A healthcare organization that is financially robust is supported by efficient revenue cycle performance. Such that you run a hospital, multi-specialty clinic, or your own practice, determining what Revenue Cycle Management (RCM) is, how it functions, and how to quantify it could mean the difference between steady profitability and incurable cash flow issues.
The meaning of revenue cycle management?
Revenue Cycle Management (RCM) refers to the complete process of managing financial transactions within the healthcare industry, starting with booking of appointments by a patient to final payment. It entails patient registration, insurance, medical coding, capturing charge, submitting claims, payment and following up of accounts.
In a nutshell, revenue cycle management ensures that health professionals receive all the money they deserve and in a timely manner to carry out their services.
What Does Revenue Cycle Management Entail?
Although the workflow in any organization is peculiar, the RCM cycle is normally based on the following steps:
- Pre-Registration and Patient Scheduling.
- Checking of Eligibility and Benefits of Insurance.
- Medical Coding/ Documentation.
- Charge Capture & Billing
- Claim Submission to Payers
- Payment Posting
- Accounts receivable follow-up
- Denial Management & Appeals
- Patient Collections
This process improves the efficiency of the operation when properly done and it does not allow revenue to leak.
The importance of RCM Performance Measurement
Many organizations use revenue cycle management services to support their financial operations because manual tracking can be time-consuming and prone to errors. The observable indicators of the KPIs can be tracked and assessed to identify the state of health of the process, where the revenue leaks and what needs to be improved.
The benefits of revenue cycle management done right include:
- Faster reimbursements
- Higher clean-claim rate
- Reduced denials
- Improved patient satisfaction.
- Lower administrative cost
- Better cash flow visibility
Top Healthcare Revenue Cycle Management Metrics to Track
The following are the key measures that any healthcare organization must quantify in order to assess the strength of RCM.
1. Clean Claim Rate (CCR)
Defines the ratio percentage of claims accepted on the initial submission without correction or amendment.
CCR is high = less delays + quicker payments.
Target goal: 90-95%+
2. Days Accounts Receivable (A/R)
Indicates the average length of time required to collect payments.
The fewer the A/R days, the better the cash flow.
Target objective: Less than 40 days (preferably less than 30)
3. Denial Rate
Displays the proportion of refusal in claims by payers.
High denial rates indicate problems with coding, checking the eligibility, or documentation.
Target goal: Below 5%
4. Net Collection Rate (NCR)
Represents the percentage of the overall amount of the collectible revenue that has been collected with adjustments.
A good NCR displays actual revenue performance.
Target goal: 95-99%
5. First-Pass Resolution rate (FPRR)
Measures the claims that are resolved on the first claim without any manual corrective action i.e. paid or rightly rejected.
Target goal: 85%+
6. Collection rate of patient portion.
As patient responsibility collection increases with growing self-pay balances and high-deductibles, it is important to measure patient responsibility collection.
Target goal: 70%+
7. Cost to Collect
A ratio of administration and operation per dollar collected.
When this number reduces, efficiency increases.
Target goal: 3-5%
The way Providers may enhance RCM Metrics
To improve the key healthcare revenue cycle management metrics, organizations are focusing on:
- eligibility check and claims scrubbing automation.
- centralized coding teams and denial management teams.
- electronic payment systems of patients.
- KPI monitoring analytics dashboards.
- outsourcing to professional revenue cycle management services
Being in-house or outsourced, the objective is the same, that is to maximize cash flow in terms of minimizing administrative load.
Final Thoughts
Quantifying your revenue cycle is a necessity not an option. As reimbursements become smaller, patients increasingly bear greater responsibility, and the rules with regard to payers are more complicated, healthcare organizations that monitor RCM KPIs are stronger, more lucrative, and more prepared to develop.
In case your organization doesn’t know where to begin or wants to improve a lagging revenue cycle, a metric-based approach supported by technology and RCM experts can significantly improve financial outcomes.
MedOps360 is an AI-powered RCM partner that automates billing, reduces denials, and boosts reimbursement efficiency.