A Growing Healthcare Outsourcing Market
Healthcare organizations have to juggle various tasks on a day-to-day basis; some are those related to direct patient care, while others are admin and financial jobs which have an equally significant impact on the business and on patient experience. One such critical task is revenue cycle management which involves patient appointment, billing, coding, claim processing, and managing payments, among others. In recent times, outsourcing this part of the business has become a preferred choice for many healthcare companies considering that it needs specialized skills, consistent focus, and an experienced team to conduct the tasks in an effective manner with no errors. According to Research and Markets, the U.S. healthcare outsourcing market was valued at $52.9 billion in 2020 and is forecast to reach $66.3 billion by 2025[1]. Furthermore, a recent survey of more than 500 hospitals and inpatient organizations found that 90% of healthcare executives are exploring cost savings through relationships with third-party vendors[2]. This does not come as a surprise, considering affordability is becoming a growing concern and cost optimization has become a high priority in the industry. One of the critical business processes that is often outsourced and is extremely vital to the business is revenue cycle management. Revenue Cycle Management (RCM) covers all the complex processes of billing, coding, claim processing, and getting paid, which directly impact how much money an organization brings in.
If there is scope for improving costs by outsourcing, such an opportunity should not go unconsidered. In this article, we dive a little deeper to address the question of why to outsource a critical activity like RCM.
Why Outsource Revenue Cycle Management?
Outsourcing RCM is not a new practice among healthcare organizations and has been done for quite a few years now. In the past, they have turned to outsourcing of this process primarily to improve organizational efficiency and improving costs. It is important to note that RCM processes require a specialized expertise with experience. If the engaged staff is not equipped with the skill and experience it can lead to heavy losses in the form of denied claims. Experienced healthcare providers have understood this need and hence, make sure they have the right people on the job. A lot of the RCM tasks are also labor intensive which can lead to high costs, and to add to it, there is a shortage of such skilled professionals making hiring, maintaining and working with such professionals costly and inefficient, especially when compared with the costs of outsourcing.
Given these challenges, healthcare providers often rely on outsourcing agencies or technology solutions to address these gaps.
The Pros of Outsourcing RCM
There is a reason healthcare providers have moved to the option of outsourcing and have continued to stick to that choice, primarily due to the following reasons:
- Improved Efficiency leading to Better Profitability and Cash Flow: It is an industry wide observation that the cost of outsourcing RCM processes is lesser than the cost of managing it in house. This happens because outsourcing companies operate on economies of scale, where they are able to have similar skilled staff, processes and access to technology which can cater to a large number of healthcare providers, bringing the cost of delivery to a healthcare provider much lower than it would be for an independent team to deliver the same work in a healthcare organization. Hence, outsourcing RCM improves efficiency in the admin and financial operations, leading to better profitability at an organization level. Furthermore, by engaging a dedicated, well trained staff for these activities, a healthcare provider ensures better accuracy and reduced errors leading to timely payments and better cash flow.
- Access to Skilled and Experienced RCM Team :Outsourcing companies that handle RCM are experts in managing revenue cycles. They have skilled professionals who know all about billing, coding, and understanding the complicated rules and regulations of insurance. When healthcare providers let these companies handle these tasks, they can take advantage of the expertise.
- Focus on Patient Care: They can save time and resources to dedicate more and undivided attention to delivering excellent patient care. Instead of getting bogged down by administrative tasks and paperwork, providers can focus on what they do best: diagnosing and treating patients.
- Scalability and Flexibility: Providers gain the ability to adjust the scale of their operations to match their needs. Whether patient numbers increase or decrease or new services are introduced, outsourcing companies can modify their scale and nature of services accordingly. Healthcare providers don't need to manage every member of the team - which includes hiring, firing, training, incurring costs like office space, working infrastructure, equipment etc. Also, every time standards/regulations change, the cost of training and execution of the changes in operational processes is not borne by the healthcare provider, but by the outsourcing company.
Factors to Keep in Mind When Outsourcing RCM
For an organization to implement it for the first time, there are some aspects that should not be overlooked, especially during the transition phase from managing it in-house to getting it managed by a partner vendor.
- Choose a Partner with Strong Data Security and Compliance Practices: Providers give access to sensitive patient and financial data to a third party. It's crucial for them to make sure that the outsourcing company has strong security measures to safeguard this information.
- Let Go of Control: When outsourcing RCM, providers relinquish some degree of control over their revenue cycle processes. They have to rely on the outsourcing company to do tasks correctly and on time. Providers need to carefully check out possible outsourcing partners and set up clear lines of communication to keep an eye on things. At the same time, a strong cadence on audit and reporting practices should be established to ensure transparency between the provider and outsourced partner.
- Evaluation of Partner’s Quality of Service: The quality of service offered by potential outsourcing partners should be carefully evaluated. This includes assessing their track record, reputation, and client testimonials. They should also define clear service level agreements (SLAs) with the outsourcing company to ensure that expectations are met.
- Cultural Fit: The RCM partners will be representing the provider to patients, insurers, and other stakeholders. It's essential to choose a partner that aligns with the provider's values, culture, and mission. A strong cultural fit can foster collaboration and mutual trust between the provider and the RCM partner, the outsourcing company.
- Transition and Training: Transitioning to revenue cycle management outsourcing requires careful planning and coordination. It is important to ensure that staff members are adequately trained on new processes and technologies. Clear communication and support from the outsourcing company can help smooth the transition and minimize disruptions to operations. Also, all practices and organizations have their own nuances - and what works for one healthcare provider may not work for another, thus, making training and timely refreshing the knowledge even more important.
Is Outsourcing RCM Right for You?
In conclusion, whether to outsource RCM functions should match the strategic goals and operational requirements of the healthcare organization. Through rigorous research, setting clear goals, and building solid relationships with outsourcing partners, healthcare organizations can make the most of the advantages of revenue cycle management outsourcing while effectively dealing with any hurdles that may arise.
As the healthcare landscape keeps changing, RCM outsourcing is likely to remain a smart strategy for organizations aiming to streamline revenue processes and maintain stable financial performance in a more intricate environment.
If you are a healthcare professional and wish to discuss how to effectively outsource revenue cycle management for your organization, feel free to write to us at partnerships@homrcm.com.
[1]US Healthcare Outsourcing Market Forecast
[2]Hospital Outsourcing - The Opportunities and Challenges
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