Healthcare Revenue Cycle Management – Where to Start to Get it Right

Healthcare Revenue Cycle Management

Healthcare systems have long been challenged to optimize the collection of payments for the care they provide to patients. As demands on healthcare systems have markedly increased in recent years, so too has the importance of effective healthcare revenue cycle management (HCRCM) practices. Still, surprisingly few organizations have a good handle on HCRCM while most struggle to find the best path for addressing it.

Many point to the complexities associated with healthcare and claims processing as a primary factor of HCRCM challenges. While varying levels of complexity do present themselves across the life of a claim, inadequate attention on the right processes and performance indicators drives most HCRCM difficulties. Shoring up these processes and monitoring the metrics that matter will improve the financial health of healthcare systems and support the personal health of the patients they serve.

What is HCRCM? Healthcare Revenue Cycle Management (HCRCM) is the collection of processes (from first patient contact to final payment) that healthcare systems employ to capture revenue for the services and care they provide to patients.

HCRCM Success Starts Up Front

Supporting and ensuring rock-solid front desk functions is foundational to successful HCRCM. This begins from the very first moment that a patient schedules an appointment (Pre-registration). One of the first tasks here is the verification of benefits coverage and determination of whether co-payment will be required on the part of the patient. Verification ensures that the right carrier is being billed and prevents delays in trying to correct billing errors down the road.

Managing pre-authorizations (PA) is another key aspect of front desk procedures. This includes getting pre-authorizations completed in the proper window before procedures that require them, minimizing the chance of claims being rejected due to the lack of pre-authorizations present at the time of processing. PA is a sometimes time-consuming but always essential step that involves finding and navigating through the right points of contact, fully completing the right forms, and accessing a patient’s medical records.

Charge capture (revenue Integrity) is the next critical stage. Here, charges are captured for the services provided and then submitted to the insurance provider. Rendering medical services into billable charges is crucial in ensuring healthcare organization are fully reimbursed their “allowable” amounts by the insurance carrier. Proper coding cuts down the number of claims that are rejected, stalled, or not paid in full. One issue here is the lack or misapplication of coding modifiers that provide additional context about the procedure. For example, this could include an instance of a cosmetic procedure that would typically not be covered being necessitated by an automobile accident. Coding should always be reviewed for accuracy and clarity before a claim is submitted.

Effective and efficient front desk procedures require the right combination of capabilities, tools, discipline, and knowledge. Weakness in any of these links indeed affects the entirety of the HCRCM chain.

Measuring and Monitoring What Matters in HCRCM

A continual review of the right key performance indicators is also necessary for successful HCRCM practices. Review alone is not enough. Healthcare systems must be willing to dive into the drivers of these KPIs to inform decisions and actions that move them in the right direction. Let’s look below at several HCRCM measures.

Clean Claims Rate

The Cleans Claims Rate shows the percentage of claims that were complete and correct the first time they were submitted. The best health care systems achieve a clean claims rate of 94-97%. Getting claims right the first time eliminates retouches and streamlines payment. Analyzing the  Clean Claims Rate helps to unearth issues surrounding submission and processing that cause delays and denials.

Denial Rate

Denial Rate is strongly correlated with one’s Clean Claims Rate. The Denial Rate is the percentage of claims that are disputed or denied. Some organizations base this measure on the overall percentage of claims that were rejected. Others go further to assess denials at the individual charge line-item level.

Net Collections Rate

The Net Collections Rate indicates an organization’s effectiveness in being reimbursed for services at the amount “allowed” after all-payer contract adjustments are made. Most hover around 75-85% which means that 15-25% of claims have to be reworked and resubmitted, costing organizations precious time and denial or delay of revenue they should routinely receive.

In addition to the overall net collections rate, healthcare systems should assess net collections rate at an individual payer (third-party insurers, government programs) level. Doing so reveals instances where one or a small number of individual payers are significantly underperforming and, as a result, dragging down the overall net collections rate. Review contracts with these payers to address any misalignment with respect to pricing levels, in- vs. out-of-network criteria, and related variables.

Bad Debt Rate

Bad Debt, referred to by some as uncompensated care, is another indicator of collection effort effectiveness. Bad debt is essentially the variance between what patients were billed vs. what was ultimately paid. For most, calculating Bad Debt Rate is done by dividing overall bad debt by gross patient revenue over a period. High levels of bad debt reveal inefficiencies and problem points in earlier elements of the HCRCM cycle.

The above measures are by no means the only ones required for effective HCRCM practices. They do, however, provide clear indications of where healthcare systems should look first and where they should go deeper to identify underlying issues and implement sustainable HCRCM improvements.

Supporting Financial Health for Healthcare Organizations

The financial health of healthcare systems is analogous to patient health. When a healthcare system’s financial health is diminished, so too is its ability to fully focus on optimizing the care and experiences of its patients. Effective HCRCM is necessary in order for healthcare systems to operate efficiently and meet the needs of the communities they serve.

To get HCRCM right, healthcare systems need to focus on educating and enabling front desk professionals for success and continually assessing the procedures they follow to close any gaps that allow claims to be denied or delayed. Additionally, regular reviews of the right metrics will indicate where further inquiry and action may be needed and whether HCRCM efforts are performing as they should.


Are you struggling with these or similar issues? If you wonder sometimes what you don’t know, or need assistance preparing your business for new levels of growth, request a complimentary consultation today from a vcfo expert. We have worked with more than 5,000 business teams in our 25 years. We would love to talk with you, hear your story and concerns, and share our experience and collective wisdom to see how we can help.