Revenue Cycle Modernization in the 2020's

The evolution of Revenue Cycle Management in the U.S.

The early days (pre-1960s): cash-based, Provider-controlled billing

Before the rise of insurance and government programs, healthcare billing was a direct transaction between patients and providers.

Key characteristics:

• Simple payments: Patients paid out-of-pocket for care, often at the time of service.
• No standardized pricing: Providers set their own rates, leading to inconsistent billing.
• Minimal record-keeping: Medical documentation was handwritten, and no formal coding system existed.
• High financial risk for patients: With no insurance safety net, unexpected medical costs led to unpaid bills and charity care.

The challenge? Providers had unpredictable revenue cycles, and patients faced financial burdens without structured reimbursement options.

The rise of third-party Payers & Standardized Billing (1960s–1980s)

The Birth of Medicare & Medicaid (1965) – A game changer: With the introduction of Medicare (for seniors) and Medicaid (for low-income individuals), healthcare financing shifted from direct patient payments to third-party reimbursement.

Key developments:

• Employer-sponsored insurance growth: More Americans received coverage through work, increasing payer involvement in Revenue Cycle Management (RCM).
• Fee-for-Service (FFS) Becomes the Norm: Providers billed insurers based on procedures performed, incentivizing volume over value.
• First steps toward billing standardization:
• ICD-9 (1979): Introduced structured coding for diagnoses and procedures.
• UB-82 & CMS-1500 Forms: Standardized hospital and physician claims submission.
• Early mainframe-based billingsystems: Hospitals adopted basic electronic billing but still relied heavily on manual processing.

The challenge? Claims processing was still slow, error-prone, and highly administrative.

The digital shift: Electronic claims, HIPAA, and EHRs (1990s–2000s)

The 1990s brought significant digitization, interoperability mandates, and increased payer complexity.

Key milestones in the 1990s:

• HIPAA (1996): Established national standards for electronic claims submission and patient data security.
• EDI 837 Format Introduced: Allowed providers to submit claims electronically to payers.
• Clearinghouses Emerge: Served as intermediaries to check claims, flag errors, and format submissions for different payers.

The early 2000s: The rise of EHRs & ICD-10 planning

• HITECH Act (2009): Incentivized the adoption of Electronic Health Records (EHRs), merging clinical and billing data.
• ICD-10 (2015) Rollout: Expanded from 17,000 to 155,000 codes, improving documentation but adding coding complexity.

The challenge? Interoperability gaps between EHRs, RCM systems, and Payer platforms slowed automation efforts.

The shift to value-based care & RCM automation (2010s–Present)

Regulatory and reimbursement shifts

• Affordable Care Act (ACA, 2010): Introduced value-based reimbursement models (VBR), linking payments to patient outcomes.
• Bundled payments & capitation: Providers received fixed payments for entire episodes of care, increasing financial risk.
• No Surprises Act (2022): Mandated price transparency and fair billing, adding compliance challenges.

Technology-driven RCM innovations (2010s–2020s)

• AI-Powered Claims Processing & Denial Management: Automated claim scrubbing and predictive denial analytics reduce revenue leakage.
• Robotic Process Automation (RPA) for Workflow Optimization: Automates eligibility checks, claim follow-ups, and payment posting.
• Cloud-based RCM platforms: Replacing on-premise billing systems for scalability and cost-efficiency.
• FHIR-based APIs for Payer-Provider Data Exchange: Enabling real-time prior authorization and eligibility verification.

The challenge? Despite these advancements, RCM remains fragmented, administrative costs are rising, and patient bad debt is increasing.

The urgent need for RCM modernization (Beyond 2020s)

Thus, we see that even though RCM has evolved from manual billing to AI-driven automation, solving many prior challenges along the way, but many organizations still rely on outdated, disjointed systems and unoptimized manual, error-prone workflows. The future demands a systematic and accelerated approach towards technology integration into RCM with a view towards reducing costs and error rates across Patients, Providers, Payors and for Healthcare RCM ISVs.

Where we stand today – An overburdened, fragmented revenue cycle

An unoptimized, legacy and fragmented revenue cycle is affecting all key entities in the healthcare system.

• Patients

• Rising out-of-pocket costs: Higher deductibles increase patient responsibility, with more than 1/3^rd of provider revenue coming from patients, but 2/3^rd patients struggle with affordability, causing delayed payments.
• Lack of price transparency: Patients struggle to understand bills and estimate costs upfront.
• Complexity in payment options: Limited financing or instalment plans lead to bad debt.

• Providers & health systems

• Claim denials and rework: 10-15% of claims get denied, leading to revenue loss.
• Administrative burden: RCM teams spend excessive time on manual workflows.
• Interoperability challenges: Disconnected systems cause delays in prior authorizations and billing.

• Payers

• Fraud, waste, and abuse: Inaccurate billing and duplicate claims increase costs.
• Lack of real-time data: Manual claim adjudication causes delays in reimbursement.
• Complex prior authorization workflows: Cumbersome processes lead to treatment delays.

• RCM Software ISVs & Clearinghouses

• Legacy systems: Many RCM platforms lack AI-driven automation.
• Regulatory compliance: Keeping up with HIPAA, CMS, and No Surprises Act requirements is challenging.
• Scalability issues: Growing data volumes require modernized cloud infrastructure.

How technology can solve these challenges

Here we try to outline the end-to-end revenue cycle processes and appropriate technology solutions that can optimize each stage for different stakeholders (Patients, Providers, Payers, ISVs, and Clearinghouses)

End-to-end revenue cycle process and key technology elements

Technology elements mapped to RCM processes

Each of these solutions reduces friction in revenue cycle workflows, optimizing cash flow and reducing administrative costs.

While AI, GenAI, and RPA automation directly optimize the revenue cycle processes, their success ultimately depends on an implicit, strong technology foundation which we call as “Core Enablers”. These enablers power your RCM platforms and backend data ensuring scalability, adaptability, security and user friendliness.

The future of RCM: What to expect in the next five years

• AI-driven RCM: Predictive analytics will optimize claims submission and denial prevention.
• End-to-end automation: RPA + AI will eliminate manual intervention in key processes.
• Embedded finance solutions: Healthcare BNPL (Buy Now, Pay Later) will become mainstream for patient payments.
• Real-time interoperability: Widespread adoption of FHIR APIs will streamline data exchange.
• Hyper-personalized billing: AI-powered recommendations will tailor financial plans for patients.

These trends will shape a more efficient, patient-friendly, and cost-effective revenue cycle.

Getting Started with Revenue Cycle Modernization: Quick Wins & Long-Term Plays

Modernizing your revenue cycle doesn’t have to mean a disruptive overhaul. The smartest organizations start small, show ROI quickly, and scale strategically. Here’s how to get started:

Quick Wins: Build Momentum, Show Impact

These are low-friction, high-ROI interventions you can implement in weeks—not months.

• Automate Eligibility Checks & Prior Auth: Use RPA, GenAI and FHIR APIs to verify insurance in real time and streamline authorization processes.
• Deploy AI-Powered Claim Scrubbing & Denial Prediction: Cut rework by catching errors before submission and proactively flagging high-risk claims.
• Digitize Patient Estimates & Collections: Offer automated, accurate out-of-pocket estimates and digital payment options—boost patient trust and reduce bad debt.
• Cloud-Migrate Legacy RCM Systems: Move core billing components to the cloud for cost savings, scalability, and uptime.
• Dashboards for Denials & AR Aging: Set up real-time analytics dashboards for visibility into payment delays and revenue leakage.

Long-Term Plays: Rewire for Resilience & Scale

For sustainable impact, organizations need to reimagine their RCM foundation.

• Adopt End-to-End Cloud-Native RCM Platforms: Break free from siloed, on-prem systems and unify clinical, financial, and administrative data.
• Invest in Interoperability & Standards-Based Data Exchange: Embrace FHIR, HL7, and real-time APIs to enable payer-provider collaboration and compliance.
• Build an RCM Data Lakehouse for Predictive Analytics: Consolidate claims, payments, patient interactions, and clinical data for smarter forecasting and audit readiness.
• Integrate GenAI for Knowledge Work Automation: Use large language models (LLMs) to interpret EOBs, automate appeals, summarize payer policies, and support coding.
• Reimagine Patient Experience Across the Financial Journey: From pre-service estimates to post-service follow-up, make billing transparent, digital, and patient-friendly.