Hospitals and health systems have historically taken a cut and dry approach to revenue cycle management: either all in-house or entirely outsourced. But, what if they could have the best of both worlds?
Outsourcing often comes with a loss of autonomy, while retaining all revenue cycle functions can put a strain on hospitals and health systems. Many healthcare providers excel in the revenue cycle process, only to stumble over exceptions in the routine. Denials, credit balances, underpayments, small balances and bad debt take time to work with and the root cause can remain unknown. "For many situations, we recommend to health systems - don't outsource the entire process," says Brian Sanderson, National Managing Principal of Crowe Horwath LLP's Healthcare Services. "Co-source the exceptions. Find someone to work the problematic areas." According to Sanderson, there are two basic models for co-sourcing revenue cycle management functions.
1. Management overlay. In this scenario, a revenue cycle management company or consulting firm will partner with the hospital and health system to manage the exceptions prevention and resolution process. "The consulting firm will use your people and teach them to understand, monitor and resolve these exceptions," says Mr. Sanderson. Management overlay requires no change in staffing, but puts in place additional standards and integrates technologies such as predictive analytics and machine learning. The hospital or health system's partner will stay on for a set period of time. After which, some choose to keep the overlay structure in place while others decide to shift the management function entirely back to their own team, once performance has improved sufficiently.
2. Outsourcing the exceptions. Typically, 15 percent of claims fall into the category of exceptions, says Mr. Sanderson. The remaining 85 percent (i.e. the "clean claims") hospitals and health systems can in most cases handle efficiently. In those typical situations, rather than outsourcing in one fell swoop, hospitals and health systems can simply outsource those claims that will be a struggle to resolve.
3. Measuring results. Within two to six months, hospitals and health systems can expect to see measurable results. At the beginning of the partnership, set a benchmark that is consistent with industry and attaches to measurable financial gain. How many claims are falling into the exceptions category? After the two to six month period, that percentage should have dropped. Another core way to measure progress is by the amount of money collected on the dollar for those claim exceptions. "Your partner should help you collect more than you have historically collected on these exceptions, and should also reduce the amount of exceptions overall," says Mr. Sanderson.
As more hospitals and health systems outsource or co-source revenue cycle functions, larger pools of financial data will begin to form. Through this data, hospitals, health systems and consulting firms will be able to see trends emerge. "Using predictive analytics and machine learning to figure out how to resolve accounts: That is the next generation in patient accounting," says Mr. Sanderson.