WK6
Revenue Cycle Management
Describe the importance of revenue cycle management in the acute care environment and
the impact it can have on the healthcare organization. In your description be sure to
identify the consequences of improper revenue cycle management as it pertains to the
healthcare organization.
With technology advancements and an aging population, health care costs are on the rise.
With the rise in health care costs, it is important for hospitals, physician offices, and large health
care systems to develop and maintain successful processes and policies to maintain financial
stability (LaPointe, 2016). Developing and maintaining financial stability is done through
revenue cycle management (RCM). Harrington (2020) defines RCM as a complex process that
involves balancing people, processes, technology, and the environment in which the process
takes place (p. 306). LaPointe (2017) explains that the health care revenue cycle encompasses
all administrative and clinical functions that contribute to the capture, management, and
collection of patient service revenue.
As health care organizations transition from fee-for-service (FFS) to prospective
payments systems (PPSs), RCM has become the center of managing organizational finances
(Harrington, 2020, p. 175). In the FFS environment, health care organizations were able to bill
for every service provided. However, when shifting to PPS, the focus of reimbursement is no
longer focused on managing revenue from the beginning of care in the preadmission process to
the discharge process from an inpatient/outpatient facility (Harrington, 2020, p. 175). PPS
focuses on reimbursement that is based on a predetermined, fixed amount as well as a payment
amount for services based on a classification system (Centers for Medicare & Medicaid Services
(CMS), 2021). Under PPSs, there are separate reimbursements for acute inpatient hospitals,
, home health agencies, hospice, hospital outpatient, inpatient psychiatric facilities, inpatient rehabilitation
facilities, long-term care hospitals, and skilled nursing facilities (CMS, 2021). RCM is used on
conjunction with PPS to manage the revenue of the health care organization. This is done by the facility by
managing care prior to a patient visit to ensure that payment is received after the visit (Harrington, 2020,
p. 175). The health care revenue process is a team process where all departments work together
(Harrington, 2020, p. 176). LaPointe (2016) explains that the team process includes coding medical
services and billing insurance.
Components of the Revenue Cycle
The revenue cycle is a critical element of the reimbursement process of a health care
organization. Harrington (2020) explains that there are several areas of the cycle that have a
responsibility of their functions and how those functions blend into the overall goal of submitting
clean claims for services (p. 176). There is a three-tiered approach and a four-tiered approach
that can represent the revenue cycle. Harrington (2020) explains that the four-tiered approach is
the most complex and that the three-tiered approach is easier to apply (p. 176). The three-tiered
approach is broken down into three categories. Those three categories are front-end process,
middle process, and back-end process (Harrington, 2020, p. 176).
Front-End Process
The front-end process is the first part of the revenue cycle. Essentially, the front-end
process represents the face of the health care organization (LaPointe, 2017). Health care
organizations rely on patients seeking medical help to keep the doors to the organization open.
From a financial aspect, the front-end process entails payer negotiation that happens outside the
patient encounter (Harrington, 2020, 9. 176-177). The patient access component includes
scheduling, registration, insurance verification, obtaining prior authorizations/precertification,
Revenue Cycle Management
Describe the importance of revenue cycle management in the acute care environment and
the impact it can have on the healthcare organization. In your description be sure to
identify the consequences of improper revenue cycle management as it pertains to the
healthcare organization.
With technology advancements and an aging population, health care costs are on the rise.
With the rise in health care costs, it is important for hospitals, physician offices, and large health
care systems to develop and maintain successful processes and policies to maintain financial
stability (LaPointe, 2016). Developing and maintaining financial stability is done through
revenue cycle management (RCM). Harrington (2020) defines RCM as a complex process that
involves balancing people, processes, technology, and the environment in which the process
takes place (p. 306). LaPointe (2017) explains that the health care revenue cycle encompasses
all administrative and clinical functions that contribute to the capture, management, and
collection of patient service revenue.
As health care organizations transition from fee-for-service (FFS) to prospective
payments systems (PPSs), RCM has become the center of managing organizational finances
(Harrington, 2020, p. 175). In the FFS environment, health care organizations were able to bill
for every service provided. However, when shifting to PPS, the focus of reimbursement is no
longer focused on managing revenue from the beginning of care in the preadmission process to
the discharge process from an inpatient/outpatient facility (Harrington, 2020, p. 175). PPS
focuses on reimbursement that is based on a predetermined, fixed amount as well as a payment
amount for services based on a classification system (Centers for Medicare & Medicaid Services
(CMS), 2021). Under PPSs, there are separate reimbursements for acute inpatient hospitals,
, home health agencies, hospice, hospital outpatient, inpatient psychiatric facilities, inpatient rehabilitation
facilities, long-term care hospitals, and skilled nursing facilities (CMS, 2021). RCM is used on
conjunction with PPS to manage the revenue of the health care organization. This is done by the facility by
managing care prior to a patient visit to ensure that payment is received after the visit (Harrington, 2020,
p. 175). The health care revenue process is a team process where all departments work together
(Harrington, 2020, p. 176). LaPointe (2016) explains that the team process includes coding medical
services and billing insurance.
Components of the Revenue Cycle
The revenue cycle is a critical element of the reimbursement process of a health care
organization. Harrington (2020) explains that there are several areas of the cycle that have a
responsibility of their functions and how those functions blend into the overall goal of submitting
clean claims for services (p. 176). There is a three-tiered approach and a four-tiered approach
that can represent the revenue cycle. Harrington (2020) explains that the four-tiered approach is
the most complex and that the three-tiered approach is easier to apply (p. 176). The three-tiered
approach is broken down into three categories. Those three categories are front-end process,
middle process, and back-end process (Harrington, 2020, p. 176).
Front-End Process
The front-end process is the first part of the revenue cycle. Essentially, the front-end
process represents the face of the health care organization (LaPointe, 2017). Health care
organizations rely on patients seeking medical help to keep the doors to the organization open.
From a financial aspect, the front-end process entails payer negotiation that happens outside the
patient encounter (Harrington, 2020, 9. 176-177). The patient access component includes
scheduling, registration, insurance verification, obtaining prior authorizations/precertification,
