What Is the Difference Between RCM and a Medical Billing Clearinghouse?

What Is the Difference Between RCM and a Medical Billing Clearinghouse?

Billing is often a misunderstood and underappreciated part of operating a medical practice. Some professionals might view billing as a necessary evil, something that’s needed for financial reasons, but complicated, boring, and less important than other office-related tasks.

Instead, consider billing processes as stepping stones to greater things. Medical clearinghouses and revenue cycle management (RCM) are billing tools that could help streamline billing and the offices that employ them.

What are medical clearinghouses? What do they do?

To begin our discussion of medical clearinghouses, it might be helpful to explain what they are and what they do.


As their name indicates, medical clearinghouses help doctors’ offices clear paperwork. They do this by serving as liaisons between medical offices and insurance payers. These insurance payers could be private insurance companies or government-sponsored health care programs such as Medicare and Medicaid.

According to Bricker & Eckler attorneys at law, clearinghouses may be

  • “Billing services
  • Repricing companies
  • Community health management information systems
  • Community health information systems
  • ‘Value-added’ networks and switches”

In the United States alone, medical offices file millions of insurance claims every day. They file this paperwork on countless types of claims software and send it to thousands of insurance carriers throughout the company. The carriers require several specific regulations and edits that may occasionally change.

Those processes require knowledge of software programs, medical codes, and changing requirements. Medical offices that need to schedule, treat, and help patients in other ways may not have the time to learn and relearn these processes, make and track claims, follow up on appeals, and complete other insurance-related tasks.

Clearinghouses employ people who focus on such tasks.

What is revenue cycle management (RCM)? What does it do?

Since they work with insurance claims, medical clearinghouses play a vital role in the medical billing revenue cycle. Revenue cycle management (RCM) works with a medical practice’s payment claims, the payments themselves, and also on its revenue generation.


While different practices might have different procedures, RCM in medical billing generally contains several steps that could include:

  • Installing a RCM software system or hiring RCM professionals.
  • Pre-authorizing or pre-certifying patients for treatments and medications.
  • Verifying insurance eligibility.
  • Applying medical codes to patients’ conditions and treatments.
  • Requiring patients to cover copayments (copays) and deductibles.
  • Filing claims with insurance providers.
  • Requesting financial reimbursement to pay for medical services.
  • Handling reimbursement denials.
  • Collecting for services not covered and communicating with patients.

Working with these functions, medical clearinghouses are entities that provide services. RCM is the entire process as a whole.

How do medical clearinghouses and RCM professionals correct (scrub) claims?

Health care offices are busy. They’re scheduling appointments, seeing patients in person, and communicating with them by phone and computer, updating files, and doing several other things, sometimes more than one at once.

Staff members might find it difficult to find the exact code needed to define a patient’s medical condition to a health insurer. They might use the wrong code entirely or might use a wrong number or two when recording a code.

Insurance companies frequently reject incorrect codes, requiring offices to start the process over again. Or patients might be required to pay higher out-of-pocket costs.

During the RCM process, medical practices might want to send their claims to a clearinghouse to avoid such coding problems entirely.

To improve the process, professionals participate in a process known as claims scrubbing. When professionals scrub insurance claims, they examine important areas of these documents, including information about

  • Patients, providers, and insurance providers
  • Procedures related to the patients’ genders, ages, and other demographic factors
  • Medical procedures used to determine diagnoses and treatments
  • Medicaid, Medicare, and other programs
  • The necessity of medical services

Citing any of these items incorrectly could lead to claims being delayed or denied.

People who are scrubbing claims examine items more closely, correct them, and address any discrepancies. They’ll create claims that are more likely to produce results that satisfy patients and their health care providers.

How do medical clearinghouses serve as advocates and simplify tasks?

Providing quality control isn’t the only way clearinghouses could assist medical offices during the claims process. Clearinghouses could also serve as advocates during this time.

As useful as revenue cycle management is, it’s a complicated process. It requires medical offices to do and track several things.

On the other hand, the scope of a clearinghouse is more limited. Clearinghouses only process, issue, and dispute insurance claims.

Because of this focus, clearinghouses have extensive experience performing certain tasks. They know the right questions to ask and how to deal effectively with insurance providers, creating streamlined experiences that eliminate tasks that could waste time or money.

Basically, clearinghouses know how to speak the language of insurance companies. They’ll use these language skills to work with insurers to assist patients and their medical providers.

Working with clearinghouses might also simplify common tasks. They might work through one portal instead of directly billing through several insurance companies.

After working as claim scrubbers, they’ll send more correct claims. Clearinghouses could submit these insurance claims in batches instead of individually. This saves time, paperwork, and actual paper if they’re using paper bills.

In short, clearinghouses serve as the middleman between insurance companies and health care providers during the entire process. The efficiency of clearinghouses creates a more efficient billing process more likely to produce positive results.

How can clearinghouses help medical practices build revenue?

Streamlining professional processes could also help medical practices manage their finances as well.


How? Well, if clearinghouses send correct claims that the insurance companies accept, they’ll receive payment more easily and quickly. By monitoring this steady stream of payments, people could determine how much money is entering and exiting their medical practices.

Employees working on the practices’ revenue cycle management could then make more accurate budgets and financial forecasts.

With more incoming revenue, medical professionals could also invest in and expand their practices. Expansion could lead to additional revenue and continued success.

To learn more about top RCM processes, contact us. We can show you ways to streamline and expand your business operations.

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