Revamping hospital RCM using outsourcing, insourcing or something in-between

Hospital billing is more complex than ever, and in a healthcare environment focused on improving quality while reducing costs, it is going to become increasingly more important for hospitals to optimize revenue cycle management.

The pressure to update RCM systems is strong, and hospital CFOs, especially those at financially distressed hospitals, are definitely feeling the heat. In fact, according to a Black Book survey, 61 percent of CFOs who self-identified their hospitals as struggling foresee being fired by 2016 because RCM, staff and solutions were stuck in fee-for-service mode too long.

Since a hospital's RCM system can either help lead it to success or wreak havoc on its finances, even hospitals that are not financially distressed occasionally reach out for help with hospital billing.

Outsourcing is a growing trend
There are several options available to hospitals looking to improve their revenue cycle, including outsourcing. Many financially distressed hospitals are outsourcing their RCM because it lets them avoid the capital cost of updating their system and instead allows them to use the vendor's updated system.

Making the decision to outsource often comes at a time when a hospital is at a crossroads. According to a Black Book poll, 21 percent of CFOs who changed to RCM outsourcing said their organization was absolutely facing bankruptcy within the next four years if either state-of-the-art software or outsourced services were not implemented immediately.

The choice to outsource has had a positive financial effect on many healthcare organizations. Eighty-three percent of hospitals with more than 200 beds that outsourced all or most of their RCM operations attributed 5.3 percent of their revenue increases to the decision to outsource, while 78 percent of hospitals with less than 200 beds attributed 6.2 percent of their revenue increases to the decision to outsource all or most of their RCM operations, according to the Black Book poll.

Though it is beneficial for distressed facilities, outsourcing RCM operations isn't just for hospitals in financial peril. Most hospitals today, even those that are performing well, outsource some part of the RCM process. Although end-to-end outsourcing is more likely to be used by struggling hospitals, outsourcing presents advantages to financially healthy hospitals as well. Outsourcing part of the process allows those hospitals to let specialty vendors handle particularly difficult claims, including motor vehicle accidents, according to Joel Gardiner, principal at Deloitte Consulting, who serves as the company's National Practice Leader for RCM services.

However, there are disadvantages of outsourcing, which according to Mr. Gardinar are "cost, quality and control." When a hospital outsources its RCM operations it gives up control, and the outside vendor may not be able to get the results they promise, which can compromise quality. Also, outsourcing is going to cost more than updating or maintaining an RCM system in the long run, according to Mr. Gardinar.

Insourcing lets the hospital stay in control
Even hospitals that have up-to-date RCM systems need help occasionally, and many of them rely on interim revenue cycle services. Sometimes hospitals rely on outside revenue cycle help simply because they cannot find local talent in their communities who have revenue cycle experience. That is the position of many of the hospitals than enlist Expeditive — a provider of interim staffing and accounts receivable management services to healthcare providers.

Expeditive sends accounts receivable "swat teams" to hospitals to help them work through a billing backlog, according to Jim Yarsinsky, president and founder of Expeditive. The teams the company deploys to hospitals are comprised of individuals who each have more than 10 years of hospital revenue cycle experience, and the team typically works with a hospital for three to five months, although there is no minimum or maximum amount of time the team can work with facilities.

The Expeditive teams work with hospitals of all sizes and help them put tracking mechanisms in place to determine root causes of delayed billing and assist the hospitals in deploying an action plan to correct those issues. The key is that the teams from Expeditive "hit the ground running" to get hospitals up to speed with their billing, says Mr. Yarsinsky.

Although utilizing interim revenue cycle services is beneficial to many hospitals, as the vast majority (80 percent) of Expeditive's customers only need the company's services once, some facilities need to invest in the more permanent solution of updating their RCM system. Without the ability to work with multiprovider bundles, shared savings or other complex payment models, hospitals with dated RCM systems are at a significant disadvantage. Trying to use antiquated RCM systems to add the new data sources and analytics needed to validate inbound revenue in the new healthcare environment is like "trying to deliver the functionality of a modern EHR using a typewriter," says Jay Sultan, strategy consultant at Edifecs, a health IT company.

Addressing the complexities of hospital billing
As healthcare moves from a fee-for-service world into a value-based one with complex payment models at its core, enlisting temporary on-site revenue cycle help, outsourcing the responsibilities or investing in an updated RCM system will only become increasingly important.

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