Regardless of your industry, managing revenue is essential for your business to have a steady cash flow to pay for outgoing expenses. Revenue cycle management (RCM) plays a vital role, especially for hospitals and small-to-medium practices, due to the complicated billing and revenue collection process. RCM can make your practice’s success possible and help you stay competitive if implemented correctly.
What Is RCM?
Revenue Cycle Management (RCM) is the process of handling billing, payment processing and revenue collection. It is a continuous process that starts when you bill a patient against the provided care services and ends with the reimbursement. It is instantaneous in some industries, such as retail stores. However, in the healthcare sector, it is a complex technique.
Healthcare RCM comprises tools and procedures ensuring the revenue cycle proceeds swiftly and brings in the maximum revenue you are legally entitled to in due time. With the help of effective RCM implementation, your practice can have a reliable revenue foundation in cash.
How Does RCM Fit into the Healthcare Industry?
The implementation of effective RCM strategies is critical for the lasting success of hospitals and clinical practices of all sizes. In any healthcare organization, the revenue cycle consists of the following major steps:
Step 1: Claim Preparation
The process starts with collecting patient information required to bill for the services. It generally happens before the first appointment, or in the case of anesthesia providers, data collection is done on the day of surgery. During this stage, clinical staff also verifies the patient’s insurance eligibility.
Step 2: Claim Submission
Once the services are rendered, the claim is created, charges are coded and entered, and the claim is submitted to the relevant insurance company for reimbursement.
Step 3: Claim Management
To keep the financial health in check, the billing team needs to manage claims proactively. It involves following up with the insurance companies to ensure payments are received on time. Additionally, it also includes claim editing and resubmission of rejected claims.
Step 4: Receivables Collection
This step is about the collection of payments and issuing statements, and sending the bill if necessary. It includes processed records of patient revenues that are filed and maintained using the RCM software to provide customized reports, including financial data and management of information for future references.
Step 5: Analysis and Evaluation
Optimizing is not a one-time thing. It requires continuous improvement to increase the overall profitability of the practice. Hence, the final step involves collecting and analyzing data from the RCM software to identify the speed breakers.
RCM systems in healthcare can reduce the error frequency, enhance the likelihood of payments, and avoid aging account receivables. Furthermore, it increases claims efficiency while reconciling costs against revenues.
Why Is Healthcare RCM Important?
Since the process from initial service delivery to full payment is complex, it often results in a delay between the care provision and the reimbursements. The worst-case scenario can lead to confusion, mistakes during coding and billing procedures and unnecessary back-and-forth.
Thus, implementing effective RCM is essential for all healthcare facilities. Even though every hospital has an RCM process in practice, they need to evaluate its performance and ask themselves if the system is thoughtful, well-implemented and takes the nuances of different specialties into account or not.
Moreover, the entire revenue cycle involves a considerable amount of patient information which can lead to substantial legal and financial consequences in case of errors. Therefore, practices must strive to implement an effective RCM to mitigate the severity of mistakes during the billing.
RCM and Transition to Value-Based Care
RCM implementation is also crucial because it ultimately assists the fraternity of physicians in smoothly transitioning from fee-for-service to value-based reimbursements. The analytics let providers and payers get an insightful look at the patient population. For example, data helps you understand which segment is more prone to suffer from chronic diseases and allows providers to monitor any abnormalities in claims so that data-driven decisions are made to improve the revenue cycle and patient journey.
Bottom Line
For any practice or hospital, effective RCM can be a game changer. It will help the organization reduce the account receivable time, so you have enough incoming cash to keep it running and stay competitive in the space. However, setting up an in-house department for revenue cycle optimization is tricky and expensive. Hence, it is recommended to outsource it, especially for medium-to-small clinical practices.
