Revenue Cycle Management Outsourcing: Pros, Cons, & Alternatives

Delivering high-quality patient care depends on many factors beyond clinical considerations. Healthcare organizations have to juggle various processes that aren’t directly related to patient care. Efficiently managing the revenue cycle is one of the most critical.

Claims processing, denial management, collections, and patient billing are all time-consuming administrative tasks that can detract providers from delivering optimal clinical care. Many organizations and providers are outsourcing revenue cycle management (RCM) in an attempt to save money, improve cash flow, and reduce errors.

{{toc}}

How big is the revenue cycle management outsourcing industry?

Revenue cycle management outsourcing is a growing trend in the entire healthcare industry, from rural hospitals to multi-provider practices to large academic hospitals. The analytics provided by revenue cycle management practices can offer insights that help align front-end office activities with back-end billing. The global healthcare revenue cycle management industry is expected to reach $23,000 million by the end of 2023, a growth of 11.9% since 2017.

Leaders in revenue cycle management are taking advantage of this growth, with 22% currently outsourcing at least some revenue cycle management tasks and 12% planning to do so in the future. The major drivers behind revenue cycle management outsourcing are improving patient experience, optimizing the RCM process, and generating revenue.

Why outsource revenue cycle management?

Healthcare organizations cite many reasons for outsourcing RCM, including many related to staffing issues.

Lack of in-house expertise

Revenue cycle management encompasses multiple tasks across many domains. These tasks take longer to complete and are more likely to contain errors if performed by staff without specialized skills in revenue cycle management.

To be more efficient with labor costs amid an inflationary environment

Even if you have team members skilled in revenue cycle management, it’s often more expensive to handle it in-house than to outsource. Many revenue cycle optimization tasks are labor-intensive. In today’s inflationary climate, labor costs are more expensive than ever.

RCM staffing shortage

In addition to being expensive, skilled RCM staff can be hard to find. Many healthcare finance leaders face critical workforce shortages, with 25% stating they need to hire more than 20 employees to adequately staff their departments.

These critical staffing shortages have leaders turning to outsourcing agencies or technology to fill the void.

Benefits of outsourcing revenue cycle management

Given the complexity and costs of RCM, in addition to the significant consequences associated with errors, there are many benefits associated with outsourcing revenue cycle management.

Often more economical than having RCM staff in-house

An in-house RCM staff can be a major drain. Hiring and training RCM staff is expensive. Additionally, the inefficiencies and errors associated with having an untrained staff also result in increased costs and decreased revenue, negatively impacting your bottom line.

Allows you to shift focus to patients and physicians instead of administration

When you’re tied up with administrative burdens and manual data entry and processing, you have less time to focus on your physicians' and patients' health and happiness. By freeing you from time-consuming and tedious tasks, outsourcing RCM lets you concentrate on initiatives that improve patient experience and physician support.

RCM agencies have a lot of experience across different practices

Agencies that specialize in RCM work with many types of healthcare organizations and insurance providers. They have extensive experience handling issues related to billing and reimbursement. Because of their expertise, they’re less likely to make mistakes that result in denials or underpayments.

They also have experience working with different payment models, such as fee-for-service, value-based care, and capitation. Because they’re accustomed to working with these models, they can help you navigate the complex practices necessary for successful reimbursement.

Disadvantages of outsourced revenue cycle management

Despite the advantages of outsourcing revenue cycle management, there are some marked disadvantages as well.

Sharing data with third-parties

One of the biggest risks with outsourcing your revenue cycle management is that you have to share your data with the vendor and any third parties they use. Sharing confidential data outside of your organization carries risks such as:

Security risks

Anytime you give outside parties access to your data, there’s a chance it can be compromised. Even if you take the appropriate precautions on your end, you can’t be sure all third-party vendors are protecting your data. Third parties are involved in over half of all data breaches.

Legal issues

As the owner of your data, your organization can be held accountable if a third-party vendor uses it in a way that violates data protection regulations. You can open yourself up to liability, fines and penalties, and damage to your reputation.

Loss of control

When you hand over control of your data to someone else, you lose control over how the data is handled and used. Although your contract should include a data use agreement, it can be hard to enforce.

Slower communication

When you outsource your RCM, you add extra layers to the communication process. These extra layers can interfere with efficient communication and lead to delays and mistakes in handling accounts. When your outsourcing agency doesn’t have the most accurate and up-to-date information, they may submit incorrect information, which can result in late payments, increased days in accounts receivable, and lost revenue.

Longer turnaround time to get things done

Although many organizations turn to outsourcing to improve efficiency, it can end up taking longer to get revenue cycle management tasks completed due to the inherent extra steps involved. You may also find that you’re not the agency’s top priority, so your turnaround time is longer.

Turnover and inconsistent point of contacts

Hospitals are the only organizations that are struggling to find skilled talent to fill open positions. Your vendor may also be understaffed. It’s not uncommon for RCM agencies to have high turnover. You may feel like you’re on the same page with your account manager this week but find that someone new is filling the position next week. This can be frustrating, particularly since you have no control over the situation.

Costs for RCM outsourced services vs. in-house

It’s difficult to make a head-to-head cost comparison between in-house and outsourced revenue cycle management because many factors influence the associated expenses. While you may pay your outsourcing agency more than you’d pay employees, that doesn’t take into account all of the hidden expenses you incur handling RCM in-house.

Staff education

If you outsource, you may be able to avoid some of the detailed training needed for in-house revenue cycle management. However, you’ll still have to train your staff in how to work with the vendor, so you can provide the complete and accurate information they need to quickly process your claims.

Missing or incorrect information

Incomplete patient data increases the cost of all RCM activities. Data that isn’t collected at the time of intake means someone will have to hunt it down later. This adds to the cost, whether it’s handled in-house or outsourced, because it slows down the automated process and requires manual intervention.

Variable costs of RCM tasks

There are several billing tasks that require a significant amount of time and attention, regardless of who handles them. While an outsourcing agency may be able to handle them more efficiently than you can, there’s still a lot of variability in how long each will take. When you multiply the number of tasks by the number of accounts, this can be a significant factor in RCM expenses. These tasks include the following:

• Verifying insurance coverage
• Entering patient data at intake
• Specifying the charge entry
• Submitting the claim
• Awaiting payment
• Following up to collect payment when needed
• Managing denials
• Submitting reports

Not all of these tasks will apply to every claim. Some can be handled quickly, while others can drag out for hours, particularly if you have to wait on information from someone else. This uncertainty can make it difficult to calculate costs.

Outsourcing pricing structure

Because of the many variables that can affect pricing, most RCM outsourcing agencies don’t offer pricing information on their websites. You’ll have to contact them to get an accurate quote. There are some standard pricing practices in the industry, however.

Many agencies charge around $300 per doctor or $1,000 per practice if you have a large office with many doctors. Administrative fees can run from $3,000 to $6,000 depending on the size of your office and the number of patients you treat each year. Small practices may pay hourly rates instead of flat fees and administrative costs.

Regardless of the pricing model, you should notice an increase in revenue that more than offsets the price of the service. According to Medical Billing Service Review, healthcare organizations lose $125 billion yearly because of denied claims. If you can recoup some of those losses, it will more than pay for an outsourcing service.

Best RCM outsourcing companies

Choosing the right company is essential if you’re planning to outsource your RCM. Some of the top-rated options include:

Guidehouse

Guidehouse won Best in KLAS in 2023 for revenue cycle outsourcing. Guidehouse is a management consulting firm that provides RCM for hospitals and other healthcare providers. Their consulting services and technology solutions are designed to help streamline your billing and collecting processes, reduce your denials and underpayments, and improve overall revenue performance.

Some of the key features of Guidehouse’s RCM solution are:

• Identifying inefficiencies and developing strategies to overcome them
• Ensuring accurate and appropriate billing to avoid underpayments
• Identifying the root causes of claim denial and developing strategies to reduce them
• Advanced analytic reporting tools that allow you to identify and track key metrics so you can improve them

Ensemble Health Partners

Ensemble Health Partners uses a combination of expertise, process improvement, and technology to optimize revenue cycle management. Some of their services include:

• Patient access services to ensure timely registration, insurance verification, and preauthorization
• Charge capture and coding to capture all billable services and proceedings and assign accurate codes
• Claims management and denial prevention to proactively identify and remediate issues and optimize reimbursement
• Analytics and reporting to help identify trends to improve efficiency, accuracy, and compliance

R1 RCM

R1 RCM is another KLAS award winner. They offer an end-to-end revenue cycle management platform that reduces friction throughout the entire revenue cycle. R1 RCM technology is focused on improving the patient experience by providing a smoother experience for providers to coordinate care. Patient access services include verifying insurance coverage, registering patients, and collecting copayments and other fees.

R1 RCM also provides coding and billing services and denial management to root out denied or underpaid claims. They provide self-service business intelligence so stakeholders can use data-driven insights to identify gaps and trends so they can course correct and drive continuous improvement.

BillFlash

BillFlash integrates with all EMR software and has expert medical billers in every state and every specialty. It’s a cost-effective RCM platform for practices of all sizes. BillFlash provides support at all stages of the revenue cycle, from patient registration to collection and claims follow-up.

With BillFlash, you can send electronic bills and statements to patients in various formats, collect online payments, and even offer pre-approved payment plans for bills that may not be paid otherwise.

BillFlash also offers tools for increasing patient engagement and satisfaction. Their patient portal helps improve patient communication through direct patient access, appointment reminders, and patient satisfaction surveys.

Conifer Health Solutions

Conifer Health Solutions has over 35 years of experience in the healthcare industry. You can take advantage of their end-to-end revenue cycle management with front-end, mid-cycle, and back-end support. They also offer additional services, such as financial risk management, to help create and retain an accountable care culture by aligning provider compensation with quality-based initiatives.

Why you should consider revenue cycle management software over RCM outsourcing

Although outsourcing revenue cycle management can increase your efficiency, reduce your denial and underpayment rates, and increase your overall revenue, it’s not always the best option. Another option that can provide many of the advantages of outsourcing RCM without the disadvantages is using RCM software with your existing in-house team.  

Improve productivity of existing staff without hiring more FTEs

Outsourcing RCM is efficient because automated workflows eliminate many of the error points associated with manually handling patient accounts. Revenue management software serves the same purpose; only you can implement it with your existing staff instead of outsourcing it to an agency.

Automating tasks such as patient registration, insurance verification, and claims processing reduces the time your staff has to spend on tedious, time-consuming manual administrative tasks. They’re free to spend more time focusing on high-value activities instead.

Using revenue cycle management software can also identify and correct errors in the revenue cycle before they’re submitted. Correcting errors before they’re submitted lets you avoid costly delays. Incorrect patient information, coding errors, and missing documentation can all be flagged for correction before they get to billing.

Keep your data and RCM team in-house

Revenue cycle management software provides a centralized platform for managing all aspects of the revenue cycle. Centralized data management allows you to keep your data in-house. You don’t have to entrust your confidential patient data to a third party.

Your RCM team can benefit from the same technology outsourcing companies use to manage the revenue cycle. By providing a centralized, updated source of truth, RCM software streamlines communication between all departments, including billing, coding, and collections, without the complexity involved in communicating with a third-party vendor. Your team can make informed decisions based on real-time data, allowing them to achieve the same or greater efficiency than outsourcing agencies.

Faster communication and turn-around times

Outsourced agencies are outside your office, have other clients of their own, and rely heavily on offshore resources. It's likely you won't get service that's even in your own time zone. This results in SLAs that delay work getting done promptly in a space where time is literally money. When you're automating RCM in-house with software you can get to take advantage of the real-time collaboration that is natural within your own office setting and this results in work getting done quicker.

Software vendors also have a lot of knowledge about RCM

Like revenue cycle management agencies, RCM software vendors also work with many practices, specialties, and payers. Because of this, they can offer guidance and expertise based on their experience.

If you run into problems, you can reach out to the customer support team for assistance. While your team will handle the day-to-day operations of revenue cycle management, you’ll still have access to highly-skilled experts who can help you make the most of your software.

Good RCM software will provide all of the features you’d get from a software outsourcing agency, including:

• Claim management to track and manage claims with visibility throughout the process
• Patient scheduling to schedule appointments and automate communication
• Eligibility verification for coverage
• Charge capture for accurate billing
• Billing and coding to reduce the risk of errors
• Denial management
• Payment posting
• Reporting and analytics to better understand revenue cycle performance
• Compliance and security to protect sensitive data
• Integration with EHR

Outsource your revenue cycle management to software

MD Clarity helps you improve the patient experience, automate manual workflows, and reduce bad debt, cost-to-collect, and days in accounts receivable. You can improve patient care while also increasing your revenue.

Reach out today to find out how MD Clarity can bring the power and expertise of a revenue cycle management agency to your healthcare finance department.