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Why Is Revenue Cycle Management Important in the Healthcare Industry?

what is revenue cycle management in healthcare?

Revenue Cycle Management (RCM) plays an important role in the healthcare industry. Managing revenue is vital for any business but may not be the primary focus of healthcare providers. However, these providers need revenue to pay for medical supplies, salaries, equipment, and more.

Healthcare costs are increasing with technology adoption in a time when an aging population is foreshadowing increased demand for care. Insurance and medical suppliers are placing an increased burden on patients and providers. Value-based healthcare payment models are also reshaping how providers can approach revenue cycle management.

What Is Revenue Cycle in Healthcare?

Revenue Cycle Management is how an organization handles the finances and processes associated with different steps of patient care from start to finish. It begins when a patient is first encountered or scheduled for an appointment and continues through the services provided to the billing afterward. Patient scheduling offers the opportunity to gather information vital to the claims process, such as insurance information, to verify eligibility.

The healthcare revenue cycle process includes coding medical services and billing insurance. Making sure that patients have eligible insurance on file can help in determining costs for various treatments. Faster and more accurate claims transmission allows for greater flexibility in arranging patient care.

After medical services have been provided, another key medical billing RCM process emerges. Managing past due patient accounts and accounts receivables impact the provider’s cash flow through collection times. The revenue cycle in healthcare also includes bad debt or managing uncollectible patient records. When patient accounts are up to date, the cycle continues with scheduling the patient’s next visit and perhaps even offering reminders.

What Is Revenue Cycle Management in Healthcare?

While there are variations between provider types and how the specifics are handled, medical revenue cycle management revolves around the finance and administrative side of the organization.

What is RCM in medical billing? This includes not just patient collection issues but also costs and efficiency of claims submission. These factors are also impacted by staff training.

revenue cycle management process in medical billing

Medical billing has been impacted by recent changes to healthcare models that now focus on value-based care. In addition to this, medical providers have also recently been required to transition to new diagnosis codes ICD10. For more information on understanding the hospital revenue cycle and for assistance with various related issues, consider Nearterm’s Healthcare Revenue Cycle Consulting.

Why Is Revenue Cycle Management Important in the Healthcare Industry?

There are many benefits to efficiently managing your revenue cycle. The overall goal is to increase revenue throughout the various processes by first identifying points of friction and then resolving them.

These problems may include fraud, waste, and abuse such as unnecessary tests and procedures. For some healthcare providers, revenue and finances are not the primary concern. Some may be more focused on patient care.

Problems and issues with an RCM process in healthcare can impact various other processes and take time away from patient care or medical training. The rapid pace of technological improvement has also greatly improved medical billing through electronic data interchange made available by healthcare clearinghouses and electronic claims submission. Technology has improved many other areas but also resulted in new security issues.

Medical revenue cycle management also includes medical records and how they are accessed and stored for billing purposes. Recently there has been an increase in attacks on medical organizations aimed at accessing medical records. These records and other personal health information (PHI) are protected by federal law such as the Health Insurance Portability and Accountability Act (HIPAA) Privacy and Security Rules.

Ensuring medical records are properly protected while processing financial information is a key concern that could potentially detract from patient care. This emphasizes the importance of health information management at your organization. Effective hospital revenue cycle management will include the security of PHI and patient financial information.

Finally, the RCM process in healthcare is important because it can be analyzed to find a process that can be automated safely leading to more time spent with the patient. For more information on why you should outsource your RCM administrative and financial needs contact the healthcare management consultants at Nearterm today!

Revenue Cycle Management Process in Medical Billing

why is revenue cycle management important in the healthcare industry?

The healthcare revenue cycle management process traditionally involved long delays between patient care and associated payment as claims submission was a lengthy process. This is the communication between healthcare providers and the patient’s insurance companies to negotiate payment for services as well as negotiating payment with patients.

What insurance will pay for is impacted by many factors including the patient’s specific plan and what diagnosis codes the provider submits. The medical billing RCM process involves preparing a claim and sending it the insurance. These days technology allows for rapid claim inputting and submission as well as automated “scrubbing” to ensure these claims meet basic requirements for acceptance.

Claims can be rejected for a wide range of problems ranging from a lack of information, improper coding, compatibility issues, and system errors. The number of claims that pass on their first attempt is a key metric to consider in the revenue cycle for medical billing. Multiple claims rejecting for the same errors could be caused by problems with the inputting process as a result of a lack of training. They may be resolved with the proper medical billing denial management process.

Electronic claims can allow for immediate approval for procedures and services from a patient’s insurance company. This can allow a provider to offer a range of services to the patient and increases the likelihood of receiving associated payments. Thus efficiently managing claims allows for greater flexibility in patient care concerning their finances and ability to pay. It also allows the potential for decreasing collection times on services which translates to increased cash flow and better Key Performance Indicator ratios.

On the extreme side of the revenue cycle is the issue of outstanding payments leading to bad debt. Managing the collections process is not always pleasant and will detract from providing valuable care to patients, especially to those in need. Some providers choose to write off the bad debt as a loss.

Efficiently managing RCM, at many different steps in the process, may help to decrease the number of cases that reach bad debt. One powerful solution to these issues is to contract with a third party Healthcare Revenue Cycle Management company. Nearterm’s Healthcare Management Consultants can offer experienced RCM consulting to help increase cash flow, lower bad debt expenses, improve patient satisfaction with financial services, as well as reduce operating costs and increase productivity.

Contact the Nearterm team oday for more information about how our services can make you more productive and profitable.


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What is Health Information Management & Why Is It Important?

what is medical health information management

Individuals involved in healthcare around the world acquire and generate a significant amount of personal health information about patients. The scope of health information includes not only personal information and private health data, but also associated payment forms and transactions. Clinical notes, pharmacy, and outpatient care records are also covered health information.

As technology has developed, it has greatly increased the potential for reliability, speed, efficiency, and usability of medical records. However, this also increased the ability for information to be misused, sold, and accessed without an individual’s consent.

As technological advancements outpaced ethical and legal policy, it became necessary to define medical/healthcare information management.

What is Health Information Management?

According to AHIMA; “Health Information Management (HIM) is the practice of acquiring, analyzing, and protecting digital and traditional medical information vital to providing quality patient care.”

The American Health Information Management Association (AHIMA) was formed to define and oversee the training and educating of Registered Health Information Technicians (RHIT) and Registered Health Information Administration (RHIA) certifications.

In tandem with this association, several laws were passed to support patient rights and the practices involving HIM. The Health Insurance Portability and Accountability Act (HIPAA) along with subsequent Privacy and Security Rules were designed to address many issues in this field. These were augmented by the Health Information Technology for Economic and Clinical Health Act (HITECH) which requires contingency plans for emergencies and for when PHI health information management technology systems are impacted.

Besides regulations and requirements for covered entities, these laws also moved to standardize many aspects relating to HIM. Recently healthcare has started transitioning to value-based therapy reflecting each organization’s role in overall healthcare management.

What is HIM in Healthcare?


Health Information Management is essential for healthcare providers and other HIPAA-covered entities to ensure patient information privacy and security. HIM involves medical coding and billing, ensuring compliance with government regulations, and handling customer requests for Personal Health Information (PHI).

This field also involves medical records retention and transition to electronic formats, as well as analysis of health care trends and the implementation of improvements. Because healthcare information overlaps many different areas in any healthcare cycle, it became necessary for many organizations to create HIM departments to oversee these important requirements are adhered to as well as managing training and education of staff.

Healthcare Information Managers would oversee all facets of an organization’s collection and retention of records as well as security, privacy, analysis, and implementations, coding, billing, and compliance.

Healthcare information managers work in healthcare organizations and associated businesses around the world. These include hospitals, dentists, pharmacies, chiropractors, and third-party healthcare services.

Security and HIM

Healthcare breaches have become a significant problem for healthcare providers today. In 2015 almost 100 million healthcare records were breached by cyber attacks. The impact from breaches has declined since then due to the implementation of privacy and security regulations for healthcare providers; however, the number of attempted breaches has increased over that same time.

As attackers become more organized or sophisticated the potential for successful breaches will increase unless organizations keep pace or excel with relevant health information management practices. Those interested in stealing health information may also gain access through the front door. In organizations that utilize unsecured wireless networks, or have lax regulations concerning secured network devices, someone could gain access from within and walk out with the data.

Role of a Health Information Manager

importance of health information management technology

What a healthcare information manager does will vary by organization. Many roles in this field require one to first pass an accredited academic program as well as a certification test. These roles include collecting and securely storing medical records and Protected Health Information (PHI).

Healthcare facilities often utilize coders and claims specialists, even third-party medical coding services, to handle medical records and healthcare revenue cycle management. HIPAA rules also impact what information you share with business associates. Your organization might be liable for damages even if a breach occurred due to a third-party business, which is why it is important to choose certified HIM companies.

In addition to the roles above, HIM staff would also implement and enforce security and privacy rule adherence on top of designing and improving network security.  At a minimum, this includes considering administrative, technical, and physical safeguards for traditional and electronic PHI.

Health information management duties can also include analysis and implementation of improvements. For example, an analyst might use the aggregate available information to determine patterns in various areas which can be used to devise improvements to an organization.

Importance of Health Information Management

HIM is vital for every healthcare organization and associated business. Not only are there legal requirements that must be adhered by to receive certain incentives and avoid penalties, but organizations have an ethical responsibility to protect PHI in their possession.

Breaches impact patient trust in a healthcare provider and may prohibit a patient from sharing vital information for fear of exposure. Hackers can also steal patient payment information causing residual harm such as identity theft and stolen money. Both of those factors can impact a patient’s willingness to seek care at certain providers.

A focus on HIM also allows an organization many positive benefits such as the potential for increased efficiency and optimization of healthcare information system access and other key aspects involved with revenue cycle management. A coordinated effort to standardize and efficiently operate tasks involving PHI will take a manager dedicated to the task, especially in larger organizations.

For healthcare management consulting, or for more information on HIM and how it may impact your organization, please contact Nearterm today.


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Top Revenue Cycle Key Performance Indicators

physician revenue cycle metrics

Healthcare organizations must manage their revenue cycle with an approach that balances patient care and quality. Due to increasing medical and drug costs paired with higher insurance premiums and deductibles, efficient revenue cycle management (RCM) is more important than ever.

There are many indicators one could use to gauge the effectiveness of various elements of the revenue cycle for their organization. However, these vary based on the type of organization doing the measuring. A pharmacy will value certain indicators more than a hospital might, and vice versa. Therefore, revenue cycle Key Performance Indicators (KPIs) will differ for each organization.

The Healthcare Financial Management Association (HFMA) approached this problem and determined 29 KPIs as a standard for healthcare revenue cycle excellence known as the MAP Keys. Regardless, some of these KPIs will not apply to certain organizations, and some will be valued more than others.

Revenue cycle performance benchmarks found in the MAP Keys can help determine where your company currently performs as well, as track improvements over time to desired levels.

To determine your organization’s best benchmarks and KPIs, you can reach out to one of our experts at Nearterm today.

Healthcare companies come in all sizes, from national pharmacy chains and large hospitals to small-town clinics and stand-alone providers. Some smaller organizations may need to hire additional staff to work on medical billing and revenue cycle management. These costs can add up, especially when considering training and education, turnover rates, and work limitations requiring multiple employees for each role.

Due to these factors, common financial tasks such as collections and medical accounts receivable services are often outsourced to third parties. You can also improve your RCM with the help of healthcare RCM companies. Modern technology allows for more efficient and seamless integration of third-party services (like healthcare clearinghouse services) than ever before.

5 Important Revenue Cycle KPIs

Here are some of the top KPIs to consider tracking now to measure important aspects of the revenue cycle:

  • Point-of-Sale Service (POS) Cash Collections
  • Clean Claim Rate
  • Days in Total Discharged Not Billed
  • Bad Debt
  • Days in Accounts Receivable

Point-of-Service (POS) Cash Collections

This KPI tracks POS collection and relates to payment received before services rendered and up to seven days after. This will help determine the effectiveness of your POS systems and those operating them.

This revenue cycle performance metric can be found using information from your POS system and your accounts receivable records. It can be calculated by taking the POS payments and dividing it by the total self-pay cash collected.

Tracking this and related revenue cycle metrics can identify problems in POS operations that are impacting RCM. Decreased efficiency in up-front payments may lead to increased collections and thus a loss of revenue. However, organizations with typically higher payments that require long-term payment options (greater than seven days average) may not benefit from this metric as much.

Clean Claim Rate

The clean claim rate corresponds to the claim denial rate in that it helps reveal problems and inefficiency in claims submitting and processing. Rejected claims require time to correct and may incur extra charges. The longer it takes to submit claims and resolve them, the longer it takes to determine eligibility and receive payments.

While there are many KPIs that relate to claims processing efficiency, the clean claim rate will show the average daily number of claims that pass without needing editing compared to the total number of claims accepted. This metric reveals the effectiveness of your claims processing and medical billing team. You can usually obtain this information from your claims management system or RCM Company.

Days in Total Discharged Not Final Billed (DNFB)

This healthcare key performance indicator helps determine revenue cycle performance by focusing on the claims-generation process. Variations of this metric will show the impact on cash flow due to claims inputting, and it can include issues related to delayed claims. A higher rate may reveal that claims are not be submitted promptly and warrants further investigating.

For example, if staffing issues are keeping claims from being submitted in a reasonable time-frame, it impacts your revenue cycle. You can calculate this metric by dividing the gross dollars in DNFB by the average daily gross patient service revenue, which is determined by the income statement and unbilled accounts receivable.

Bad Debt

Another useful KPI to consider is Bad Debt, which shows the effectiveness of collection efforts. It can also be used to determine the effectiveness of pre-service financial counseling or similar programs. It is important to note that this is not debt that has already been written off as lost.

Higher bad debt indicates inefficiency in previous areas of the revenue cycle including POS collections and financial counseling. It can be calculated by dividing bad debt from the income statement by gross patient service revenue over a set period.

Days in Accounts Receivable (A/R)

Finally, Days in A/R reveals how long it takes to get paid for services on average. This is useful in determining the effectiveness in obtaining payment for services, and how well the account receivables are being managed.

To find this KPI divide the total A/R by the average daily net patient service revenue using information from the balance sheet and income statement. To get the average daily net patient service revenue, you can also divide total annual sales by 365.

revenue cycle key performance indicators


There are many different performance indicators that healthcare businesses can use to benchmark and track various aspects of their revenue cycle. The key performance indicators to focus on will vary by organization type.

The Healthcare Financial Management Association developed 29 KPIs for healthcare companies and an additional six physician revenue cycle metrics. Of those, there are several that stand out as closely related to revenue cycle management. These are POS Cash Collections, Clean Claim Rates, Days in Total Discharged Not billed, Bad Debt, and Days in Accounts Receivable.

Calculating and tracking these revenue cycle KPIs will help identify problems or areas of improvement for your revenue cycle. However, it is not always practical or cost-efficient for a healthcare company to manage their revenue cycle in-house. Besides the various RCM metrics that could be tracked and identifying which are most important, there is also the need for quick and efficient medical billing, claims work, and financial management. On top of this is the need for constant training and education for staff working in these areas. Because of these factors, many healthcare organizations choose to outsource these important functions to qualified experts or healthcare management consulting firms like ours.

To find out more about how you can improve revenue cycle management efficiency and save on costs, contact our experts at Nearterm today.


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What is a Healthcare Clearinghouse & Why Use One?

Modern medicine in the United States includes a complex relationship between healthcare providers and insurance payers. Technology plays a critical role in electronic data interchange (EDI) between payers and providers, but the wide variety of software systems used can make seamless connection difficult.

The Health Insurance Portability and Accounting Act (HIPAA) addresses the importance of patient privacy regarding the protection of health information as well as the need for secure electronic data interchanges (EDI). Due to these factors, it is necessary for healthcare providers to consider their billing practices carefully.

Part of that billing process involves the option to submit claims to a healthcare clearinghouse rather than directly to insurance companies. Let’s break down the clearinghouse meaning in medical and hospital billing.

What is a Healthcare Clearinghouse?

A medical claims clearinghouse is a third-party system that interprets claim data between provider systems and insurance payers. According to the Department of Health & Human Services, a health care clearinghouse is a “public or private entity, including a billing service, repricing company, or community health information system, which processes non-standard data or transactions received from one entity into standard transactions or data elements, or vice versa.”

Typically, a healthcare claims clearinghouse will “scrub” or check a claim for errors before submitting. Once a response is received, the electronic claims submission clearinghouse transmits either a denial or acceptance back to the healthcare provider.

National health insurance clearinghouses allow providers to confidently outsource a vital function of the billing process whose difficulty is one of the current issues in healthcare administration.

Issues in Processing Healthcare Claims

Billing for hospital and provider services and supplies can be a challenging process in this complex environment. The International Classification of Diseases Tenth Revision Clinical Modification (ICD-10-CM) coding system includes over 68,000 diagnosis codes to identify procedures and treatments to be used in health care claims. Frequently, the use of medical coding services is required for the accurate coding of healthcare claims.

what is a healthcare clearinghouse?

In 2016, there were 5,977 insurance companies in the U.S. with “$507.7 billion, or 2.7 percent, of gross domestic product,“ (, 2018). Those thousands of insurance companies were exceeded by the number of healthcare providers such as hospitals, doctors, nurses, dentists, chiropractors, pharmacists, and durable medical suppliers across the country. Matters get more complicated when considering that many providers and insurance payers use incompatible software or systems of communicating protected health information (PHI). Also, different states have non-matching regulations regarding insurance and claims submission.

Problems in claim submissions can result from human error, mismatched diagnosis codes, improper calculations, coverage denials, or invalid EDI address and payer information to name a few. Issues can also arise over the mismatch between software used and establishing a secure connection between healthcare entities. Claims correction and denial management in medical billing adds to the workflow and can delay or negate payments.

Recent changes in U.S. healthcare laws and subsequent effect on insurance companies has resulted in tightening cash flows for many providers. Rising healthcare costs have greatly impacted provider profitability.

On the other hand, insurance company philosophy might consider the importance of encouraging patient responsibility for healthcare management by passing on a greater share of the medical cost as a co-pay or deductible. This has the possible negative effect of pushing patients away from costly but necessary procedures or medicine. The patient might instead follow through on treatment and slide into debt or possibly fail to pay the provider by way of personal bankruptcy. This could leave the provider eating the cost of care which impacts revenue.

Why Use a Medical Billing Clearinghouse?

Efficient claim submission involves many steps starting with the hospital that prepares a claim for services. In order to maximize revenue, it is necessary to optimize the claims process and the revenue cycle continuum. This involves analyzing the claims and billing process for possible improvements.

Contact Nearterm for more information on our healthcare revenue cycle management services today.

Error checking or claim “scrubbing” is one of the primary functions of an electronic claims clearinghouse. This allows a provider to quickly check if a claim will pass the basic requirements to be accepted by an insurance company. Insurance-specific error scrubbing decreases the time needed to successfully process a claim from days or weeks to seconds or minutes.

electronic claims submission clearinghouse

Providers, especially smaller ones, don’t have the knowledgeable staff or resources to match this third-party scrubbing efficiency for each insurance type. Larger electronic medical billing clearinghouses have established relationships with multiple insurance payers by ensuring software compatibility and learning their systems over long periods of time. This can help the medical clearinghouse companies explain rejections to providers and offer guidance to meet the insurance company claim expectations.

Medical clearinghouses can process single or multiple transactions and allow quick claim updates on client dashboards. There is also the added benefit of only needing one portal to manage claim information rather than a separate account for each insurance company for direct billing. Faster and more reliable healthcare coverage determination and claim submission allows providers shorter payment cycles, and as a byproduct, more accurate financial forecasts. Using an electronic healthcare clearinghouse also reduces the number of paper claims needed with subsequent positive effect on the environment.

Final thoughts on Clearinghouses and Health Insurance
While the healthcare industry is complex and has many issues, a health system or hospital can improve the efficiency and speed of electronic medical billing by using a healthcare clearinghouse. These HIPAA-covered entities can process multiple claims to a variety of insurance companies to overcome software incompatibility.

The main benefits offered by insurance billing clearinghouses are fast payment, error scrubbing and assistance, reductions in administrative costs, and finally a single source of handling claim submissions and status. The faster Medicare, Medicaid or a commercial payer are billed correctly, the faster they pay. The faster a patient is provided an accurate bill for an amount not covered by insurance, the quicker the money can be collected and utilized to improve another patient’s health.

Contact Nearterm Today for More Information

Contact the experts at Nearterm today for more information on how to optimize your billing process and medical accounts receivable.


References (n.d.) How to Select a Good Clearinghouse – 7 Things You Must Know. Retrieved from: (2015) Healthcare Common Procedure Coding System (HCPCS) Level II Coding Procedures. Center for Medicare & Medicaid Services. Retrieved from: (2017) Disclosures for Emergency Preparedness – A Decision Tool: Is the Source a Covered Entity? U.S. Department of Health & Human Services. Retrieved from: (2018) Facts + Statistics: Industry overview. Insurance Information Institute. Retrieved from:

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