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Analysis

Full Outsourcing Is Not a Revenue Cycle Cure-All

By Alexandra Wilson Pecci  
   September 24, 2018

Hospitals that fully outsource their revenue cycle exhibit higher denial rates and higher final denial write-offs.

A new report calls into question the effectiveness of fully outsourcing the hospital revenue cycle.

"Every revenue cycle outsources to one degree or another," says report co-author Alex Garrison, manager of healthcare performance analytics at Crowe, LLP. "I think every revenue cycle leader would recommend one aspect or another."

However, over the past several years, an increasing number of organizations are fully outsourcing their revenue cycles, keeping one leader in-house and shifting everything else to a vendor.

"We were really questioning the effectiveness of that," Garrison says.  

The benchmarking report analyzed organizations across 45 states, including 553 hospitals within Medicaid expansion states and 378 hospitals in non-expansion states.

The results were somewhat surprising, but overall, the performance wasn’t really that different between hospitals that fully outsourced and those that didn’t.

The report found that hospitals that outsource their revenue cycles collect more patient balance payments, but it takes much longer. For instance:

  • For point-of-service collections from patients, insourced revenue cycles collected 16.5% of total patient collections compared to 19.7% for outsourced revenue cycles
     
  • Self-pay after insurance collection rates were higher for outsourced revenue cycles (38.7%) than for insourced (36.7%)
     
  • The uninsured/self-pay collection cycle for outsourced revenue cycles was 109.4 days, versus 76.3 for insourced.

The report also found that hospitals that outsource their revenue cycle exhibit higher denial rates and higher final denial write-offs. This data showed:

  • For insourced revenue cycles, approximately 9.09% of patient accounts have an initial denial for insourced revenue cycles, compared to a 10.00% initial denial rate outsourced revenue cycles
     
  • Insourced revenue cycles had a 1.65% final denial rate and outsourced revenue cycles had a 2.56% final denial rate

"It was probably an eye-opener for folks to see the final denials piece being a little bit higher," Garrison says.

Garrison says that revenue cycle leaders shouldn’t interpret this report as concluding that outsourcing in general is bad. But it should cause them to deeply evaluate whether fully outsourcing their revenue cycle will bring the results they are hoping for.

"I think if organizations [are] evaluating completely outsourcing the revenue cycle they need to ask the question, 'why?'" he says.

After all, topline revenue increases aren’t the only reason to outsource. There are other issues at play, too, like access to technology, access to a large enough talent pool, the overall cost structure, and the ability to scale operations.

"I think that the takeaway is, assume you may not get much of a net revenue lift, so you have to take a look at all the other items," Garrison says.

Alexandra Wilson Pecci is an editor for HealthLeaders.


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