Are Outsourced Revenue Cycle Services Worth the Investment?

Revenue cycle management (RCM) can sometimes be tricky for hospitals to navigate. When a provider gets overwhelmed, various metrics suffer. For example, many hospitals are struggling to keep up with denials management and are losing money on claims and in-house management because of changing insurance regulations. Oftentimes, providers say they just don’t have the revenue cycle expertise or manpower to keep up and are looking to outside service firms for help.

Provider organizations need revenue cycle outsourcing firms to take ownership of the complex revenue cycle and to deliver relief for these cost and resource burdens. But are these firms worth the investment? In a recent report, KLAS dug a little deeper to determine which outsourcing firms are delivering and which are falling behind.

The Bad News

I’ll start with the bad news—33% of respondents who worked with full revenue cycle outsourcing (RCO) firms have buyer’s remorse. This means that fully one-third of respondents wouldn’t purchase their firm’s services again. This is in stark contrast to a similar 2017 KLAS report. At that time, some clients were in the first year of their contracts. These providers saw the potential resources offered by the firm and felt optimistic about the future. As a result, they rated their service firm a little bit higher.

Now, two years later, many providers have reported that there continues to be a lag in denials management, in reducing the cost to collect, and in increasing their cash flow. These providers just don’t see the ROI they were hoping for. These organizations regret paying millions of dollars bringing in a firm when they feel they could have done the job better internally. Sometimes, incentives are misaligned with the outcomes. Providers get frustrated because they’re pouring money into a firm that doesn’t provide the metrics they need.

The Good News

Thankfully, that isn’t the full story. The good news is that there are some full RCO firms that offer incredible value: Navigant, R1 RCM, and Ensemble Health Partners (though the last two have limited data).

As we can see in the below chart from the report, RCO customers that told KLAS they would buy from their firms again tended to give higher ratings to their firms’ services (which encompassed staff quality, innovative tools/processes, and strategic expertise). This should come as no surprise.

But what specifically do they do differently? I’ll include just a few things here. Navigant contracts often require the firm to meet certain performance metrics, and Navigant proactively identifies gaps in processes. R1 RCM makes an impact with their tools that provide specific metrics that drive performance results within the revenue cycle. Clients also appreciate the R1 RCM staff’s analytics expertise.

Something else that seems to make a difference is aligning incentives with outcomes. Firms that do this get paid based how well they deliver (e.g. they are only paid on what they collect). This type of engagement is helpful for the provider because they know that they’re only paying for high-quality work.

RCO versus EBOS

We also measured a select number of firms that provide extended business office services (EBOS). These services are more of a focused engagement than complete RCO. We see that, on average, this type of outsourcing scores quite a bit higher.

Part of the reason for this difference may be how specific the projects given to EBOS firms are. It’s a little bit easier to provide visibility into the firm’s performance if they can customize their approach and their workflow.

In addition, full, end-to-end engagements are more complicated and more strategic. A lot more must go into the partnership for such an engagement. It is hard to do RCO well, and competitor scores show this.

Read the full report to learn more about why EBOS firms tend to perform better than full RCO firms.

Shining a Light

Given the insights in this report, are outsourced revenue cycle services worth the investment? Though there is no cut-and-dry answer, I think that the services definitely can be worth the investment. The right RCO partner can deliver positive results. The high-performing organizations have demonstrated a strong partnership model, accountability for results, and a consistent track record of bringing innovation and continuous improvement. It’s true that some firms need to make major improvements, but there are great options out there, and firms like Navigant have blazed the trail to success.

Though it’s great that some EBOS firms are seeing success, the need for full, end-to-end RCO is only going to grow. Health systems have recognized that total transformation is required in order to deliver the experience patients expect and achieve financial improvements that are needed for long-term viability. That’s why hospitals would consider outsourcing their entire revenue cycle. This is highlighted in the way the market is moving for larger health organizations, especially in the mergers that we’re seeing amongst health systems. Soon, many providers are going to be looking to outsource their entire revenue cycle to an expert firm. We hope more firms will be ready by then.




     Photo cred: Shutterstock, JETACOM AUTOFOCUS