a healthcare organization. These stages are sequential yet interdependent. For example, if a registration staff member forgets to verify a patient’s insurance plan (Front End), the wrong insurance company could get billed (Back End).
Here is an overview of the Front End, Middle, and Back End areas of revenue cycle management.
When a patient initiates a clinical interaction with a doctor or nurse practitioner, the front end of the revenue cycle starts, e.g., schedule a doctor’s appointment or check into an Emergency Department.
The front end of revenue cycle management involves all the processes before a patient receives medical care. These include scheduling appointments, verifying insurance, obtaining authorizations and completing registrations.
First, the front-end teams collect the patient’s demographic and insurance information. Next, the staff verifies the patient’s insurance coverage and identifies the appropriate entities or person(s) responsible for paying the bill.
In some cases, employees communicate the patient’s estimated out-of-pocket costs and collect co-pays and past-due balances.
Usually, the front-end stage ends when a patient’s account is fully registered, and medical treatment begins.
Often, front-end revenue cycle employees establish a patient’s first impression of a healthcare provider. Front desk receptionists greet patients and visitors and act as the health care organization’s patient point-of-contact.
Specific job titles may vary across hospitals and healthcare organizations, but here are some of the most common front-end roles:
- Patient Access Representative
- Front Desk Representative
- Registration Clerk
- Admissions Coordinator
- Medical Receptionist
- Insurance Verification Specialists
- Financial Counselor
Traditionally, individuals with front-end responsibilities worked onsite at a hospital, doctor’s, or business office. But, after the COVID-19 pandemic, some healthcare providers kept their front-end revenue cycle staff members working remotely.
Most Front End team members use a hospital or provider Electronic Health Record (EHR) Patient Access Software to execute most of their tasks.
These integrated software tools validate patient demographics, conduct real-time insurance eligibility, or check authorization statuses.
Some other standard software technologies used in the revenue cycle front-end include:
- Electronic Data Interchange (EDI)
- Revenue Cycle Management (RCM)
- Patient Portals
- Mobile apps
The middle revenue cycle processes occur during or after a patient receives medical treatment before a billing claim is generated.
The Middle’s three stages include coding diagnoses and procedures, capturing charges and verifying that clinical documentation supports the services rendered.
Middle teams ensure that healthcare providers include accurate, complete, and compliant clinical information on billing claims.
First, to receive appropriate payment for their services, healthcare providers must have a strategy to capture all relevant clinical information related to their patient’s care. This practice is commonly called Charge Capture.
Charge Capture encompasses the physician order process for treatment, tests, and referrals. It relies on accurate physician order entries supported by a comprehensive charge master database, or Charge Description Master (CDM)
Next, a person or system assigns codes to each service provided to the patient. These codes must accurately correspond to the patient’s diagnoses and procedures associated with the respective service. This process is commonly called Coding Diagnoses and Procedures.
Lastly, the Clinical Documentation phase validates that the provider orders, notes, and all associated documentation supports the services provided. Otherwise, insurance companies can withhold payment.
Middle team members tend to be detail-oriented employees with a deep knowledge of coding and documentation billing regulations.
Some of the most common middle revenue cycle job titles include:
- Medical Coder
- Charge Description Master (CDM) Analyst
- Revenue Integrity Analyst
- Clinical Documentation Specialist
From a charge capture perspective, most healthcare providers require their clinicians to use their EHR’s Computerized Provider Order Entry (CPOE) and barcode scanning systems to place and fulfill orders.
Here are some of the other popular software technologies used in the middle revenue cycle stage:
- Coding Software
- Computer-Assisted-Coding (CAC)
- Revenue Integrity Software
- Practice Management Software (PMS)
The back end of the revenue cycle process includes generating, submitting, and reconciling insurance claims, creating and delivering patient statements, and collecting from insurance companies and patients. These processes are often called Billing and A/R Follow Up.
First, electronic and paper claims generate from the hospital’s EHR system. The back-end team completes automated and manual claim checks to ensure the billing information is accurate and adheres to the respective payor’s rules. Otherwise, the claim may get rejected or denied for payment.
Next, the back-end team uses a document provided by the insurance company called an Explanation of Benefits (EOB) to determine the patient’s responsibility. After insurance carriers pay their portion of the medical bill, the back-end team delivers a statement to the patient.
The final step for the back end is to follow-up with insurance companies and patients to collect payments.
The back-end teams monitor the payment statuses of all submitted claims. If needed, they check pending claims online or via telephone calls. This follow-up process continues until the hospital provider receives a response from the payer.
If the payer refuses to make a payment, i.e., denial, the back-end team reviews the denial reason, makes changes and resubmits the claim.
Unfortunately, this process can last months for some insurance claims, especially the high dollar submissions.
Cash Posting also sits in the back end. This workstream is primarily responsible for posting insurance and patient payments to the appropriate lock boxes and patient accounts.
Billing and Follow Up tasks require detail-oriented, reliable, and persistent team members. Many back-end teams have a tremendous amount of revenue cycle experience that helps them work with other RCM team members and payors.
Common back-end job titles include:
- Billing Specialist
- A/R Follow-Up Specialist
- Billing & A/R Representative
- Collections Specialist
- Payment Poster
Back-end teams use software tools that automate and streamline redundant and highly manual processes. They reduce errors and improve billing accuracy.
Some popular software technologies include:
- Practice Management Systems (PMS)
- Electronic Health Records (EHR)
- Revenue Cycle Management (RCM)
- Payment processing platforms
Throughout the RCM process, all team members must strive for accuracy, timeliness and reliability.
All three stages–front-end, Middle, and back-end–of revenue cycle management play critical roles in maintaining a healthcare provider’s financial well-being. From gathering patient demographics to billing the correct insurance carrier, the RCM team is responsible for monitoring, validating and identifying any issues that may disrupt payor or patient payments.
One of the most challenging aspects of hospital revenue cycle management is balance.
At the end of the day, healthcare providers want to focus on patient care, not payer payments. Unfortunately, the complex payer landscape makes it difficult for many healthcare providers to balance time between their administrative duties to “keep the lights on” and practicing medicine.
Unsurprisingly, many healthcare providers decide to outsource a portion or all of the revenue cycle to third-party partners. This business model enables clinicians to focus on delivering patient care rather than following up with payers on claim denials.
If you’d like to learn more about Advantum Health’s RCM Services or technology, click here.