Hospitals Outsource More Revenue Cycle Operations

KLAS attributes trend to cost pressures, Meaningful Use and ICD-10, noting that hospitals are facing strain on IT and staff resources.

Ken Terry, Contributor

December 12, 2012

4 Min Read

6 Healthcare Revenue Cycle Management Systems To Watch

6 Healthcare Revenue Cycle Management Systems To Watch

6 Healthcare Revenue Cycle Management Systems To Watch (click image for larger view and for slideshow)

The market for revenue cycle management (RCM) consulting and outsourcing is growing, a new KLAS Research report says. Increasing pressures on hospitals to cut costs, as well as the diversion of hospital resources to Meaningful Use and ICD-10, are among the factors driving the trend, noted the Orem, Utah-based research firm.

"What we're seeing in some instances are folks choosing to use outside resources so they can have some more focus on Meaningful Use," said Mike Smith, VP of financial and services research for KLAS, in an interview with InformationWeek Healthcare.

In addition, he noted, many healthcare systems are replacing their electronic health record systems to meet Meaningful Use objectives. As they do that, some organizations are purchasing financial systems from the same source so they can deal with a single vendor for everything. While they undergo the transition to the new system, he said, they might bring in an outside RCM vendor to deal with "legacy stuff," such as collecting old receivables.

[ Practice management software keeps the medical office running smoothly. For a closer look at KLAS' top-ranked systems, see 10 Top Medical Practice Management Software Systems. ]

Organizations have three options if they need help with RCM operations, he pointed out:

-- They can continue to do RCM themselves and bring in a consulting firm such as Deloitte Consulting, Huron Consulting or PWC to help them redesign their processes to increase efficiency and collections. KLAS calls this revenue cycle transformation (RCT).

-- They can outsource certain operations, such as "low-dollar self-pay collection work," to outside firms. These are known as extended business outsourcing services (EBOS).

-- They can outsource their entire revenue cycle department to revenue cycling outsourcing (RCO) companies. Relatively few organizations are doing this, Smith says, but some are quite large.

Hospitals and health systems of all sizes are seeking outside assistance with RCM, he said. But smaller organizations are more likely than large ones to outsource all or part of their RCM operations. "This is an area where we anticipate a lot of growth."

Smith adds, however, that some big outsourcing deals have been signed recently. For example, Tenet subsidiary Conifer last spring struck an agreement with Catholic Health Initiatives for 50 hospitals; Parallon, an HCA offshoot, did a deal with LifePoint for 50 mostly smaller facilities; and Intermountain recently outsourced its RCM operations to Accretive Health, Smith said.

According to the KLAS survey of 122 healthcare organizations, the biggest reasons for providers to use outside RCM firms are to improve their bottom lines, improve their processes and obtain additional resources. Beyond that, hospitals are more likely to use EBOS than RCT/RCO services to increase Medicaid and charity conversions, lower costs and minimize revenue fluctuations.

The top-performing EBOS firms, the survey found, are Deloitte, PwC, Cymetrix, FirstSource and Xerox. Accretive and Dell were the only companies that KLAS reported on for RCO because they were the only ones with enough contracts. Huron, PwC and Deloitte were ranked number one, two and three, respectively, for RCT. Cerner recently launched an offering in this area.

In the EBOS field, private insurance follow-up was the most often-cited function, represented in 32% of contracts. The second most popular EBOS function was self-pay follow-up at 27%. Government insurance follow-up came in third at 25%.

EBOS and RCO companies must be doing effective work for many of their clients: 74% of the respondents that used these kinds of firms said they planned to stay the course or renew their contracts.

Many providers who used EBOS said they were happy or "excited" with the technology tools their vendors had left behind. They especially liked the applications from Huron, Accretive, Cymetrix and Deloitte.

Smith said that some vendors develop their own software and others acquire it from third parties. Among those with homegrown RCM tools are Huron, MedAssets, Accretive and Deloitte. But except for MedAssets, RCM companies require hospitals to buy their consulting services to get access to the tools, he noted.

The lines between technology and consulting firms are increasingly blurring, he added. "We're starting to see more technology vendors step into the consulting arena than we have in the past," he said. "They're stepping onto the provider side of the line to help ensure that they'll be successful in using their technology."

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About the Author(s)

Ken Terry


Ken Terry is a freelance healthcare writer, specializing in health IT. A former technology editor of Medical Economics Magazine, he is also the author of the book Rx For Healthcare Reform.

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