How a Revenue Cycle Works

Whether or not you’ve heard the term revenue cycle before, you’ve almost certainly been involved in the process at one time or another. A revenue cycle is what the healthcare industry calls the cycle of requesting and receiving payment from patients and subscribers after they receive services. There are entire departments dedicated to the cycle, often with specific teams that focus on just one step or aspect. That’s because large companies deal with lots of people and so need all hands on deck to adequately and quickly handle claims, payments, billing, and questions. Here are some of the most common revenue cycle management steps you might see in health care companies.

Preauthorization and Benefits

Most medical plans have certain procedures, situations, or prescriptions that they will cover no matter what, and the same goes for private companies. The revenue cycle team should know which events are preauthorized to be discounted or fully covered so they can include accurate information in every bill or statement. Additionally, they may be the ones preauthorizing special services with doctors or facilities to see if the patient would have to pay out of pocket. The next step is similar to preauthorization because it has to do with what money the client is eligible to receive. Revenue cycle employees will have to check the plans clients have subscribed to in order to determine how much they’ll receive in benefits or if they’re eligible for any payments at all.


Claims can be an entire department further divided into specialist areas such as claims receiving, processing, submitting, and payments. Any person who requires service or pays for a medical event must submit a claim to their insurer or private company to state the out of pocket cost. This cost can either go toward their deductible or be reimbursed if that amount is met. A team should be in place to receive and file claims in a timely fashion, then someone must be available to either issue checks or send bills for outstanding amounts. This part of the process is called claims posting, and it’s vitally important to keeping the company and subscriber on the same page for what is owed to whom. Sometimes, however, claims are denied based on a variety of circumstances, and in that case there’s usually a small team of people responsible for sending letters and responding to inquiries.

Revenue management can be complicated, but it’s in place to make the payment process easier.