Outsourcing Revenue Cycle Management: Benefits, Risks and Best Practices

• Benefits of outsourcing revenue cycle management
• Challenges of outsourcing revenue cycle management
• Signs you need to outsource your RCM
• Questions to ask a potential vendor when outsourcing RCM
• Best practices for outsourcing RCM by stage

Here's a summary of the main benefits of outsourcing RCM for healthcare providers:

• Reduces costs and redirects overhead costs
  Typically, outsourcing is more cost-effective than maintaining an in-house team. Outsourcing reduces the overhead costs of hiring, training, and managing an RCM staff.

  "Outsourcing reduces the cost of in-house space, salaries, benefits, furniture, fixtures, and equipment," Rosenberg says. "These and other tasks are usually less expensive for outsourced solutions. It also increases the cost-effectiveness of leveraging technology into the RCM processes, and it provides a lower-cost approach to scale your organization."

• Gives you access to a dedicated team of RCM experts
  RCM vendors specialize in being comprehensive RCM experts. Their focus allows them to dedicate their energy and resources to RCM expertise. Having these seasoned experts on your side is invaluable.

  "Top vendors ensure consistent best practices in RCM performance," Rosenberg says. "You can expect top-level expertise with well-defined service level agreements, performance incentives, and penalties."

• Improved denial management
  A critical part of RCM revolves around minimizing, addressing, and preventing denials. Establishing a robust denial management system stands out as one of the most effective methods for enhancing RCM, boosting cash flow, and improving overall revenue. RCM vendors approach denial management with the precision of experts, meticulously streamlining the process to minimize denials.

  Rosenberg sums up the impact of outsourcing on denial management: "You will collaborate with top-notch experts, including skilled analytical and program management leaders. They will thoroughly investigate, document, and engage effectively with clients and payers to resolve denials within the appropriate timeline."

• Improves compliance
  Staying abreast of ever-evolving healthcare regulations can be challenging. Your RCM partner should be an expert in the relevant laws. They'll ensure your compliance and minimize the risk that you'll incur legal and financial penalties related to non-compliance.

• Better tech and reporting
  Your RCM vendor will have advanced tech that many healthcare companies wouldn't normally invest in themselves. This software leverages AI and other automated processes to expedite billing, make coding more accurate, streamline the payment posting process, predict whether a payer will deny a claim, and more.

  "Outsourcing partners have workflow management technologies specifically designed to track unpaid claims and accelerate the collection of A/R,” Rosenberg says. "They also have claim follow-up tools that can resolve specific claim issues much more quickly."

  Rosenberg also emphasizes that the best vendors will keep you up to date every step of the way. "Outsourcing partners ensure transparency via dashboards and reporting that gives providers, managers, and investors confident in RCM performance."

• Improves financial forecasting
  The advanced technology, analytics, and reporting capabilities of your outsourcing partner will give you a deeper understanding of your financial health and growth potential. Collaborating with your outsourced partner empowers stakeholders to make informed decisions, identify and proactively address potential issues, and continually implement measures to optimize revenue.

• Enables you to focus on enhancing the patient experience
  RCM helps connect the clinical and business sides of healthcare. By outsourcing, you can focus on that clinical piece, your core competency.

  To see how outsourcing RCM helps improve the patient experience, it’s helpful to consider what happens when your RCM is poorly managed.

  A poorly managed revenue cycle will delay the scheduling and pre-authorization process. This increases the wait time for patients for appointments and procedures, resulting in understandable frustration. Also, billing errors and delays will lead to patient dissatisfaction.

  Outsourcing RCM means cleaning up these and other processes to ensure a smooth patient experience. "The billing company can bring in software that can easily handle and improve parts of the patient experience like making and confirming appointments, processing patient billing, and posting payment," Bala says. "Overall, you can expect a smoother RCM cycle to directly benefit the patient experience."

Here's a list outlining the primary risks and challenges of outsourcing, along with tips from Rosenberg and Bala on how actions organizations and vendors can address and prevent issues:

• Fear of losing control and oversight of the billing cycle
  "Lots of healthcare organizations fear that if they outsource their RCM, they'll lose control over their entire revenue cycle," Bala says. "It's understandably difficult for some people to get used to that loss of control."

  Bala says healthcare organizations must scrutinize their vendors to deal with this issue. "Make sure that your vendor will share any reports with you, give you full access to their software, and provide you with complete transparency and visibility into your RCM. For example, we get on a call every week with each of our clients. We discuss what happened the previous week, talk about issues, and keep them fully aware of what's happening with their billing and collections."

  Bala adds that organizations should avoid vendors that don't provide full access to their RCM software or ask to take over the healthcare organization's bank account. “These are both red flags of a bad partner,” he says. "I've seen some organizations who don't know what their A/R is, what their denial percentage is, and where they stand on other key performance indicators. Being at the mercy of third-party software is not the sign of a healthy partnership, and no organization should have to give up that control or accessibility when they're outsourcing their RCM."

• Failure to integrate RCM across the entire healthcare organization
  "Many organizations miss the crucial point that the revenue cycle spans the entire healthcare enterprise, not just a standalone department," notes Rosenberg. "This oversight often results in isolated and fragmented RCM. Without integration throughout the organization, the suboptimal performance persists, making it challenging for the outsourcing partner to bring about improvement."

  Here are the solutions that Rosenberg suggests organizations can implement:

  • Engage with clinical and operational leaders and staff to clarify their RCM roles.

  • Document the entire RCM process, highlighting intersections, owners, dependencies, and expectations.

  • Define responsibilities for onsite and outsourced teams, addressing breakdowns and performance measurement.

  • Establish reports and dashboards to track revenue cycle performance and address issues promptly.

• Lack of visibility and transparency
  "Healthcare organizations may not realize the amount of data and monitoring needed to keep the RCM clean and productive," says Rosenberg. "The outsourced partner should be transparent, but clients should also reconcile their own data to the outsource partner’s data to be sure nothing drops through the cracks. Essentially, you always want to be on the same page and be completely transparent with one another. Remember, you're on the same team—success for one partner brings success for the other."

  Here are the solutions that Rosenberg suggests:

  • The healthcare organization should:

    1. Send nightly updates of A/R data to the outsourced partner to load into their work queue management system.

    2. Provide access to the billing system and require the outsourced vendor to load all notes into the client billing system.

    3. Create reports or dashboards necessary to provide transparency so that claims and payments are processed quickly and effectively.

  • The outsourced partner should:

    1. Provide dashboards of all transactions in their workflow management system.

    2. Accommodate client needs for transparency and accountability.

• Miscommunication about values and expectations
  The healthcare organization and vendor must be on the same page regarding expectations and values.

  "Sometimes, the outsourced partner may underestimate how many resources they need to implement or maintain a productive RCM relationship," Rosenberg notes. "They may not provide effective leadership of their teams, which causes the relationship to fail. In some cases, the healthcare organization is forced to bring functions back in-house at an extra cost."

  Here are some ways that Rosenberg suggests organizations and vendors can prevent this issue:

  • The outsourced partner should:

    1. Demonstrate the skills and capabilities of the individuals who will lead and work on the client's project during and after implementation.

    2. Accommodate changes in scope and process as the client learns how to integrate and perform with the outsourced partner.

    3. Offer strong leadership and a confident assurance that they're motivated to ensure a successful partnership with the client.

  • The healthcare organization should:

    1. Monitor RCM performance, working with the outsourced partner to resolve backlogs and issues quickly.

    2. Implement a formal “Issues Escalation and Root Cause Resolution” process as part of governance.

    3. Take responsibility for resolving onsite issues that cause RCM backlogs, poor RCM performance, and conflicts between team members.

    4. Include service level agreements (SLAs) and termination language in the outsourcing agreement in the rare instance that the relationship becomes untenable and unproductive.

• Difficult and costly transition from in-house to outsourced management
  "Clients often underestimate what it takes to implement and integrate onsite and outsourced teams, causing frustration, blame, and implementation delays and failures," notes Rosenberg.

  Here are the solutions that Rosenberg says can mitigate this risk:

  • Define the scope of onsite and outsourced teams, preferably with SLAs and standard operating procedures (SOPs) that you refine over time.

  • Determine and provide the reports and dashboards necessary to transfer data, monitor work queues, escalate risks, and monitor/measure performance.

  • Create a detailed transition plan with critical milestones and dates.

  • Provide effective leadership for the implementation. Identify a team member who can build strong relationships between onsite and outsourced team members and help them achieve critical milestones to keep the implementation on track.

  • Formally document the policies and procedures that onsite and offshore teams will use in their work and decision-making.

• Fear of outsourcing because of a prior bad experience
  Bala says that many healthcare organizations are too afraid of outsourcing because they tried it once and lost money.

  "Unfortunately, a lot of organizations select vendors based on one metric: the cost. While price is obviously important, the cheapest billing companies out there usually lead to lackluster results. They burn the client badly. Now, the client categorizes every RCM company to be like their failed partner. It can be difficult convincing a company that there are reputable billing partners that will lead to a positive experience."

  Bala says it's important to do your due diligence when selecting an RCM company for healthcare companies in this position. Ensure they’re reputable and understand your goals and expectations.

  We include a comprehensive list of questions to ask potential vendors later in this article. These questions will help you validate that the RCM partner is reputable, effective, and cost-effective.

Risks and Challenges of Outsourcing RCM

Here's a fuller list of signs that you should outsource your RCM:

• Failing to achieve "best practice metrics"
  According to Rosenberg, you can assess certain RCM key performance indicators (KPIs) to determine if your RCM is struggling alone or in multiple stages.

  The following metrics may indicate a weak RCM that could benefit from outsourcing.

  • Accounts Receivable (A/R) over 90 days comprises more than 40% of the total A/R.

  • Days in A/R surpass 50.

  • Net collections ratio falls below 96%.

  • Denials or rejections are notably high (exceeding 4%).

  • Unresolved A/R extends beyond 250 days.

  • The total cost to collect exceeds 8%.

• High turnover of RCM staff
  Rosenberg says that a consistent churn of RCM management or employees indicates that your in-house team may not be up to par. Managing staff is time-consuming, and when a key member of your internal RCM team departs, it can disrupt the entire workflow. Consider outsourcing if this trend persists.

• Lower revenue, ineffective billing, reduced collections performance
  If your revenue is declining, you probably have an RCM issue. Identifying the problem can be challenging, but an RCM expert can pinpoint the issue and offer a solution.

• Frustrated providers, managers, or investors
  You may have operational challenges if providers, managers, or investors consistently express frustration, even if not specifically related to RCM. Outsourcing RCM could be beneficial in such cases, as it enables a focus on revenue processes.

• Patients complain of lower-quality care or difficulty in making payments or appointments
  You likely have operational problems if patients consistently complain about lower-quality care, difficulty in making payments, or challenges scheduling appointments. Outsourcing RCM can help address these issues by improving financial processes, enhancing patient experience, and streamlining administrative tasks.

• Patients complain of lower-quality care or difficulty in making payments or appointments
  You likely have operational problems if patients consistently complain about lower-quality care, difficulty in making payments, or challenges scheduling appointments. Outsourcing RCM can help address these issues by improving financial processes, enhancing patient experience, and streamlining administrative tasks.

• Uncoordinated RCM
  "Any fragmentation and lack of integration of the RCM cycle indicates an issue,” says Rosenberg. For example, if your credentialing, coding, providers, front-end, back-end and payers are consistently uncoordinated, it could signal a need for some outside help."

  Signs of poor integration include delays, errors, or inefficiencies in billing and reimbursement. Monitoring the overall flow and communication between these components can help determine if your RCM needs better coordination.

Here are key questions to ask a potential RCM partner:

• Expertise, experience, and culture
  Understanding a vendor's experience and expertise is the first place to start. You'll want to know how long they've been in the business and how much experience they have working with healthcare organizations similar in size or specialty to yours.

  Also, if you outsource RCM, your vendor will interact with patients. It's important to ensure they'll uphold the same standard of patient experience you value.

  Finally, you'll want to evaluate how your vendor manages their staff. You need to ensure they all have the right accreditations and certifications, and it’s always best if they are vendor employees. All this information will help you determine if your vendor can meet your expectations.

  Here are specific questions:

  • How long have you been providing RCM services, and what specific services do you offer?

  • Are you a member of any associations like the Healthcare Business Management Association (HBMA)?

  • Who are your current clients? Can you provide us with references we can contact and any reviews?

  • What is your experience with healthcare providers like our organization?

  • Can you provide specific case studies that show how you helped healthcare providers like us improve their RCM?

  • How do you stay up to date with regulations and payer changes?

  • Are you prepared to follow up with our patients in the same manner and tone we use? How can we be sure our patients will be happy with their interactions and experience?

  • Do you provide a dedicated account manager that will be dedicated to our account?

• Technology
  RCM vendors usually bring their own systems and software

  • Do you provide us with full access to your software?

  • Is your system easy to use? How long will it take my staff to learn it?

  • Does your technology integrate with our existing EHR and EMR systems?

  • Does your technology include important tools that patients appreciate, like appointment reminders or patient portals?

• Access
  You might be afraid to outsource RCM because you will lose some control. Get peace of mind by asking these types of questions:

  • Will you provide full transparency to all the records?

  • How much will my team have access to? How will we access and monitor the RCM data?

  • Will you provide regular reports and updates on the RCM performance?

  • Do you provide weekly calls to update us on our status and any issues?

  • Will there be a representative we can contact at any time to ask questions?

• Denial management and coding

  • What is your denial management process?

  • What is your average denial rate? What percentage of denials do you successfully appeal?

  • Do your team members have medical coding credentials?

  • How do you reduce coding errors?

• Reporting and analytics

  • Which KPIs do you track? How do you ensure that you are meeting our goals and setting us up to improve continually?

  • What kinds of reports can you generate? Do they include forecasted revenue and expenses?

• Pricing structure

  • What is your pricing model? For example, do you utilize a pay-per-use, subscription model, or percentage of revenue? (Pro tip: Choose someone with a percentage-based fee or a flat fee).

  • Do you charge setup fees?

  • How long is your contract?

  • How do you try to reduce costs?

  • Do you charge us for the technology on top of your service offering, or is the technology included? Will you train us in the technology if our relationship ends?

• Partnership goals

  Before asking these questions, make sure you understand what goals you hope to accomplish by outsourcing. For example, are you looking for a vendor to handle your RCM process end-to-end permanently? Are you just looking to outsource specific targets? Do you want your vendor to help you become self-sufficient and train staff?

  With a firm understanding of your expectations, ask your potential partner these questions:

  • Do you want to outsource our RCM permanently, or do you want to collaborate to help us resolve our issues and train our internal team to become self-sufficient?

  • Will you be able to scale with us if we grow?

Here are RCM stage descriptions and the best practices for each stage:

1. Pre-service: Pre-service RCM involves activities that happen before the patient receives services. These include patient registration, insurance eligibility verification, and obtaining necessary medical authorizations and pre-certifications. Best practices include:

   • Automated eligibility check:
     Look for an expert who can automate insurance prior authorization and eligibility. Automated systems will save time, reduce costs, and increase accuracy.

   • Integration with existing systems:
     

     Ensure the partner can also automate authorization requests for specialist referrals and procedures.

     Try their scheduling and registration technology, and make sure it works well for your front desk staff. Ensure it integrates with your existing systems.

2. Service: The service stage of RCM covers everything related to delivering healthcare services. This includes medical coding and ensuring compliance with healthcare regulations and guidelines. Best practices are:

   • Ensure that your partner is an expert in medical coding.

   • Verify that the partner adheres to all relevant regulations and guidelines, like HIPAA.

3. Billing: In the billing stage, the RCM team prepares and submits claims to insurance providers. Managing denied claims also falls under the billing stage. Best practices include:

   • Claims scrubbing and submission:
     If you want to outsource billing, Rosenberg recommends ensuring your partner has a process for claims scrubbing and submissions. "They should use technology and human resources to review claims for payer and clearinghouse rules."

   • Automated billing and coding:
     

     Select a partner that uses advanced RPA and AI tools for billing and coding. They should use AI predictive software to flag problematic claims for human review before being submitted.

   • Payment posting:
     

     Good partners will have a system to ensure accurate bills before the patient receives them. This involves using software to identify potential errors in the final bill.

   • Denial management:
     

     Ensure that your outsourcing partner has a robust system for tracking, appealing, and preventing denials. Ensure they have a proven track record for reducing their clients' denial rate to 2% or less.

4. Payment: The payment stage focuses on processing payments made to the provider from an insurance provider, patient, or other payer. It involves payment posting and account reconciliation. Best practices include:

   • Account reconciliation:
     Your partner should regularly check that the accounting system and the payment are in sync.

   • Contractual analysis:
     Does the outsourcing partner review the contracts with payers and the rates to ensure they get the best contract terms and rates?

5. Post-payment: In the final RCM stage, post-payment, the RCM team manages any outstanding accounts and monitors financial performance with relevant KPIs. Best practices include:

   • A/R management:
     Seek a partner with a strong ability to manage accounts receivable, ensure timely collection of payments, and automatically follow up with overdue payments. Rosenberg says this includes "EOB posting and following up on payer rejections for in-network and out-of-network providers."

     Your outsourced partner in this stage should be accountable for A/R performance metrics, like days in A/R and the net collection rate (NCR).

   • Payment posting:
     Make sure your partner understands they are accountable for timely and accurate payment posting and bank reconciliations. This includes being responsible for posting ERA payments, checking payments, and researching unidentified payments.

     With insurance payment done, this stage also involves patient invoicing. "The partner will be accountable for creating accurate patient accounts with clear identification of transactions, creating and sending patient invoices, and researching patient invoice inquiries," Rosenberg says.

   • Analytics and reporting:
     Your partner should have robust reporting and analytics capabilities, especially with RCM KPIs. Important ones are the denial rate, days in A/R, and clean claims rate. The best partners should strive to improve the RCM process continually.

Here are three real-world success stories from Plutus Health:

• Mid-sized hospital reduces denials and increases revenue
  A mid-sized hospital grappled with various RCM challenges, struggling to adapt to new coding guidelines and facing staffing shortages. As denials mounted, the hospital turned to Plutus Health for help. Plutus provided certified coding professionals adept at handling the specialized outpatient, inpatient, and ICD-10 coding intricacies that had posed difficulties.

  By entrusting these RCM concerns to a team of experts, the hospital experienced a boost in cash flow and a significant drop in denial rates. In just five months, they achieved an impressive 98% claim reimbursement rate and a 10% rise in revenue. Most notably, coding denials were reduced to under 2%, and coding quality exceeded 95%. RCM outsourcing allowed Plutus to target and address their specific issues, leading to comprehensive benefits across the hospital.

• Urgent-care clinic revamps its RCM
  An urgent-care facility in Dallas was dealing with a limited billing department that couldn't meet the clinic's complex RCM demands. As a result, the facility's cash flow suffered, with payments stuck in accounts receivable for more than two months at a time. To improve their RCM and cash flow, the clinic outsourced all their RCM operations to Plutus.

  After proposing a specific, cost-effective plan that alleviated the client’s concerns about high initial expenses, Plutus got to work. They assessed the clinic’s existing procedures and created a plan to ensure swift and precise bill posting. They leveraged robotic processing automation (RPA), and their billing specialists collaborated with the clinic’s accounts receivable team. Together, they created best practices and strategies for revising claims.

  After just one month, the clinic embraced end-to-end RCM management. Within six months, they cut their average days in A/R from 72 to 33 days. This dramatic improvement in cash flow allowed them to redirect their focus toward patient care while Plutus managed their RCM.

• Multi-facility urology ambulatory surgical center (ASC) dramatically improves A/R
  Plutus Health addressed the revenue challenges of a multi-facility urology ASC struggling with a significant A/R backlog, exacerbated by the impact of the COVID-19 pandemic. The ASC faced a complex situation: 95% of their outstanding invoices were over a year old, and payers denied 45% of their A/R claims.

  Plutus Health managed an experienced coding and billing team to strategically appeal various denial categories, segregate claims, and rigorously follow up with outstanding invoices. As a result, Plutus helped the ASR successfully generate $500,000 in revenue, clean the A/R inventory within three months, and collect $150,000 from the A/R they had considered dead.