What Are the Steps in the Revenue Cycle?

The revenue cycle is the process that transforms services provided by an organization into cash flow. It encompasses all administrative and clinical functions contributing to the capture, management, and collection of patient or client service revenue. Managing this cycle is fundamental to an organization’s financial health, ensuring its ability to operate and provide services. It involves interconnected steps, each playing a significant role in accurate and timely reimbursement.

Initial Patient Information and Verification

The revenue cycle begins with collecting patient or customer information, which forms the basis for all subsequent billing and collection efforts. This initial registration gathers essential demographic data, including names, addresses, contact details, and financial information like insurance policy numbers. Accurate data collection at this stage prevents future billing inaccuracies and claim rejections.

Following registration, verifying insurance eligibility and benefits is crucial. This confirms active coverage and identifies financial responsibilities, such as co-payments, deductibles, and service-specific coverage limitations. Organizations often use electronic portals or direct calls to obtain this information. Understanding these parameters upfront helps estimate the patient’s financial obligation and inform them.

For certain services, pre-authorization or a referral may be a prerequisite for coverage. This involves obtaining prior approval from the insurance carrier before services are delivered, ensuring the treatment is medically necessary and covered. Managing these requirements proactively helps avoid claim denials and unexpected out-of-pocket costs, streamlining reimbursement.

Service Documentation and Charge Capture

Accurate service documentation is a component of the revenue cycle, establishing the record of all services, procedures, and treatments provided. This documentation, often maintained in electronic systems, serves as the authoritative source for billing. Precise records are essential for demonstrating medical necessity and supporting charges submitted to payers.

Following documentation, medical coding translates rendered services, diagnoses, and procedures into standardized alphanumeric codes. This involves using coding systems like Current Procedural Terminology (CPT) for procedures and services, and the International Classification of Diseases, Tenth Revision (ICD-10) for diagnoses. Certified coders or trained professionals perform this translation, adhering to strict guidelines to ensure compliance and accurate representation. This standardized coding is recognized by payers and facilitates efficient claim processing.

Charge capture is the process of recording all billable services, supplies, and medications provided to a patient or client and assigning them a monetary value. This ensures every item and service with a cost is accurately entered into the billing system. Effective charge capture prevents revenue leakage by ensuring all performed services are accounted for and billed correctly.

Claim Submission and Payment Resolution

Once all necessary information has been gathered, documented, and coded, the compilation into a formal claim or invoice marks the next stage. Healthcare organizations typically generate claims using standardized forms like the CMS-1500 for professional services or the UB-04 for institutional services, which are then submitted to insurance companies. For other service-based businesses, a detailed invoice summarizing services and charges is prepared for the customer. Most claims are submitted electronically through Electronic Data Interchange (EDI) via clearinghouses, which act as intermediaries between providers and payers, ensuring secure and efficient transmission.

Upon receipt of payments, payment posting and reconciliation begins. This involves accurately recording received funds into patient or client accounts, matching them against claims or invoices. Discrepancies between expected and actual payments are identified and investigated during reconciliation, including underpayments, overpayments, or payments for services not claimed. This accounting ensures financial records are up-to-date and accurate.

Claims may be rejected or partially paid, leading to a denial that requires management and potential appeals. Denials are identified by reviewing Explanation of Benefits (EOBs) or remittance advices, which detail reasons for non-payment. Common reasons include incorrect coding, lack of pre-authorization, or eligibility issues. The denial management team investigates the root cause, makes corrections, and may submit an appeal with additional documentation.

After the payer processes the claim and pays its portion, the remaining balance becomes the patient’s or client’s responsibility. Patient billing and collections involve generating statements for these outstanding balances, which include co-pays, deductibles, or services not covered by insurance. Organizations send regular statements detailing charges and payments. Should balances remain unpaid, collection efforts may escalate through reminders, phone calls, and, if necessary, engagement with third-party collection agencies, while adhering to fair debt collection practices.