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Outsourcing nonclinical services has long been a way for healthcare organizations to transfer day-to-day management of noncore functions to firms that specialize in such services. But in the drive to deliver high-quality, cost-effective care, hospitals are considering the use of outside resources to provide clinical and diagnostic expertise as well.
According to a survey on healthcare outsourcing conducted by Waller, a Nashville, Tenn.-based law firm, the top five outsourced patient care services in 2012 were those related to anesthesia, emergency department (ED), dialysis services, diagnostic imaging, and hospitalist care. In comparison, in 2006, the top five outsourced clinical services were dialysis services, sleep disorders, diagnostic imaging, laboratory services, and physical therapy.
Today, additional services that are being outsourced include surgical services and specialty services, such as labor and delivery (laborists) and orthopedics.
“All healthcare providers—particularly those that deliver inpatient care—are looking for ways to contain costs and drive quality. One way this can be done is by outsourcing certain clinical services to companies that have a proven track record of outstanding clinical quality, data-driven results, and robust emphasis on compliance while focusing in-house labor and resources on the organization’s core capabilities,” says Melvin F. Hall, PhD, CEO, SpecialtyCare, Nashville, which provides clinicians and technicians to operating rooms in more than 800 hospitals throughout the country.
No matter the service, providers should fundamentally understand that outsourcing means transferring the work—not the overall responsibility—for a particular program.Assessing the feasibility of outsourcing a particular service, setting expectations, and then following through to ensure that the performance of the outsourcing partner meets those expectations are imperative to the success of any outsourced program.
Some services, such as emergency medicine and anesthesiology, are commonly outsourced. According to TeamHealth, a Knoxville, Tenn.-based provider of clinical services, out of 5,000 community hospitals nationwide, approximately 81 percent outsource ED care and approximately 90 percent outsource anesthesia, primarily to small, local groups.
Traditionally, the opportunity to reduce cost has made outsourcing such services an attractive option. Improving quality is at the other end of the spectrum of considerations. TeamHealth president and CEO Michael D. Snow describes the decision to outsource as either a defensive or offensive move.
“It comes down to a make-or-buy decision for the hospitals,” Snow says. “Maybe they have a cost structure that is not sustainable, so they’re looking for an outsourced alternative to help them maintain quality, but at a lower price point.”
A hospital may want to play offense by enhancing a certain clinical area, such as obstetrics. So the hospital may bring in laborists to try to improve patient satisfaction or even drive volume in its labor and delivery program, Snow says.
Declining payments from government and commercial payers can make outsourcing certain functions, such as imaging services, an attractive option, say authors Damien Coltey, Sandra G. Lawson, and Les Jebson (“Mitigating Outsourcing Challenges,” CFO Forum, HFMA, October 2012). If maintaining profits on these services is too challenging, transferring the service to a group that can more easily spread out costs among several clients is often more cost-effective. Healthcare organizations also may outsource imaging services because they lack the capital funds necessary to invest in new and advanced imaging equipment.
However, as reform puts pressure on hospitals to reduce inpatient volume, meet outcomes targets, and provide cost-effective care, the decision to outsource often is based not on only cost or only quality. “You have to look at it much more holistically,” Snow says.
For example, if a hospital’s 30-day avoidable readmission rates for heart attack increase while patient satisfaction scores decline, the hospital will be penalized under new value-based rules, meaning its payment will decline, as well.
“In many cases, it’s just that local groups lack the resources to deliver on how hospital finances are going to be rewarded going forward,” Snow says. “The steady march toward greater transparency, greater visibility, and higher accountability is making hospitals evaluate their programs, and they are finding that many of their local groups just lack the resources to deliver on that product. That really as much as anything is the source of request for outsourcing proposals that we receive today.”
The ED, in particular, has become more important under healthcare reform, Snow says. As more nonurgent services are delivered in the outpatient setting, a greater number of admissions are coming through the ED, making it the de facto “front door” to the hospital and of major importance to the organization’s business. If a hospital’s patient wait times in the ED or admission times from the ED are too long, patient satisfaction and business will suffer. If the hospital, cannot improve emergency services through internal resources, outsourcing becomes an attractive option, he says.
As healthcare reform affects traditional areas of outsourcing, it also may be creating new areas of opportunity for outsourced services. One possible area for outsourcing that may be emerging as a result of changing payment models is clinical outreach within accountable care organizations (ACOs), says John Boland, managing director in the healthcare practice of Chicago-based Navigant, Inc.
Boland says the need to use midlevel practitioners, such as physician assistants and nurse practitioners, who coordinate care through methods such as patient education and home monitoring, can mean a significant investment—particularly for smaller hospitals.
“In some of the data that I’ve seen, the cost of that outreach program for ACOs has been a very high component of the overall cost of developing ACOs,” Boland says.
According to a 2011 report by the American Hospital Association, the cost of developing an ACO for a single hospital with 80 primary care physicians and 150 specialists is $5.3 million, including $550,000 for ACO managers and staff.
The cost for a five-hospital system with 250 primary care physicians and 500 specialists is $12 million, including $600,000 for ACO management and staff (The Work Ahead: Activities and Costs to Develop an Accountable Care Organization, April 2011, American Hospital Association).
As hospitals work more closely with physicians through some form of clinical integration to meet cost and quality demands, they also need to place physicians in management roles, and these physicians will require at least a basic understanding of employee management. Outsourcing can provide the requisite managerial training that individual hospitals or smaller health systems may not be able to afford.
“Many outsourcing companies put a lot of emphasis into clinical leadership,” says Jason Standifird, CFO of EmCare, a Dallas-based provider of ED and facility-based physician services.
Outsourcing firms, for example, may send on-site medical directors to educational conferences that cover areas such as how to manage employees, how to hold staff accountable, and how to work better with administrative management. The outsourcing partner may even have its own training academy to provide specific education focused on hospital goals.
“Management training is not something taught in medical school,” Snow says.
Sidebar: The Strategic Value of Laboratory Outreach
Although outsourcing can offer attractive benefits, it is not necessarily a good option for all hospitals. The first question healthcare organizations should ask in deciding whether to outsource is, “Why?” To answer this question, the organization should critically assess the state of the clinical service that is being considered for outsourcing, the desired end state, and what it will take to get there, Boland says.
“First and foremost, healthcare organizations have to take a real hard look at their own performance, from a clinical side and a cost side. And they have to understand where they want to be,” he says.
For example, does the organization want to reduce readmissions for patients with congestive heart failure to meet payer-required targets? What internal processes would need to be modified or added to reach that goal? How much of an investment would that require?
Additional factors include how the outsourcing will affect internal staff morale and the hospital’s public reputation, Boland says. Will there be a staff reduction, or can staff within the service that is to be outsourced be reallocated to another area? “Hospital leaders also have to take a hard look at the impact on the community and if, in fact, outsourcing is going to put their organizations in a better or worse position moving forward,” he says.
Boland says an organization may rely on its public relations department to gauge the internal and external impact of the outsourcing option through messaging campaigns and other forms of outreach.
The selection of an outsourcing partner also should take into account many factors. Perhaps the No. 1 consideration for a hospital in judging a firm’s fitness as a potential outsourcing partner is whether the firm and the hospital share the same strategic vision. “If hospitals want to have a highly efficient model and are interested in clinical leadership, then they need to choose a partner that can support efficiency and provide access to high-quality clinical leaders,” Standifird says.
Healthcare organizations should also ensure that the outsourcing candidate’s pool of clinical resources is adequate. Can the firm, for instance, adequately staff a site in rural Kentucky with physicians who have experience with small-town living? Would the outsourcing provider be able to quickly pinpoint such candidates?
The pay scale for outsourced clinicians should be fair and market-competitive, and the organization’s retention rate should be excellent to ensure the quality and caliber of the labor remain high, Snow says.
“Through market-competitive rates and appropriate incentive-based provider compensation, physicians are aligned with the hospital’s goals, which results in client satisfaction and retention,” Snow says. Physician and client retention rates for the outsourcer should be at least in the low 90s. “That speaks to the caliber and stability of the organization,” he says.
Organizations may do a good job of assessing the need to outsource and selecting an appropriate partner. However, where they most often fail is in managing the outsourcing relationship, Boland says. “Sometimes the tendency is to think: ‘We’ve outsourced that. Now, we can breathe easier.’ Yes and no,” he says.
It is true that the daily tasks of the outsourced function are now the responsibility of the outsourcing provider; however, the overall responsibility for that service remains with the healthcare organization. Therefore, monitoring the performance of the outsourcing partner and maintaining regular contact are crucial. The best way to track progress is through key clinical and financial performance indicators developed by the healthcare organization and its partner.
In the ED, one metric that can gauge performance is the left-without-being-seen rate. Under the outsourcing partnership, is the hospital reducing the number of people who come to its ED but leave without having been examined by a clinician? Contracts may even be negotiated so that the outsourcing partner’s management services fee could be affected if it does not meet the target for the metric, Standifird says. For hospitalists, one measure of performance may be the hospital’s core measures. Are patients satisfied with the level of physician performance during inpatient stays? Each outsourced area should have a defined metric and a mechanism for regular feedback to discuss performance in that metric.
“What’s important is to have that conversation and set those expectations on the front end, and then expect regular scorecard reviews from your outsource provider,” Snow says.
Outsourcing requires a lot of work, both in the decision to outsource and in maintaining the relationship. But the outcomes may speak for themselves.
Grays Harbor Community Hospital, Aberdeen, Wash., needed better leadership in its ED to improve patient throughput. The hospital selected an outsourcing partner that was able to recruit physicians from the area, which can be important in maintaining a sense of community and finding physicians that represent a good fit, Snow says.
The outsourcing firm also equipped the hospital with expertise required to facilitate improvement. For example, the hospital’s new medical director was trained through the outsourcing firm’s leadership academy, where ED physician and nursing staff also underwent training in communication and teamwork.
By working together, physicians and nurses developed and implemented solutions such as a patient tracking board, streamlined admissions process, scripting tools for patient communication, a rapid-assessment triage, a better way to manage volume surges, and an upgrade to the patient documentation system.
After the new processes were implemented, Grays Harbor’s time to bed after decision to admit was reduced from between 158 and 193 minutes to about 33 minutes; the percentage of patients who left without being seen was reduced from slightly less than 7 percent to about 2.5 percent.
Outsourcing partners are also sometimes more up to speed on technology that can help to make processes more efficient.
Two hospitals (a 101-bed general medical and surgical hospital and a 112-bed acute care community hospital) within one large national health system were able to cut ED admissions time about in half by outsourcing both ED and hospitalist services with the same outsourcing partner and making use of its proprietary software. The outsourcer provided its clinicians with technology that enables ED staff to quickly communicate clinical information (e.g., diagnosis, course of treatment) about patients whom physicians want to evaluate for further care, including observation and possible admission. The ED physicians input the information into the system and send it to hospital case management staff and hospitalists at the same time, enabling all parties to be fully apprised of the patients’ needs and expectations and well-prepared for the new admissions.
Traditionally, this information has been communicated by means such as a telephone or an internal paging system. The technology-based approach speeds up the communication, creating better efficiency. Follow-up questions are also easier to ask and address.
“Now, one firm can direct the efforts of the hospitalist group and the ED,” Standifird says.
The integrated outsourcing model coupled with EmCare’s technology enabled the hospitals to reduce ED admission wait times from three hours to about one hour, Standifird says.
As healthcare organizations consider outsourcing as a way to meet the mandates of healthcare reform, they should look beyond housekeeping and maintenance as areas to outsource. Keeping an open mind about what options are available for outsourcing is important to realizing all of the potential benefits outsourcing can provide.
Robert R. (Reed) Saunders is business development manager, Mayo Medical Laboratories, Rochester, Minn.
Arjen Westerink is director, business development, VitalHealth Software, Milwaukee.
This article originally appeared in the February 2012 issue of Healthcare Cost Containment.
Publication Date: Saturday, November 01, 2014
In this Business Profile, Bruce Haupt, president and CEO of ClearBalance, discusses how a patient loan program can increase patient collections, reduce bad debt, and speed cash flow.
Patient financial engagement is more challenging than ever – and more critical. With patient responsibility as a percentage of revenue on the rise, providers have seen their billing-related costs and accounts receivable levels increase. If increasing collection yield and reducing costs are a priority for your organization, the metrics outlined in this presentation will provide the framework you need to understand what’s working and what’s not, in order to guide your overall patient financial engagement initiatives and optimize results.
In this Business Profile, Jerry Bruno, principal with Deloitte Consulting LLP, discusses the importance of choosing revenue cycle solutions that help an organization meet the challenges of a quickly evolving healthcare environment.
No two patients are the same. Each has a very personal healthcare experience, and each has distinct financial needs and preferences that have an impact on how, when and if they chose to pay their healthcare bill. It’s no longer effective to apply static billing techniques to solve the complex challenge of collecting balances from patients. The need to tailor financial conversations and payment options to individual needs and preferences is critical. This presentation provides 10 recommendations that will not only help you improve payment performance through a more tailored approach, but take control of rising collection costs.
In this business profile, Lane Jackson, a partner in the Grant Thornton LLP Health Care Advisory Services practice, with extensive experience in overseeing system implementations and revenue cycle reorganizations, discusses best practices for elevating revenue cycle performance during an EMR implementation. Grant Thornton LLP is a sponsor of the Large System Controllers Council Affinity Group.
This white paper, written by Apex Vice President of Solutions and Services, Carrie Romandine, discusses the importance of patient segmentation and messaging specifically related to the patient revenue cycle. Applying strategic messaging that is tailored to each patient type will not only better educate consumers on payment options specific to their billing needs, but it will maximize the amount collected before sending to collections. Further, targeted messaging should be applied across all points of patient interaction (i.e. point of service, customer service, patient statements) and analyzed regularly for maximized results.
In this business profile, Amy Gross, senior vice president of Key Government Finance, discusses the benefits of private placement transactions to support large-scale financing projects.
This white paper, written by Apex President Patrick Maurer, discusses methods to increase patient adoption of online payments. Providers are now seeking ways to incrementally collect more payments due from patients as well as speeding up the rate of collections. This white paper shows why patient-centric approaches to online payment portals are important complements to traditional provider-centric approaches.
In this business profile, Doug Polasky, executive vice president at Xtend Healthcare, explains the importance of having sound workflow processes in a consolidated business office to ensure optimal performance and reduce costs.
Increased electronic engagement between healthcare providers and patients provides significant opportunities for improving revenue cycle metrics and encouraging patients to access EHRs. This article, written by Apex Founder and CEO Brian Kueppers, explores a number of strategies to create synergy between patient billing, online payment portals and electronic health record (EHR) software to realize a high ROI in speed to payment, patient satisfaction and portal adoption for meaningful use.
In this business profile, sponsored by SSI, Jay Colfer, vice president of sales and marketing, shares how patient access solutions are reversing the trend toward increased bad debt resulting from the rise in high-deductible consumer health plans.
Faced with a rising tide of bad debt, a large Southeastern healthcare system was seeing a sharp decline in net patient revenues. The need to improve collections was dire. By integrating critical tools and processes, the health system was able to increase online payments and improve its financial position. Taking a holistic approach increased overall collection yield by 10% while costs came down because the number of statements sent to patients fell by 10%, which equated to a $1.3M annualized improvement in patient cash over a six-month period. This case study explains how.
In this business profile of Deloitte Consulting, Matthew Hitch and David Betts explore the potential benefits of elevating the customer experience and outline strategies to change service delivery.
With the ICD10 deadline quickly approaching and daily responsibilities not slowing down, final preparations for October 1 require strategic prioritization and laser focus.
TriMedx helps health systems control costs and uncover savings opportunities by optimizing the clinical engineering function.
Read how Gwinnett Medical Center provides clear connections to financial information, offers multiple payment options for patients, and gives onsite staff the ability to collect payments at multiple points throughout the care process.
Read how Orlando Health was able to perform deeper dives into claims data to help the health system see claim rejections more quickly–even on the front end–and reduce A/R days.
To maintain fiscal fitness and boost patient satisfaction and loyalty, healthcare providers need visibility into when and how much they will be paid–by whom–and the ability to better navigate obstacles to payment. They need payment clarity. This whitepaper illuminates this concept that is winning fans at forward-thinking hospitals.
Financial services staff are always looking for ways to improve the verification, billing and collections processes, and Munson Healthcare is no different. Read about how they streamlined the billing process to produce cleaner bills on the front end and helped financial services staff collect more than $1 million in additional upfront annual revenue in one year.
Effective revenue cycle management can be a challenge for any hospital, but for smaller providers it is even tougher. Read how Wallace Thomson identified unreimbursed procedures, streamlined claims management, and improved its ability to determine charity eligibility.
Before launching an energy-efficiency initiative, it’s important to build a solid business case and understand the funding options and potential incentives that are available. Healthcare leaders should consider taking the steps outlined in the whitepaper to ease the process of gaining approval, piloting, implementing, and supporting sustainability projects. You will find that investing in sustainability and energy efficiency helps hospitals add cash to their bottom line. Discover how hospitals and health systems have various options for funding energy-efficient and renewable-energy initiatives, depending on their current financial structure and strategy.
Health care is a dynamic mergers and acquisitions market with numerous hospitals and health systems contemplating or pursuing formal arrangements with other entities. These relationships often pose a strategic benefit, such as enhancing competencies across the continuum, facilitating economies of scale, or giving the participants a competitive advantage in a crowded market. Underpinning any profitable acquisition is a robust capital planning strategy that ensures an organization reserves sufficient funds and efficiently onboards partners that advance the enterprise mission and values.
The success of healthcare mergers, acquisitions, and other affiliations is predicated in part on available capital, and the need for and sources of funding are considerations present throughout the partnering process, from choosing a partner to evaluating an arrangement’s capital needs to selecting an integration model to finding the right money source to finance the deal. This whitepaper offers several strategies that health system leaders have used to assess and manage capital needs for their growing networks.
Announcements from several commercial payers and the Centers for Medicare and Medicaid Services (CMS) early in 2015 around increased efforts to form value-based contracts with providers seemed to point to an impending rise in risk-based contracting. Rather than wait for disruption from the outside in, health care providers are now making inroads on collaborating with payers on various risk-based contracting models to increase the value of health care from within.
Yuma Regional Medical Center (YRMC) is a not-for-profit hospital serving a population of roughly 200,000 in Yuma and the surrounding communities.
Before becoming a ZirMed client, Yuma was attempting to manually monitor hundreds of thousands of charges which led to significant charge capture leakage. Learn how Yuma & ZirMed worked together to address underlying collections issues at the front end, thus increasing Yuma’s overall bottom line.
Kindred Hospital Rehabilitation Services works with partners to audit the market and the facility’s role in that market to identify opportunities for improvement. This approach leads to successes; Kindred’s clinical rehab and management expertise complements our partners’ strengths. Every facility and challenge is unique, and requires a full objective analysis.
As the critical link between patient care and reimbursement, health information enables more complete and accurate revenue capture. This 5-Minute White Paper Briefing shares how to achieve cost-effective revenue integrity by your optimizing HIM systems.
Speedier cash flow starts with better CDI and coding. This 5-Minute White Paper Briefing explains how providers can improve vital measures of technical and business performance to accelerate cash flow.
Qualified coders are getting harder to come by, and even the most seasoned professional can struggle with the complexity of ICD-10. This 5-Minute White Paper Briefing explains how partnerships can help improve coding and other key RCM operations potentially at a cost savings.
The point of managing your revenue cycle isn’t just to improve revenue and cash flow. It’s to do those things effectively by consistently following best practices— while spending as little time, money, and energy on them as possible.
How Lucile Packard Children’s Hospital Stanford increased payments received within 45 days by 20% and reduced paper submission claims by 70% by using ZirMed solutions.
The reasons claims are denied are so varied that managing denials can feel like chasing a thousand different tails. This situation is not surprising given that a hypothetical denial rate of just 5 percent translates to tens of thousands of denied claims per year for large hospitals—where real‐world denial rates often range from 12 to 22 percent. Read about how predictive modeling can detect meaningful correlations across claims denials data.
Emergency Mobile Health Care (EMHC) was founded to be and remains an exclusively locally owned and operated emergency medical service organization; today EMHC serves a population of more than a million people in and around Memphis, answering 75,000 calls each year.
Since the Physician Quality Reporting Initiative (PQRI) introduction, CMS has paid more than $100 million in bonus payments to participants. However, these bonuses ended in 2015; providers who successfully meet the reporting requirements in 2016 will avoid the 2% negative payment adjustment in 2018, so now is the time to act! Included in this whitepaper are implications of increasing patient responsibility, collections best practices, and collections and internal control solutions.
Getting paid what your physician deserves—that’s the goal of every biller. Yet even for the best billers, achieving that success can be elusive when denials stand in the way of success, presenting challenges at every turn. Denials aren’t going away, but you can learn techniques to manage and even prevent them.Join practice management expert Elizabeth W. Woodcock, MBA, FACMPE, CPC, to: Discover methods to translate denial data into business intelligence to improve your bottom line, determine staff productivity benchmarks for billers, and recognize common mistakes in denial management.
Physician practices must improve organizational efficiency to compete in this era of reduced reimbursement and escalating administrative costs.
Many healthcare organizations are pursuing next-generation health information systems solutions. Learn more about Navigant's work with University of Michigan Health System.
The proper implementation of healthcare information technology systems is crucial to an organization’s financial health.
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