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Thursday, April 18, 2024

How to Improve Hospital Profits with Optimized Revenue Cycle Management?

Traditional billing and collections model is changing, Technology and administrative processes become more complicated also payer pool grows every day, on the other hand, Reimbursement continues to be a challenge.

billing and collecting became such a huge challenge, even with artificial intelligence, medical coding systems, and employee training programs, profit maximization is still a challenge.

And to keep on track you need some expertise, time, and willingness of change. So, we see that the key to solving this problem is a well-managed revenue cycle.

In this article, we will have a quick overview of Revenue Cycle Management, some useful KPIs, together with considerations for outsourcing your RCM to a third-party provider or keeping it in-house.

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.”

Administrative and clinical functions work in parallel to perform the revenue cycle. Even for fully computerized healthcare providers, the revenue cycle process can be complex and involves information being threaded through multiple areas.

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How to Optimize Revenue Cycle KPIs to Improve hospital Profits?

Throughout your revenue cycle, there are several ways you can optimize KPIs. there are a lot of financial services for medical practices that can help you optimize your RCM and sustain your hospital profits, here are some tips on how to improve it

Revenue Mix:

The revenue mix of practice evolves over time, e.g.:

  • % From payer vs. % from patient
  • % From office visits vs. % from surgeries/procedures vs. % from ancillary services
  • % From physicians vs. % from mid-level providers

Net Collection Ratio:

Answers the question, ‘Are we getting paid what we are contractually entitled to?’ Compare Payments to Net Charges (Charges less Contractual Adjustments).

Key is a disciplined posting process that distinguishes contractual adjustments from other adjustments.

Visit Volume:

Visits are the headwaters of the revenue cycle.

  • Track trends over a 13-month period (compare to same month last year).
  • Watch the mix of visit types (new patients, current patients, surgeries/procedures, ancillary services, etc.) to get an early indicator to the future heath of the practice.
  • Build into the key people (providers, executives, managers) a general understanding of the average payment for each visit type.

Days in AR:

An important measure, but easily distorted (e.g., just writing off denials will reduce days in AR).

  • Track how 30-day aging claims resolve over time.
  • Pay particular attention to the ‘old’ claims (varies by specialty – some track 90+ days; some 120+ days).

First Pay Rate:

Measures percentage of claims paid in full by the payer on the first time (no denial).

faster cash flow means lower cost (working denials costs money), and less likelihood of losing a payment entirely.

Denial Rate:

Number of Claims denied as a percentage of the total Claims submitted.

While some level of denials is inevitable, a high denial rate indicates where the process (front end demographics, back-end coding) in not working as it should. Few things better drive RCM performance improvement than a good denials management process.

Zero Pay:

% All claims that receive no payment before they are completely adjusted to a zero balance.

However, some of these may make sense, but zero pay claims generally mean that work was done for free.

Should You Outsource Your RCM Services?

When RCM was a simpler process, and its main factor was the workers themselves. Healthcare providers often depended on having some strong billers who could find profit within the billing cycle. so, it made sense to keep this capability in-house.

Once businesses massively scaled and complexity increased, A lack of standardization across employee skill sets led to variations in performance, and profits sitting undiscovered.

Over time, as RCM technology matured, big players recognized that outsourcing this work helped increase hospital profit across the entire cycle, as Claims processing shifted from a human activity to a fully computerized process assisted by humans with minimum level of overheads costs.

also, it help you Focus on patient care by Eliminate distractions while increasing time spent on healthcare.

But the problem here that many outsourcing companies are focused on “conventional outsourcing”, like submitting claims, data entry, and collection. But a full RCM solution can involve a range of other activities, including contracting, scheduling, coding, accounts payable, and even payroll processing and physician compensation.


The rising complexity in healthcare settings is associated with challenges like the rising cost of care, healthcare providers should be smart and more efficient to provide a good quality of service and valued at good prices within a well-managed revenue cycle.

Once organizations are getting bigger and scaling up as planned, they would prefer to outsource revenue cycle management services to give a better focus on the quality of care and delegating the administrative work to other RCM third parties.

Thinking about RCM should be inclusive and not just focusing on specific activities, but preserving the whole ecosystem that achieves an efficient revenue cycle management.

Ahmed Ezz Eldin
Ahmed Ezz Eldin
Ahmed M. Ezz EL-Din, MBA - is a Senior Cost accountant for healthcare services in Egyptian General Authority of Health Insurance, Former member of the Standing Committee for Pricing of Medical Services in universal health insurance (UHIO), experience in calculating healthcare services costs and preparing price lists for health care services, has established the cost system in many governmental and private hospitals also participated in preparing healthcare service price lists in the Egyptian Ministry of Health and Universal Health Insurance (UHIO)

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