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Importance of Revenue Cycle Management in Healthcare

Healthcare Claims Processing

All hospitals, from small practices to large healthcare systems, treat patients and save lives. However, these health care organizations also need to stay financially healthy by developing successful policies and processes. This is what revenue cycle management in healthcare is all about.

What is RCM?

Revenue cycle management (RCM) is a financial process that relies on medical billing software to track every step of patient care starting from registration and schedules of appointments to the payment of bills the patient incurs in the course of treatment. It is a process that the healthcare facility uses to manage both clinical and administrative functions related to payment, claims processing, and revenue generating. The entire process involves identification, management, and processing patient service revenue.
RCM brings together the clinical and business aspects of healthcare by unifying administrative data such as patients’ identity and insurance provider with treatment and other relevant healthcare data. Without a properly run RCM, a healthcare facility cannot pay its bills or keep its doors open for patients.

Communication with insurance companies

One of the key components of revenue cycle management is communication with health insurance providers. When a patient schedules a treatment appointment with a doctor, the facility’s staff checks and confirms the patient’s insurance coverage before the scheduled visit. Once the patient has been treated and given any applicable copayment, the hospital’s coder or healthcare provider uses ICD-10 codes to categorize the nature of treatment provided to the patient. The hospital will then send a summary of ICD codes together with Current Procedural Technology codes to the insurance company to see how much the insurance will cover while the patient is billed the balance.

Revenue Cycle Management

What is involved in a revenue cycle?

The revenue cycle involves all the administrative and clinical factors that contribute to management and collection of patient service revenue.
The Healthcare Financial Management Association (HFMA) includes the following factors in a revenue cycle:

  • Charge capture which renders services provided into billable charges
  • Claim submission which is all about submitting billable claims to the insurance provider
  • Coding diagnoses and procedures efficiently
  • Collections which is about determining balances to be paid by the patients and collecting the payments
  • Collecting preregistration data
  • Remittance processing
  • Following up and collecting payment from 3rd party insurers
  • Examining and reviewing the necessity of the services provided.


Using technology to drive revenue cycle management in healthcare

Healthcare organizations and facilities rely on technology to track claims, collect payments, and even handle claim denials. The technologies ensure that the hospital has a steady stream of income to cater for its day to day activities. Leading companies in RCM technology such as HER Systems and Health IT has revolutionized the way revenue cycle is managed in most healthcare facilities. It is estimated that over 4,201 hospitals across the country have invested heavily in the best RCM technology to streamline their operations.


RCM in healthcare is expected to be more popular in the coming years. Investments in RCM technology are predicted to grow by 15.51% in the next few years. As healthcare RCM continues to grow, healthcare professionals should strive to stay updated with emerging RCM technologies to ensure the smooth running of their hospitals and other treatment facilities.

You can get funding to help you with your working capital and cash flow for your healthcare business through our easy online application. NWT Capital can offer from $5,000 – $500,000 for your healthcare practice since we specialize in that industry.

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