Healthcare providers aim to give good care to their patients, but this requires managing the financial side of their practice too. Without proper payment, they can’t keep their doors open and provide care. Revenue cycle management helps healthcare providers handle their financial activities well. It is important for a successful medical practice and brings many benefits to both patients and administrative staff. In this article, we will discuss the top five benefits of revenue cycle management in healthcare.
What is Revenue Cycle Management?
Revenue cycle management (RCM or RCM Cycle) is a way for healthcare facilities and small practices to make sure they get paid for their services as quickly as possible. It includes everything from when a patient schedules an appointment to when the healthcare provider receives payment for their services.
However, RCM is not a simple process. It involves several steps that must be done correctly to avoid mistakes that could lead to delayed payments, lower revenue, and more stress for the facility.
Let’s break down the steps of revenue cycle management:
- The first step is to make sure all patient and insurance information is accurate and up-to-date. This helps avoid errors and claim denials that could slow down payment.
- Next, healthcare providers must detail and code the services they provide, using universally accepted medical codes to determine reimbursement amounts.
- Then, providers submit the coded services to the insurance company for reimbursement.
- Communication with the insurance company is crucial at this stage, as healthcare providers need to stay informed about the status of their claims. Having a good payer contract can help ensure timely payment.
- Once the insurance company pays its portion, the remaining balance is sent to the patient for payment. The entire process is then reviewed to find ways to improve efficiency.
By following these steps correctly, healthcare providers can see improvements in their financial success and the quality of service they provide.
Benefits of Revenue Cycle Management
#1: Improved Claims Management Leads to Increased Revenue
Revenue cycle management (RCM) is a set of practices that help healthcare providers manage their financial operations effectively. One of the primary goals of RCM is to ensure that claims are paid correctly and promptly. To achieve this, there must be a focus on completing front-end tasks accurately. These tasks include insurance verification, patient information collection, and proper coding.
It is estimated that between 5-10% of claims are denied after the first submission. However, most of these denials are due to human error or technical problems, such as errors in coding and insurance verification, or missing information in the patient’s chart. In fact, approximately 90% of claim denials are preventable.
When claims are denied, it can take months of back-and-forth communication between insurance companies and providers to resolve the issue. This results in costly delays for the provider. The best way to avoid these delays is to ensure the accuracy of the claim before it is submitted.
#2: Reducing Delays and Costs Associated with Denied Claims
Healthcare facilities have numerous expenses to consider, including paying for the services they provide to patients and paying their staff for their work. When claims are denied or patients are unable to pay upfront for services, the healthcare facility’s payments are delayed. This makes it challenging for the practice to manage its expenses.
RCM helps practices identify patterns of claim denial, allowing them to avoid claim denials in the future and receive timely reimbursement. Denied claims not only result in reimbursement delays but also cost the provider money in claim investigations and appeals. In fact, practices spend around $15,000 on reworking claims. Effective claim denial prevention can result in more than five million dollars in additional revenue for the average hospital.
#3: Streamlining Administrative Tasks and Promoting Value-Based Reimbursement
Implementing revenue cycle management means that practices no longer have to spend time and money correcting errors and appealing claims. Instead, they can focus on providing quality care to their patients.
RCM can also help providers transition from traditional fee-for-service reimbursement practices to value-based reimbursement practices. Value-based reimbursement practices aim to provide better care for patients by promoting quality of service over quantity of service. Under the traditional fee-for-service model, healthcare facilities were incentivized to see more patients and order more procedures or tests for those patients, even if outcomes weren’t necessarily improving. In contrast, value-based reimbursement rewards providers for effectiveness of service, with payment based on the financial value of the healthcare services they provide.
Providers report specific metrics to insurance companies, including hospital readmission, adverse events, population health, and patient management. By analyzing this data, providers can track their progress in improving patient care and health management strategies.
#4: Simplifying Administrative Processes and Providing Transparent Billing
With a greater focus on patient outcomes, effective revenue cycle management means improvements in overall patient experience. Patients can expect to receive more comprehensive and targeted healthcare, reducing their likelihood of readmission.
RCM also simplifies processes like scheduling, filling out intake forms, and billing, creating a more satisfactory experience for both patients and administrative staff. Additionally, because RCM emphasizes thorough insurance verification upfront, patients will better understand their insurance eligibility from the start. This way, they’re not caught off guard by any out-of-pocket expenses down the line.
#5: Reduced time spent on claim investigations and appeals
Revenue cycle management can significantly reduce the administrative burden on healthcare providers. Typically, administrative staff are responsible for scheduling appointments, updating patient information, and verifying insurance eligibility. These tasks are essential to the revenue cycle process, but they can be time-consuming and prone to errors.
With a revenue cycle management system in place, these front-end tasks are streamlined so that administrative staff can work more efficiently. The system automates many of these tasks, such as insurance verification, to reduce the time required to complete them. This automation not only saves time but also reduces the likelihood of errors, ensuring that claims are submitted accurately and promptly.
Furthermore, RCM ensures these administrative tasks are completed accurately so claims aren’t denied in the future. When claims aren’t denied, administrative staff doesn’t have to spend their time investigating and appealing denials, which frees up more time for them to focus on other tasks.
By reducing the administrative burden, healthcare providers can increase productivity and efficiency, ultimately resulting in better patient care and satisfaction.
Implementing revenue cycle management can have a significant positive impact on a healthcare practice’s financial success, efficiency, and patient satisfaction. By streamlining administrative tasks, preventing claim denials, and optimizing revenue collection, practices can experience increased revenue and decreased administrative burdens. Furthermore, revenue cycle management can help providers focus on delivering quality care, while also transitioning towards value-based reimbursement models. Ultimately, revenue cycle management is an essential tool for any healthcare practice looking to improve their operations, increase their revenue, and provide better care to their patients.