RCM vs. Third-Party Billing: Key Differences for Home Care Agencies

Struggling with home care billing? Understanding the difference between Revenue Cycle Management (RCM) and Third-Party Billing can help your agency improve cash flow and efficiency. Two common terms you may hear when discussing billing processes are RCM and Third-Party Billing. While they are related, they are not the same. Understanding the differences between these two concepts can help home care agencies make informed decisions about their billing processes.

What is Revenue Cycle Management (RCM)?

RCM is the end-to-end financial process that home care agencies use to manage claims, payments, and revenue generation. It encompasses the entire lifecycle of a patient encounter, from the moment services are provided to the final collection of payment. Key steps in RCM include:

• Patient Eligibility Verification – Ensuring the client’s insurance or Medicaid eligibility is active before services are rendered.

• Claims Submission – Preparing and submitting claims to payers, such as Medicaid, private insurance, or other funding sources.

• Denial Management – Identifying and addressing denied claims to ensure timely reimbursement.

• Payment Posting – Recording payments received and ensuring they match the expected reimbursement.

• Accounts Receivable Management – Tracking outstanding balances and following up on unpaid claims.

RCM is a comprehensive approach to managing an agency’s financial health and ensuring steady cash flow by optimizing billing and collections.

What is Third-Party Billing?

Third-party billing refers to outsourcing the claims submission and collection process to an external company or service provider. Instead of handling billing in-house, a home care agency hires a third-party billing service to manage specific tasks, such as:

• Preparing and Submitting Claims – The third-party service ensures claims are accurately prepared and submitted to payers.

• Follow-ups on Unpaid Claims – They handle denials and reprocess claims when necessary.

• Payment Collection – Some third-party services also assist in collecting payments from payers.

While third-party billing services can be an essential component of RCM, they do not encompass the full revenue cycle. Their role is more focused on claim submission and collection rather than the broader financial strategy that RCM entails.

How Are They Different?

The key difference between RCM and third-party billing lies in scope and control:

• RCM is a full-scale financial strategy that covers everything from verifying eligibility to collecting payments and managing financial reporting.

• Third-party billing is a service that assists with specific billing tasks but does not manage the entire revenue cycle.

Which One is Right for Your Home Care Agency?

The decision between managing RCM in-house or using a third-party billing service depends on the needs of your agency. If you have a strong internal billing team and need full financial oversight, RCM may be the best approach. However, if you lack the resources or expertise to manage claims and collections effectively, outsourcing to a third-party billing service can help lighten the workload while ensuring claims are processed efficiently.

Many agencies find that combining third-party billing with RCM services provides the best results—allowing for both expert claims management and a more strategic approach to financial health. No matter which approach your agency takes, the goal remains the same: ensuring timely payments, reducing denials, and maintaining a steady cash flow.

If you're exploring your options, consider how CareTime’s billing with RCM services can provide the best results—helping your agency navigate complex billing requirements, reduce claim denials, and maintain financial stability for long-term success.