What Is the Healthcare Revenue Cycle? Facility Guide and FAQ
Tracking and receiving payments is a necessary way for organizations to maintain financial stability. For healthcare facilities, however, this process isn’t as straightforward as charging patients a fixed fee. Because of the way health insurance claims play into service delivery, facilities must take unique measures when managing their healthcare revenue cycle.
Given the intricacies of medical billing, it can be difficult to picture what a revenue cycle in healthcare actually looks like. To help clarify this process, we’ll walk you through everything you need to know — from the revenue cycle definition in healthcare to steps you can take to effectively manage it.
What Is the Revenue Cycle in Healthcare?
The healthcare revenue cycle refers to every step of the care process that goes into calculating how much a patient should be billed. This cycle begins from a patient’s initial encounter with a facility to the time that payments for services are received in full. Throughout the healthcare revenue cycle process, facilities track essential pieces of information that influence patient revenue, such as:
- Patient medical histories
- Health insurance payers
- Medical diagnoses and codes
- Approvals and denials of claims
What Are the Stages of the Healthcare Revenue Cycle?
When reviewing the revenue cycle definition in healthcare, it’s important to consider all steps of the process. The overarching structure of the revenue cycle in healthcare can be broken down into three simplified stages, as described below.
1. Pre-Authorization and Registration
The first stage involves gathering information needed to accurately provide and bill for a prospective patient’s services. To register a patient at a facility, administrators must gather all relevant contact information, medical records, and insurance information. During this stage, staff will also take measures to verify that all of this information is accurate and up-to-date.
2. Medical Coding
The second stage includes all of the coding procedures for supplies and services delivered throughout the patient’s care. ICD diagnoses and CPT codes can be either manually inputted into patient records or automatically generated as healthcare providers conduct their medical charting. This is an important step, since codes need to be accurately recorded to generate claims that are later submitted to insurers.
3. Medical Billing and Collections
The revenue cycle concludes when all claims are processed and payments are collected. During this final stage, medical billers review ICD and CPT codes, fixing any errors to generate a bill for medical insurers. Once insurers receive and approve of the bill, payments can then be collected from all relevant payers, including the patient.
What Does the Revenue Cycle Look Like in Practice?
To get a better idea of how the revenue cycle works in healthcare, we can take a look at a simplified example below.
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| 1. Preauthorization and Registration | Mr. Smith schedules his annual exam through a local clinic’s online appointment portal. He uploads his medical history, insurance, and contact information. A receptionist reviews and verifies this information, also calling his insurer to double check his eligibility for coverage. |
| 2. Medical Coding | Mr. Smith comes into the office for his check-up. His doctor documents his wellness exam into his patient chart on the EHR system. An ICD code for his diagnosis and CPT codes for his exam procedures are automatically generated. |
| 3. Medical Billing and Collections | After Mr. Smith’s visit, medical billers review the ICD and CPT codes in his chart alongside his insurance plan. They send a bill over to his insurer, who approves and pays for their coverage costs. Mr. Smith is then sent a bill for any other uncovered costs, which he pays for via credit card on his online portal. |
Why Is Revenue Cycle Management Important?
Every type of business should understand their revenue cycle and implement strategies for managing each stage. So, why is it important to healthcare organizations specifically? If facilities collect incorrect information or carry out improper billing practices, they may lose out on revenue. Moreover, proper revenue cycle management can also help improve workflow and care delivery, allowing facilities to:
- Keep patients more informed about their care costs.
- Avoid overcharging or undercharging patients and insurers.
- Minimize delays and costs resulting from denied insurance claims.
- Facilitate communication between administrative and clinical staff.
- Bridge gaps between healthcare providers, billers, and insurers.
What Are Effective Strategies For Healthcare Revenue Cycle Management?
When it comes to revenue cycle management, healthcare facilities can explore different ways to streamline the collection, review, and submission of payment information. Your exact process for managing the revenue cycle will depend on the types of services you provide and the patients you serve. However, facilities can follow these general tips to improve their processes.
1. Automate Repetitive Tasks
Technology is rapidly advancing in the healthcare industry, providing many opportunities to automate repetitive administrative and care-related procedures. If your facility primarily relies on manual coding or billing, explore ways to adopt electronic systems that automatically link medical and administrative information.
2. Engage and Train Your Staff
While technology can help streamline parts of billing processes, your staff plays an important role in overseeing these procedures. Provide regular training on any new technologies you decide to adopt. Additionally, actively engage your staff by soliciting ongoing feedback on what types of resources can support workflow.
3. Consider the Patient Experience
Patients also play an important role in the revenue cycle, so it’s important to make your services as accessible as possible. Utilize efficient and effective ways to collect information and payments from patients without burdening them.
This may involve providing different options for how patients complete their intake forms, such as uploading their information online or filling out packets in-office. Also, consider accepting multiple payment modes (e.g., credit card, debit card, check, cash) to make the collection process more inclusive.
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