Outsourcing Revenue Cycle Management: Benefits, Risks and Best Practices
Revenue cycle management helps healthcare providers reach their business goals. Explore if you should join 45% of companies that outsource their RCM so they can focus on patient care. Explore benefits and challenges, plus tips from RCM experts on how to find the perfect vendor.
In this article:
What is Revenue Cycle Management Outsourcing?
Revenue cycle management outsourcing means you hire a company to handle all or part of your revenue cycle. This helps healthcare providers maximize their revenue and focus more on patient care.
Revenue cycle management (RCM) means handling a healthcare organization’s revenue-related processes to optimize profitability and minimize errors. RCM enters every stage of the patient’s journey, from making an appointment to receiving treatment and paying the bill.
RCM is incredibly important to a healthcare organization. It will determine your total revenue and cash flow. It directly impacts the money you must pay to provide care and grow. In short, it can make or break a healthcare company.
Given its complexity, it’s not surprising that many healthcare providers struggle with RCM.
Patti Rosenberg, partner at JHD Healthcare Partners, says the key to RCM is mastering its complexities. For over 25 years, Rosenberg has led financial transformation and outsourcing operations for healthcare, business process, and technology enterprises.
“Navigating RCM involves dealing with numerous unique payers, plans, schedules, codes, and payer rules,” she describes. “These elements often act as hurdles for healthcare organizations that are seeking reimbursement. To be effective, one needs to ensure full charge capture and effective coding. You also need workflow management technology that embeds payer rules into the claims and analyzes trends in rejections, denials, and underpayments. Focusing on the root causes of denials is also critical to success. Finally, communicating collaboratively across the revenue cycle prevents errors at the source.”
One common solution is to outsource these tasks to a trusted partner specializing in RCM. This group of experts is dedicated to perfecting your RCM, and they have the time, resources, and expertise to do it effectively.
Most research suggests that outsourcing RCM is a common and growing practice. In 2023, Plutus Health conducted a survey, the Plutus Health Revenue Cycle Management Challenges Index, of over 200 U.S. healthcare providers. The purpose was to learn how healthcare organizations with RCM teams of 50 to 700 members manage RCM and identify key RCM challenges and pain points. They reported their findings in the whitepaper Diagnosis Critical: Revenue Cycle Management Challenges Among Healthcare Providers in 2023.
The survey shows some interesting statistics about RCM outsourcing. Around 45% of the respondents rely on external support in some capacity—but only 6% outsource their entire RCM to a single vendor. That means about 55% of organizations rely on internal support.
However, the survey also shows that more providers might begin to outsource their RCM. When asked how they plan to manage RCM challenges, 22% of respondents said they plan to work with a trusted external advisor.
“RCM outsourcing provides the technologies, focus, expertise, and resources needed to stay on top of RCM challenges and build a bulletproof RCM system,” says Rosenberg. “Outsourcing is appropriate for many healthcare organizations. Providers needing better RCM performance, lower costs, or accelerated cash flow will particularly benefit from outsourcing. Likewise, healthcare organizations in a high-growth phase or looking to scale could consider outsourcing.”
RCM outsourcing is a growing industry all on its own. The Market Report, an index of business conditions for various markets, estimating RCM Outsourcing to grow to $23 billion by the end of 2023, up from $11.7 billion in 2017.
This growth and the survey results reflect that more vendors will enter the market to meet burgeoning demand. All in all, outsourcing RCM is becoming an even more popular and attractive option for healthcare organizations of all types and sizes.
- A growing number of healthcare organizations are outsourcing their RCM to improve their finances and focus more on patient care.
- A good vendor ensures full transparency, informing you of the RCM processes and results.
- Taking time to validate potential partners ensures they align with your organization's needs.
- The major benefits of outsourcing include increased revenue, lower costs, and improved patient experience.
- Look for vendors that use AI and machine-learning software to provide advanced RCM solutions.
Why Outsource Revenue Cycle Management?
Healthcare providers outsource their RCM because it offers several distinct advantages. The biggest reason is to increase your revenue by trusting your RCM with a dedicated team of experts. Outsourcing RCM also will improve your operations by giving you more time to focus on patient care.
According to Rosenberg, any weakness in your RCM process can lead to issues, potentially reducing revenue and restricting cash flow. This creates a domino effect of negative impacts, ultimately affecting patient care. Establishing a robust RCM system is crucial for ensuring strong processes and results.
“At every point along the RCM continuum, payers seem to find reasons to deny, delay, or underpay a claim,” Rosenberg says. “A small fraction of reasons are caused by lack of correct information from patients, such as the wrong insurance plan ID. In other cases, the provider was not credentialed, coding was insufficient, the claim was not accepted by the payer… The list goes on and on.”
Rosenberg says outsourcing is the best way to create reliable RCM processes for many organizations. “RCM outsourcing provides the technologies, focus, expertise, and resources needed to stay on top of these challenges and build a bulletproof RCM system.”
Balaji (Bala) Ramani, vice president of business development at Plutus Health Inc., emphasizes that outsourcing lets healthcare organizations focus more on clinical care. Bala is a senior management sales professional with several years of experience in building teams for marketing, sales and customer success in the field of healthcare RCM.
Benefits of Outsourcing RCM for Healthcare Organizations
Outsourcing RCM can improve an organization’s revenue and reduce costs. It also aids cash flow and helps the organization follow regulations. And with outsourced RCM, organizations can focus more on patient experience.
Key Benefits of Outsourcing for Hospitals
Hospitals usually need more extensive RCM services because they are more complex organizations. Outsourcing RCM means that a hospital doesn’t need to hire and train a large staff capable of handling RCM for a large institution.
Key Benefits of Outsourcing for ASCs
Ambulatory surgical centers (ASCs) have an intricate billing structure and specific compliance regulations. ASCs benefit from outsourcing because specialized teams can handle these particular needs. Finding and retaining this expertise in-house is challenging.
Key Benefits of Outsourcing for Private Practices
Private practices need to scrutinize their revenue collection more than most because they are under more economic pressure and usually have a smaller margin for acceptable billing errors. Many cannot train an in-house team.
Moreover, numerous private practices specialize in a specific area or cater to a particular demographic. Outsourcing proves instrumental in optimizing their revenue cycle, allowing them to maintain independence and deliver the highest quality of specialized care they are known for.
Risks and Challenges in Outsourcing Revenue Cycle Management
The main challenge of outsourcing RCM is transitioning from internal to external management. Integrating the new team within the entire healthcare organization can also be challenging. Both parties can implement plans to address these and other challenges.
Outsourcing your RCM isn't a hands-off task; trusting a partner with your entire revenue cycle management involves risks that need careful consideration. It also demands that you work with the outsourced partner to create the best outcome for both entities.
“Many clients underestimated the resources and work that’s required to outsource effectively,” Rosenberg says.
Managing risks starts with identifying and clearly articulating your expectations to your vendor. Understanding your role and responsibilities is crucial to fostering a successful partnership.
Signs That You Need to Outsource Your RCM
Signs that you should outsource your RCM include reduced revenue, failure to achieve industry KPIs and high staff turnover. Frustrated patients and a high denial rate are two other signs that might indicate a weak RCM process.
Questions to Ask When Outsourcing RCM
It’s essential to ask the right questions when choosing an RCM partner. For example, consider their experience, expertise, and technology. Ensure they use a fair pricing structure and are committed to continually improving your RCM.
“You must validate your outsourced partner,” Bala says. “You don’t just want to give anyone the keys and call it good. Instead, ask them a lot of questions about their experience, their past results, their processes, and more.”
Bala also suggests contacting some of their clients to validate how the company works and performs.
Best Practices for Outsourcing RCM by Stage
RCM involves five key stages: pre-service, service, billing, payment, and post-payment. Many providers opt to outsource specific stages. Follow best practices particular to each stage to make sure you select the right outsourcing partner.
All five stages are crucial for financial management. “It’s reasonable for a healthcare organization to outsource certain large categories of the RCM process,” Rosenberg says.
Bala agrees. “People are apprehensive about outsourcing to begin with,” he explains. “They don’t want to just hand over the keys on day one. A common way to start is by outsourcing one area, like pre-billing, coding, denials, or whatever aspect they’re having the most trouble with. Then, if things go well and the company enjoys how it works and is pleased with the results, they’ll give more responsibility to the vendor until they’re ready to outsource the entire cycle.”
Bala also says outsourcing by stage is a great way for a healthcare provider to transition slowly from an in-house team. “If a healthcare practice has a team of five people managing their RCM and decide to fully outsource their billing cycle, they’ll have to either find new roles for these individuals or let them go,” he explains. “However, if they outsource by stage, they can just choose not to recruit new people as staff members leave. Depending on the level of engagement, they’ll have a few people to coordinate with the billing company.”
Outsourcing Revenue Cycle Management Success Stories
Many success stories show how outsourcing revenue cycle management can improve a healthcare provider’s finances and operations. For example, one hospital reduced denials and increased revenue. Another clinic boosted cash flow and improved patient care.
The benefits of RCM aren’t just theoretical. Healthcare providers that find the right RCM partner can expect to experience real, tangible increases in revenue, reductions in denials, and improved operations.
Efficient Revenue Cycle and Denial Management
Plutus combines top technology with the best healthcare talent in the industry. Healthcare organizations of all sizes trust Plutus to handle their revenue cycle management so they can stay focused on patient care.
With over 15 years of experience serving more than 800 healthcare providers, Plutus has the experience to handle any organization’s RCM. With a customized approach tailored to your needs, Plutus collaborates closely with our clients to ensure top-tier service that exceeds expectations.
With a unique, tech-driven focus, Plutus brings proprietary software to the table that other companies don’t. We use RPA, AI, and machine learning approaches to optimize processes that save you money, improve the patient experience, and smooth out your RCM. Alongside our team of healthcare experts, we can handle any RCM problem.
Partner with Plutus and watch your denials plummet while your patient satisfaction and revenue grow.
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