The Basics of Healthcare Finance and Revenue Cycle Management

July 9, 2021

The financial side of the healthcare industry is complex and can be challenging to understand. Revenue cycle management, insurance coverage, and eligibility are not simple or straightforward. At DECO, our goal is to help you understand the whole process better so your medical organization can become more efficient and make more money. So we’ve put together some information to help clarify and flesh out these finance terms. Here are some of the basics of what healthcare providers and organizations need to know about insurance and revenue cycle management.


Medicare and Medicaid

The healthcare sector leans heavily on both Medicare and Medicaid. These two terms can easily be confused with one another, but there are key differences that organizations should be aware of. Medicare and Medicaid are two of the biggest programs that the United States government pays for with taxpayer money, since they are some of the biggest payers of healthcare bills. They’re the government’s answers to some of the biggest healthcare issues in this nation, and they’ve existed for decades. They’re also huge programs that impact other elements of healthcare finance.


Medicare is one of the largest government programs in the United States, comparable in spending to public education and Social Security. It provides subsidized healthcare to senior citizens (individuals over the age of 65) who no longer have coverage due to retirement or ineligibility for other programs. In some special cases, like becoming disabled prior to retirement age, an individual may be able to draw upon Medicare for medical expenses earlier than the age of 65.


Medicaid works similarly to Medicare and is the third largest domestic government program in the United States (accounting for $577 billion in FY 2017), though it’s only for individuals under the age of 65. It usually covers the low-income populations of the United States, individuals with disabilities or chronic illness, individuals who are unemployed, pregnant women, children (through CHIP, the Children’s Health Insurance Program), and several other categories of people. If your healthcare organization treats individuals who fit within these categories, it may be entitled to financial compensation from the government. This process, however, can often be long and challenging.

Affordable Care Act

Usually known as the ACA or Obamacare, the Affordable Care Act is a massive healthcare bill that was passed into law during the presidency of Barack Obama. It expanded government spending and regulations to accommodate the increasing need for financial assistance in the American healthcare system. As controversial as this law has been, and though it has changed much since most of its major provisions went into effect in 2014, it has become a mainstay of the healthcare revenue system. It has allowed the expansion of Medicare and Medicaid provision to those in the “coverage gap” (the population that has been unable to afford healthcare due to ineligibility). However, both of these programs are still largely determined and regulated by individual state mandates.

The Healthcare Marketplace

The ACA also established the Healthcare Marketplace, a hub where individuals can sign up for private healthcare plans outside of Medicaid/Medicare or employer-provided healthcare programs. These insurance plans may be eligible for subsidization by the federal government depending on a patient’s financial status.

Federal Poverty Level

The Federal Poverty Level (FPL) is a metric that the ACA uses to determine eligibility for Medicaid provision. The current standard in any state that has fully implemented the regulations of the ACA is that most people whose income is less than 138 percent of the FPL can be eligible for Medicaid. The FPL currently sits at about $26,500 annually for a family of four in 2021.

Work Requirements

One of the most hotly debated topics within the sphere of the ACA is work requirements. If a state has implemented work requirements as a part of being eligible for Medicaid, it means that nonexempt recipients must be able to show that they have worked for a set number of hours per week, through a job, education, volunteer work or other form of community investment. This regulation, which some states uphold and others do not, is a way to encourage people to find work that will provide them with private insurance plans and allow them to stop using Medicaid.

Social Security

Another major program of the federal government, Social Security is closely linked in many cases to Medicaid and Medicare.

Social Security Disability Insurance

Social Security Disability Insurance (SSDI) is a program that provides free or reduced-cost healthcare to individuals with disabilities. These people and their families or caretakers may be unable to work, and therefore are unlikely to be able to pay for healthcare services. SSDI can help them gain access to the care they need.

Supplemental Security Income

Supplemental Security Income (SSI) is a program designed for the most economically disadvantaged and vulnerable individuals of the nation. These individuals commonly have little to no income or resources at their disposal. Not only does SSI provide them with income to meet their most basic needs, it can also help them become eligible for Medicaid.

Revenue Cycle Management

Revenue Cycle Management is a broad term that describes the process by which a healthcare organization or hospital receives and uses funds to provide the highest quality care possible to patients. RCM strategies vary greatly and can make a difference between financial success and failure for a healthcare organization.

Medical Billing and Coding

One aspect of RCM that can easily add a great deal of complexity and lead to a lack of resources is the billing cycle. If a hospital is unable to effectively keep track of payments, patients’ abilities to pay their bills, or support from government programs, it may find itself floundering. Medical billers and coders in Accounts Receivable departments work hard every day to turn patient experiences into healthcare bills through a process known as charge capture. Then they submit claims to insurance companies in the hopes of being reimbursed for the care they’ve provided, and follow up throughout the process. 

Claim Denials

One of the most difficult aspects of the claims management process is claim denials. When a claim is denied, it’s often because there was an error in the claim or because an insurance company doesn’t cover a certain aspect of the bill. These errors must be fixed, appealed, and followed up on, or the healthcare organization will have to charge the patient more money out of pocket or eat the cost and risk the buildup of bad debt. Performing claim denial management tasks is often one of the toughest parts of the billing process.

Eligibility/Eligibility Advocate

Many patients who don’t have healthcare coverage may be eligible for financial assistance from government programs like Medicaid. However, the process of identifying and receiving such support is often long and difficult to understand. An eligibility advocate or specialist can guide patients through this complex process by helping them fill out and submit the necessary paperwork. In performing these tasks, the advocate promotes the patient’s health and well-being, resulting in a better financial situation for both the patient and the healthcare organization.

Reimbursement Models

Health insurance and reimbursement can take many different forms outside the spectrum of government-subsidized care. Some of these models include:

Electronic Health Records

Electronic Health Records (EHRs) are the digital record of patient information, particularly their medical and treatment background. Data in an EHR can range from records of vaccinations to health risks to past surgeries or notes from doctors on treatment. Such information is vital to the ongoing treatment of each patient. Every human being has different health needs, and physicians have to pay close attention to these needs when treating them.

What DECO Does

Our specialty at DECO is partnering with healthcare organizations to help them meet their bottom lines and increase cash flow. This often means working on the front lines with clinical staff to help administrative work and patient interactions go smoothly. Our eligibility advocates and other expert personnel are here to help your healthcare organization improve its finances, solve problems that could be costly, and work to streamline revenue cycle management systems. If your organization wants assistance with getting compensated for care, contact us today.