The healthcare industry is an ever-evolving landscape, and nowhere is this more apparent than in revenue cycle management (RCM). As we navigate 2025, RCM leaders are keenly focused on adapting their strategies to maintain financial stability, accelerate revenue, reduce denials, and ultimately, deliver quality patient care. Understanding the latest trends in RCM is crucial for staying competitive and thriving amidst constant change.
To gain deeper insights into the realities faced by those on the front lines of RCM, we recently sat down with April Torres, an experienced revenue cycle manager, for our "Day in the Life" series. With 20 years in the field, April has seen many sides of revenue cycle operations, progressing from an authorizations position to her current role as a billing manager for outpatient clinics within a hospital. Her perspective sheds light on the multifaceted nature of this role, which she describes as having "never a dull moment". April firmly believes her primary purpose is serving patients, emphasizing that while it might not be direct patient care, everything in RCM ultimately contributes to getting patients through their healthcare journey and ensuring the organization can better serve them. This patient-centric view, she explains, extends to working with patients to ease the burden of daunting medical bills.
As we look ahead, April highlights that the primary challenges in 2025 largely revolve around processes, particularly due to shifts in work models. Let’s dive into these challenges and explore how revenue cycle managers are strategically adapting to them.
The Payer Puzzle: A Constant Challenge and Resource
One of the most persistent frustrations for revenue cycle managers, April notes, stems from the inconsistencies among payers. "Every payer’s different, and it’s a challenge," she explains, highlighting that what one payer looks for or how they review claims is not standardized across the board. This lack of uniformity can make claim processing a constant puzzle for RCM teams.
The healthcare industry is heavily regulated, with rules and requirements constantly shifting, adding another layer of complexity. Healthcare administrators and revenue cycle managers are continually scrambling to stay up-to-date on everything from new coding guidelines to evolving privacy regulations. A significant area of focus for 2025 is the development of new regulations around the safe and proper use of AI tools in RCM. There's also an ongoing "push and pull" with insurance companies regarding the use of AI for applications like prior authorization. While positive for patients, these regulatory shifts create more backend work for providers, requiring ongoing staff training, vigilant monitoring, and potentially, collaboration with compliance experts or legal counsel to avoid costly penalties.
Despite the challenges, April emphasizes that payers can also be a valuable resource. She shares a positive development:
"I have found though that a lot of our payers have been extremely helpful. If they’re going to reject a claim, especially if they reject it by paper, I’m getting rejections that have basically directions, step by step, what they’re looking for. So I think they’ve really put in a lot of time there too, trying to assist the billing teams and let them know what they’re looking for so that our clients can be paid."
This insight reveals that sometimes the issues encountered are larger "corporate problems" within the payer system rather than internal RCM team problems, highlighting the need for collaboration and understanding across the industry.
Internal Hurdles: People, Processes, and Infrastructure
Beyond the external complexities of dealing with diverse payers and evolving regulations, revenue cycle managers contend with significant internal challenges related to their teams, established processes, and underlying infrastructure.
Employee Turnover and Understaffing
Staffing shortages and rising labor costs continue to strain the healthcare industry, despite some rebound in hospital margins. Contract labor costs have dramatically increased by nearly 258% over the past four years. This burden directly impacts RCM teams, leading to employee turnover and understaffing, which in turn disrupts communication and established processes. When departments are understaffed, communication can suffer, and it takes time for it to pick back up once staffing levels are restored.
To alleviate this pressure, many health systems are seeking external help from revenue cycle management providers. Outsourced RCM services can efficiently manage patient collections, including patient billing, claims processing and submission, and denials management and appeals. Partnering with experienced external providers can minimize claim denials and increase revenue flow, offering a competitive advantage. For example, companies like Magical offer fully autonomous, end-to-end automation driven by AI employees, making them an excellent choice for healthcare organizations looking to automate complex RCM workflows.
Network Issues and Outages
Even with robust internal processes, unforeseen disruptions like network issues and system outages can throw a wrench into operations. These are factors often beyond the direct control of an RCM manager but can significantly impact productivity and cash flow.
Importance of Solid Processes and Communication
Despite these challenges, April emphasizes that having "pretty solid" processes is crucial. However, even strong processes can be disrupted. This underscores the essential nature of strong team support and clear internal communication. April proudly highlights her team’s initiative to implement daily 15-minute meetings, a simple yet highly effective way to keep lines of communication open and address issues proactively. "If it’s a short list and it’s quick and you’re just going to bring it up and put it out there, everybody can hear it right away," she notes, stressing how this avoids information getting lost and allows for immediate problem-solving. This approach also helps foster better inter-departmental communication.
This commitment to process improvement and team support is a driving force for April. She admits that "process improvement keeps me up at night," but clarifies it's not a negative thing, rather something she gets excited about. Her goal is always to find ways to reduce charge entry, coding, and billing times, making processes as easy as possible for everyone on the team, from front office staff to providers and billing/coding personnel.
Meeting Expectations: KPIs and Productivity in a Challenging Environment
Revenue cycle managers are constantly measured against Key Performance Indicators (KPIs) and productivity goals that reflect the financial health of their organization. April's leadership team sets clear expectations, focusing on three main KPIs: credit balances, days in accounts receivable (AR), and clean claim rate.
Credit Balances: Aiming to keep these at 30 days is vital, as they can significantly affect AR and prevent the organization from holding onto excess dollars.
Days in AR: The goal is to keep these as low as possible, requiring close tracking to identify any issues or trends impacting the numbers. Understanding what drives numbers up or down provides the best insight into resolution.
Clean Claim Rate: This KPI emphasizes maximizing work on the front end to ensure claims are accurate upon initial submission, minimizing the need for subsequent follow-up. April stresses the productivity goal: "We always want to touch as many accounts as possible, but we want to touch them the least amount of times, right? We want to send the clean claims out the door. So the next time we touch it, we’re going to be posting the payment."
While industry standards exist, April's organization primarily uses its own internal trends to set benchmarks, acknowledging that external factors beyond their control can influence these numbers.
A significant challenge impacting these KPIs is the "Rise in Denials." An AKASA survey found that half of providers experienced an increase in denial rates in the past year, making it a critical concern for revenue cycles. Common causes include errors in patient information, insufficient documentation, or issues with prior authorizations. A proactive approach is best, involving ongoing staff training on submission requirements, leveraging technology for automated prior authorizations, prioritizing denials with high recovery chances, and improving data quality and medical coding accuracy.
This is where advanced technologies, particularly Artificial Intelligence (AI) and automation, become indispensable. AI and automation are rapidly transforming healthcare RCM, helping organizations manage vast amounts of data, improve efficiency, optimize workflows, and minimize errors. AI-based tools, including generative AI, are especially helpful in RCM areas such as patient registration and eligibility verification, claims processing, denials management, and payment posting. These tools can drastically reduce manual effort, minimize errors, and accelerate the revenue cycle.
Magical, for instance, uses AI to make it incredibly easy to set up Robotic Process Automation (RPA) workflows in minutes, compared to the months it might traditionally take. Agentic AI, a more advanced form of AI-powered automation, is designed to autonomously perceive, decide, and act to achieve goals, adapting to new situations based on predefined instructions. Unlike traditional, rule-based RPA that can be rigid and break easily, Agentic AI operates more like a human worker, understanding context, adapting to changing situations, and making judgments. It can handle date conversions, text extraction, and formatting automatically, ensuring self-healing workflows and error handling. This kind of intelligent automation is critical for meeting KPIs and boosting productivity in a challenging environment.
Is your team spending too much time on repetitive tasks, impacting your KPIs? Discover how Magical's Agentic AI can automate complex RCM workflows, reduce denials, and accelerate your revenue cycle, freeing your team to focus on strategic work. Book a demo today and see the magic in action!
The Hybrid Work Model: A Nudge Towards the Future
The past few years have ushered in a significant shift in work models, with many healthcare professionals, including those in RCM, working remotely or in hybrid arrangements. April describes this as a "nudge towards the future," acknowledging that while it's different and requires creativity, it can "absolutely be done." This transition has altered internal processes and even hiring strategies.
The widespread adoption of tools like Zoom has facilitated this shift, allowing teams to collaborate effectively even when not physically co-located. Crucially, the hybrid model has opened up new hiring opportunities, enabling organizations to access talent across states or counties that were previously out of reach. This expands the talent pool and allows companies to find the best fit regardless of geographical location.
April reflects on the broader implications of this shift:
"So much of what we do doesn't have to be in the office. But again, there's a balance. Like you were saying, you need the communication, you need the check-in and different things work for different people. But personally, for me, I just think it was really just a nudge that was really needed. And I think in the end, of course, you’ve got to work through those processes and work through those changes. But I think that in the end, it’ll be a really great change for our industry."
While the benefits of remote work are clear, maintaining strong communication and regular check-ins remains essential to ensure seamless operations and team cohesion.
The "Embracing AI and Automation" trend is particularly relevant in supporting the hybrid work model. AI and automation can bridge communication gaps and ensure workflows remain optimized regardless of where team members are located. For instance, Agentic AI can automate complex processes effortlessly, making decisions like a human and running on virtual machines. This capability allows for scalable automations that can run entirely without human inputs, effectively acting as "AI employees" that work while your human team members are engaged elsewhere or even "while you sleep". This autonomy and scalability are perfect for organizations embracing distributed or hybrid teams, providing reliable automation even when faced with changes in applications.
Conclusion: Strategic Adaptation for RCM Success
The dynamic landscape of healthcare revenue cycle management demands strategic adaptation and a proactive approach. As April Torres highlights, challenges stemming from diverse payer requirements, internal hurdles related to staffing and processes, and the evolution of work models all require creative problem-solving and robust solutions.
Understanding these trends isn't about being "trendy"; it's about equipping healthcare teams with the strategies to maintain financial stability, accelerate revenue, and ultimately, deliver quality patient care. This includes a heightened focus on patient financial engagement, as patients are shouldering more of their healthcare costs and expect seamless, digital-first experiences similar to those in banking. Offering flexible payment options, easy-to-understand billing, and online payment portals are no longer optional but crucial for patient satisfaction and revenue acceleration. Cybersecurity concerns also remain paramount, given the sensitive patient data handled by the industry, necessitating strong measures to protect against breaches that could disrupt RCM and damage reputation.
For revenue cycle leaders looking to navigate these complexities, investing in innovation is key. Technology, especially advanced AI and automation, plays a pivotal role in streamlining operations, reducing manual processes, and enhancing efficiency. By embracing solutions like Magical's Agentic AI, healthcare organizations can automate repetitive RCM workflows, from claims processing to denials management and payment posting, achieving significant improvements in efficiency and accuracy.
Ready to transform your RCM processes and empower your team? See how Magical's Agentic AI can automate your most time-consuming workflows, making them self-driving and reliable. Request a personalized demo today!
By taking a proactive stance and leveraging cutting-edge tools, revenue cycle leaders can steer their organizations through challenging times, ensure financial well-being, and ultimately, support their core mission of patient care. The future of RCM is not just about managing transactions; it's about optimizing every step of the patient's financial journey with intelligence, efficiency, and a human-centered approach.
