What Is RCM in Health Care? Revenue Cycle Management Explained

You’ve probably heard RCM (revenue cycle management) used in health care before, but do you know what it does? In health care, aiding and treating patients is a given, whether in a small clinic or a large hospital. You’re likely at ease as a patient because you have health insurance to reduce costs. 

While patients may have the comfort of health insurance, health care workers face obstacles in terms of compensation and career advancement. So what is RCM in health care?

This article delves into RCM’s significance, advantages, and implementation in health care, and how it can enhance maintenance approaches and patient outcomes. So, let’s dive in!

Key Takeaways

  • Revenue cycle management (RCM) is used by health care facilities to identify, manage, and collect payments for services received.
  • RCM combines the clinical and business sides of health care to help match a patient’s needs with available resources and check for insurance coverage.
  • It is made up of three phases: Patient Access/Pre-Cycle, Mid-Cycle, and Post-Cycle — each one involving several key components, such as scheduling, registration, coding, charge capture, and more.
  • Benefits of an effective RCM include improved billing and collection processes and patient experience, while challenges involve errors in billing and collections, processing and monitoring, or lack of talent.
  • Technology can be implemented to make revenue cycle management easier, such as EHRs/PMS systems and AI/ML software.
what is rcm in health care

Definition of Revenue Cycle Management (RCM) in Health Care

Health care revenue cycle management is used to help identify, manage, and collect money owed for services that patients receive. Regardless of size, medical facilities need to properly manage clinical and administrative functions connected to payment, claims processing, and revenue generation.

After all, a medical practice is still a business, which means they would still need to keep up with expenses while earning enough to continue operations at the level required to provide quality health care. Without RCM, health care organizations will find it difficult to achieve this.  

How Does RCM Work

An RCM system combines the clinical and business sides of health care. That is, it connects such data as the patient’s personal and insurance information with their health care data, including any information on treatment received in the past. 

In doing so, an RCM system makes it easy for staff to check a patient’s insurance coverage, among other information, when said patient schedules an appointment. RCM also helps a health care provider summarize the patient’s treatment and care before sending it to the insurance company. 

This is done so the health care provider can see how much the insurance company will pay, and how much the patient will have to shoulder. Once they have this information, the billing department can tell the patient how much they need to pay out of pocket on top of their deductible or co-pay. 

As you can imagine, this can get confusing if the medical facility cannot check how much they’re supposed to receive from all parties involved and if patient data isn’t consolidated in some way. The nature of RCM as a treatment and payment tracking process makes the system an important one for any health care provider.

RCM Process Phases

The revenue cycle management process itself is made up of three phases, each one involving several key components:

  • Patient Access/Pre-Cycle
  • Mid-Cycle
  • Post-Cycle 

Key Components of RCM

Here’s an overview of key components that happen at each phase of RCM, and what the key components entail. 

Patient Access Phase

Also known as the pre-cycle phase, this encompasses scheduling, registration, insurance verification, and authorization. 


Patient scheduling involves matching health care resources with a patient’s needs, which is crucial for reducing the amount of time a patient has to wait before receiving care. It can also help improve how and where health care providers use critical resources.


A patient registration specialist takes charge of this component, collecting information that will help identify the patient, including any demographic data. 

This is crucial because any missing information can lead to patient records getting mixed up, which will create more work for everyone involved as they strive to correct the records.

Insurance Verification

This part of the process checks a patient’s insurance coverage, verifying any benefits they’re entitled to receive. This is also necessary for expediting payment later on in the cycle. 

As you can tell, a lack of patient information at this stage can delay verification or even lead to a denial of coverage, which can affect the patient’s care. 


This component involves getting a guarantee or agreement from the insurance provider, also known as the payer, that they’ll cover specific services before or after the health care provider performs them.


As this part of the cycle encompasses only three components, it’s the shortest of the three phases. But that doesn’t make it any less important. 

Charge Capture

This is part of the cycle where health care workers record information on their services and the appropriate charge. A representative of the medical facility will then send these charges to the insurance company or companies for proper reimbursement. 


A coder — either at the medical facility or a medical coding service — will transform health care diagnoses, procedures, equipment, and services into universal medical alphanumeric codes. This is to help make information easier to file. 

Clinical Documentation Improvement and Auditing 

CDI or clinical documentation improvement has to be timely and accurate. It also has to reflect the scope of services that a patient receives. 

Auditing, meanwhile, is supposed to validate documentation and clinical coding to ensure that any medical service added to a patient’s record reflects the care they received — no more, no less. 

Indeed, both are necessary to determine the representation of care and the accuracy of the same, making it easier to encode and add to a patient’s information. 

Post-Cycle Phase

This cycle phase begins once a patient has received care, eventually leading the cycle back to the beginning.


Medical billing involves the health care provider double-checking their records and editing as needed before they submit a claim to a health insurance company. 


Health care compliance helps to ensure that patient records are secure and that medical facilities comply with requirements. This is also crucial for making sure no health care provider submits false claims.

Compliance also ensures that all patients have access to the medicines they need, and employees at all medical facilities have proper working conditions and receive proper compensation. 

Denial Management 

This part of the RCM process is crucial since it helps uncover the causes leading to coverage denials. It analyzes data to assist health care facilities in identifying areas of improvement to resolve current denials and avoid future ones. 

Payment Posting

At this cycle stage, all payers will send an explanation of benefits (EOB) or electronic remittance advice (ERA) toward paying a claim. Someone — usually a representative of the medical facility — will then post these payments into a patient’s account so that services can be marked as paid.

Patient Pay

This step in the process, referred to as patient payment, essentially entails the collection of the outstanding balance from the patient after the insurance company has settled its obligated portion.

Reporting and Benchmarking

Health care benchmarking involves analytics to some degree since it takes a medical organization’s performance metrics — including what they earn — and compares them to a standard. 

Since benchmarking is meant to help implement best practices at the best possible cost, this component helps ensure that the organization or facility can provide adequate care without drastically overcharging or undercharging. 

Others Components 

The components included here don’t fall neatly into any of the three phases above, but they’re still crucial parts of RCM.

Financial Counseling 

Financial counseling offers advice and assistance regarding medical bills and acts as the liaison between an insurance company and a patient. They’re also supposed to answer any questions both parties may have, and later collect payments from the patient. 

Financial Assistance

When dealing with low-income, uninsured, and underserved patients, this aspect of RCM comes into play to guarantee they have access to medical treatment. This may necessitate the provision of temporary financial aid or even free health care services.


Similar to patient payment, this cycle component concentrates on obtaining payments owed by a patient, particularly when they are overdue.

Collection Agency

Unpaid medical bills go into collections after some time has passed. A collection agency will then help ensure the medical facility gets paid while helping it maintain its relationship with the patient.

Benefits of RCM

rcm in health care definition

An effective RCM service or program can help improve, streamline, and optimize all processes involved in ensuring hospitals, clinics, and the like receive payment without compromising patient care.

Improves Billing and Collection

Revenue cycle management can help make it easier for health care providers to track a claim submission, request more information, and verify eligibility, among other things. This will ensure claims are filed properly, and health care providers receive timely payments. 

Saves Time

Medical facilities can quickly become busy, affecting how efficiently each department works. RCM can help optimize the financial process and ensure no department is stretched too thin, making it easier for administrative staff to focus on their duties and bill patients correctly. 

Improves Record Keeping

This ties into the preview benefit because proper and efficient record-keeping means a patient’s record is up-to-date. This will make it easier for all departments — especially billing — to keep track of care provided, payments received, and unsettled accounts.

Improves Patient Experience

A patient’s experience doesn’t end when they leave the hospital, so they can have negative experiences weeks or months afterward if they receive a bill that confuses them or makes them worry. 

RCM can help health care providers avoid this by ensuring a bill isn’t just easy to understand but also as easy as possible to settle once the patient is out of the hospital.

Challenges of RCM

rcm challenges in health care

Health care providers face numerous challenges when it comes to optimizing their revenue cycle. Interestingly, the challenges a health care provider faces during RCM relate directly to the benefits they stand to gain.

Errors in Billing and Collections

As you can tell, health care providers need the correct information from the beginning. This helps ensure patients get the right care and that the facility is paid properly. Otherwise, the facility may lack funds, and patients may receive confusing bills.   

Processing and Monitoring

Whether it’s eligibility verification or filing a claim, doing everything manually can make it difficult to keep track of things. An outdated IT system can have a similar effect.

Limited Access to Talent 

When a health care facility doesn’t have access to highly skilled employees, this can affect the whole RCM and cause operations to deteriorate while everyone scrambles to keep up with their tasks. 

Role of Technology in RCM

There are a number of technologies a health care provider can implement to help make revenue cycle management easier, ranging from automation software to digital forms. These can help make the billing process more efficient and accurate while improving patient experience.

Electronic Health Records (EHRs) and Practice Management Systems (PMS)

An electronic health record, or EHR, is a digital version of a patient chart, which helps ensure that patient information is made easily available to users authorized to access that information.

The EHR contains medical histories of patients, including diagnoses, immunization dates, allergies, and treatment plans, to name a few.

Practice management software (PMS), on the other hand, is a kind of software that helps medical practices streamline operations, keeping track of everything from scheduling to patient records and billing.

Both technologies can help make it easier to keep track of what care patients receive, when claims are filed and with which insurance companies, and how much payers and patients owe a medical facility. 

Revenue Cycle Management Software

This tool is meant to help health care providers better manage every step of the revenue cycle, from patient intake to authorization, to charge capturing to billing. It can also help make it easier to track expenses and payments, so no one is double-billed. 

Artificial Intelligence (AI) and Machine Learning (ML) in RCM

Artificial intelligence or AI refers to techniques used so computers can mimic human intelligence. Machine learning (ML) is a smaller area of this, referring to the process of having computers analyze data and determine patterns so they can make decisions and take action without someone actually having to program them. 

AI and ML will be helpful if you’re looking to automate certain processes in your RCM. For instance, ML can be used to help your RCM software predict which claims are most at risk of being denied, or spot errors in processing and assign them to employees best suited to handle and fix the errors. 

Frequently Asked Questions

What is the responsibility of RCM?

RCM, or revenue cycle management, is the process of identifying, managing, and collecting a medical practice’s revenue from both patients and their insurance providers. 

What is RCM workflow?

RCM workflows refer to processes needed for health care facilities to receive payment for the care provided and services performed. 

How many steps are in RCM?

Typically, there are seven steps in RCM: preregistration, registration, charge capture, claim submission, remittance processing, insurance follow-up, and patient collections. 

Final Thoughts

In the complex world of health care, RCM is fundamental. 

Now that we’ve answered the question, “What is RCM in health care?” you know medical facilities risk becoming bogged down with the complexities of billing and collections, which can have a ripple effect on their overall operations.

As the health care industry transitions towards a value-driven approach, the significance of quality patient care has become even more critical. RCM plays a crucial role in addressing billing and collection complexities that may otherwise impede smooth operations.

By leveraging RCM, health care organizations can effectively overcome potential challenges and concentrate on their primary objective — caring for patients.