Mastering Revenue Cycle Management: Key Components for Financial Success
By: N. Adam Brown, MD MBA, CMO Radiant Healthcare
Revenue cycle management (RCM) is the backbone of any healthcare organization’s financial health.
It’s the process that keeps operations running smoothly—from the moment a patient schedules an appointment to the final payment received for their care. However, its complexity often leads to inefficiencies that strain resources and impact bottom lines.
To thrive in today’s dynamic healthcare industry, hospitals need a well-oiled RCM process. But what exactly are the key components of RCM, and how can their improvement transform your organization?
Let’s break it down.
1. Patient Registration, Verification, and Preauthorization
A strong revenue cycle starts the moment a patient walks through the door.
Accurate registration isn’t just about collecting names and insurance cards. It’s about ensuring every detail aligns with payer requirements, setting the stage for smooth billing and timely reimbursements.
Preauthorization is the next critical step. Whether it’s an MRI or a complex surgery, getting approval from payers upfront means fewer denials and no financial surprises for patients. Skipping this step is a recipe for delayed payments or costly write-offs.
The secret weapon here is technology. Real-time eligibility tools verify insurance details instantly to check the fine print for coverage limits and exclusions. They also flag missing preauthorizations and alert staff to inconsistencies before they snowball into denied claims.
These tools save time and build trust by avoiding bill shock, which still affects around 57% of patients. When these systems work harmoniously, the result is simple: fewer headaches, faster payments, and a revenue cycle that actually cycles.
2. Charge Capture and Coding
Charge capture and coding ensure hospitals are paid for the care they provide. Every service—whether a diagnostic test, procedure, or treatment—must be properly documented and coded.
Even small mistakes—like a missed charge or an incorrect code—can lead to delayed payments or outright denials. Over time, these mistakes can cost hospitals vast sums of money.
Here's some math to consider. In the U.S., around 450 million claims are rejected each year with an average cost of $43.84 per denial. When those numbers are multiplied, we see that hospitals and health systems spend almost $20 billion each year on denied claims.
Periodic training for coding staff can help reduce the financial burden—but the most effective approach pairs that training with smart technology. Advanced coding software, for example, can alert terms to potential errors, make corrections, and adapt to changing coding requirements.
This combination of human expertise and technology makes the entire process faster, more reliable, and more cost-effective.
3. Claims Management and Submission
At the heart of RCM is the claims process, where hospitals turn the care they provide into the revenue they need to operate.
Claims management and submission involve compiling all the necessary information—patient details, coding for services, and payer requirements—and sending it to insurers for reimbursement.
Hospitals face several hurdles in the claims process:
Complex payer requirements. Each insurance company has its own approval rules, which makes it difficult for staff to keep up.
Data inaccuracies. Errors in patient demographics or coverage details can derail a claim entirely.
Limited transparency. Without visibility into the status of claims, pinpointing bottlenecks or identifying patterns is a guessing game.
Efficient claims management is crucial for a hospital's financial health, but the above hurdles persist. Indeed, a 2024 survey found that 73% of healthcare providers have experienced an increase in claim denials compared to just 42% in 2022.
Real-time error detection, standardized workflows, root cause analyses, and a dedicated tracking system all play an important role in strengthening claims management.
4. Denial Management
Claim denials cost hospitals time and money, with the average denial rate reaching 11% of submitted claims. In claims submitted to private payers for more expensive treatments, that number may exceed 15%.
In any case, recovering these denials costs up to $118 per claim over and above the provision of care. This cost adds up quickly for larger health systems that make thousands of claims each month.
Denials delay payments, disrupt operations, and require admin teams to make time for appeals and rework. Such is the investment of time and money that many hospitals choose to write failed claims off as bad debt.
To recoup lost revenue requires a proactive, data-driven approach. Denial management tools analyze patterns—like recurring coding errors or missing prior authorizations— to help hospitals resolve underlying issues.
Automation also plays a vital role, streamlining appeals to reduce manual workload and facilitating more rapid decisions. Adequate staff training further reduces denial rates by making sure claims meet payer requirements before submission.
Final Thoughts
Revenue cycle management is the engine that keeps your hospital running smoothly, but weak links can diminish the effectiveness of an otherwise functioning system.
Understanding your data can take your RCM from “good enough” to exceptional. Reporting and analytics give you the clarity to act, not just react. They help uncover hidden inefficiencies, spot trends in denials, and give you the insights you need to fine-tune your processes.
If you’re ready to explore actionable strategies in more detail, Radiant Healthcare’s new whitepaper has you covered. It’s packed with practical tips to streamline your RCM, reduce headaches, and boost your bottom line.
Want to take it a step further? Schedule a call with COO Jacob Byrlen and let's talk about how Radiant can help you build a smarter, stronger revenue cycle.
References
https://www.beckershospitalreview.com/finance/claims-denials-are-costing-hospitals-nearly-20b-per-year.html
https://www.medicaleconomics.com/view/claims-under-fire-three-reasons-why-denials-are-hitting-revenue-cycle-management-harder-than-ever
https://pmc.ncbi.nlm.nih.gov/articles/PMC10391242/
https://www.techtarget.com/revcyclemanagement/news/366599884/Private-payers-initially-deny-nearly-15-of-medical-claims
https://www.norc.org/research/library/new-survey-reveals-57--of-americans-have-been-surprised-by-a-med.html
