How Small Medical Practices Can Understand and Optimize Their Revenue Cycle

By: Lisa Morris on October 2, 2018

Calculating the exact cost of uncollected medical payments is tricky, and a handful of studies serve as cautionary tales.

  1. Physicians Foundation research found that in 2012, over half of physicians lost at least $25,000 in uncompensated care.

  2. The following year, “Health Affairs” figured physicians lost a total of $10.5 billion in uncompensated care.

Also alarming: Nearly half of all accounts open with U.S. collections agencies are due to medical expenses, and the majority of bankruptcies are caused by medical bills.

With figures like that, there’s no telling how many small practices are forced to shut down due to uncollected payments. Many of those payments could have been recovered with the use of a revenue cycle management (RCM) system.

Physicians in small or solo practices are often pulled between being a caregiver and a business owner. Caregivers are inclined to provide treatment to every patient regardless of their ability to make payments, and business owners need to generate revenue.

Enter revenue cycle management, a solution that organizes and structures the payment collection process so providers can focus on treating patients while maintaining a profitable business.

What Are the Steps of the Revenue Cycle?

The term “revenue cycle” does not actually refer to a specific type of software, but rather a process that uses different types of software to track and manage the financial life cycle of patients.

Broadly speaking, the revenue cycle encompasses every administrative task involved in the capture, management and collection of patient payments and revenue.

The cycle begins with collecting patient information and ends with reviewing data and assessing financial performance.

Steps Within the Revenue Cycle


Pre-visit: Patients fill out intake forms and complete preregistration paperwork that includes insurance and payment information. From there, office administrators verify and validate insurance to ensure coverage is available for the level of care that the patient may need.

Medical exam: Includes everything that happens from the moment the patient arrives for their appointment to when they walk out of the doctor’s office. If an upfront copay is required, the patient will make that payment here before seeing the physician. From there, treatments or other services are provided and documented by the physician.

Bill generation: Involves coding the diagnoses and services provided by the physician and submitting them to insurance providers for reimbursement. It’s where administrators have an opportunity to document and track every billable procedure to ensure payment is received later.

Payment collection: Includes processing insurance claims and receiving reimbursement. From there, office staff can create statements for remaining balances and send those to the patient via patient portals, email or snail mail.

This stage of the process can also include a remittance process for those practices that send unpaid statements to third-party collection agencies and the like. Essentially, this stage includes whatever steps it takes to get paid for the services rendered.

Cycle management: Once balances have been settled, practices can review their performance through every stage of the revenue cycle and assess whether or not any changes should be made. This is when office staff can check the pulse of the practice’s financial health and make sure things are going smoothly.

Revenue Cycle Management Software Is Helpful, But Not the Only Answer

Dedicated RCM software can make all the difference for practices that struggle to track, manage and collect payments from patients and insurance providers.

Just a few of the capabilities of this software type include:

  • Storage of patient billing information and payment records

  • Automated insurance verification

  • Integration with electronic health records systems (EHRs) to better track billable services

  • Automated balance reminders for patients and payers

  • Payment processing and point-of-sale

  • Tracking current balances through accounts receivable

  • Data analytics that provide insights, such as why claims are denied

Still, RCM software may not be the answer for every practice. Some software options may provide numerous features that your practice doesn’t need, or may be too expensive for small and solo practices.

With strong organizational strategies, those practices could get by with other software systems such as patient scheduling software, medical billing software and health care analytics software.

How Practices Can Improve Revenue Cycle Performance Today

Beyond investing in RCM software or other claims and payment systems, practices looking to improve their revenue cycle performance can take a few immediate steps today.

Bird Blitch, chair of the Healthcare Information and Management Systems Society‘s Revenue Cycle Improvement Task Force, says that small practices are seeing a shift in where their revenue comes from.

Five years ago, the majority of revenue came from insurance providers, Medicare or Medicaid. But in the last year, small practices are seeing a roughly even amount of revenue coming from government providers, private insurance companies and patients themselves.

As practices adjust to this change, they should institute three specific policies to make sure payments are likely to be collected:

      1. Ask for copays and/or balances to be settled before the patient sees the physician.

      1. Send statements and reminders regularly, using a variety of communication avenues such as email, regular mail, text messaging and patient portals.

    1. Provide a variety of payment options, such as online payment portals or payment plans, to make it easier for patients to settle accounts quickly.

And when your practice is ready for RCM software or dedicated billing software for physicians, be sure to check out our Buyers Guides to learn more about what to look out for when choosing software and see the top-rated systems out there.