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Navigating Revenue Cycle Management: Three Benefits of Outsourcing in Healthcare

With healthcare organizations continuing to experience the pressures of rising operating costs and slower or lower rates of reimbursement, outsourcing revenue cycle management (“RCM”) functions might be an attractive, cost-effective option for labor-intensive and repetitive tasks. Considering the large human capital costs of recruiting, hiring, training, retaining, and managing, revenue cycle outsourcing can be a worthwhile alternative for healthcare providers, particularly in labor markets with skilled workforce shortages. Akasa’s research suggested that “replacing revenue cycle specialists with 0-5 years of experience takes 84 days (~3 months) and costs $2,167, while those with 10 or more years of experience take 207 days (~7 months) and costs $5,699.”¹ These human capital costs increase fixed overhead expenses as healthcare providers struggle to maintain thin profit margins.

With outsourcing, healthcare organizations share the workload with a vendor partner, which allows the providers to shift internal staff to higher-value tasks and gives them an element of flexibility to respond to business changes faster and more effectively. A mutually beneficial vendor relationship allows healthcare providers to reduce costs, improve cash flow, and obtain access to specialized RCM expertise.

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This article will delve into the key benefits of outsourcing RCM functions: alleviating staffing challenges, fostering continuous process improvement, and leveraging advanced technologies. By exploring these areas, we will highlight how outsourcing can help healthcare organizations optimize their revenue cycle, maintain cash flow, and navigate the evolving healthcare landscape more effectively.

Resource and Technology Challenges in Today’s Environment

As the complexity of revenue cycle operations continues to increase, it is advantageous to build and maintain effective strategies around people, processes, and technology to drive optimal performance. RCM vendors may help in these areas:

Alleviating staffing challenges: Rising labor costs coupled with budget cuts leave the revenue cycle in a precarious position; it is not uncommon that “when you have to stack budgets up against patient care departments, the revenue cycle is often considered less essential and loses out.”² Leveraging a third-party outsourcing vendor can offer both support and the necessary flexibility to quickly fill staffing gaps while allowing the provider to maintain and accelerate cash performance. The human capital flexibility associated with outsourcing enables providers to absorb volume changes and manage turnover without disruptive changes to staffing levels, thereby preserving revenue cycle performance.
Identifying process improvement: Engaging a third-party vendor allows an objective review of existing processes and root cause analyses that can drive continued process improvement initiatives, which the provider can benefit from long after an RCM vendor is involved. Experienced RCM vendors review and understand existing processes to efficiently train their staff on the provider's policies and procedures. This exercise also allows the RCM vendor to identify potential opportunities and provide recommendations that can improve the overall performance of the revenue cycle functions.
Leveraging advanced technologies: With the complexity of healthcare billing paired with the growing trend of payers using artificial intelligence (“AI”) technology to automate claim denials, organizations can benefit from automation to gain efficiencies and reduce costs to collect.³ Outsourcing firms often utilize AI and machine learning (“ML”), robotics process automation (“RPA”), and predictive analytics to significantly improve cash performance and reduce errors. Partnering with the right vendor provides access to the benefits of this technology without the cost of purchasing, implementing, and maintaining it.

Key Areas of Focus When Developing Your Outsourcing Strategy

When looking for a vendor partner, an outsourcing strategy is key to relieving your pain points and utilizing data to drive decision-making. From an initial strategy perspective, an organization should:

Review work queues to determine if unpaid accounts are unaddressed and/or if follow-up timeframes are being met;
Examine denial trends to identify areas of improvement in upstream processes or knowledge gaps, as well as success rates on appeals;
Analyze write-off trends to identify root causes for missed reimbursement opportunities on preventable write-offs;
Determine if certain balance thresholds, payers, or A/R aging categories could benefit from a more focused approach; and
Review timeliness of clinical and technical appeals.

Knowing your areas of opportunities will help you identify a third-party outsourcing partner with the required expertise and will allow you to drive the conversation.

What Should You Expect from Your Vendor Partner?

Selecting the right vendor partner — one who is aligned with your organization’s expectations and outcomes — is critical. Here are three expectations you should have for your vendor throughout the selection process:

Scoping and pre-implementation
Engaging in meaningful, data-driven discussions is an often-overlooked element with unintended consequences, such as improper staff alignment for payer mix and disparity in receivable liquidity. To facilitate those informed discussions, an exchange of data is encouraged, and it is recommended the data be as comprehensive as possible.

Implementation

Before the patient account-level work effort begins, collaborate with your vendor to define and document the procedures to be followed when handling your A/R. This agreed-upon procedure document or playbook should be a working document that is updated as new scenarios, or changes in an organization’s or payer’s processes, arise. Clearly defining the appropriate actions that a vendor takes with your inventory allows you to maintain control of your A/R.

While most vendors have trained resources in the RCM-field, their team members will likely be new to your organization’s specific processes. As such, discuss with the vendor what their training and quality program encompasses. Are training and quality reviews performed by the same people? Do trainers and quality analysts reside in separate departments or in a single group? Are these people dedicated to one team or shared across the organization? While there is no “right” answer to these questions, success can be found in a number of structures – which will provide clarity into how your accounts will be treated.

Additionally, while many vendors have standard operating procedures, they should provide insight on their high-level strategy: how A/R will be prioritized, expected follow-up timeframes, denial prevention, etc. Additionally, if automation is utilized, how is it incorporated into the workflow? What steps are in place to validate automation results/output?

Investing time up front to provide complete data sets and define processes will benefit both your organization and the vendor partner during the engagement’s implementation and execution.

Execution

As a healthcare organization, you may have already invested significant resources into your revenue cycle management function. As such, your vendor partner should leverage the patient accounting platform in place, particularly with respect to noting, updating, and deferring accounts. By utilizing your RCM system’s workflow methodologies, you will gain visibility into the vendor partner’s work and also maintain your system as the “true source.”

You should receive biweekly or monthly reporting showing cash targets and their performance to goal, as well as other agreed-upon KPIs. Frequent communication from your vendor partner should be an expectation. As vendors work through your inventory, they should meet with you regularly and provide insight into root-cause issues contributing to denial trends and A/R aging.

Case Study: Providing Outsourced A/R Remediation Services at a Large Healthcare System

A large, not-for-profit health organization made up of a network of hospitals, outpatient centers, assisted living and long-term care facilities in the mid-Atlantic region retained FTI Consulting’s Healthcare Manager Services (HMS) team to provide third-party A/R remediation services. The health organization’s aging insurance claims had increased above the industry’s best practice benchmark, and they needed assistance with cash acceleration and A/R clean-up. FTI Consulting performed an A/R analysis and identified the target area that needed the most attention was receivables greater than 120 days old from date of service.

FTI Consulting’s impact:

Placed $230 million of aged A/R with FTI Consulting’s HMS team.
Resolved 74.1% of the dollars assigned and 52.1% of the accounts assigned.
Accelerated cash flow and increased net revenue by reducing the burden of aged A/R from the client’s portfolio.
Collected $53.3 million against an overall goal of $34.3 million, thereby exceeding the cash goal by 55%.
Cash collection efforts resulted in realizing a 9:1 ROI.

FTI Consulting’s extensive revenue cycle management experience enabled our HMS team to identify 17 payer denial trends impacting aged A/R and cash performance. This root-cause analysis provided the health organization with the insight needed to identify and execute performance improvement initiatives in their revenue cycle functions.

The Crucial Role of RCM Vendors

Amidst rising costs and evolving reimbursement rates, outsourcing RCM functions has proven essential for managing operational efficiencies and adapting to market demands. Partnering with an experienced RCM vendor allows providers to streamline labor-intensive tasks, address staffing shortages, and leverage advanced technologies cost-effectively. This strategic shift enables healthcare providers to focus internal resources on higher-value initiatives, ensuring robust cash flow management and agility in navigating healthcare industry complexities.

Ultimately, selecting a vendor aligned with your organization’s goals and also capable of delivering comprehensive support is critical to optimizing efficiency, enhancing revenue outcomes, and sustaining success in today's competitive healthcare landscape.

Footnotes:

1: “There Is Hope: 5 Takeaways from the Great Resignation and the Added Impact on Healthcare Revenue Cycle.” Akasa Inc., August 7, 2022.

2: Id.

3: Agarwal, Shashank. “The AI Revolution in Medical Claims Processing.” Forbes, March 28, 2024.