Understanding the Healthcare Billing Process and Its Impact on Revenue Cycle Management

Healthcare billing is a key component of any healthcare practice's or organization's financial well-being because it's how providers are compensated for their services. Without billing, there wouldn't be funds to pay for staff, equipment, healthcare supplies — or even the providers themselves. So it's important to understand how the healthcare billing process works to ensure your practice is handling it properly.

With multiple steps that require you to communicate and coordinate payments between one or more insurers as well as the patients themselves, healthcare billing can be complex. Still, you can navigate the process with ease — and may improve the billing experience for your patients — by following the tips and advice below.

But first, let's cover some of the basics.

Healthcare Billing vs. Revenue Cycle Management: What's the Difference?

The terms "healthcare billing" and "revenue cycle management" (RCM) are often used interchangeably, but while they are related, they are actually two different things. In fact, healthcare billing is just one part of the larger revenue management cycle.

Healthcare billing refers specifically to all the steps involved in billing and claims — like coding services, claims submission and sending bills to patients for their portion of the cost.¹ Healthcare RCM encompasses the bigger picture of collecting payment for care, from the information you obtain from a new patient and processing insurance claims to your own internal reviews, performance improvement and beyond.²

Because the steps of healthcare revenue cycle management are connected, it's important to think through the entire process from start to finish (including the pre-appointment, appointment and post-appointment stages) so you can fully understand and optimize the healthcare billing practices.

Steps of the Healthcare Billing Process

There are several healthcare billing cycle steps, and they all work together to help make billing smoother and easier for both your office and your patients.

1. Patient registration

The process starts by collecting information from the patient that will be important later in the healthcare billing cycle. This can include basic demographic data like their age, mailing address and emergency contact, as well as insurance information like their insurance provider, plan, policy number and any supplementary insurance they might have. For returning patients, this is the time to verify that the information you have on file is still current and to check if the patient has any outstanding payments that need to be factored into subsequent billing.¹

2. Verify insurance

The insurance verification process involves cross-checking the patient's insurance information with the insurance provider.¹ Insurance verification can help optimize your revenue cycle management by minimizing the number of denied claims, which will also keep your patients happy. By confirming your patients’ coverage and benefits and getting authorization beforehand, everyone will know what services insurance will cover.¹ This means your patients can opt to proceed with needed care or procedures and have a clear understanding of the costs they will be responsible for covering.

3. Point of service collection

Providers typically collect payment from the patient before they leave the office on the day of the visit, either when they arrive for their appointment or when they check out. This can include copay, coinsurance, deductible or the full balance of what they owe. Receiving at least some form of payment at the time of service is important because it reduces the chance of nonpayment down the line and cuts down on the time and expense of following up with the patient to pay off their balance or pursuing collections.¹

4. Documentation

It's important to enter the information you collected about the patient at check-in into your practice management system (PMS), along with details about the care they're receiving at that visit.¹ Be sure to document the entire visit completely and accurately, including the reason for the visit, any symptoms the patient is having, their diagnosis and any tests or treatments they received. This information is critical for the insurance billing process.

5. Coding

Insurers use alphanumeric codes to keep track of the services they pay for, so accurate medical coding is a critical step in the healthcare billing process. Coding involves translating the patient's medical chart into the correct billing codes.¹ These include diagnosis codes, which describe the reasons why the patient is receiving care, and procedure codes, which describe the different services the patient received during the visit.¹ Providers need to code each visit properly to be reimbursed correctly and avoid having claims denied or delayed.²

6. Charge entry

Charge entry involves reviewing all the information that has been collected about the patient and determining the total cost of the visit. To calculate this number, staff must go down the list of medical codes, note the charge for each item and add up the total amount. Staff then submit these charges to the appropriate payers, including private insurance and government payers like Medicare.¹

7. Claims submission

Once the total cost is calculated, it's time to submit the claim to insurers. Using the correct form, filling out the itemized claim completely and accurately and submitting any required documentation on time will help ensure the reimbursement process goes smoothly and efficiently.¹

One study shows that more than half (61%) of surveyed healthcare providers do not automate claims submissions.³ Turning to AI-driven healthcare claims management software can help reduce errors and facilitate faster reimbursements.⁴

8. Adjudication and payment

After you've submitted a claim, it's important to keep track of it and regularly check the claim status. On the payer's side, the claim will enter adjudication, where it's evaluated to determine if it's eligible for payment. Based on this review, the payer may approve or deny the entire claim, or it may deny some services and approve others.¹

If a claim is denied, the insurer will provide an explanation of the denial to both the provider and the patient, explaining which services were denied and why. Staff may need to address denied claims by providing additional information and continuing to follow up with payers to make sure previously denied claims are paid promptly. If you believe a claim was denied improperly, you may need to file an appeal with the payer.¹

Staff also need to keep track of incoming payments from insurers and make sure that payments are reconciled against the appropriate claim and recorded to the patient's account.¹

9. Patient billing

If there is still a balance after insurance and other payers cover their portion of the costs, the next step is to send the patient a bill for any remaining charges.¹ Invoices should list the balance due, as well as the date by which the patient needs to pay and the accepted methods of payment. If the patient has questions about the charges, staff may need to discuss the bill with them and explain why they are being charged.

10. Patient collections and payment posting

This step involves receiving payment and posting it to the patient's account. For many providers, this transaction may happen online; a 2024 survey by the Healthcare Financial Management Association found that 59% of providers have prioritized investing in patient payment portals to improve their RCM.⁵

If payment isn't received, staff may need to follow up with the patient by email, phone or letter in the mail. Collections may also involve working with the patient to resolve a delinquent account, such as offering a payment plan.¹

Learn more: Explore five helpful strategies for improving your healthcare billing process.

Keeping the Patient Experience Top of Mind

Providers may benefit from seeking new methods to streamline and enhance the patient financial experience. By understanding each fundamental step of RCM and taking the time to assess which areas need work, you can provide a better understanding of this complex process for your team and help your patients have greater peace of mind.

A Patient Financing Solution for Health and Wellness Providers

If you are looking for a way to connect your patients with flexible financing that empowers them to pay for the care they want and need, consider offering CareCredit as a financing solution. CareCredit allows cardholders to pay for out-of-pocket health and wellness expenses over time while helping enhance the payments process for your practice or business.

When you accept CareCredit, patients can see if they prequalify with no impact to their credit score, and those who apply, if approved, can take advantage of special financing on qualifying purchases.* Additionally, your practice or business will be paid directly within two business days.

Learn more about the CareCredit credit card as a patient financing solution or start the provider enrollment process by filling out this form.

Author Bio

Ilima Loomis is a freelance writer with more than 18 years of experience in journalism and B2B content marketing. With a background in writing about science and technology, she has a knack for taking on complex subjects and helping readers understand not only what is going on but why it relates to them. She specializes in writing about healthcare, health tech and medical research.

Healthcare payment and financing solution

The CareCredit health and wellness credit card helps improve the payment experience for patients and clients, and your financial performance.

Get Started