There has long been a debate among healthcare providers about whether it is wise to outsource some or all of revenue cycle operations to third-party experts who specialize in optimizing financial performance. Although the debate continues, perspectives may be changing as organizations move away from fee-for-service and toward value-based care. In the following roundtable, sponsored by Cerner, several revenue cycle leaders discuss the role of outsourcing in their own organizations and how they envision it changing as the industry evolves.
What role does outsourcing play in your organization, and how has that changed in the past five years?
Tracy Berry: BJC Healthcare uses a number of revenue cycle companies. For example, we work with a coding firm, outsource most of our patient receivables, leverage a third party to qualify patients for Medicaid, and have a resource that reviews our zero-balance accounts to find opportunities to recoup money. We also went through an IT system conversion several years ago and relied on an external vendor to work down accounts receivable (A/R) in our legacy system.
Our approach to outsourcing has changed a bit in the past five years. Previously, we worked with different vendors that provided similar services, and we would give each one a small portion of the business. Over the years, however, we have consolidated to more of a partner model where we work with one company in each area that closely collaborates with us to achieve our goals. So, for instance, with coding, our partner acts as an extension of our coding team, training its coders the way we want them trained and assessing them on the same performance metrics. There are enough vendor employees in the coding department that the company provided a supervisor to manage the staff, so it feels like they are just another team within our coding group.
Teresa Campbell: Indianapolis Gastroenterology and Hepatology (IGH) uses a hybrid approach to outsourcing the revenue cycle, meaning there are certain functions that we take internal responsibility for, and there are others that our vendor assumes. We focus on demographics, coding, charge entry, denial review, reviewing appeals, providing direction on information that needs to be submitted with appeals, and self-pay collections. Our outsourcing partner is responsible for things like scrubbing and transmitting claims, and assigning claim errors, collections, or denials to the appropriate queues for us to address. They also follow up with payers as well as post payments and send out statements. We use a second outsource vendor to supplement our internal coding staff.
This is a change from how we operated five years ago. At that time, we basically outsourced the entire revenue cycle. We used a different vendor and we weren’t particularly pleased with their results. We decided to implement a new revenue cycle system—and the previous vendor didn’t support the technology—so we switched over to a partner that supports the new system.
Angela Cox: At Centura, we prefer to do as much internally as we can because we have found that it can be less expensive to perform services in-house. That said, we have been going through a system go-live for the past two years and are relying on a third party to work down our legacy A/R. We are also contracting out our self-pay collections. In addition, we use an external company for accounts that involve injuries related to automobile accidents where an attorney is involved and there is some sort of litigation. In these cases, we found it helpful to rely on a resource that has the knowledge to speak directly with attorneys. It allows us to resolve these types of accounts faster.
Mary Beth Briscoe: UAB Medicine has outsourced the majority of its hospital and faculty practice revenue cycle operation, including patient access, coding, and patient financial services. Primary drivers for our decision to outsource were to leverage national subject-matter expertise, execute continuous improvement strategies, and implement performance-enhancing technology. Our goals were to streamline operations, reduce cost-to-collect, and enhance our overall patient experience. Additionally, the ever-increasing complexity of the revenue cycle will require a continuous evolution of human capital and technical skillsets. A national partner can access a wide range of talent and experiences to provide immediate assistance and insight to our operation.
How do you envision outsourcing changing going forward? How will the move toward value-based care affect your efforts?
Jeff Hurst: I’ve been in health care for 20 years, and I’ve never seen the magnitude of change in the revenue cycle that’s occurring now. More provider organizations are realizing the advantages of partnering with a third party that can bring expertise, solutions, services, experience, and insight into the relationship and drive results. There has been a shift in how individual organizations—and the industry as a whole—view the revenue cycle, treating it as a strategic business unit and not just a cost center. There is also a dearth of revenue cycle know-how right now. Anytime you have an area that’s undergoing major transformation and you have a lack of expertise and leadership to effectively manage the change, it creates a perfect environment for organizations to look outside their walls and identify external resources to foster improvement.
Berry: We will continue to focus on what we’re good at and then seek the right partners to work on specific areas where it makes sense. Let’s face it, we are continuing to experience cost pressures and want to collect all the money that is due to us. If there is somebody who can help us do that better and faster, we will consider those strategic arrangements.
Campbell: The jury is still out on whether we will increase our use of outsourcing. We don’t have any immediate plans to change our model, but likely we will add mutually developed key performance indicators (KPIs) linked to value-based reimbursement. As we move more into the value-based arena—and it’s still unclear as to how fast that will accelerate—our reimbursement will be more and more affected by activities that have not traditionally been part of the revenue cycle. At that point, it will become more important to have a depth of knowledge in-house because we must be able to understand how the revenue cycle and the new payment models interact. I believe it’s foolish for physician practices in today’s environment to assume they can get by without any in-house revenue cycle knowledge. This is especially true for independent physicians. One advantage of outsourcing for an independent practice is you get access to a bigger staffing pool—it’s difficult to staff a revenue cycle in this setting—the disadvantage is that physician practices often give up too much control of their revenue cycle when they work with an external partner. They end up failing simply because they don’t have anyone internally who fully understands how to marry clinical and revenue cycle functions to fully optimize reimbursement.
Are there areas that make more sense for outsourcing than others? Do you see that changing in the future?
Briscoe: The decision to outsource operational functionalities will be largely dependent on the organization’s view of outsourcing. If historical organizational performance is strong and the organization possesses the appropriate skillsets, outsourcing may not be an immediate initiative to pursue. However, as changes to our payment models continue to advance and the associated impacts to the revenue cycle require greater agility to adapt, outsourcing may be an option to consider. To ensure future success, our organization must possess skilled staff, deep “bench strength,” and optimized technology, all of which may be enhanced by a vendor partner. Traditionally, our outsourcing was limited to specific back-end functions; however, as the industry evolved and our business needs changed, so did our desire to expand our outsourcing footprint.
Hurst: For many organizations, it starts with the back office. Predominantly because the back office is not patient-facing and involves more internal communications and working with health plans or third-party payers like Medicare and Medicaid. That’s fundamentally different than front-end operations such as access management, where staff must be physically located in the facility and interacting with customers—the patients. If an organization is considering outsourcing the front end, it needs to make sure there is cultural alignment and the third-party staff fully integrates with the organization, espousing its approach to patient interactions.
Cox: It boils down to who is the expert? If there’s an outside party that can more cost-effectively bring cash in the door, then a collaboration with that company should be considered. If an organization is choosing to outsource, it’s because the knowledge and capabilities aren’t in house, and it truly believes the bottom line will be better. Sometimes we can’t find the expertise that we need in our marketplace. We’ve found that to be true with inpatient and outpatient coders in particular.
Berry: Specialized areas such as workers’ compensation, third-party liability, and zero balance review are good candidates for outsourcing. These activities require a degree of knowledge that might be difficult to find. Also, areas where resources are scarce, such as coding, are possible options. We have done a lot of work to create career ladders and provide hands-on training in coding, and as a result, we have expanded our internal staff. However, we’re a long way from being 100 percent, and so we have had to look externally to fill the gap.
Are there reasons why an organization might not want to outsource? What would those be? Could those change over time?
Briscoe: There are a number of factors to be considered when making a decision to outsource. These would include the desire to maintain autonomy, defining accountability between organizations, costs associated with start-up and maintenance of a partnership, performance goals and improvement expectations, cultural fit between organizations, and the impacts on patient and employee populations. As markets evolve and performance changes, the weight of these influencing factors could alter the decision to outsource over time. As with all decisions, consistent monitoring and risk-mitigation strategies should be continuously employed.
Berry: Oftentimes, the biggest concern is losing control. At BJC, we believe managing the revenue cycle and the patient’s financial experience is core to our business, so I don’t see BJC outsourcing the entire revenue cycle in the near-term. Creating strategic partnerships to address certain aspects of the revenue cycle works well for us.
Cox: Loss of control is usually the first concern of outsourcing, and the second is how will my staff be affected? Will they have opportunities with the vendor or receive severance? The third is hidden costs that come from the unknown of the book of business. This opinion can change if the outsource company has streamlined processes and trained experts already in place to hit the ground running for faster collections.
Hurst: There’s always a little hesitation about taking something that has historically been managed internally and shifting it to a third party. That said, one of my favorite quotes is, “In a time of rapid change, experience is your worst enemy.” With all the new developments in health care, it’s wise for organizations to think less about how they’ve done business in the past and more about how they will do business in the future. If they alter their mind-sets, they may decide that a lot of legacy business processes and structures are obsolete. Further, they may start to see more value in building relationships to drive their business outcomes from a financial, clinical, and patient experience standpoint.
If an organization chooses to outsource, what recommendations would you offer for getting started?
Campbell: There are several steps involved in establishing a strong partnership. First, make sure that you carefully evaluate whether your potential partner has the level of expertise you need—and don’t forget to look at their physician practice and hospital knowledge because these are not the same. Also, choose a partner that will take the time to learn about your organization, particularly if you’re delivering specialized services. Any potential outside party must also understand the requirements that are specific to your state and contracted payers because they all require different things.
It can also be valuable to ask your partner whether there will be a dedicated team assigned to your revenue cycle or whether the responsibilities will be spread across a broad range of people who also work with other clients. If the company is growing, how will bringing on new clients affect the team that’s assigned to your account?
You should also assess reporting and data capability and make sure any reports visibly demonstrate the vendor’s productivity, performance, outcomes, and improvement opportunities.
Cox: I agree. Getting sample reports can be quite beneficial to see what the vendor will provide and how you can use that information. It will also allow you to gauge their experience and make sure it’s sufficient—and surpasses your own. You want to find a partner that’s not just going to throw bodies at a problem but is actively working with you to rethink processes and optimize workflow to yield the best possible outcomes.
Briscoe: Initially, the goals of outsourcing should be clearly defined, and a comprehensive business case that aligns with your organization’s strategic goals and focus must be developed. It is important that there is a cultural fit with your vendor partner. Do you share similar organizational beliefs and values? How will expectations and accountability be clearly defined and communicated between organizations? Has the vendor demonstrated a level of expertise to address your organization’s size and complexity? Is there a commitment to provide a dedicated team solely focused on engaging organizational leadership and learning about you? Which key performance indicators will be the measure of success, and how will those measures be reported?
Trust and transparent communication are paramount when considering an outsourcing relationship. Once you enter into a partnership and begin to redesign processes, you must be purposeful and transparent with communication about proposed changes and the anticipated outcomes. The organization and outsourcing partner must also be clear about the approach to patient communication and interactions that align with patient satisfaction objectives and goals. Organizations that are able to link the patient’s clinical experience with their financial experience will be in a better position to positively impact overall patient satisfaction.
Hurst: You should have absolute clarity on what you’re trying to accomplish and what success looks like in quantifiable and measurable terms before you begin any conversation about outsourcing. Once you have a handle on where you’re trying to go, you need to fully appreciate where you are today. That will require some type of assessment, and I would recommend an external, rather than an internal, review. With an external evaluation, you’re getting an objective opinion about what’s working well and what needs to improve. Once that’s done, you can start to weigh your options—both internal and external—that will drive you toward your goals. If you are thinking about using a third party, note that the burden of responsibility is on the potential partner to create a compelling value proposition. In other words, they should clearly demonstrate that they can do the task more efficiently and accurately and for less cost without sacrificing quality or the patient experience. When setting up the agreement, look for outside parties that are interested in a partnership, not a limited relationship. A partnership implies mutual benefits, accountabilities, and expectations. A critical component is a risk-sharing or gain-sharing structure in which both organizations are invested. That way, if performance isn’t where it should be, all parties end up sharing the risk, and if performance is where it needs to be or is better, then they share in the benefits.
In the end, it’s best to approach the outsourcing decision in a thoughtful, rational, and objective manner, regardless of how you’ve done things in the past. Getting locked into your historic way of doing business could be dangerous because that may—or may not—be the path for success in the future.
HFMA Roundtable Participants
Mary Beth Briscoe is CFO for UAB Hospital and UAB Medicine Clinical Operations in Birmingham, Ala.
Tracy Berry is vice president, revenue cycle management for BJC Healthcare in St. Louis.
Teresa Campbell is CFO for Indianapolis Gastroenterology and Hepatology in Indianapolis.
Angela Cox is vice president of revenue cycle management for Centura Health in Denver.
Jeff Hurst is senior vice president, revenue cycle management and president of RevWorks for Cerner Corporation in Kansas City, Mo.
Cerner’s health information technologies connect people, information, and systems at more than 25,000 provider facilities worldwide. Recognized for innovation, Cerner solutions assist clinicians in making care decisions and enable organizations to manage the health of populations. The company also offers an integrated clinical and financial system to help healthcare organizations manage revenue, as well as a wide range of services to support clients’ clinical, financial, and operational needs. Cerner’s mission is to contribute to the systemic improvement of health care delivery and the health of communities. Nasdaq: CERN. For more information about Cerner, visit cerner.com, read our blog at blogs.cerner.com, and connect with us on Twitter at twitter.com/cerner and on Facebook at facebook.com/cerner.