Health Care Revenue Cycle Management

Health Care Revenue Cycle Management

Revenue Cycle Management

Revenue Cycle Management (RCM) in health care refers to the steps taken by healthcare institutions to receive payment from patients from the services that have been offered (Singh et al., 2016). Historically, the responsibility for this activity was left to back-office functions, but this has since changed with the emergence for a need to have an efficient process for revenue collection. This has resulted in the process of RCM in healthcare adopting three functions. These are the generation of revenue, capturing revenue, and collecting revenue.

The generation of revenue emanates from the reality that for healthcare institutions to survive in the long-term, there is a need to practice survival and sustainability (Singh et al., 2016). However, this will depend on the ability of health institutions to generate revenue. Healthcare practices can achieve the goal of maximizing reimbursement by reducing the inefficiencies and gaps in scheduling (Fredrickson, 2020). Also, the healthcare institutions must adopt a proactive approach in their scheduling and capturing of copays and necessary patient information upfront (Jewell, 2020). If the generation of revenue is optimized, the services provided in healthcare institutions can increase revenue by minimizing no shows’ numbers.

The other function of RCM, capturing revenue, involves the initial processes that a patient undergoes when he or she visits a health institution. The clinical encounter with the patient begins at the time when the patient is called to see a doctor from the waiting room. The encounter extends throughout the processes that the patient is advised to undergo while in the hospital, and ends once the patient leaves the appointment (Jewell, 2020). All the activities that occur during this timeframe when the patient is going through the appointment provide the foundation from which the function to capture revenue by RCM is exercised (Fredrickson, 2020). All the services provided to the patient must be diligently recorded. RCM uses the complete and accurate documentation of the services provided to the patient, and the proper coding by the institution on the services rendered, for efficient capturing of the revenue.

The last function of the RCM, which is to collect revenue, is largely performed by the back-office billing department. The office is instrumental to the cycle as it rounds up the realization of the benefits from the earlier processes in the cycle. Some of the services that are associated with this function include billing of the payments, costing, payment collection (Singh et al., 2016). This is the last step in the process of implementing RCM. Collectively, the three functions assist health institutions to optimally account for revenue collection processes.

Revenue Cycle Management (RCM) Model

The model is divided into three sections, which are ‘before patient contact,’ ‘during patient contact,’ and after patient contact.’ In the section where the health institution is yet to contact the patient, some of the processes that are undertaken include the development and implementation of RCM. The health institution also establishes some of the procedures, standards, and performance measures, which will be applied once contact has been made with the patient. During the contact with the patient, the RCM process is divided into two key areas, which are the front-end tasks and the core tasks. The front-end tasks include the scheduling and registration of the patient, precertification, and the verification of the insurance information. The core tasks, on the other hand, include the provision of the medical services and subsequent documentation of the services provided. Charges are also preferred under the core tasks, and this depends on the coding that exists within the system on the services provided.

RCM Model

Before contact with patient:

Contract management and negotiation of third-party payer

During patient contact:

Front-end tasks

Scheduling and registration of patients, insurance verification, and precertification


Core tasks

Service provision and medical documentation



Coding of charge entries

After patient discharge:

Back-end tasks

Billing, preparation of claims, claims editing, follow-up, and management of denials.



Collection and posting of cash

The last part, which occurs after the patient is discharged, is the back-end tasks. Some of the services under this section include bulling, preparation of the claims, editing of the claims, following up of the claims from the insurance companies, and managing denials. The end activity of the cycle is cash collection and posting.


In the above model, users are the patients who require services from health institutions. There are two types of patients, and these are the uninsured and insured patients. The insured payments have health insurance policies that they are a part of and use their insurance services to make payments for the services that they have received from the health institutions (Singh et al., 2016). The uninsured patients, on the other hand, are patients who do not have any insurance. However, there are insured payments which might fall under uninsured payments, depending on the type of health service that they receive from the health institution (Jewell, 2020). Insurance companies do not insure some diseases, and this would warrant their own payment by a patient. In such situations, the patient could be insured but would not receive billing payment from the insurance company.


The approach taken by healthcare providers in the past, regarding revenue collection, was to focus on the billing of the services provided and enhancing the collection processes of the billed services. Recent developments in the health sector have introduced the front end of the cycle to focus on healthcare providers (Singh et al., 2016). This begins with the scheduling of an appointment with a patient and the registration of the patient by a staff member of the hospital. Subsequently, the patient undergoes a process where the critical personal information that will aid in the follow-up process during billing is collected. Information such as insurance details, the patient’s clinical records, and demographics, are collected at this stage (Jewell, 2020). Once the patient has received the healthcare services, the services are billed according to the coding procedure that the institution uses (Fredrickson, 2020). Consequently, depending on the mode of payment that a patient uses, the clearance of the bill is done.

Insurance companies

Patients can have either private or public insurance covers. The pubic health insurance covers in the United States are provided under the Affordable Healthcare Act, which seeks to subsidize the costs of healthcare to the majority of U.S. citizens (Fredrickson, 2020). Depending on the insurance cover that the patient chooses to use, the billing of the provided services is posted to the insurance company, and the claim is settled through clearance of the bill.

The relationship depicted in the model

There are three elements of the model from which a relationship is demonstrated between the healthcare providers, the users, and the insurance companies. The model reveals a process of revenue collection by healthcare institutions from services that are provided to users. Health as a service is paid for by users. Patients, therefore, become an important part of the model. However, when they come to health institutions to seek services, they are tendered to by healthcare providers (Fredrickson, 2020). The service provided is at a fee, which can be paid by cash or through other forms of payment. Given that the nature of health issues is that they occur unplanned, most people have sought to plan for the expenses that they might incur from health issues (Singh et al., 2016). This is often done by taking up health insurance covers. Consequently, when a person with health insurance cover seeks treatment, their bills are paid for by the insurance companies (Jewell, 2020). It is for this reason that the insurance companies form a part of the model. They are included in the last section during the settlement of the healthcare bills.

Challenges in using RCM

The challenges of RCM manifest in both the healthcare providers front and the users’ side. In the healthcare providers side, some of the challenges that are witnessed are billing and collection mistakes, having untrained staff who are not managing the process effectively, and inefficiency in monitoring the claims process (Jewell, 2020). The other limitation is the absence of an item in the coding system, yet the service has been provided to a patient (Singh et al., 2016). On the users’ side, the challenges include lack of knowledge on how the billing is conducted, which could lead to overbilling of the services provided, lack of understanding of the health issues that are covered by an insurance policy, and failure by a healthcare provider to recognize an insurance company to which a patient has taken a cover.

Recommendations to improve RCM

There are three ways that Healthcare RCM can be improved. The first is through breaking down the front-end and the back-end sections of the RCM. This means that the healthcare provider must establish some of the processes that it will take in collecting revenue. The benefit of this break down is to understand the areas that might need some changes to achieve efficiency. The second method is to apply data to benchmark and track the performance of the revenue cycle. Through the use of data, the healthcare provider can audit the processes on their efficiency. The third method is to collect the financial responsibility of patients upfront. The benefit of this is to minimize the payment default cases and to determine the ability of the patient to service the bill from the requested health services


Fredrickson, J. (2020). Billing and Review Perspectives in Healthcare. In Theory and Practice of

Business Intelligence in Healthcare (pp. 18-67). IGI Global.

Jewell, B. (2020). Revenue Cycle Management. The Business Basics of Building and

Managing a Healthcare Practice (pp. 19-29). Springer, Cham.

Singh, R., Mindel, V., & Mathiassen, L. (2016, January). IT-Based Revenue Cycle Management:

An Action Research into Relational Coordination. In 2016 49th Hawaii International Conference on System Sciences (HICSS) (pp. 3152-3161). IEEE.

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