RCM steps define how healthcare organizations track, manage, and collect revenue from the moment a patient schedules an appointment through final payment. When these steps are clearly defined and well executed, organizations improve cash flow, reduce denials, and gain better visibility into financial performance. When they are not, revenue leakage, delayed payments, and administrative strain quickly follow.
Below, we break down the seven essential RCM steps, explain what happens in each stage, and show practical examples of how they work in real healthcare environments.
1. Patient Scheduling and PreRegistration
The first step in the revenue cycle begins before a patient ever walks through the door. Scheduling and pre-registration involves collecting basic demographic and insurance information early so it can be validated before services are provided.
This step matters because inaccurate or incomplete data at the front end is one of the most common causes of downstream claim denials. When information is collected early and reviewed ahead of time, staff can correct issues before they become costly and time-consuming billing problems.
Example: A diagnostic imaging center collects insurance information during online scheduling and flags appointments that require prior authorizations (PAs). PA issues are rectified before the visit, ideally with an automated PA option instead of spending inordinate amounts of time obtaining PAs manually, or by discovering them after the claim is denied.
2. Insurance Verification and Financial Responsibility
Once patient information is collected, insurance coverage must be verified. This includes confirming active coverage, determining benefits, identifying required PAs as mentioned, getting out-of-network alerts, and estimating patient responsibility such as copays, deductibles, or coinsurance.
Clear insurance verification reduces surprises for both the provider and the patient. It also sets expectations around payment, which improves collections and patient satisfaction.
Example: A specialty clinic verifies benefits two days before appointments and notifies patients if their plan requires a higher out of pocket contribution. Patients are offered payment options before services are rendered.
3. Clinical Documentation
Clinical documentation captures what actually happened during the patient encounter. Providers document diagnoses, procedures, and services delivered, creating the medical record that supports billing and compliance.
Accurate documentation is critical because it directly supports coding and claim submission. Incomplete or unclear documentation increases the risk of underbilling, denials, or audits.
Example: A physician documents all performed procedures during a visit, including additional diagnostic tests that were medically necessary. This documentation ensures the billing team can code and bill correctly for the full scope of care provided.
4. Medical Coding and Charge Capture
Coding translates clinical documentation into standardized codes required by payers. Charge capture ensures that every billable service is recorded and nothing is missed.
This step is one of the most sensitive points in the revenue cycle. Coding errors or missed charges can result in lost revenue or denied claims. Correct E/M, HCC, and NCCI coding will help drive revenue and eliminate denials.
Example: Coding teams can review encounter notes and attempt to apply the correct coding including for complicated E/M and HCC, unless automated, AI-driven tools are available to do so.
5. Claim Submission
Once coding (including for E/M and HCC) is complete, claims are created and submitted to payers. Clean claim submission means claims are accurate, complete, and compliant with payer rules before they are sent.
Timely and accurate claims submission directly impacts cash flow. The faster a clean claim is submitted, the faster payment can be received.
Example: You’ll want a nearly 100% accuracy rate on first-attempt HFCA, UB, WC, NF, and other personal injury-related claims, preferably driven by AI-enabled automation
6. Payment Posting and Remittance Processing
After a payer processes a claim, payment is issued along with a remittance advice explaining how the claim was adjudicated. Payment posting applies these payments to the correct patient accounts and identifies any remaining balances or adjustments.
This step provides financial visibility and ensures accounts receivable data remains accurate.
Example: To the best of their ability, a billing team posts insurer payments daily and flags underpayments based on contract terms so follow up can occur quickly rather than months later, unless automated tools are available for doing the same.
7. Denial Management, Patient Billing, and Collections
The final step in RCM focuses on resolving unpaid balances. This includes managing denied or underpaid claims, billing patients for remaining balances, and collecting payment.
Effective denial management looks beyond individual claims to identify patterns and root causes so they can be detected and edited before they’re submitted. This is especially critical when payers are thought to use AI to virtually mass-deny claims.
Example: An RCM team notices repeated denials related to missing authorizations. They adjust front end workflows to require authorization confirmation before scheduling certain procedures, tests, or imaging, thereby reducing future denials. Or, a well-oiled RCM “machine” would handle these complicated routines on-the-fly.
Why Revenue Cycle Management Steps Matter
RCM is not a single system or department. It is a connected process where every step affects the next. Weaknesses at the front end create problems that compound downstream, while strong processes create efficiency, predictability, and financial stability.
Organizations that clearly define and continuously optimize their revenue cycle management steps are better positioned to reduce revenue leakage, shorten days in accounts receivable, and improve both staff efficiency and patient experience.
Final Thoughts
Understanding and optimizing the seven essential steps of revenue cycle management gives healthcare organizations a practical framework for improving financial performance without sacrificing care quality. From accurate data collection to proactive denial management, each step plays a critical role in keeping revenue flowing and operations running smoothly.
When revenue cycle management is approached as a strategic, end to end process rather than a reactive billing function, organizations gain clarity, control, and confidence in their financial outcomes.
Want to see where revenue is leaking in your revenue cycle? ADSRCM helps healthcare organizations identify breakdowns across intake, billing, and collections and turn RCM data into action. We’ll even guarantee to increase your revenue in 90 days based on your current stats.
Talk to an ADSRCM outsourcing expert to get a clearer picture of your revenue cycle. The same AI-driven platform we use – the MedicsCloud Suite – is available from ADS if in-house automation is preferred.