Home

Revenue Cycle Management (RCM) in Healthcare

---

Key Steps in Revenue Cycle Management (RCM)

1. Appointment Scheduling

The first step in the RCM process is when a patient schedules an appointment with a healthcare provider. This step can occur either via phone or online through the provider’s website or appointment portal. Appointment scheduling is important because it helps avoid unnecessary delays or inconvenience for both the patient and the healthcare provider. It also ensures that the provider’s schedule is managed efficiently, reducing wasted time.

2. Eligibility and Benefit Verification

Once the appointment is scheduled, the next step is verifying the patient’s eligibility and insurance benefits. The healthcare provider confirms whether the patient’s insurance covers the services they are seeking and if they are eligible for those services at the time of the appointment. This can be done via phone call to the insurance company, by validating patient details through the insurance provider’s website, or by verifying information provided by the patient through their insurance ID card. It is crucial to verify eligibility before services are rendered to avoid any billing issues later.

Even if the patient has visited the provider before, eligibility should be checked for each new visit, as their insurance plan may have changed or new coverage may have been added.

3. Registration and Pre-Encounter

In this phase, the healthcare provider completes necessary patient documentation, which includes collecting personal information, insurance details, and signed consent forms. These forms establish the patient’s financial responsibility for the services they will receive. Pre-Encounter tasks include ensuring that all necessary instruments, medical reports, or equipment are ready for use before the patient’s visit. These administrative steps are often completed a day before the patient’s actual encounter with the provider.

4. Encounter (Service Delivery)

This is the phase where the actual healthcare services are delivered to the patient. During the encounter, healthcare professionals (physicians, nurses, technicians, etc.) provide treatment or care to the patient. While rendering services, the healthcare provider typically records the patient’s medical history, diagnosis, treatment plan, and any other relevant information through dictation. This voice recording is later transcribed to create medical records.

5. Medical Transcription

After the healthcare provider has recorded the details of the encounter, the medical transcriptionist transcribes the voice recordings into a formal medical record. The transcription process ensures that the information is documented correctly in a standard format that complies with legal and regulatory requirements.

6. Medical Coding

Medical coding is the process where trained medical coders assign specific CPT codes (Current Procedural Terminology) and ICD-10 codes (International Classification of Diseases) to the diagnoses and procedures performed during the encounter. CPT codes identify the medical, surgical, and diagnostic services rendered, while ICD-10 codes describe the patient’s diagnoses or the reasons for the services.

Accurate coding is essential for proper reimbursement and to prevent delays or denials in payment. Medical coders must stay up-to-date with coding systems and guidelines to ensure that claims are processed smoothly.

7. Demographic and Charge Entry

Once coding is complete, patient demographics (such as name, address, and insurance information) and charge details are entered into the Practice Management System (PMS). This data entry phase is critical because any errors in entering patient details, medical codes, or charges can lead to claim rejections, denials, or delays.

8. Claim Submission

Once the patient’s information and charges are entered into the system, the next step is submitting the claim to the insurance company for reimbursement. Claims are typically submitted using one of two forms:

• CMS 1500 Form: Used for individual healthcare provider services such as physician or outpatient services.
  
• UB-04 Form: Used for hospital or inpatient services.
  

These claim forms include all necessary patient, provider, and treatment information, and they serve as the formal request for payment from the insurer.

9. PMS Scrubber (System Scrubbing)

Before submitting claims, the data is run through a system scrubber (also known as PMS Scrubber), which checks for errors in formatting or missing information. For example, it ensures that phone numbers are in the correct format, names are spelled correctly, and other critical information is accurate. If any discrepancies or errors are found, the claim is rejected by the system and needs to be corrected before it is sent for processing.

10. Clearing House and Payer Rejection

After passing the scrubber, the claim is sent to the Clearing House, which acts as an intermediary between the provider and the insurance company. The clearing house checks claims for additional issues, such as eligibility problems, provider enrollment issues, or payer ID issues, and may reject claims if any information is incorrect. Claims that pass through the clearing house are forwarded to the payer (insurance company).

Once the payer receives the claim, it undergoes another validation process known as payer rejection. This phase ensures that the payer has all the necessary and correct information. Claims can be rejected at this stage if any data is missing or incorrect, even if they were accepted by the clearing house.

11. Insurance (Payer) Processing

Once the claim has passed the clearing house and payer rejection checks, the insurance company reviews the claim for payment. The insurance company determines whether the claim will be paid or denied based on the terms of the patient’s policy. Insurance companies generate an Explanation of Benefits (EOB) for paper claims or an Electronic Remittance Advice (ERA) for electronic claims to communicate the payment status to the provider. These documents outline the payment amount, denials, and any necessary adjustments.

12. Payment Posting

The payment posting team receives the EOB or ERA from the insurance company and posts the payment information into the system. This includes applying any patient payments, insurance payments, or adjustments (e.g., deductibles, copayments) to the patient’s account. Payment posting is critical to tracking and reconciling the provider’s revenue.

13. Accounts Receivable (AR)

In some cases, the provider may not receive the EOB or ERA, or the information may be unclear. The Accounts Receivable (AR) team is responsible for following up on these missing or unclear payments. This team communicates with the insurance company to resolve any issues, ensuring the payment is processed correctly.

14. Denial Management

Denial management involves investigating unpaid or partially paid claims. The AR team works to understand the reasons for denials and takes appropriate actions to resolve the issues. This may involve appealing denied claims, addressing coding errors, or rectifying provider credentialing issues. Effective denial management is critical to ensuring that claims are paid and the provider receives appropriate reimbursement.

---

Conclusion

Revenue Cycle Management (RCM) is a complex, multi-step process that ensures healthcare providers are paid accurately and promptly for the services they provide. Each step, from appointment scheduling to denial management, plays a critical role in maintaining financial health and operational efficiency in healthcare organizations.