Hospital administrators face increasing pressure to contain spending and cut overhead expenses as healthcare delivery costs grow. At the same time, the impending industry transition to outcomes-based reimbursement has presented hospital leaders with a new set of investment demands for financial and IT systems.
Below are seven noteworthy financial services outsourcing trends.
1. Significant growth. The medical billing outsourcing market, valued at $6.3 billion in 2015, is expected to reach a value of $16.9 billion by 2024, according to a study published by Grand View Research.
2. Smaller hospitals choose outsourcing over IT investment. Because hospital leaders traditionally considered revenue cycle a cost-of-business expense, hospitals have typically underinvested in revenue cycle capabilities, training and infrastructure. In fact, Black Book found 71 percent of providers have not selected an end-to-end technology vendor for value-based payments. Updating or replacing financial management systems internally can be both cost-prohibitive and time-intensive, particularly for smaller organizations. A third-party service contractor takes on the overhead cost for IT infrastructures, system upgrades and maintenance, which allows hospital leaders to focus resources on clinical departments.
Black Book found 87 percent of self-determined profitable hospitals said they plan to keep revenue cycle management software and staff in-house to retain control and invest in RCM development.
3. Outsourcing for financial stability. Successful financial service partnerships can generate serious fiscal savings for hospitals and health systems by simply enhancing workflow efficiency. McKinsey estimated revenue cycle inefficiencies accounted for 15 percent of $2.7 trillion spent in U.S. healthcare in 2013. That means hospitals have $400 billion in potential cost-savings by streamlining workflows, reducing denial rates and optimizing account resolution. Updated IT systems and advanced payment tools in the hands of capable financial experts can speed account processing and drive positive patient experience down the line, resulting in improved cash flow.
4. Outsourcing as a stop-gap measure. More hospital systems are using outsourced revenue cycle as a stop-gap measure as they work to develop new business acumen in-house. For instance, many hospitals employ extended business office services or other types of financial management during system conversion. Using external financial support can help reduce the negative impacts of IT implementation on revenue cycle processes while hospital employees become accustomed to new IT and RCM software.
5. Subject matter expertise in new payment models. Some hospitals don't have the resources to hire and maintain high-level financial expertise in-house. Without the ability to work with multi-provider bundles, shared savings or other complex payment models, even hospitals with up-to-date revenue cycle systems are at a significant disadvantage. According to a 2016 Black Book poll, 85 percent of hospital CFOs agree that without a strong financial solutions vendor to provide value-based reimbursement software, outsourced support and consulting services, they will be forced to opt out of many risk-based contract opportunities through 2016.
6. Not just about billing, but about connectivity. The ability to connect financial and clinical information is critical for success under bundled payments. Some financial services and revenue cycle management providers are developing IT capabilities to facilitate more seamless communication between certain payer-provider partners.
7. Physician practices outsourcing. According to a recent Black Book survey, the U.S. market for physician and ambulatory revenue cycle management outsourcing and extended business office services are expected to increase by 42 percent from the fourth quarter of 2016 to the first quarter of 2019. Physicians surveyed identified the following reasons why they are considering outsourcing.
- Ninety-six percent of practice leaders report inefficient billing processes.
- Ninety-seven percent of independent group and solo practices experience high business staff turnover.
- Eighty-three percent of hospital-based physicians report trouble recruiting business office candidates experienced in ICD-10, value-based care, risk-based contracting and the Medicare Access and CHIP Reauthorization Act.
- Ninety-five percent of practices with less than five physicians self-identify as "not tech savvy."
- Seventy-seven percent of physicians believe they need to find more direct patient care time currently taken up by business office-related issues.
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