What is Revenue Cycle in Healthcare:
Understanding Rev Cycle Management

 

woman sitting at desk in front of computer at a hospital billing office
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March 4, 2024

Author: Kristy Boldt, Sr. Marketing Director at The SSI Group, LLC

When a patient visits a doctor or a hospital, there’s a whole system in place that ensures the services received are billed and paid for. This system is known as revenue cycle management (RCM), and it’s crucial for keeping healthcare providers operating smoothly. RCM, or as we’ll refer to it from here on out, rev cycle management, is a financial process that encompasses everything from scheduling a patient’s appointment to paying the healthcare provider.

Rev Cycle Management: Why Does It Matter?
Without rev cycle management, hospitals and doctors wouldn’t get paid timely, making it challenging to provide the care we all need. It’s a crucial part of the healthcare system, working behind the scenes to keep everything running.

Ensuring Providers Get Paid
When healthcare providers perform services, they’re not just offering care; they’re also running a business. Like any business, they have costs: the building’s rent or mortgage, the medical equipment that needs to be bought or leased, the utilities, and, of course, the wages for the people who work there. Rev cycle management ensures that for every vaccine given, every X-ray taken, and every surgery performed, there’s a financial transaction that compensates the provider.

The Journey of Rev Cycle Management
Rev cycle management is like a relay race. It starts when the patient makes an appointment and ends when the healthcare provider receives full payment for their services. Every step in this relay is essential – a dropped baton can mean a delay in payment or a billing error.

The Many Roles in Rev Cycle Management
There are several key players in rev cycle management, each with an important role:

  • Medical Coders: These are the people who take the doctor’s notes from the patient’s visit and turn them into standardized codes that insurance companies understand.
  • Billing Specialists: They take these codes and other vital information to create the patient’s medical bill or claim.
  • Claims Processors: These are the people at the insurance company who review the claim to ensure everything’s covered under the patient’s insurance plan.
  • Patient Financial Services Representatives: They help the patients understand their bill, set up payment plans, and explain insurance benefits and why they owe what they do.

 

The Role of Rev Cycle Management Teams
Rev cycle management teams are the financial navigators in the world of healthcare. They ensure that:

  • Claims are Accurate: They make sure that the services provided are correctly coded and billed. Incorrect claims can lead to denied charges, which means the provider might not get paid.
  • Payments are Timely: They follow up on claims to ensure payments are made promptly. Delays can strain the provider’s cash flow.
  • Collections are Handled Properly: When patients owe money, rev cycle management teams handle the collections process with sensitivity and care, understanding that medical bills can be a complex and burdensome experience.

 

The Different Types of Medical Billing in Rev Cycle Management
In the world of healthcare, not all bills are created equal. Rev cycle management teams navigate a complex landscape of billing types, each with its own rules, codes, and pathways to payment. Understanding these variations is crucial for ensuring the financial health of healthcare providers and clarity for patients.

  • Institutional Bills: The Backbone of Hospital Finance
    When we talk about institutional bills, we’re referring to the charges generated by hospitals, skilled nursing facilities, and other inpatient services. These bills cover the use of medical equipment, room and board, laboratory tests, and any procedures or surgeries performed. In rev cycle management, these bills are often the most complex due to the vast array of services and treatments that can occur during a patient’s stay. They’re not just about a single doctor’s visit but can encompass a whole team’s care over several days or weeks.
  • Professional Bills: Valuing Expertise
    Professional bills come into play for services rendered by healthcare providers such as physicians, surgeons, anesthetists, and therapists. These bills are based on the evaluation, diagnosis, and treatment provided by these professionals. Unlike institutional bills, which are about the facility’s resources, professional bills focus on the individual care provider’s expertise and time. In rev cycle management, these require a detailed understanding of various fee schedules and direct interaction with healthcare professionals to ensure accurate billing.
  • Mental Health Bills: Specialized Billing for Specialized Care
    Mental health services involve unique billing challenges. The nuances of psychiatric care, counseling sessions, and other therapeutic services necessitate a different set of billing codes and an intimate understanding of various insurance plans’ coverage for mental health. Rev cycle management teams work closely with mental health providers to navigate the subtleties of this billing, ensuring that patients receive the benefits they’re entitled to for their mental health care.
  • Dental Bills: A World of Their Own
    Dental bills cover a range of services, from routine cleanings to oral surgeries. Unlike other medical services, dental billing often involves a separate set of insurance plans and coverage details, but not always. Rev cycle management in dentistry requires a specific knowledge base about dental procedures, coding, and the ins and outs of dental insurance policies. Each type of bill goes through the rev cycle management process to ensure that the healthcare providers are reimbursed for their services.

 

In addition to institutional, professional, mental health, and dental bills, there are other bill types that hospitals and physician practices may submit to payers, including:

  • Ambulatory Surgical Center Bills: These bills apply to services provided in outpatient surgical settings. They include facility fees for the surgery center and may also encompass charges for the use of operating rooms, recovery rooms, and any outpatient services or supplies.
  • Laboratory and Diagnostic Bills: Separate billing for laboratory and diagnostic services such as blood tests, X-rays, MRIs, and other imaging services can be common, especially when these are not included in a hospital’s institutional bill.
  • Home Health and Durable Medical Equipment (DME) Bills: For patients receiving care at home, there are specific bills related to home health services and the rental or purchase of durable medical equipment, such as oxygen tanks, wheelchairs, and other medical appliances.
  • Pharmacy Bills: Medications are often billed separately from other healthcare services. Hospitals and practices might have to handle pharmacy bills, especially for specialty or compounded medications.
  • Rehabilitation Bills: These are for services provided by physical, occupational, and speech therapists. Rehabilitation can occur in various settings, from outpatient clinics to specialized rehab facilities, and each may have a distinct billing structure.
  • Long-term Care and Assisted Living Bills: For patients in long-term care or assisted living facilities, billing includes charges for room, board, and ongoing medical and personal care services.
  • Hospice Care Bills: Hospice care billing encompasses services for palliative care provided to patients with terminal illnesses, typically in the patient’s home or a hospice facility.
  • Telemedicine Bills: With the rise of remote healthcare services, telemedicine bills for virtual consultations and treatments have become more prevalent.
  • Emergency Medical Services (EMS) Bills: These bills cover pre-hospital emergency services and transport provided by ambulance services or air medical transport.

Each type of bill has its own complexities and requires careful management to ensure that healthcare providers are reimbursed correctly. Revenue cycle management teams must be well-versed in the billing nuances of each service type to maintain a smooth and efficient billing and payment process.

The Unified Goal of Rev Cycle Management
Regardless of the type of bill, the ultimate aim of rev cycle management remains the same: to streamline the billing process, ensure accurate coding, secure timely payments, and minimize errors. This not only protects the financial stability of healthcare institutions but also helps patients understand their bills, their options for potential financial assistance, and, ultimately, their outstanding financial responsibilities.

Breaking Down the Rev Cycle Management Relay: Step by Step
The journey of rev cycle management is intricate and detailed. Like a baton passed between runners in a relay race, each phase is crucial to the next, ensuring the ultimate goal of complete and accurate payment for healthcare services. Let’s break down each “leg” of the process.

  • The Starting Blocks: Pre-Registration and Registration
    The race kicks off with pre-registration. This is when the patient first interacts with the healthcare provider’s system. Patients might call ahead or use an online form to provide their insurance details and reason for the visit. This early step is pivotal; it’s when the healthcare provider checks insurance coverage and benefits. Think of it as laying the groundwork to ensure that the services a patient receives are covered, reducing surprises down the line.

     

    Next, we come to the registration desk on the day of the appointment. Here, registrar team members confirm identity, insurance information, and other necessary details. This step is about verifying the information from pre-registration and ensuring everything is up-to-date. It’s a double-check to ensure no detail is missed before the baton is passed.

  • The Middle Leg of the Race: Charge Capture, Claim Submission, and Payment Posting
    After the appointment, we enter the charge capture phase. This is where the services a patient received—every check-up, test, or procedure—are recorded and assigned a cost. It’s a meticulous process requiring precision, as inaccuracies can lead to billing errors and denied claims.

     

    Then comes claim submission. This is where the patient’s bill, now formalized as a claim with all the necessary codes and prices, is sent to the insurance company. The claim is a request for payment based on the terms of the patient’s insurance policy, and it’s packed with detailed information about the visit or what’s sometimes called an encounter.

    Once the insurance company receives the claim, they review it—a process known as adjudication—to decide how much they will pay. After adjudication, we reach the payment posting leg. This is when the insurance company’s payment arrives at the healthcare provider’s office and is posted to the patient’s account. It’s a critical moment, marking the closing of the loop on the insurance company’s part.

  • Navigating Hurdles: Insurance Follow-Up and Patient Billing
    However, the race isn’t always hurdle-free. Sometimes, there’s a discrepancy, a denied claim, or a delay in payment. That’s when the insurance follow-up comes into play. Healthcare providers have teams dedicated to resolving these issues, ensuring every service rendered is accounted for and paid.

     

    The final leg is patient billing. After the insurance has paid its share, there might still be a balance due, which is billed directly to the patient. This could include a deductible, co-pay, or any services not covered by the patient’s insurance. The bill a patient receives should clearly state the amount owed and why. It’s the final stretch of the relay, where the healthcare provider settles accounts with the most important player in the race—the patient.

  • The Finish Line: Full Reconciliation
    Ultimately, the goal of rev cycle management is full reconciliation, where every service is billed, and every charge is paid. It’s a complex process with many checkpoints, but when done correctly, it ensures a smooth financial experience for both the patient and the healthcare provider.

Learn more about SSI’s remit and reconciliation process by watching this free on-demand webinar, “The Power Pair: Simplifying Paper Conversion and Reconciliation with SSI.”

The Complexity of Healthcare Payments
It’s not as simple as paying for a product at a store. Healthcare payments involve negotiations with insurance companies, adherence to complex state and federal billing regulations, and, often, the management of patient copayments and deductibles. Each step in the rev cycle management process is designed to navigate these complexities efficiently.

 

Rev Cycle Management: It’s All About Teamwork
Rev cycle management is all about teamwork. From the moment a patient walks into a healthcare provider’s office to the final payment, every player in rev cycle management works together to ensure that the financial side of healthcare is handled with as much care as the medical side.

And that’s the basics – rev cycle management is the unsung hero of the healthcare world, keeping things in check financially so that healthcare providers can focus their attention on what’s most important: taking care of patients. It’s a complex process made simple by a team of dedicated professionals who make sure every step of the race to payment is handled with care.

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