Why is Revenue Cycle Management Important?

There are a multitude of factors that go into running a successful medical practice. One of the most important is revenue cycle management. Why is revenue cycle management important in healthcare? With revenue cycle management or RCM, healthcare organizations ensure they’re properly and quickly reimbursed for their services. While this is certainly beneficial to the provider, it’s equally beneficial to the patient.

Before we explore why ensuring reimbursement makes RCM so important, let’s break down what RCM entails.

What is Revenue Cycle Management?

Revenue cycle management is exactly what it sounds like—a strategy that healthcare providers can use to manage the administrative and clinical functions in their revenue cycle. The revenue cycle begins as soon as a patient reaches out to the healthcare provider to schedule an appointment. The cycle ends when the final payment for the appointment and treatment has been collected.

The goal of revenue cycle management is to identify any points of friction in the provider’s revenue cycle and resolve them. With proper revenue cycle management, care providers can maximize their claim reimbursements and increase their patient service revenue.

The Steps in the Healthcare Revenue Cycle

The healthcare revenue cycle consists of many steps. This means that there are many opportunities for errors to occur. Any errors in the revenue cycle can delay the provider’s reimbursement from insurers and patients or halt reimbursement altogether.

For a better understanding of where errors can occur and how RCM can prevent them, let’s look at the steps included in the healthcare revenue cycle.

Pre-Authorization and Eligibility Verification

When a patient makes an appointment, the healthcare provider collects information to establish a patient account. This includes collecting the patient’s insurance information and verifying their insurance eligibility.

Revenue cycle management emphasizes accurately completing this patient intake step, even if a patient already has an account with the provider. Inaccurate information or ineligible insurance will only result in a denied claim later in the revenue cycle. This means a delay in the provider’s reimbursement payment. It also means more work for the provider, who must then comb through the patient’s information to correct the errors that were made.

Charge Capturing and Coding

Charge capturing is the process by which medical services are transcribed into billable charges using universally accepted medical codes. These procedure codes are how health insurance companies determine reimbursement amounts.

Without proper medical coding, the insurance company may deny the patient’s claim. This results in delayed provider reimbursement. It also costs the provider time and money as denied claims must be investigated and appealed. Effective revenue cycle management ensures entering correct medical codes so that denials can be avoided altogether.

Claims Submission

Once a patient’s medical services have been properly coded, the claim is sent to the insurance company for approval. RCM ensures this claim submission happens quickly by tracking and managing the claim from the start of the process.

Payment Collections

Once the patient’s claim has been approved, the insurance company reimburses the provider based on the patient’s eligibility. If there is any remaining balance after the insurance reimbursement, the provider is responsible for reaching out and collecting patient payments.

Revenue cycle management expedites billing processes by streamlining claims processing. Plus, because of the increased focus that RCM puts on front-end tasks, such as insurance eligibility verification, patients will know from the start what out-of-pocket expenses they’re responsible for paying. Again, this helps to avoid any delays in collecting payments.

Medical Service Review

Thorough revenue cycle management encourages care providers to analyze clinical treatment data. Analyzing this data allows providers to pinpoint steps in the cycle where errors are made and identify ways to lower their expenses. In turn, this will help increase provider revenue and improve the patient experience.

The Benefits of Healthcare Revenue Cycle Management

Effective revenue cycle management ensures that these steps are performed thoroughly and accurately to help providers avoid delayed or lost revenue. Although the main goal of RCM is to increase provider revenue, it delivers other benefits in the process. These benefits not only serve the providers but also the patients, giving revenue cycle management processes even greater value.

Let’s explore some of these benefits of revenue cycle management.

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Identifying and Resolving Coding Errors

By implementing RCM, many providers can more easily identify where errors are occurring within the medical billing process. This decreases the likelihood of future denials since about 90% of claim denials are due to easily preventable technical issues, like missing information in the patient’s chart or improper coding.1

When these medical billing errors are avoided and claims are approved after their first submission, providers quickly receive their reimbursements. Plus, they don’t have to spend extra money to investigate and appeal denied claims.

For the average hospital, claim denial prevention can result in an additional $5 million in revenue.2 This statistic alone is a good enough reason why healthcare organizations should be asking how an organization can improve their revenue cycle management.

Decreasing Administrative Burden

Preventing claim denials also keeps the administrative burden to a minimum. When administrative staff members don’t have to spend time and energy investigating and appealing denied claims, more time and energy is freed up for patient care.

Plus, RCM’s careful focus on front-end tasks simplifies interactions between administrative staff and patients. Appointment scheduling, intake form completion, submitting claims, and medical billing are streamlined to create a more satisfactory experience for all.

Avoiding Healthcare Fraud

Another significant benefit of RCM is its prevention of healthcare fraud and abuse. Healthcare fraud costs the healthcare industry billions of dollars every year. A fraud investigation can cost a healthcare organization its revenue, as well as its reputation.

Whether intentional or unintentional, inaccurate medical coding can lead to healthcare fraud investigations. Some common coding issues include billing for:

  • Services that weren’t rendered
  • Medically unnecessary procedures
  • Services performed by an improperly supervised or unqualified employee
  • Low-quality procedures or tests

Providers may also upcode procedures. Upcoding means requesting a higher reimbursement rate for services that don’t necessarily merit it.

With revenue cycle management’s emphasis on accurate data collection, medical billing, and coding, providers are much less likely to submit inaccurate information (if at all) to insurance companies. Plus, RCM can keep providers up-to-date with ever-changing healthcare regulations so that unintentional fraud is never an issue.

Avoiding Patient Fraud

Patient dishonesty can also be a source of healthcare fraud. This can happen in two ways:

  • Providing inaccurate information – A patient may lie about their insurance coverage in order to receive non-covered services they are not qualified for. However, insurance verification is one of the first steps of revenue cycle management. This means that any inaccurate insurance coverage will be quickly detected by administrative staff.
  • Engaging in medical identity theft – Medical identity theft has become a growing concern in the healthcare industry. It costs providers, as well as its victims. Since revenue cycle management starts with verifying a patient’s information, any occurrence of identity theft will be detected and addressed early in the process.

Medical providers can also take additional steps to verify a patient’s identity during the pre-authorization phase of the revenue cycle.

Increasing Healthcare Facility Revenue

By avoiding technical errors, claim denials, and fraud investigations, healthcare providers can promptly receive reimbursements for their services. Plus, they can avoid spending thousands of dollars on resolving errors, appealing claims, and investigating fraud.

With their additional revenue, providers can invest in their patient care. After all, quality patient care is any healthcare provider’s top priority.

RCM: An Important Tool for Providers and Patients

So why is revenue cycle management important? RCM’s overall goal of increasing provider revenue works to benefit the patient above everyone else. Revenue cycle management increases provider revenue while decreasing the time spent on administrative and clinical functions. This means more money and time devoted to value-based care for the patient and their treatment.

That’s why many healthcare organizations choose to trust PayrHealth. With our expert payor contract negotiators, you’ll ensure you have all the tools you need to ensure a streamlined revenue cycle. We’re experienced, thorough, and dedicated to helping healthcare facilities provide the best patient care possible.


  1. Revcycle Intelligence. Top 4 Claims Denial Management Challenges Impacting Revenue. https://revcycleintelligence.com/news/top-4-claims-denial-management-challenges-impacting-revenue
  2. Revcycle Intelligence. What Is Healthcare Revenue Cycle Management? https://revcycleintelligence.com/features/what-is-healthcare-revenue-cycle-management
  3. CollaborateMD. The Key Steps and Benefits of Revenue Cycle Management. https://www.collaboratemd.com/blog/the-steps-and-benefits-of-revenue-cycle-management/
  4. University of Illinois Chicago. What Is Healthcare Revenue Cycle Management? https://healthinformatics.uic.edu/blog/what-is-healthcare-revenue-cycle-management/
  5. Revcycle Intelligence. How Providers Can Detect, Prevent Healthcare Fraud and Abuse. https://revcycleintelligence.com/features/how-providers-can-detect-prevent-healthcare-fraud-and-abuse