Why Revenue Cycle Management is Necessary in Healthcare

There are many components that go into running a successful healthcare organization. From hiring medical staff to keeping the offices clean, each aspect of the practice needs careful tracking and management.

No matter the size of the organization, keeping track of revenue is paramount to making the organization successful. It doesn’t matter if the business is a multi-state hospital or a one-doctor practice.

Keep reading to learn more about revenue cycle management and why it’s important.

What Is Revenue Cycle Management, Exactly?

Revenue cycle management (RCM) in healthcare is the set of activities that tracks revenue activities. This includes billing, collecting payments, and claims processing.

To manage these activities, health care offices need medical billing software. This software helps them keep track of patient billing, claims filing, and claims follow up.

The overall RCM process also includes:

  • Collecting patient co-pays
  • Codifying and tracking claims
  • Inquiring about rejected claims
  • Patient eligibility

A well thought-out RCM system simplifies the process for doctors and staff. RCM systems can also communicate with electronic medical record software (EMR). This closes the gap between the business and medical sides of the practice.

What Are Current Problems With Billing in Medical Practices?

The main problem with revenue management in medical practices is human error.

Often, there is a lack of communication between administrative and medical staff about what has been recorded. This leads to long lag times in entering information and submitting claims.

Administrative staffers often don’t receive proper training on how to manage the revenue cycle. Most revenue activities occur in a waterfall manner. If one person does something wrong, the next person cannot complete his or her task.

Why Is RCM So Important?

The key to understanding the question “why is revenue cycle management important” is understanding how detail-oriented a medical practice is.

Medical offices need to keep meticulous records. Patient visits, claims filing, and full accounting records for tax purposes must all be kept.

The most important reason a healthcare organization needs an RCM system is to follow up on filed and denied claims. In 2015, The Centers for Medicare & Medicaid Services (CMS) reported that 10% of claims are denied. Of that 10%, 2% were from incomplete forms and 0.11% were from incorrect codes.

To put that into perspective, the CMS receives 4.6 million submitted claims each day.

Those denied claims are a huge drain on a practice’s money and time. An administrative staffer must find each mistake and resubmit each claim.

A revenue cycle management system can help minimize errors in claims filings. It can also help the administrative staff remember to follow up about re-submitted claims. These activities help put money back into the medical practice’s accounts.

An RCM can help with these other revenue-generating activities:

  • Reminding patients of their appointments (missed appointments = no revenue)
  • Automate administrative tasks
  • Help the billing department find inefficiencies and discrepancies in the accounts


Revenue cycle management is of the utmost importance to medical practices, no matter the size. Investing in an RCM can help a health care business save thousands of dollars each month.

Once you install an RCM, you’ll be amazed by how smoothly your practice’s billing and collections run.

If you’re sick of how your practice’s revenue is managed and don’t want to see more dollars fall through the cracks, invest in an RCM today!