Changed Your Service Lines? It's Time to Rethink Your Hospital Billing Outsource Strategy

In the wake of COVID, budget crunches, and labor shortages, many hospitals and health systems have been making the smart decision to rethink their service lines. But what many haven’t had the space to consider is the impact on hospital billing, hospital coding, and how their decisions should impact outsourcing strategy. 

If you are a billing or coding leader in a hospital, it’s time to review your approach to outsourcing to determine whether you have an opportunity to make changes that will positively impact your profitability as well as patient and employee experiences.

Hospitals have lost billions in recent years, resulting in threats of service line closures and even systemic collapse without support. 

One hospital, Main Line Health, saw its expense per admission jump by 26% – significantly more than their revenue per admission, which was only increasing by 14% per admission. While they had budgeted for a $6 million loss, they actually lost $20 million. Hospitals that have seen issues like these have been closing services like obstetrics, leaving mothers who were ready to deliver facing a three-hour drive to find a hospital [1]. In 2022, hospitals cut services including obstetrics, converted pediatric units to ICU, closed emergency departments, inpatient care at a Children’s hospital, behavioral health services, at least one even temporarily closed an ICU [2].

Service lines are groups or populations of patients with similar traits based on encounter attributes. This includes DRGs, ICD groups, HCPCS codes, inpatient or outpatient status, and MDCs. Planning service lines is a way of evaluating the performance of a hospital or health system, where patients are engaging with multiple departments during a visit. By focusing on service lines, hospital leaders can gain deeper insights into the contribution that each line is making to the organization's financial health as well as community well-being. 

Consider that, in cases where a hospital is only providing services that are highly profitable, they might not be best serving their community. And if they’re only providing the services that the community prefers, they might not be meeting the long-term health needs or supporting the health of the organization. This type of question has caused hospital leadership to change their approach to service lines in recent years. But the questions can’t stop there. 

When service lines shift, finances and revenue cycle are impacted. Every change to a service line can impact stakeholder groups including patients, providers, and other administrative departments, but especially hospital coding and billing. Hospital billing leaders must also ask whether they’re receiving appropriate and market-comparable reimbursement from all payer types, including employers, managed care, and government.

When an organization is considering changing service lines, they have to go through a few considerations [3].

What Do We Need?

Hospitals and health systems are rethinking the revenue potential of many service lines after experiencing constraints due to COVID-19. Some add lines to gain market share, increase patient volume, or even generate new revenue. When this happens, the impact on hospital billing should always be considered.

What Are Our Operational Concerns?

Any shift in service lines will impact your labor force, the physical space different departments use, and the need for medical staff specialties. Beyond this, leadership should also consider the impact on hospital billing and hospital coding. This is because new service lines could mean different coding processes, shifts to relationships with payors, and new approaches to follow up. 

What Will the Financial Impact Be?

Adding or subtracting service lines will have a direct impact on the finances of a facility. It will be crucial to plan ahead for this. This includes understanding your starting point and ensuring you have the right metrics to properly evaluate the financial impact on your organization. These measurements also apply directly to your revenue cycle processes, where you’ll need to ensure you have efficient hospital coding and billing workflows that are ready to adapt to change. 

How Service Line Changes Impact Outsourcing Hospital Billing 

Outsourcing hospital billing in particular can be a smart option for managing this type of volatility. The Healthcare Financial Management Association (HFMA) found that over one out of every five revenue cycle leaders manage their inpatient revenue cycle, but have shifted to outsourcing for ancillary and outpatient services. Meaning that if you are considering service line adjustments in these areas, outsourcing could be a smart decision [4]. 

While 22% of survey respondents who managed RCM internally reported outsourcing some RCM services, 12% of leaders were interested in taking this step in the future. And a notable number want to go even further – 10% said they want to outsource all of their ancillary or outpatient services. The most common services outsourced were:

• Anesthesiology
• Gastroenterology
• Urology

Survey respondents were most likely to consider outsourcing services for:

• Remote patient monitoring and medical devices
• Internal medicine
• Radiology and imaging

The best news is that most organizations that outsourced their RCM services were satisfied with the outcomes, and that leaders who outsourced more than one function were more highly likely to outsource more. 

The main takeaway is that, if you’ve had any service line changes, outsourcing hospital billing should be on the table for your organization. If you’d like to discuss which service lines could be a good starting point for you, or what changes you should consider after dropping service lines, contact us and we can help.