Healthcare Glossary→Revenue Cycle
Revenue Cycle

Revenue Cycle Management (RCM)

Revenue cycle management encompasses every administrative and clinical function that contributes to the capture, management, and collection of patient service revenue — from patient registration to final payment posting.

The Revenue Cycle Process

The revenue cycle is the complete financial process a healthcare organisation uses to manage clinical data and generate revenue. It begins before the patient arrives and ends when all balances are fully resolved. The typical revenue cycle steps are:

  1. Pre-registration and scheduling — Insurance verification, eligibility check, prior authorisation initiation
  2. Registration — Patient demographic capture, consent, copayment collection
  3. Charge capture — Clinical documentation → CPT and ICD-10 code assignment
  4. Claims submission — Claim creation, scrubbing, and electronic submission to payer
  5. Payment posting — Electronic Remittance Advice (ERA) processing, adjustment posting
  6. Denial management — Denial identification, appeal, resubmission
  7. Patient collections — Balance billing, payment plan management

Key Revenue Cycle Benchmarks

  • Clean Claim Rate: 95%+ industry benchmark. Percentage of claims submitted that pass all edits and are accepted without denial or rejection on first submission.
  • Days in AR (Accounts Receivable): 35–45 days for commercial payers; <30 days for Medicare. Total outstanding AR ÷ (Total charges ÷ days in period).
  • Net Collection Rate: 95–99% benchmark. (Total payments ÷ (Total charges − contractual adjustments)). Measures how effectively you collect what you are entitled to.
  • First-Pass Resolution Rate: 90%+ benchmark. Percentage of claims resolved (paid or denied) on first submission without requiring follow-up or resubmission.
  • Denial Rate: 5–7% benchmark for commercial; Medicaid often 15–20%.

Denial Rate by Payer

Payer-specific denial rates vary significantly. Medicare typically has the lowest denial rate (2–4%) because of clear LCD/NCD policies and standardised billing rules. Commercial payers range from 5–12%. Medicaid often has the highest denial rates (12–20%) due to eligibility volatility and complex billing rules. Worker's compensation and auto insurance claims have unique denial patterns. Benchmarking denial rates by payer reveals where revenue cycle resources and process improvement should be directed.