6 Phases of RCM and their role in Hospital Revenues

Hospitals and other health care providers are known for providing exceptional treatment for patients. Patients do expect best of the treatment and care. But in reality, sometimes the expectations are not met. The reason could be either over expectations or the promised delivery not done.In both the cases, the patient will be dissatisfied.

The major area of concern for hospitals and health-care providers is the health insurance process and claims. This is where most of the patients face issues. This can be attributed to patient’s lack of knowledge on the various processes and procedures in health insurance.

From the health-care provider perspective, the entire patient journey right from the time of appointment fixing till receiving the final health-care claim balance is critical. Revenue cycle management plays a pivotal role in managing the patient’s revenue claims.

Health-care RCM handles all the administrative and clinical functions which include: front desk operations, coding, billing, medical claim processing and final payment. Thus, it helps in reducing the work of the clinicians, saving time and enhancing the quality of care.

Let’s take a look at the six phases of RCM and their role in the health industry.


The initial stage is the pre-authorization of each patient. This is where the individual’s data are collected. It not only saves time for the employees and patients, but also allows them to know the anticipated charges ahead of time. From the hospital’s point of view, it ensures a higher possibility of on-time payments.

The data is then recorded in the system, in case the health department staffs notices a blunder in the submitted data, the concerned person is notified before the error develops into a bigger concern. Issues in documentation may cause a delay in hospital remuneration of payment.

The registration process is to make sure that the prior authorization for prescribed services is received and the obtained details and clients information are precise. 


In the second stage, the eligibility and benefits of the patient are verified. The current coverage limit and deductibles are also clarified. During this process, some may receive an Explanation of Benefits notice (EOB) which explains which part has to be paid by the individual and reasons for which it can’t be compensated by the insurance department.

Once the verification is done, the diagnosis from the clinics is sent for coding. Optimal coding results in faster claim approvals and reduces claim denials. Modern medical companies will use RCM software that can speed up the work involved in verifying if a particular patient is eligible for some benefits.

Eligibility and benefits are verified at least 24 hours before the submission of claims.


The third stage comprises of processing the charges to claim settlement. The charges are calculated, claims are submitted, and processed as per the hospital’s contributions. Even a small mistake in this section can lead to denials or slow payments. Once the claims are generated, they are delivered to the clients in the form of Electronic Remittance Advice (ERA) or Electronic Funds Transfer (EFT).

Like an EOB an ERA provides the billing specifications about the amount charged, the amount that is taken care of by the insurance department as per their terms and an explanation of any miscalculation in the charges and paid amounts. Thus, this process lowers manual tasks, provides faster payment and improves in handling denials.

An EFT refers to the transfer of funds using an electronic process instead of paperwork. EFT through Automated Clearing House (ACH) is the only electronic standard as per the Health Insurance Portability and Accountability Act (HIPAA) which provides many advantages such as quicker payments, avoidance of extra fees through other payment methods, easy reconciliation, and improved efficiency.

A part of anticipated patient balances calculated from the EOB is collected in this process.

Related: 4 Things To Check Before Outsourcing Hospital Billing Services


Once the claims are processed successfully and reviewed, the payment is collected from the patient. RCM software processes medical billing through Electronic Data Interchange (EDI). It provides a structured method to exchange data between users and systems using enhanced methods. Thus, electronic data interchange gives security and efficient data processing is achieved.

Denial management helps to identify the issues with the work-flow processes,and to find out whether the claim is denied because of hospital or the patient. Through the help of EDI, denials can be sent back to process the claim from the payer if there is a valid reason.

Feedback must be conveyed promptly to the medical departments in case any denial were caused due to faults on their end. The accounts receivable team will manage the denials regarding any fraud and abuse of any medical or financial departments.


The back end team of the revenue cycle management follows up with the status of pending claims, patient statements and reasons for claim denials. Patients whose claims that have been resubmitted for charges must be contacted promptly to make payments on the outstanding balance. They handle inquiries from patients and payers and resolve any clarifications regarding reports.

The team also manage the pending and outdated revenue payments and process the appeals of the patients who refuse to pay. They also communicate with the insurance department regarding the reasons for claim denials.

The reports for the processed client are provided to the physician within 10 days before the end of the monthly cycle.


The processed records of patient revenues are filed and maintained using the RCM software to provide customized reports, including financial data, management information for future references.

All other accounts such as outstanding payments and pursuing payment from patients are also monitored on a regular basis to ensure that the revenue cycle is managed effectively.

As the treatment costs and health plan costs are higher it becomes all the more important for hospitals to maintain the revenue cycle in a systematic manner through RCM companies. When the hospital grows bigger it will become even more difficult to manage through in house revenue cycle management team.So it is always advisable to choose the right RCM company to manage health insurance claims.

Update Patients on Medical Billing:

  • Training staff on patient education at initial stage in process of treatment or diagnosis, ensure patients not to get disappointed after receiving the medical bill.
  • Healthcare professionals are to be prepared to help patients to estimate their bills of the services rendered, so that they can estimate the cost.
  • Additionally it is necessary to update patients for any further financial assistance programs that they are qualified for.
  • Financially clearing patients stands as the most important priority of revenue cycle management as it avoids hospitals debt collection.
  • Cost transparency is another crucial factor of improving patient and providers communication and responsibility.

As the medical industry continues to grow, the need for revenue cycle management companies has only increased. When RCM is outsourced, hospitals can focus more on providing better patient care and meet the expectations of the patients. To conclude, hospitals have to understand the growing demands of the patients and work on strategies accordingly for a smooth flow of revenue cycle.

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