Over two-thirds of hospitals are using RCM software or service vendors — Here's 3 proven outsourcing plays to transform your revenue cycle

Hospital leaders are facing significant challenges to revenue cycle performance, including more complexity in payer rules and contracting, declining reimbursement rates, higher costs leading to lower margins, denials and revenue integrity, and rising patient consumerism.

Hospitals also have less capital to enhance technology platforms that could help solve some of these problems. Unsurprisingly, two-thirds of hospitals have started to engage partners for at least some part of their revenue cycle to combat this trend, according to comments made by two revenue cycle experts during a Sept. 10 webinar sponsored by R1 RCM and hosted by Becker's Hospital Review. The presenters said coding, patient receivables and revenue optimization functions are among the most frequently outsourced services.

"Systems can't continue throwing more people at the problem or just trying harder. It's getting too complex and too narrow in the margin space," Kate Harper, senior vice president of revenue integrity at R1 RCM, said. "What health systems need is subject matter expertise and revenue enhancing technology."

Whether it be reducing operating expenses, increasing scores on performance metrics, improving the patient and physician relationship or gaining experience at scale for ever-changing payment models, hospitals are increasingly looking for revenue cycle management partners. Ms. Harper and Daniel Graves, vice president of coding operations at R1 RCM, spoke to webinar listeners about what makes an outsourcing experience successful, and why hospitals should expect added bonuses within their outsourcing contracts.

3 proven plays to yield success in RCM outsourcing

There are three proven outsourcing models hospitals can choose from to improve revenue cycle management functions: a full end-to-end outsource, a co-managed model and a selective outsource of certain RCM functions.

"We're seeing health systems beginning to view revenue cycle as a competitive advantage against others in their market," Ms. Harper said. "They're looking for an outsourcing model that focuses attention on improving patient care without sacrificing expertise in revenue cycle."

Which model will work best depends on the needs and goals of the hospital. Some hospitals seeking standardization and new technology will likely see the greatest improvement through an end-to-end outsource. Full outsourcing can help reduce risk for hospitals and present them with the most opportunity to lower cost to collect, the R1 RCM presenters said.

Hospitals that want to maintain internal oversight of revenue cycle operations, but recognize a need for transformative change, may consider a co-managed outsource model.

"It's a 'try before you buy' model before full outsource," Ms. Harper said. "It's an arrangement with a key partner that provides more options for customization." Ms. Harper said what attracts some hospitals to a co-managed model is the ability to allow revenue cycle managers to maintain jurisdiction over all operations, while letting the vendor to take care of systems on the back end that hospitals may not have the technological or personnel bandwidth for.

The third proven play, outsourcing a strategic focus area, is the smallest scale outsourcing strategy. In simple terms, it's outsourcing select RCM functions, such as self-pay collections, rather than agreeing to co-manage the revenue cycle with a partner or give full reins to an outside vendor.

"We see providers going in this direction for a few reasons. In general, it can be a good strategy for people who are looking for a solution to an identified problem. They may be prioritizing speed to value in a focused area over a more comprehensive solution," Mr. Graves said.

Bonus proven play: Patient experience

Another challenge driving hospitals to consider outsourcing for RCM is the growing need to meet patient payment expectations. A recent survey of hospital revenue cycle leaders conducted by R1 RCM found 41 percent of respondents rank patient experience as their No. 1 priority.

"The added benefit of outsourcing is the ability to improve the patient financial experience," Mr. Graves said. "What hospitals should expect from an outsourcing firm is added benefits through the way they invest in technology and leverage their expertise in all other revenue cycle functions to make patient experience better."

R1 RCM has come to recognize the importance of this added value through its experience managing $31 billion in net patient revenue across end-to-end, co-managed and strategic outsourcing models. R1 RCM's standards, methods and technology are based on deep day-to-day operating experience with 135-plus hospitals nationwide.

"A revenue cycle outsourcing experience should create a more loyal, happy patient space. From a financial standpoint, we've seen in our own operating experience that a patient who is better educated and a patient who trusts and is satisfied with the billing process is likely to pay more of their share," Mr. Graves said.

To view a recording of the webinar, click here.

To learn more about R1 RCM, click here.

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