Outsourcing accounts receivable can be a strategic decision for hospitals that want to improve their cash flow, reduce costs, and focus on their core competencies.
In today’s changing healthcare environment, it is critical to continually optimize the revenue cycle for the best possible outcomes. Some organizations prefer to keep all functions in-house. Still, for many, it makes good financial sense to outsource certain revenue cycle functions to a third party, allowing the organization to scale RCM functions according to need.
Accounts Receivable is Changing
One key trend in the current healthcare market is that of changing payer behaviors. Insurers are adding more complex layers of pre-approvals and rules that providers must navigate for payment. This added red tape has increased claims denials across the board. Many payers, including Medicare and Medicaid, are still slow to pay, despite technological advances that should speed up the process.
All of this additional intricacy adds up to more complicated reimbursement and increases the number of staff required to work your AR, and increases the cost to collect. Current claims processors are under heavy pressure to deliver timely and accurate results as the workload piles up and more help is needed. The added work involved slows the organization’s cash flow and adds more expense to the revenue cycle.
The story gets even more grim – we all know that the longer an account goes unpaid, the less likely the organization will receive payment at all. After 120 days, the average collection rate drops to only 10 cents per dollar owed. Failure to collect reimbursement lengthens the entire revenue cycle, reduces cash flow, and results in revenue leakage. One KPI that is a good indicator of healthy A/R processes is the percentage of accounts in the “over 90 days” bucket. Industry averages for accounts > 90 days should be no higher than 18-22% of accounts receivable. Organizations that are falling at the top end of that range or even above should consider alternative methods of securing payments and reimbursements promptly.
As the operational realities of AR change, more healthcare organizations are evolving their internal processes to rise to the occasion and improve their collection rates. While evaluating AR practices, financial leaders must ask questions judiciously of outsourcing partners to ensure the best match is made.
Questions to Consider When Selecting an Outsource Partner
- What is the outsourcing company’s experience and expertise in the healthcare industry? The company should have a track record of success in managing hospital accounts receivable and should be familiar with the unique challenges and regulations of the healthcare industry within your specific region. The company should also be able to show data trends of progressively improving collections performance over the baseline.
- What are the outsourcing company’s technology and analytics capabilities? The company should use advanced technology and software to streamline the billing process, enhance data security, and provide timely and accurate reports and feedback.
- What are the outsourcing company’s staffing and support capabilities? The company should have enough qualified and trained staff to manage the volume and complexity of the hospital’s accounts receivable. The company should also provide dedicated account leaders and a demonstrated focus on quality assurance.
- What are the outsourcing company’s pricing and contract terms? The company should first view summary-level AR data to tailor pricing and service offerings that align with the hospital’s budget while reducing revenue cycle costs. The company should also provide flexible and customized contract terms that suit the hospital’s needs and expectations.
- How will the outsourcing company oversee the current accounts receivable? The hospital should decide whether to transfer all or part of its existing accounts receivable to the outsourcing company, or whether to keep them in-house. The outsourcing company should have a clear plan and timeline for collecting the old and unpaid claims.
Once the choices are a bit clearer, some additional questions to ask are:
- How will the outsourcing company measure and report its performance? The company should have clear and measurable service level agreements (SLAs) that reflect the hospital’s key performance indicators (KPIs), such as cash-to-net ratio, A/R days, denials rate, etc. The company should also provide regular and comprehensive reports that show its progress and outcomes.
- How will the outsourcing company ensure compliance with laws and regulations? The company should comply with all relevant federal, state, and local laws and regulations, such as HIPAA, Medicare, Medicaid, etc. The company should also have a robust compliance program that includes policies, procedures, training, audits, and corrective actions.
- How will the outsourcing company protect the hospital’s data and reputation? The company should have strong data security measures, such as encryption, firewalls, backups, etc., to prevent unauthorized access, loss, or breach of sensitive information. The company should also have a crisis management plan in case of any data or service issues. Moreover, the company should respect the hospital’s brand identity and values and maintain a positive relationship with its patients and payers.
- How will the outsourcing company coordinate with the hospital’s staff and systems? The company should integrate seamlessly with the hospital’s existing billing software, electronic health records (EHR), and other systems. The company should also communicate effectively with the hospital’s staff, such as physicians, nurses, coders, etc., to ensure accurate documentation, coding, and billing.
When your organization is ready to implement strategies to improve your collections, Healthrise is here to answer your questions. With Healthrise managing outsourced AR and Revenue Cycle Solutions, your organization can collect more cash, at a lower overall cost. Schedule a demo and talk to a specialist that can help assess your needs and answer questions.