Revenue cycle management (RCM) of hospitals can be defined as all functions, including planning, implementation, and evaluation of collecting money from patients. The revenue cycle begins with the first contact (either by letter or telephone) between a patient and the provider or third-party payer (insurance company). It ends when the claims are paid in full.
It is also a process of managing all the billing and revenue generation activities for the hospital. It is also called financial flow management. The purpose of RCM is to get maximum revenues out of patients for hospitals and other medical institutions.
A typical hospital has many departments involved in generating revenue. These include:
• Patient accounting
• Accounts receivable
• Finance/accounting department
• Collection agency/credit bureau reporting division
• Legal division
Typically, one person oversees these functional areas, known as an executive director of revenue cycle management at every hospital. However, many people supervise or work to run the financial department of a healthcare facility smoothly. Depending on the demand or size of the hospital, some hire professionals who specialize in outsourced bookkeeping for hospitals as a cost-effective measure.
Benefits of Having a Solid RCM
The main goal of any company or organization, including a hospital, is maximizing their revenue and profitability, both short-term and long-term. RCM involves planning, executing, monitoring, and optimizing various steps in the major task of revenue collection from patients like scheduling appointments, recording payments/insurances details, filing claims, etc., enabling appropriate reimbursement for services rendered. A well-executed RCM strategy ensures higher cash inflow to the hospital, leading to better financial performance.
RCM also drives revenue generation by efficient management of claim submission/retrieval, insurance networks administration, etc. This ensures faster reimbursement from payers, resulting in a high cash inflow at a reduced cost to the hospital. This may lead to improved financial performance, including increased return on investment (ROI) and a reduction in accounts receivables.
Also, it reduces costs involved in billing and coding, clinical documentation improvement (CDI), workflow automation, etc. These processes are automated through advanced RCM solutions, with minimal manual intervention required at each step.
Main Areas of RCM
RCM can be divided into three major areas:
1. Financial Management
Financial management includes billing and payment processing, which allows collecting payments from patients. It also includes monitoring and reporting of accounts receivable (A/R), outstanding claims, and other financial metrics.
Financial management is a major area in RCM, and it works closely with the billing and coding department to get maximum revenues from patient care.
2. Clinical Documentation Improvement (CDI)
Clinical documentation improvement includes coding and billing process, which helps identify the accurate ICD-CM codes for each diagnosis or procedure performed, which are then used to submit claims with corresponding reimbursement rates.
With automated CDI software, clinical staff can record medical notes accurately in an electronic health record (EHR) system quickly. At the same time, a provider can see the entire note in one place without searching it in various folders.
3. Revenue Cycle Improvement (RCI)
Revenue cycle improvement focuses on managing business processes related to revenue collection, including claim submission and retrieval, insurance networks management, audits, etc. Advanced RCI software provides an enterprise with a wide view of all these tasks in a single user interface so that hospital administrators can easily monitor different departments’ performance.
RCI is also the process of efficient management of entire data entry and retrieval tasks, claim submission/retrieval, insurance networks administration, etc., to ensure faster reimbursement from payers. RCI also aims at improving the whole hospital’s performance by reducing costs through efficient management, including billing and coding, account receivables, etc., resulting in a maximum cash inflow to the organization.
Factors that Promote Better RCM
The key components of an effective revenue cycle management approach include:
• Correctly coding and billing process to get maximum reimbursement for medical services rendered
• Reducing denials and claim rejections by using the applicable ICD-10 code for each diagnosis or procedure performed
• Increasing cash inflow through improved billing process that ensures fewer payment delays leading to higher revenue generation
• Claims processing in a shorter turnaround time, which helps in reducing accounts receivables and enhancing ROI
• Reducing administrative costs by automating CDI, particularly coding and billing process
• Increasing accuracy of clinical information by implementing automated CDI process
• Decreasing charge disputes between payers and providers
RCM is a long journey, so it’s important to choose the right solution with features to help a hospital achieve its business objectives. An ideal RCM solution must be quick in its implementation, flexible enough to meet future needs, and offer cutting-edge technology at an affordable price. But it is just as essential to find the right team to manage RCM, even if it means outsourcing some aspects to qualified individuals or businesses.