How to Optimize the RCM Process

How to Optimize the RCM Process

An AAPC Services revenue cycle management case study reveals where healthcare organizations are losing money.

Optimization of healthcare revenue cycle management (RCM) processes is a critical component of successfully managing a medical practice or organization. Timely and accurate collection of revenue leads to financial stability. A healthy revenue cycle process ultimately allows for greater focus on patient care, with less time spent on wasteful administrative functions. Analyzing the key components of the revenue cycle can identify potentials gaps in workflow, thereby allowing a targeted approach to training and education.

What Is RCM?

The Healthcare Financial Management Association (HFMA) defines the healthcare revenue cycle as “all administrative and clinical functions that contribute to the capture, management, and collection of patient service revenue.” These administrative and clinical functions work synchronously to carry out the revenue cycle. Even for practices or health systems with sophisticated practice management software, the revenue cycle process can be complex because it involves information being threaded through multiple areas.

Key Components of RCM

There are nine key components to RCM, starting with patient scheduling and ending with collections.

1. Patient scheduling and registration

According to a report published by Change Healthcare, 23.9 percent of claim denials are due to errors during front-end revenue cycle processes, such as registration and eligibility. This means that nearly one-fourth of all claim denials are preventable upfront. Patient scheduling and registration is the beginning of the revenue cycle process. Accurate collection and entry of patient demographic information is a crucial building block of the overall process.

2. Insurance eligibility and benefit verification

Verification of insurance eligibility is a crucial step in the revenue cycle process and should take place no less than once a month. Eligibility and benefit verification are generally automated through most practice management software or clearinghouse vendors. The patient’s insurance eligibility status is directly linked to claim denials and delay of payment for healthcare services. If the patient does not have active coverage, the claim will be either rejected or denied.

3. Time of service payment collection

Knowledge of details, such as the patient’s copay, deductible, and coinsurance percentages, helps to estimate the patient’s total financial responsibility at the time of service. In recent years, the Centers for Medicare & Medicaid Services (CMS) passed both the Hospital Pricing Transparency Rule (January 2021) and the No Surprises Act (January 2022). These initiatives brought greater focus to price transparency. Price transparency and knowledge of a patient’s benefits lead to higher patient collections, debt reduction, and improved patient satisfaction.

4. Medical record documentation

Medical record documentation is a significant component of the revenue cycle. The medical record establishes medical necessity for billed services. Any medical auditor will confirm it’s common to find insufficient documentation that does not substantiate the billed service(s) or documentation that warrants billing for additional services not previously captured.

5. Claim submission

Effective management of claim submission is a critical step in the revenue cycle. Beating the insurance timely filing deadline depends on time entry of charges and timely clearinghouse submissions. While charge entry is a manual process, the submission of charges can be automated, and automation is recommended whenever possible.

6. Claim edits

The base function of a claim edit is to prevent a claim denial. There can be several different levels of claim edits, but generally they are broken into two categories: edits performed on the claim prior to the claim leaving your billing system and clearinghouse, and/or payer edits performed once the claim has left your billing system. Regardless of where an edit stops the claim, it allows someone to manually intervene and correct an issue, thereby preventing a claim denial. Claim edits are less expensive to work than claim denials since, on average, over 60 percent of denials go unworked.

7. Remittance processing

Electronic remittance advice (ERA), explanation of benefits (EOB), and explanation of payment (EOP) are often used interchangeably and deliver similar information. Generally, when a payment is issued for a service, both the provider and the patient receive a notification detailing the result of the claim processing. Manual posting of remittance advice can be arduous and costly. The potential for error is increased with any manual process. Unfortunately, there is also potential for error with the automated process. Regardless of how your healthcare organization processes ERAs, what is important to the revenue cycle is that this process is done routinely, accurately, and that all information from the ERA is captured.

8. Denial management

Implementing an effective and efficient process for managing claim denials is likely the single most important action a healthcare organization can make to affect its revenue cycle. According to the American Academy of Family Physicians, the average cost of working a claim denial is $25. Most denials can be addressed by implementing preventive measures. Each denial reason has a counter measure that, if implemented consistently, can decrease your claim denial rate and increase your organization’s revenue flow.

9. Back-end patient collections

Out-of-pocket costs and patient liability rose to nearly 30 percent from 10 percent as a result of certain Affordable Care Act (ACA) provisions, causing a significant shift in financial responsibility in the healthcare industry. With the ACA, we have seen a significant increase in health insurance premiums with corresponding increases in deductibles. Patient payments are typically more difficult to collect than those from insurance, which delays overall revenue and can create cash flow challenges for smaller practices. Subsequently, the need for a strong back-end collection process has become more important than ever before.

Case Study

Background: Between January and September 2022, AAPC Services performed a revenue cycle audit for a 48-physician multispecialty health organization. The organization includes a small front office staff, providers who do their own coding, and a small group of non-certified billers who review edits and work denials. They presented to us with an undetermined denial rate due to posting errors and massive adjustments and were unsure of where to start. Our solution was to perform a 12-point revenue cycle audit.

AAPC Services 12-point Revenue Cycle Audit: All evaluation and management (E/M) codes, procedure codes, modifiers, units, and diagnosis codes were audited quarterly (10 charts per provider for each provider in the group) along with yearly first quarter (Q1) audits of current consent forms, front-end collections, claim edits, posting, denials, and back-end collections, as well as policy and procedure reviews. Each audit was followed by post-audit education for billers, physicians, and administrators. The Q1 audits also included root cause analysis for all errors found.

Note: Comparisons for bad debt assignment and appeals were not evaluated in this study due to our subject’s initial issues with posting and adjustments.

Total Overall Error Rates

The results of a comparison of combined audit error rates for 2021 versus 2022 are shown in Table 1.

  • Demographic errors increased 19 percent, while eligibility and verification errors decreased 46 percent.
  • Consent errors decreased 37 percent.
  • Errors related to the collection of copays, deductibles, and coinsurance increased from 0 to 9 percent.
  • Place of service errors decreased from one to 0 percent.
  • Coding errors decreased 11 percent.
  • Claim edit errors decreased 1 percent.
  • Timely posting errors decreased 1 percent.
  • Patient balance follow-up increased 5 percent.

* Unassessed in 2021 due to issues with posting and adjustment processes.

**Unassessed due to organizational decisions not to implement.

The Coding Breakdown

As shown in Chart 1, AAPC Services found an overall 69 percent of the E/M codes were reported accurately within the providers’ medical record documentation. Three percent were over-coded, and 20 percent were under-coded primarily as a result of the change in 2021 CPT® E/M guidelines. Eight percent were coded in the wrong category due to telehealth visit documentation.

As shown in Chart 2, AAPC Services found that 84 percent of the reported CPT® codes were supported within the documentation in accordance with the American Medical Association (AMA) and CMS guidance. Eleven percent of CPT® codes reported incorrectly due to inadequate documentation. Additional codes were added totaling 5 percent due to existing documentation.

As shown in Chart 3, AAPC Services found that 89 percent of the reported ICD-10 CM codes were correct. Eight percent of reported codes were incorrect due to specificity or insufficient documentation. Three percent were added in accordance with ICD-10-CM coding guidelines based on existing documentation.

As shown in Chart 4, AAPC Services found 81 percent of reported modifiers were correct. Three percent were incorrect primarily relating to telehealth, and 16 percent were added predominantly in the areas of telehealth and Clinical Laboratory Improvement Amendments (CLIA) waived tests.

As shown in Chart 5, AAPC Services found 85 percent of reported modifiers were correct, 11 percent were incorrect due to insufficient documentation, and 4 percent were added related to injections.

Challenges and Outcomes

Approximately 75 percent of practices said that staffing was their biggest issue at the start of 2022. This undoubtedly affects RCM from many angles. That was followed by the learning curve for telehealth institution. Both of these coupled with simple lack of understanding about how the revenue cycle components work together produce the types of statistics shown above.

For numerous reasons during the COVID-19 public health emergency (PHE), there have been high turnover and long-standing vacancies in healthcare. Lack of assistance in this case drove help away from denials and patient collections to assist with duties such as benefit verification. As a result, there was a decrease in the number of errors related to benefit information (46 percent) and a 5 percent error rate related to the timeliness and accuracy of denial processes.

The addition of telehealth services and the ever evolving and varied guidelines related to those services brought challenges in multiple areas. Accurate demographics and consent forms were harder to obtain for offices performing telehealth visits as their primary service in a time where patients’ lives were changing daily. In the AAPC Services case study, demographic errors shot up by 19 percent; and while consent form errors decreased, 28 percent is still excessive and may present several compliance issues.

In tandem with the limited contact and difficult or inefficient processes, there were patient collection errors both at the front end (9 percent more errors) and the back end (5 percent more errors) increase with a failure to implement strict payment collection policies for telehealth visits. This is not unlike most organizations, with nearly 20 percent of organizations reporting leniency in payments during the COVID-19 PHE. Once the telehealth processes stabilized, however, coding became a bit easier for providers (with a little help from proactive E/M guideline training). Coding accuracy improved by 11 percent and zero place of service errors occurred in 2022. Better accuracy means cleaner claims. In turn, edit and posting errors decreased 1 percent.

Most importantly, what this case study shows is a clear picture of a global process in which each area affects the next. Implementing clearly defined processes on the front end, delivering clean, well-documented claims with accurate demographics, and collecting copays up front can save you the trouble of extensive denials and backend patient collections. Industry metrics allow that clean claims should meet or exceed 90 percent, with family practice and internal medicine leaning closer to 95 percent.

Help Is Out There

Staffing is the greatest challenge for most organizations, but there is help. There are agencies, including AAPC, that place coders and billers. Outsourcing is another option. While it’s a huge decision, if your organization is taking a financial hit simply because you don’t have employees to do the work, it may be the right decision. In some cases, you may even be able to outsource temporarily until you get your staff hired and trained.

AAPC Services can assist in identifying problem areas and developing a plan to tackle the issues. You might have a situation where you have identified where problems lay for your team and can seek specified help. AAPC Services can assist with training, backlog, and staffing support for billers and coders. Another option is working to get the people you already employ certified in your areas of need. AAPC Services also offers prospective and retrospective audits so you can have confidence in the quality of your submissions.

There are still plenty of changes to come. Be proactive in education about coming changes in coding and compliance requirements. If you don’t have someone on your team to provide that training, seek outside services. AAPC Services offers virtual options for individuals and groups. If you are unsure where to start, consider having an audit of your complete revenue cycle using our 12-point system to identify areas of risk. We can make recommendations to get your organization on its way to increased compliance and revenue.


Desiree Diggins-Brooks, BSHIM, RHIT, CPMA, CCS-P, began her healthcare career in 2009 as a medical assistant before finding her niche in revenue cycle management. She earned an associate degree in health information technology and a bachelor’s degree in health information management. She is a multispecialty coder/auditor. Her current role is Director of Revenue Cycle Management for AAPC Audit Services.

Jessica Whitney, CPC, CPMA, AAPC Approved Instructor, began her career in healthcare 25 years ago at Blue Cross of Idaho working in both provider relations and claims. After several years, she transitioned to practice management and has managed in both small, privately owned as well as large multispecialty hospital-owned practices. She has spent over 20 years refining her expertise in practice management with a strong focus in coding and revenue cycle management for practices of all sizes. Whitney also has in-depth knowledge of the credentialing and contracting process as well as experience in reimbursement analysis. She is a national speaker and author, with experience in primary care, telehealth services, pain management, OMM, and podiatry.


2 Responses to “How to Optimize the RCM Process”

  1. Jeannette Duerr says:

    Was there an audit of denials caused by lack of proper provider credentialing? We find that to be a top cause for denials when we first onboard clients. Another is wrong configuration of the practice management software. You point out two others – eligibility issues and clinical staff not properly coding.

  2. Lee-Fifield says:

    Jeannette, you can find the breakdown for types of errors in table 1.

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