Loading...

What is revenue cycle management in healthcare?

Published: September 10, 2024 by Experian Health

what is revenue cycle management in healthcare

As economists offer up their best guesses for the US economy over the coming year, healthcare leaders know one thing for sure: no matter what happens, they need solid revenue cycle management (RCM) processes to remain financially sound and deliver high-quality care.

Revenue cycle management connects the financial and clinical aspects of care by ensuring that providers are properly reimbursed for their services, through accurate and efficient billing and claims management processes. Keeping the financial scales tipped in the right direction is a growing challenge: data from the American Hospital Association shows that payer delays and denials are driving up operational costs while slowing revenue. Many providers are turning to artificial intelligence (AI), automation and data analytics to eliminate inefficiencies and maximize reimbursement.

Factors that affect healthcare revenue cycle management

While revenue cycle math is pretty simple – money in versus money out – the reality is more complex. A tight grip on delivery costs is just one part of the equation. Most RCM efforts center around determining who owes what and collating the necessary documentation to secure prompt payment from each party. A few factors to consider include:

  • Are there reliable processes for capturing accurate patient information?
  • How quickly can coverage and pre-authorizations be verified?
  • Are claims and denials managed efficiently?
  • How easy is it for patients to understand and pay their bills?
  • Can RCM leaders monitor and analyze staff and agency performance?

Changing payer policies, patients’ financial status and data management demands add to the challenge.

The goal of revenue cycle management

To achieve the primary aim of getting reimbursed in full and on time, organizations must reduce billing errors, submit clean claims and refine operational efficiency so staff can stay laser-focused on high-value tasks. But it’s important to look beyond the spreadsheets: selecting the right tools to deliver a transparent and compassionate patient experience will boost the bottom line, too.

History and evolution of RCM

RCM has shifted from largely paper-based processes to sophisticated software-based systems in just a few decades. Few could have imagined how those early healthcare information systems of the 1970s would evolve as electronic health records, standardized coding frameworks and digital data processing came to the fore. Changes in regulation and reimbursement models furthered the need for advanced analytics. And now, the rise of healthcare consumerism drives demand for the industry to open its digital front door. Organizations that commit to digital transformation will be in a stronger position to navigate today’s RCM challenges and meet the needs of digitally native consumers.

Relationship between patient experience and RCM

Experian Health’s recently published State of Patient Access Survey 2024 reveals the extent to which the patient experience affects revenue. Integrating patient-centered principles into RCM processes improves patient satisfaction, makes it easier for patients to understand and pay their bills, and leads to better financial performance overall.

Steps in the healthcare revenue cycle

A typical revenue cycle management workflow in healthcare follows the patient’s journey. Each touchpoint in the patient’s journey is an opportunity to check that patients, payers and back-off teams have the information they need to expedite payment:

  • Scheduling – When the patient books an appointment, administrative staff verify the patient’s insurance eligibility. This is a chance to make sure pricing is transparent and give the patient an estimate for the cost of care.
  • Registration – Next, the provider captures the patients’ medical history, insurance coverage and other demographics. Correct patient information on the front end reduces the errors that cause rework in the back office.
  • Prior authorization – Front-end staff check whether the patient’s insurance provider requires prior authorization for the procedure or service they need. Skipping this step can lead to costly denials and rework.
  • Treatment and follow-up – After treatment, the back office collates billable charges and assigns a medical billing code to the claim. Accuracy is paramount, as reworking claim rejections can drain resources.
  • Claim submission – Then, the claim must be submitted to the payer. Accurate and timely submissions prevent rejections and reimbursement delays. If a claim is denied, it must be resubmitted as quickly as possible to avoid lost revenue.
  • Collections – Once the payer approves the claim, the patient’s out-of-pocket costs are calculated and billed. Providing a range of convenient payment methods will increase the likelihood of prompt payment.

Regulatory and compliance considerations

At each stage in the process, staff must stay mindful of the regulatory and compliance frameworks governing revenue cycle management. These are primarily patient-centered. For example, the Health Insurance Portability and Accountability Act (HIPAA) safeguards patient privacy and sensitive health information, while the No Surprises Act seeks to make pricing more transparent.

Failure to adhere brings severe reputational and financial risks, as made painfully clear by recent headlines about the cost of cyberattacks within the industry.

Common challenges in healthcare RCM

For most providers, avoiding the cycle of claim denials and rework is the biggest challenge. A survey of 1300 hospitals found that denials by commercial payers had increased by 20.2%, while Medicare Advantage denials had increased by 55.7% between January 2022 and July 2023. Reliance on inefficient manual processes to track and monitor claims does little to help. A 2023 CAQH report shows that switching from manual to electronic claim status inquiries could reduce the time spent on each transaction by 17 minutes, saving the medical industry more than $3.2 billion overall.

Providers are also collecting increasing sums from self-pay patients. Financial pressures and uncertainty around coverage mean many patients cannot fully cover their medical expenses. Improving their financial journey with accurate upfront estimates, clear and compassionate communications, and convenient payment methods will accelerate payments. Unfortunately, there’s still some way to go: the State of Patient Access Survey 2024 found that 64% of patients had not received a cost estimate before care, and of those that did, 14% reported final costs that were much higher than expected.

Financial impact analysis

To track the financial effects of these challenges, healthcare organizations should identify key performance indicators (KPIs) aligned to their specific priorities. Conducting real-time monitoring and analysis of patient access, collections, claims and contract management metrics can flag up opportunities to prevent revenue leakage and maximize income.

Read more about how to identify the right KPIs for your revenue cycle dashboard.

4 ways to improve revenue cycle management in healthcare

When it comes to implementing specific revenue cycle management solutions, the following four tactics are likely to yield the greatest return on investment:

  1. Automate Access
    A healthy revenue cycle begins with quick, accurate and efficient patient access systems. Automated, data-driven workflows reduce the errors that lead to denials and rework. Online scheduling allows patients to easily book appointments, while solutions like Patient Access Curator use AI to capture all patient data at registration with a single click.
  1. Increase collections
    Maximizing patient collections while fostering a positive patient experience can be a delicate balance. Patient access staff must be the patient’s advocate, while ensuring the organization collects what’s owed. Giving patients upfront estimates of their financial responsibility and offering appropriate financial plans makes it as easy as possible for them to pay. Collections Optimization Manager allows providers to focus their efforts on the right accounts, through highly predictive patient segmentation.
  1. Streamline claims
    Automating claims management is another way to use technology to accelerate reimbursement. Claims management software verifies that each claim is coded properly before being submitted. Encounters can be processed in real-time with automatic alerts to flag any issues before the claim is submitted. Experian Health’s flagship AI Advantage™ solution helps predict and prevent denials by checking claims before they are submitted and calculating the probability of denial. It evaluates and segments denials that occur based on the likelihood of reimbursement following resubmission, and prioritizes the work queue so staff make the best use of time.
  1. Increase reimbursement
    Healthcare organizations that don’t stay current on payer policy and procedure changes risk payment delays and lost revenue. Providers and payers must be on the same page to quickly resolve mismatches between expected and actual reimbursement amounts. Automated payer policy and procedure change notifications help providers strengthen relationships with payers and avoid payment delays.

How healthy is your revenue cycle? Our revenue cycle management checklist helps healthcare organizations catch inefficiencies and find opportunities to boost cash flow.

Case studies

  • See how automated revenue cycle solutions helped Stanford Health optimize their patient collections strategy.
  • See how Schneck Medical Center prevents claim denials with AI AdvantageTM
  • Hear how UC San Diego Health used automation to improve patient billing and drive collections.

Getting the most out of revenue cycle management software

These case studies demonstrate that a successful revenue management strategy has three essential ingredients: data, software and training. Experian Health’s “Best in KLAS” revenue cycle management solutions are built on proven technology and proprietary databases, to help staff find new opportunities to bring in revenue. Experienced consultants are on hand to guide staff and ensure workflows are set up for the best results.

The future of RCM

Whatever the economic outlook, technology’s defining role in the future of revenue cycle management is undisputed. Payers are already leveraging AI to their advantage, and patients have come to expect convenient digital transactions—any providers that fail to embrace AI and automation-based RCM solutions will fall behind the competition.

Learn more about how Experian Health’s revenue cycle management solutions generate more revenue for healthcare organizations.

Related Posts

Learn the fundamentals of claims management in healthcare, including key steps, common challenges, and best practices to improve reimbursement rates and reduce denials.

Published: August 7, 2025 by Experian Health

Learn how key provisions in the 2025 budget bill may impact Medicaid, uncompensated care, and hospital finances - and how to prepare with the right revenue cycle tools.

Published: August 4, 2025 by Experian Health

Manual prior authorization workflows represent one of the most tedious and expensive aspects of the healthcare revenue cycle. However, despite access to automated prior authorization software, only 31% of providers use electronic prior authorizations, according to the Council for Affordable Quality Healthcare (CAQH). The CAQH predicts that providers who switch to automated prior authorization software could not only gain back valuable staff time, but also see significant cost savings. What is prior authorization and why is it important? In healthcare, prior authorizations are when providers and payers decide in advance if a patient's insurance plan will pay for a specific treatment. Prior authorizations are crucial to reimbursements and keeping revenue cycles on track. Providers that offer services without prior authorization are unlikely to receive reimbursement from the patient's insurer. This can result in unpaid medical bills, leaving billing teams chasing patient collections or writing off bad debt. During the prior authorization process, providers submit a rationale for a proposed treatment to the payer. The request is approved or denied based on certain criteria, including payer policies and medical necessity. The payer may reject a prior authorization request if the treatment or service isn't covered under the patient's insurance plan, if it's not considered medically necessary or if a more affordable alternative is available. Simple paperwork errors, like missed deadlines or incomplete documentation when submitting a prior authorization, may also result in a denial. Challenges of manual prior authorization processes Despite the importance of prior authorizations in the revenue cycle, tedious manual prior authorization processes present challenges for many healthcare providers. Some of the key obstacles providers face using manual prior authorization include: Heavy administrative burden Healthcare providers spend a significant amount of time starting, completing and revising prior authorization paperwork. An AMA survey found that 86% of physicians say prior authorization has increased healthcare resource usage. At the same time, additional AMA data reports that providers spend around 13 hours working on 39 prior authorizations each week, and nearly one-third of providers report that these prior authorization requests usually end up being denied. Changing payer policies Keeping up with multiple payers and ever-evolving payer policies adds strain on staff and ultimately results in prior authorization denials. Changes are often unannounced, making it hard for providers to stay on top of updates. As a result, prior authorization submissions aren’t always accurate and may be based on outdated rules. This can lead to instant rejection and wasted time correcting and resubmitting requests. Inefficient workflows Prior authorization requirements can be complicated, especially when providers are juggling different payers, standards and service lines. Coping with these complexities often puts strain on manual systems, especially when multiple staff and notetaking methods are involved. Staff members may each get different pieces of information from payer websites (or over the phone) and not have the ability to benefit from their shared knowledge efficiently. Navigating communication hurdles and rapid payer information changes can result in workflow inefficiencies that snowball quickly. How prior authorization software can improve efficiency Replacing manual prior authorizations processes with automated prior authorization software can help providers improve efficiency. Here are some key ways providers benefit from automated prior authorization solutions, like Experian Health's Authorizations. Reduces manual interventions: This solution limits guesswork, human errors, and misinterpretations by automating data originating from the EMRs. Automation saves staff time and energy and prevents frustration. Stays current with latest payer policies: The prior authorization system stays up-to-date with the latest regulations and payer requirements. Automatic updates provide staff with the most current information, eliminating the need for staff to visit multiple payer websites or cross-check data by hand. Provides real-time updates: Providers can promptly clear authorizations for service by proactively identifying authorization status as pending, denied or authorized. This allows physicians to make timely treatment plans and for patients to avoid disruptions in care. Reduces risk of denials: Through automation, electronic prior authorization software ensures the accuracy and completeness of submissions by automatically checking with payers and vendors to validate that the authorization is on file. Payers and providers also get a shared view of account information, reducing the need for prolonged discussions about the status of authorization and rework requests. Key features to look for in prior authorization software When implementing prior authorization software, look for a solution that offers a wide range of features to automate and streamline the prior authorization process. Experian Health's prior authorization solution, Authorizations, for instance, offers healthcare providers the following key features: Real-time knowledgebase: Access to up-to-date prior authorization requirements and criteria in the National Payer Rulesets Submissions support: Removes guesswork and directs users to the correct payer portal based on procedure Automated inquiries: Automates the prior authorization payer inquiry process Enhanced workflow: Dynamic work queues display status and guides users through next steps Postback: Allows users to easily send authorization status, number and validity dates to health information systems (HIS) and practice management systems (PMS) Image storage: Receives and securely stores payer responses in an integrated document imaging system Reconciliation: Provides insights into authorization variations and helps resolve them, so staff can take proactive steps to prevent denials and appeals Integration with electronic health records and billing systems: Why it matters Providers often choose a prior authorizations platform that seamlessly integrates with existing Electronic Health Records (EHR) and billing systems for maximum efficiency. Solutions like Experian Health's automated prior authorization management tool, Authorizations, easily adapt to existing processes. This eliminates the need for a complete workflow overhaul and minimizes the learning curve for staff. Embracing prior authorization software for a more efficient revenue cycle Revenue cycle leaders who implement prior authorization automation strategies could see significant savings – $494 million annually as an industry, according to CAQH data.  Claims and revenue management processes are often complex and outdated, costing healthcare organizations time and money. High denial rates and slow reimbursements can hurt cash flow and get in the way of financial stability. Automating prior authorization can reduce claim denials, speed up reimbursements and improve the bottom line. Learn more about how Experian Health's electronic prior authorization software, Authorizations, uses automation to achieve greater consistency and efficiency for healthcare organizations. Learn more Contact us

Published: July 30, 2025 by Experian Health

Subscribe to our blog

Enter your name and email for the latest updates.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Subscribe to the Experian Health blog

Get the latest industry news and updates!
Subscribe