When you work as a medical biller or medical coder, you may hear the term “revenue cycle” quite often. This is a process for ensuring correct reimbursement for medical services provided, allowing the operations of the medical facility to continue smoothly. An efficient revenue cycle management process provides oversight and systems to provide cash flow to hospitals, clinics, medical offices, and all healthcare facilities. There are specific steps in the revenue cycle, and processes for managing an accurate and timely billing cycle for every medical facility.
What is Revenue Cycle Management in Healthcare?
Revenue cycle management (RCM) is the financial management process that organizes medical billing and collecting revenue for the provision of medical services. RCM can be described as “all administrative and clinical functions that contribute to the capture, management, and collection of patient service revenue”. [1] The RCM process begins when a patient schedules an appointment and ends when the medical provider is compensated for health appointments, procedures, preventative care, diagnosis, treatments, surgery, or any other healthcare services provided. Compensation can be made through insurance reimbursement, government payers like Medi-cal or Medicaid, bill adjustments, or patient payments. Effective revenue cycle management will also help medical offices with regulatory compliance, patient communication, and overall patient satisfaction.
The Steps of Revenue Cycle Management
There is a process of revenue cycle management, which can be broken down into the following stages:
1 Pre-registration
The first step is scheduling the appointment and collecting a patient’s basic information and insurance information. You get their name, contact information, and insurance policy information. This information is sent to the insurance payer to confirm their coverage eligibility, and the medical team can confirm the patient’s deductible, co-pay, and total health coverage.
2 Patient Registration
In the patient registration step, the medical office collects the patient's personal details and medical history. Patient intake is completed, their insurance is verified, and forms are filled out for patient demographics and any allergies, emergency contacts, etc.
3 Insurance Verification
Next, the medical team verifies the patient’s insurance. Healthcare providers confirm the patient has an active insurance policy The medical team verifies coverage, and the amount so they know what is covered and how much the patient will pay out of pocket. Once the patient is given an estimate for their portion of responsibility, the team obtains authorizations for procedures. This ensures the insurance payer will reimburse the provider for their given portion of healthcare services.
4 Medical Coding & Charge Entry
In the medical coding and charge capture phase, all medical services and procedures are translated into universally understood codes, usually ICD-10-CM and CPT codes. These codes are used not only for medical records but most importantly for medical insurance claims. These standardized codes are used by every medical insurance company, as well as government insurance such as Medi-cal and Medicaid. The medical biller prepares an insurance claim for submission using these codes. Using the correct codes is important for preventing claims denial, undercharging, and overcharging.
5 Medical Claims Submission & Processing
The medical biller creates an insurance claim, scrubs it for potential flags, and submits it to the insurance payer for payment. The insurance company will review the claim and decide whether to approve, deny, or partially deny the claim. Insurance claims are submitted electronically using specialized software. The medical biller will also correspond with the insurance payer if there are issues, but a big part of their job is to study the compliance and payment policies to make sure the claims form is created and submitted without errors. Once the insurance company has paid their portion, the medical biller gives the patient a bill for their portion.
6 Payment Posting and Reconciliation
Payment posting is the recording of payments made by the insurance company to the medical provider on behalf of the patient account - easy enough to understand.. Reconciliation is when the medical biller compares the actual reimbursement amount to the expected reimbursement amount by the insurance company. This step is to ensure accuracy in accounting and identifying any potential discrepancies. The medical biller makes sure all payments are recorded and reconciled properly to minimize any gaps in revenue and send an accurate remaining bill to the patient.
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7 Claims Denial & Management (if necessary)
On occasion, insurance companies will deny claims, and the medical biller must review the denial codes to determine the reason for denials. While the medical biller can make corrections to the claim and appeal the denial, ultimately, the goal is to avoid claims denials altogether.
8 Patient Billing and Collection
After the insurance company has paid their portion of the claim, the patient is responsible for the remainder. The patient may be responsible for a co-pay at the time of the appointment, and there may be a yearly deductible set by their policy. Patients may get reminder bills or notifications, or they may have to set up a payment plan. In the event the patient doesn’t pay, it may go to collections.
9 Reporting and Analytics
Many medical practices use reporting and analysis to identify patterns in cash flow, payment collections, and performance indicators like denials and reimbursements. This is used to make financial decisions based on predictive modeling, and to look for areas of improvement.
What is the Goal of Revenue Cycle Management?
The goal of revenue cycle management is to ensure accurate and timely reimbursement for the healthcare services a practice provides. In an optimized healthcare revenue cycle, payers and patients are accurately billed for the appropriate services, and practices get paid what they’re owed on time.
The goal of revenue cycle management is to provide accurate and timely reimbursement for healthcare service providers. When the healthcare revenue cycle is running smoothly, insurance companies (payers) and patients are each charged appropriately for the correct procedures and treatments. This ensures accuracy in billing for payers and patients and in reimbursement for medical providers. Revenue cycle management also identifies points of deficiency and addresses concerns with compliance, wasted spending, and inaccuracies.
Why Revenue Cycle Management is Important
Every medical office, hospital network, and healthcare provider is dependent on an efficient revenue cycle for reimbursement. For day-to-day operations, RCM is necessary for private practices and healthcare organizations to receive proper reimbursement on time, so operations can be maintained.
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[1] Healthcare Financial Management Association, uploaded October 2024, https://www.hfma.org/wp-content/uploads/2024/10/revenuecycleoverview-n2hcoctober2024-mari.pdf , Accessed December 3, 2025.