What Is Revenue Cycle Management in Healthcare?

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Health care organizations properly manage revenues to increase profits.
Health care organizations properly manage revenues to increase profits. (Image: health concept image by drx from Fotolia.com)

A health care institution's senior leadership implements adequate revenue management procedures to ensure that the institution remains financially sound in the short and long terms. Revenue cycle management also helps a medical entity recover patient accounts receivable.

Definition

Health care revenue cycle management consists of the tools, methodologies and techniques that medical institutions use to review patients' financial situation, issue invoices and collect payments from the federal and state governments, insurance companies and other organizations.

Significance

A health care institution must adequately manage revenues to stay financially afloat. Some institutions use revenue management software to record transactions and prepare accounting reports at the end of each month and quarter. Without sound revenue cycle management procedures, a health care institution might experience financial distress and file for bankruptcy.

Types

Health care revenue cycle management involves many strategies, including procedures that hospitals and clinics use to improve cash collections and meet liquidity goals. These strategies also include customer receivables valuation, underpayment recovery policies and transactions involving federal government programs such as Medicare and Medicaid.

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