Outsourcing revenue cycle management
June 07, 2022
By Eric Slimp and Mitali Maheshwari
Revenue cycle management (RCM) refers to the entire process of a patient care episode, beginning at the time a patient is registered for an appointment, continuing through delivery of care, and ultimately ending with billing and obtaining payment for the services rendered. RCM is a tedious and resource-consuming process due to:
• The sheer number of participants, including patients, payers, physicians (and other providers), and third-party partners
• Use of highly complex and specialized, siloed software systems
• Changing rules for reimbursement and coding languages
Due to such complexity, almost every health system chooses to outsource some or most of the RCM process. As with many purchased service categories, hospitals simply cannot afford to hire staff who bring all of the highly specialized knowledge and training necessary or build their own software systems to support their RCM process, yet still optimize efficiency. As a result, health systems tend to buy this expertise and these systems from third parties in the form of purchased services or software solutions.
Below is a discussion of several of the key RCM subcategories that symplr commonly sees outsourced to third parties, as well as key components of those subcategories that are noteworthy. Please note that this should not be considered an exhaustive list. Rather, these are the areas of key significance that we have seen in working with health systems across the U.S.
We also discuss best practices related to performance monitoring to ensure that the ultimate result of this mosaic of services and platforms is an organism running in a cohesive manner at peak efficiency.
Billing and collections
Billing and collections services are among the most outsourced components of RCM, simply because the processes involved tend to be challenging. For example, the billing agencies must ensure they are billing the appropriate amounts for the services rendered and that they are billing the appropriate party for those services. Many companies offer billing and collections services for hospitals and healthcare organizations, and this category tends to be highly fragmented as a result. Some health systems choose to contract with multiple collections agencies and run them in tandem, for example. Other health systems utilize different agencies within different departments, adding further complexity.
Pricing for collections services is especially variable and depends on several factors. The predominant fee structure for collections is a percentage of the revenue collected. However, contingency fees can vary from single-digit percentages to as high as 50% depending on the type and age of the debt to be collected. It is important to ensure the pricing quote(s) you receive and agree upon are within industry benchmarks depending on the specific nature of the debt being turned over to each agency.
Medical coding
Medical coding is another commonly outsourced service that is part of the RCM process. This service is commonly outsourced due to the specialized knowledge and training required to perform coding. One of the challenges for medical coding companies is keeping up with the standards for the industry and continually training their coders. For example, in 2015, a shift was made from the old coding language, ICD-9, to the new coding language, ICD-10. Following this transition, pricing for coding services increased as the vendors attempted to recover their costs required to train their coders on the new, more complex, and specific coding language.
Notably, pricing for medical coding services tends to be measured on a “per chart” or “per hour” basis and is often segmented depending on the medical or departmental specialty (e.g., emergency medicine, surgery, inpatient care, outpatient, etc.). As with billing and collections, it is important to benchmark your rates for coding services to ensure they are competitive and reflect the appropriate type and fee structure.
Software solutions
Healthcare systems also use a number of software platforms for RCM. Most electronic health record vendors (e.g., Epic, Cerner, Meditech, and Allscripts) offer modules for RCM that can perform patient accounting (billing and account receivables), patient management (ADT), and general financials, and are priced based on an annual subscription fee.
Computer-Assisted Coding (CAC) software
CAC is a specialty software used for computer-assisted coding (CAC) and clinical documentation improvement (CDI), which aids coders by providing the grouping and coding of services. CAC software uses natural language processing (NLP) to analyze clinical documentations and produces appropriate medical codes for specific phrases and terms within the document. 3M’s 360 encompass platform and CDI solutions are market leaders for such solutions. Optum 360, Dolbey’s Fusion CAC, and EZDI CAC are other competing vendors in this market.
Pricing for CAC software is a subscription fee based on the number of annual inpatient days or annual outpatient visits. As such, it is important to have those metrics listed on any agreement.
Claims management software
Claims management software helps payers (insurers) manage, monitor, and evaluate the entire claims life cycle. By using it, agents manage the claims process with automated workflows. Change Healthcare’s Assurance Reimbursement Management, Experian’s ClaimSource, nThrive, Optum, and Waystar are examples.
Key performance metrics
As noted, many healthcare organizations choose to outsource some or all RCM processes, but even when RCM is no longer in-house, healthcare organizations must still track vendors’ performance.
It is vitally important for health systems to track several key metrics to ensure RCM efficiency and effectiveness. Thinking again of the RCM process as a highly complex machine, it’s essential, therefore, to monitor the metrics examples below and adjust along the way to achieve success.
In addition, including the appropriate performance metrics in your contracts with third-party service providers helps hospitals to minimize risk, enhance efficiency, and maximize revenue collected. A few performance metrics that should be addressed with specific performance targets in your contracts and monitored on an ongoing basis include:
• Cost to collect: Total fees as a percentage of total collections
• Gross A/R days: Total A/R divided by average daily gross revenue
• Collections as a percent of net A/R: Total collections divided by net A/R
• Customer service ratings: Based on customer satisfaction surveys
• Self-pay A/R as a percentage of total A/R: Portion owed by patients as a percentage of total receivables
• Bad debt as a percentage of gross patient revenue: Bad debt divided by gross patient revenue
Each of these metrics should be explicitly defined in the contract. This contract should also allow for incentives if the above metrics are met or exceeded. Finally, ensure that appropriate penalties are in place if performance falls below defined thresholds.
RCM as an outsourced service is highly complex and includes a vast number of elements and functions—such as billing, A/R management, denials management, cash posting, credit balance processing, customer service, bad debt management and medical eligibility. Even when collecting on a single account, RCM can require data to be passed among a variety of disparate organizations, which can lead to errors. For this reason, it is important to closely manage your third-party RCM services and software and continually monitor metrics to optimize your processes.
About the authors: Eric Slimp is the director of purchased services for symplr. Mitali Maheshwari is a HCIT advisor at symplr. With deployments in 9 out of every 10 U.S. hospitals, symplr is the leader in enterprise healthcare software and services.
Revenue cycle management (RCM) refers to the entire process of a patient care episode, beginning at the time a patient is registered for an appointment, continuing through delivery of care, and ultimately ending with billing and obtaining payment for the services rendered. RCM is a tedious and resource-consuming process due to:
• The sheer number of participants, including patients, payers, physicians (and other providers), and third-party partners
• Use of highly complex and specialized, siloed software systems
• Changing rules for reimbursement and coding languages
Due to such complexity, almost every health system chooses to outsource some or most of the RCM process. As with many purchased service categories, hospitals simply cannot afford to hire staff who bring all of the highly specialized knowledge and training necessary or build their own software systems to support their RCM process, yet still optimize efficiency. As a result, health systems tend to buy this expertise and these systems from third parties in the form of purchased services or software solutions.
Below is a discussion of several of the key RCM subcategories that symplr commonly sees outsourced to third parties, as well as key components of those subcategories that are noteworthy. Please note that this should not be considered an exhaustive list. Rather, these are the areas of key significance that we have seen in working with health systems across the U.S.
We also discuss best practices related to performance monitoring to ensure that the ultimate result of this mosaic of services and platforms is an organism running in a cohesive manner at peak efficiency.
Billing and collections
Billing and collections services are among the most outsourced components of RCM, simply because the processes involved tend to be challenging. For example, the billing agencies must ensure they are billing the appropriate amounts for the services rendered and that they are billing the appropriate party for those services. Many companies offer billing and collections services for hospitals and healthcare organizations, and this category tends to be highly fragmented as a result. Some health systems choose to contract with multiple collections agencies and run them in tandem, for example. Other health systems utilize different agencies within different departments, adding further complexity.
Pricing for collections services is especially variable and depends on several factors. The predominant fee structure for collections is a percentage of the revenue collected. However, contingency fees can vary from single-digit percentages to as high as 50% depending on the type and age of the debt to be collected. It is important to ensure the pricing quote(s) you receive and agree upon are within industry benchmarks depending on the specific nature of the debt being turned over to each agency.
Medical coding
Medical coding is another commonly outsourced service that is part of the RCM process. This service is commonly outsourced due to the specialized knowledge and training required to perform coding. One of the challenges for medical coding companies is keeping up with the standards for the industry and continually training their coders. For example, in 2015, a shift was made from the old coding language, ICD-9, to the new coding language, ICD-10. Following this transition, pricing for coding services increased as the vendors attempted to recover their costs required to train their coders on the new, more complex, and specific coding language.
Notably, pricing for medical coding services tends to be measured on a “per chart” or “per hour” basis and is often segmented depending on the medical or departmental specialty (e.g., emergency medicine, surgery, inpatient care, outpatient, etc.). As with billing and collections, it is important to benchmark your rates for coding services to ensure they are competitive and reflect the appropriate type and fee structure.
Software solutions
Healthcare systems also use a number of software platforms for RCM. Most electronic health record vendors (e.g., Epic, Cerner, Meditech, and Allscripts) offer modules for RCM that can perform patient accounting (billing and account receivables), patient management (ADT), and general financials, and are priced based on an annual subscription fee.
Computer-Assisted Coding (CAC) software
CAC is a specialty software used for computer-assisted coding (CAC) and clinical documentation improvement (CDI), which aids coders by providing the grouping and coding of services. CAC software uses natural language processing (NLP) to analyze clinical documentations and produces appropriate medical codes for specific phrases and terms within the document. 3M’s 360 encompass platform and CDI solutions are market leaders for such solutions. Optum 360, Dolbey’s Fusion CAC, and EZDI CAC are other competing vendors in this market.
Pricing for CAC software is a subscription fee based on the number of annual inpatient days or annual outpatient visits. As such, it is important to have those metrics listed on any agreement.
Claims management software
Claims management software helps payers (insurers) manage, monitor, and evaluate the entire claims life cycle. By using it, agents manage the claims process with automated workflows. Change Healthcare’s Assurance Reimbursement Management, Experian’s ClaimSource, nThrive, Optum, and Waystar are examples.
Key performance metrics
As noted, many healthcare organizations choose to outsource some or all RCM processes, but even when RCM is no longer in-house, healthcare organizations must still track vendors’ performance.
It is vitally important for health systems to track several key metrics to ensure RCM efficiency and effectiveness. Thinking again of the RCM process as a highly complex machine, it’s essential, therefore, to monitor the metrics examples below and adjust along the way to achieve success.
In addition, including the appropriate performance metrics in your contracts with third-party service providers helps hospitals to minimize risk, enhance efficiency, and maximize revenue collected. A few performance metrics that should be addressed with specific performance targets in your contracts and monitored on an ongoing basis include:
• Cost to collect: Total fees as a percentage of total collections
• Gross A/R days: Total A/R divided by average daily gross revenue
• Collections as a percent of net A/R: Total collections divided by net A/R
• Customer service ratings: Based on customer satisfaction surveys
• Self-pay A/R as a percentage of total A/R: Portion owed by patients as a percentage of total receivables
• Bad debt as a percentage of gross patient revenue: Bad debt divided by gross patient revenue
Each of these metrics should be explicitly defined in the contract. This contract should also allow for incentives if the above metrics are met or exceeded. Finally, ensure that appropriate penalties are in place if performance falls below defined thresholds.
RCM as an outsourced service is highly complex and includes a vast number of elements and functions—such as billing, A/R management, denials management, cash posting, credit balance processing, customer service, bad debt management and medical eligibility. Even when collecting on a single account, RCM can require data to be passed among a variety of disparate organizations, which can lead to errors. For this reason, it is important to closely manage your third-party RCM services and software and continually monitor metrics to optimize your processes.
About the authors: Eric Slimp is the director of purchased services for symplr. Mitali Maheshwari is a HCIT advisor at symplr. With deployments in 9 out of every 10 U.S. hospitals, symplr is the leader in enterprise healthcare software and services.