Hospital Billing Is Changing – And Hospital Revenue Cycle Outsourcing Is the Popular Answer

Hospital billing has been through a whirlwind of change in recent years, leaving hospital revenue cycle leaders to navigate challenges ranging from increasing labor costs, to more complex medical billing cycles, and shifting payer requirements.

While outsourcing hospital revenue cycle functions has always been a smart choice for many organizations, as the future of healthcare continues to emerge, more reasons to consider working with vendors are becoming clear.

Hospital revenue cycle leaders today are navigating multiple forces that influence their decision to outsource. 

A survey of 100 CFOs found that these healthcare leaders are optimistic about their financial future, and this is largely connected to a decision to prioritize functions like revenue cycle management. This decision is a smart one considering the pressures they’re facing, including the erosion of COVID-19 funding, challenging bond and loan agreements, and regulatory pressures. 

The “2024 Healthcare CFO Outlook Survey” revealed important findings about the future that hospital CFOs face. In terms of bond and/or loan covenants, about 11 percent said they have violated them or are concerned they will again. 30% reported that they had violated no covenants, but that they were concerned about future violations within the next year. The survey also found that only 35% of healthcare organizations included reported having more than 60 days cash on hand – a strong indicator that a healthy revenue cycle is needed. 44% of the CFOs said they feel the need to have more strategic conversations about their economic resilience [1]. 

The survey also covered change in strategy, with around 39% reporting the intent to adjust revenue cycle management in an effort to improve liquidity, and 37% reporting engagement in strategic cost reductions, which include staff. 

The survey emphasized a focus on optimizing the revenue cycle through elements like denials, post-payment audits, roles, and workflows.

Many leading hospitals have begun outsourcing their revenue cycle functions. These include: 

• Dartmouth Health
• Allina Health
• Tenet Healthcare
• Providence
• Tallahassee Memorial Healthcare
• VHC Health

They’ve made this decision to access services in financial clearance, medical coding, patient financial services, and patient access. But there are many reasons hospitals make this choice [2]. 

Others include looking to access expertise in a specific area, such as denials management or medical coding. Some leaders want to improve efficiency and realize they might not have the internal resources needed to reach their goals. Other leaders know they need to reduce costs, and know that launching the level of hospital revenue cycle services they need would be entirely too expensive to do internally. Still others want to focus limited resources on their duties of supporting patients, or simply want to improve compliance.

For outsourcing hospital billing in particular, there are multiple benefits. These include:

• Increased productivity: If your medical billing department is lagging and this is having a negative effect on cash flows, outsourcing can be a smart choice. 
• Increased cash flows: If your cash flows are slumping outsourcing can help fill holes in your hospital revenue cycle processes.
• Optimizing results: Achieving healthy revenue cycle processes can be incredibly beneficial to an institution's wellbeing, and outsourcing can help leadership achieve that goal faster. 
• Reducing errors: Many hospital billing departments suffer with high levels of errors because of increasing complexity in medical billing and medical coding requirements. Outsourcing can help address this quickly. 
• More time for leadership to focus: Managing an internal revenue cycle can be resource intensive for leadership. Outsourcing allows leaders to focus their resources on higher-importance tasks internally. 

Recommendations on Outsourcing from Experts in the Hospital Revenue Cycle

Deloitte is recommending that health systems navigating weak or modest operating margins should consider engaging more in outsourcing in 2024. 

Tina Wheeler, healthcare sector leader, explains, “I think it's a delicate dance there. Hospitals need to figure out, health systems in particular, and maybe even payers, what are they good at? And what areas would they want to consider outsourcing?” 

She adds insights on reasons for outsourcing, “You’ve got rising labor costs, higher interest rates, and all these financial pressures and determining what back office functions could be outsourced and other ways to do things. That's a huge trend that we see as far as where you can save money. Everything from rev cycle, billing, claims, finance, HR, clinical administration, supply chain, all of those things can be entirely or partially outsourced.”

Wheeler also emphasizes the additional benefits that outsourcing can offer in addressing other issues. When a health system outsources administrative functions, it often frees up money to be invested in other areas. For leaders working to address recruiting and retaining doctors, or paying nurses or other frontline workers more, outsourcing could be highly useful in answering multiple problems. 

But the key to getting the most out of outsourcing starts with choosing the right vendor. To learn how our outsourcing solutions can align with your hospital billing and revenue cycle goals, contact us today.