Hospitals that outsource their full revenue cycle function are underperforming compared to their counterparts that handle revenue cycle management internally, according to a Crowe hospital data analysis.
For the analyses, Crowe, a public accounting, consulting and technology firm, examined financial effects of revenue cycle outsourcing using data from its revenue cycle analytics software. The data included about 1,000 U.S. hospitals — 553 within Medicaid expansion states and 378 in nonexpansion states.
"Looking at the financial data, the benefits of outsourcing the complete revenue cycle seem to be marginal on some metrics, and nonexistent on others," Brian Sanderson, managing principal of Crowe healthcare services, said in a statement. "The decision to outsource any core function is complex, with considerations of access to talent, scalable technology and focused expertise — but performance should always be the key driver."
The data showed hospitals that outsource their revenue cycles collect more patient balance payments at the point of service. Hospitals that insource their revenue cycles collect these payments at a rate of 16.5 percent as a percent of total patient collections, compared to 19.7 percent for outsourced revenue cycles. Additionally, the data showed outsourced revenue cycles collect self-pay after insurance payments at a rate of 38.7 percent as a percent of total patient collections. That's higher than the 36.7 percent for insourced revenue cycles.
But Crowe said the uninsured/self-pay collections cycle for outsourced revenue cycles takes 109.4 days versus 76.3 days for insourced counterparts.
Data also showed outsourced revenue cycles have higher initial denial rates. According to Crowe, insourced revenue cycles' initial denial rate, meaning the share of patient accounts that required intervention or correction to secure payment, was 9.1 percent. That's lower than 10 percent for outsourced revenue cycles. Crowe estimated a 10 percent initial denial rate represents $22.7 million more of potential revenue for an average 400-bed hospital.
Outsourced revenue cycles also had a higher final denial write-off rate, meaning the share of patient accounts that were initially denied and could not be corrected. The final denial write-off rate for insourced revenue cycles was 1.7 percent versus 2.6 percent for outsourced revenue cycles.
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