As payment processes for healthcare services become increasingly complex, many healthcare provider organizations choose to outsource some or all their revenue cycle functions to a third-party vendor. The reasons for this approach may vary, but they usually involve some combination of the following perceived benefits:
- Access to expertise (e.g., management, coding, compliance) that does not exist internally
- Ability to deploy superior billing technology without the usual licensing fees and system transitions
- Opportunity for expense reduction, particularly if the labor is provided in a lower-cost community
As attractive as these benefits may seem, they also can turn out to be illusory. All too often, executives assume that outsourcing the revenue cycle function will somehow free them from this time-consuming and burdensome responsibility, leaving them with extra time and energy to devote to matters they find more impactful or interesting. This is a naive expectation, and a rude awakening often follows when leaders find themselves devoting even more time to revenue cycle management than before, because of the following circumstances:
- Cash flow decreases as accounts receivable (A/R) balances grow.
- Root causes of denials remain unclear due to a lack of effective reporting, analytics, and transparency.
- The billing team turns out to be less capable, less professional, and/or less sophisticated than advertised during the sales cycle.
- The vendor becomes unresponsive, restricts access to decision makers, and exhibits a general lack of partnership and collaboration.
Although it may not be possible to avoid these issues altogether, they usually can be mitigated through contract terms that clearly define performance and service level expectations and include meaningful financial incentives for meeting those expectations.
This article was originally published by hfm Magazine, September 2018.