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Healthcare market observers view 2022 as one of the worst financial years for hospitals, healthcare systems, and medical groups. The year-long trend of negative margins continues for hospitals with the high cost of medical supplies, declining reimbursements, labor shortage, and mix of services impacting the financial performance. Hospitals and healthcare systems must take an analytical approach to their cost structure to get insights on optimizing revenue, enhancing the patient experience, and minimizing costs.
While outsourcing revenue cycle functions provides solutions to reduce administrative costs, the misunderstandings and prejudices associated with outsourcing often weigh on the decision-makers.
This article addresses some of the toughest questions and concerns surrounding revenue cycle outsourcing- challenges, change management, benefits, and strategies.
In-house vs. Outsourcing
The 25-year history track record of revenue cycle outsourcing and offshoring has already addressed the question of the credibility of RCM outsourcing and offshoring strategies. RCM outsourcing is now a mature industry employing over 500,000 people in the US, India, and the Philippines. While the top concern continues to be ownership and control of the operation, mature service providers have addressed this by deploying real-time tech to allow operations leaders to assess the performance of the extended business office. Additionally, they have put seasoned operations leaders in client services roles to foster a culture of partnerships and problem-solving.
Many healthcare CFOs and revenue cycle leaders find it difficult to plan and execute outsourcing programs. The challenges involved in the decision-making include the determination of financial ROI, identifying metrics to assess the extended business office's performance, and changing their team members' roles. The nuances of working with culturally different team members in a global setting complicate the outsourcing decision even further.
A mature service provider like Access Healthcare addresses these challenges in a comprehensive transition and transformation program. To enable clients to understand the best practices in choosing the right transition partner, we have authored this paper - What to look for in a Revenue Cycle Outsourcing Services provider. Outsourced environments can help you reduce costs to collect and accelerate cash flow, but you must design and implement your outsourcing program correctly.
Dealing with preformed notions about revenue cycle outsourcing
Inherently, leaders in the revenue cycle roles have a lot of preformed notions about outsourcing revenue cycle processes. From disappointing experiences with previous RCM services providers to a lack of understanding of how outsourced programs should work, these preformed notions impede your decision to outsource or keep the processes in-house. As a decision maker, you know your in-house team's challenges, such as the inability to find the resources, lack of consistent reporting practices, quality issues, failure to meet industry standard benchmarks, lack of expertise in functions such as CDI, etc.
We recommend taking a quantitative numbers-based approach to measuring the performance of revenue cycle outsourcing programs. We recommend setting a higher benchmark for your outsourced partner than you are achieving internally. Be conscious of your internal issues and be rational about setting the goals and key performance indicators for outsourced engagements.
Outsourcing is a multi-year journey with a partner whom you can trust and transform your financial outcomes year after year. The emphasis is on the word "partner." As in a marriage, understand each other's priorities and align your service delivery goals. Set realistic expectations and strive to get better continually. Establish a climate of trust where the outsourced partner feels comfortable discussing delivery issues and challenges, and you can discuss your priorities.
Managing transitions
The first question in RCM outsourcing deals is what happens to in-house billers and coders. In recent years, in-house teams are typically short-staffed. So it is easier to address the issue of what to do with in-house team members. In many cases, the staffing model is temporary staffing too. RCM leaders must pave the way for in-house team members to get into new and senior roles with the proper training.
From a people and change management perspective, taking small steps in outsourcing is usually the most effective way. Blockbuster's approach to outsourcing the entire divisions is fraught with the risk of breaking down established processes and can significantly impact your cash flow. Gradually, increasing the scope of outsourced programs will help you focus on your critical internal resources, preserve process knowledge, and create a change management program. As you increase the scope of outsourced activities, you must also invest in improving your in-house teams' job content and responsibilities.
Revenue Cycle Outsourcing Goals
Below are some of the goals you may want to consider for outsourced revenue cycle management services:
Costs: With most hospitals and healthcare organizations operating in negative margins, cost reduction is a critical goal. While most service providers can offer labor arbitrage-based savings, very few can sustain that savings model and improve upon that year over year. Prevalent models in RCM outsourcing include per transaction, monthly FTE rates, and contingency-based pricing such as % of collections for end-to-end RCM outsourcing or backlog clearance projects. Partner with a service provider with a stack of pre-built automation tools that reduce manual effort and the total costs to collect.
Revenue Leakage: Hospitals lose between 3-5% of their revenue due to issues such as DNFB and addressable denials. Inefficient coding, ineffective clinical documentation, lack of physician education programs, and ineffective follow-up and denial clearance programs. This revenue loss is often more than 3X of what you will pay an offshore revenue cycle service provider and effectively makes your entire outsourcing program accessible.
Physician and Patient Satisfaction. Over the last few years, the rise in High Deductible Health Plans has led to the emergence of the patient as a more significant payer of services. Therefore, the outsourced team must handle patient outreach processes such as appointment scheduling, registration, self-pay estimation, and collections with empathy and efficiency.
Seamless Transition and Governance. Consistently delivering revenue cycle goals is akin to running a marathon. You will set up your extended business office for success by creating structured transition and governance processes. Ensure proper knowledge transition and create multi-tier governance processes so that the onus of achieving the KPIs gets shared between your leaders and outsourced team. Structured governance processes will ensure the distribution of work within your leadership team, and the involvement of the executive team is limited to quarterly meetings. It also sets a quantitative basis for measuring outsourced engagements and leaves no room for subjectivity.
Conclusion
It's natural for RCM decision-makers to view outsourcing with skepticism. Success in outsourcing programs requires decision-makers to consider multiple factors related to cash flow, quality, people, and transformation. The right partner can accelerate your journey and lead you to sustained profitability. In these days of tight hospital financials, outsourcing revenue cycle processes can be a strategic tool to anchor the transformation and help you achieve elusive margins.