The Executive Suite: Sometimes it pays to outsource RCM

Nothing can be done about soaring health care costs if providers aren’t paid for their work. Prompt compensation for services rendered is a prerequisite for a nuanced conversation about managing macro costs, quality, and equity.

However, getting paid is no simple task, as every provider knows. Google revenue cycle management and you will see 16-step pie charts. RCM is a $140 billion market in the U.S. with 188,000 medical records specialists. Successfully managing revenue cycles – that is, capturing fair payment with minimal effort – is a rarefied business function. RCM is too complex and laborious for a typical health care practice to master.

If you are a provider spending too much on RCM staff and process, or if your claims denial rate is above the industry average, consider eliminating your headache by outsourcing your medical billing. Let experts chase down payments while you provide the care, receive the money, and improve your key performance indicators.

Outsourcing RCM makes sense

Health care providers are increasingly moving in this direction: Up to 61% of providers plan to outsource RCM tasks in the future. Nearly one-third of hospital and health system leaders (63%) have pursued at least one outsourcing solution, with revenue cycle functions at the top of the list (27%), according to Kaufman Hall's 2022 State of Healthcare Performance Improvement report.

Meanwhile, the Global RCM outsourcing market is expected to grow by 17% yearly from US$23.7 billion in 2022 to US$62.4 billion by 2028.

Outsourcing RCM is only getting more attractive as in-house RCM gets more challenging. New, more stringent regulation has increased the degree of difficulty for both care and billing. Financial pressures, including inflation and staff shortages, have intensified the need for more efficient cash flow. Also complicating RCM are mega mergers roiling the market landscape, including retailers acquiring primary care clinics, and insurers acquiring provider capacity.

That’s the big picture.

Outsourcing advantages in detail

Here are eight specific reasons why outsourcing your RCM is smart:

Health care talent is scarce. Providers should focus their recruiting efforts on sustaining full staffs of clinicians, not on recruiting and retaining administrative staff. Let health care experts hire health care professionals, and let dedicated RCM companies hire their staff. They know best how to find and vet good employees trained in payments and claims management.

Your RCM should be cost-effective. RCM is a science. Because RCM is their core competence, dedicated RCM companies have refined their processes (and technology) to the point where they can do the work for a consistently lower cost-per-full-time-employee than in-house RCM staff, even after accounting for profit. External RCM companies improve processes and precision at every stage of the life cycle from patient registration through eligibility verification, financial screening, pre-authorization, providing out-of-pocket estimates, and collection.

Other cost savings. Outsourcing also reduces a health care organization’s direct costs of office supplies, technology, claims, and compliance management. The savings typically dwarf the outsourcing fees.

You net more revenue. Here’s one example. One integrated health provider we worked with replaced its seven-member staff with an external RCM service company and has significantly increased its revenue to the point it exceeds capitation levels they have worked under in the past. Most companies make less when they opt out of capitation.

Claims denials are no longer your problem. Perhaps the most burdensome part of a health care business is having claims denied, working on resubmissions, then getting bogged down in intermittently successful appeals. Even if you as a health care provider have a decent success rate, getting to the reimbursement can be an expensive grind. Outsourcing to experts offloads the toil and puts the challenge in the hands of a team that has mastered clean claims submission.

Accuracy. In addition to mastering the core processes, dedicated RCM teams are much less likely to make errors like incorrect coding – clean claims are their only business. Further, outsourced RCM companies are increasingly using artificial intelligence to automate the conversion of clinical notes to optimal billing codes.

Scalability. Perhaps your practice is growing? It won’t if your RCM staff can’t grow with it. With a third-party company, it’s easy to scale because the company will have trained, capable staff ready to join the team if needed, but only when needed.

Value-based care improves. Finally, outsourcing RCM is a good move for providers who are committed to value-based care. By outsourcing your RCM services to the right partner, you are providing your care at a measurably lower cost, meaning the value of the care is rising. And that’s important.

RCM billing is a highly complex business process requiring significant expertise. It’s fair to say that clinicians who studied medicine didn’t do so to become billing experts. Consider leaving it to the professionals, and watch quality rise and costs fall. Once everyone is paid fairly, we can tackle health care’s other economic issues.