Revenue Cycle Management (RCM) Steps Explained in Medical Billing

What Are the Revenue Cycle Management (RCM) Steps?

Revenue Cycle Management (RCM) is the financial process that providers use to track patient care from appointment scheduling to final payment collection. RCM converts clinical services into revenue through structured administrative and billing actions.

Below, you see each step in logical order.

1. What Happens During Patient Scheduling and Pre-Registration?

Front-desk staff collect patient demographics and insurance details before the visit.

Staff verifies:

• Full name, date of birth, address

• Insurance ID and group number

• Referring provider (if required)

Accurate data reduces claim rejections caused by invalid member IDs or incorrect payer information.

Next step: verify eligibility.

2. What Is Insurance Eligibility and Benefits Verification?

Staff confirms active coverage and patient responsibility before services occur.

They verify:

• Coverage status

• Copay amount

• Deductible balance

• Coinsurance percentage

• Authorization requirements

Example:

• Payer confirms $40 copay and 20% coinsurance.

• Clinic collects copay at check-in.

Eligibility verification improves the clean claim rate.

Next step: document care.

3. What Happens During Charge Capture and Documentation?

Providers document diagnoses and procedures in the Electronic Health Record (EHR).

Documentation must include:

• Diagnosis codes (ICD-10-CM)

• Procedure codes (CPT/HCPCS)

• Medical necessity justification

Incomplete documentation increases denial risk.

Next step: convert documentation into billable codes.

4. What Is Medical Coding?

Medical coders translate clinical documentation into standardized codes.

Key code sets:

• ICD-10-CM → diagnoses

• CPT → physician procedures

• HCPCS → supplies and non-physician services

Example semantic triple:

• Coder assigns CPT 99213 for an established patient visit.

• Coder links ICD-10 J02.9 for acute pharyngitis.

Accurate coding ensures compliant reimbursement.

Next step: create the claim.

5. What Is Claim Submission?

Billing staff create and transmits claims to payers.

Common formats:

• CMS-1500 → professional services

• UB-04 → facility services

• EDI 837 → electronic claim file

Clearinghouses validate formatting before payer submission. Rejections occur if data fields fail validation.

Next step: payer adjudication.

6. What Is Claim Adjudication?

Payers review claims and determine payment responsibility.

Payer actions:

• Approve and pay

• Reduce payment

• Deny the claim

• Request additional documentation

Payers send:

• EOB (Explanation of Benefits)

• ERA (Electronic Remittance Advice – 835)

Adjudication determines revenue outcome.

Next step: post payments.

7. What Is Payment Posting?

Billing teams record payments and contractual adjustments in the practice management system.

Posting includes:

• Insurance payment

• Contractual adjustment

• Patient balance transfer

Example:

• Allowed amount: $150

• Insurance paid: $110

• Patient owes: $40

Accurate posting updates Accounts Receivable (A/R).

Next step: manage denials.

8. What Is Denial Management?

Staff analyzes and corrects denied claims to recover revenue.

Common denial causes:

• Eligibility inactive

• Missing modifier

• Lack of medical necessity

• Timely filing exceeded

Denial workflow:

1. Identify root cause

2. Correct error

3. Resubmit or appeal

Effective denial management reduces A/R days.

Next step: collect patient balances.

9. What Is Patient Billing and Collections?

Providers bill patients for remaining balances after insurance processing.

Statements include:

• Copay

• Deductible

• Coinsurance

• Non-covered services

Collection methods:

• Payment plans

• Online portals

• Follow-up calls

Clear statements increase patient payment rates.

Next step: monitor performance.

10. What Is Reporting and Revenue Optimization?

RCM teams track financial KPIs to improve cash flow.

Key metrics:

• Clean claim rate

• First-pass resolution rate

• Denial rate

• Days in A/R

• Net collection rate

Example:

• A clean claim rate above 95% indicates strong front-end accuracy.

Data-driven analysis strengthens financial stability.

RCM Workflow Summary Table

What Is the Core Goal of RCM?

RCM ensures providers receive accurate and timely payment for delivered healthcare services while maintaining compliance with payer and regulatory requirements.

Every step connects sequentially. When one step fails, revenue leakage increases.

In the next section, you can explore how to reduce denial rates and increase clean claim percentages in your medical billing process.