Billing and Collections: Whether or Not to Outsource
Many rural hospitals find it a struggle to achieve positive cash flow and maintain enough days cash on hand to meet their capital and operational needs. This intensifies the importance of ensuring that patient accounting processes, especially billing and collection, are performing at optimal levels.
One option many turn to for managing this process is to outsource billing and collections functions. This effort may be seen as a way to improve accurate and timely billing of patient accounts, lower costs, and improve collections. The CHC Consulting Revenue Cycle team is often called upon to evaluate the pros and cons of outsourcing compared to maintaining a hospital-based employed business office.
CHC’s experienced staff has assisted hospitals in improving the entire Revenue Cycle process by helping to determine the best solution, avoid common pitfalls, and achieve a hospital’s cash goals. Here are some insights and best practice tips for evaluating whether outsourcing is right for your facility.
Define the Need
Based on your business needs and in-house capabilities, determine what can be improved and maintained internally and what would benefit from outsourcing. For instance, evaluate each of the following functions:
- Cash posting
- Account Follow-up
- Patient balances
- Credit balances
Assess Departmental Billing Skills
A keen understanding of Medicare and Medicaid billing requirements is essential, supported by regular claims management system edits. Having an experienced and strong Medicare biller is essential.
Review your organization’s billing and collections functions – determine which tasks could benefit from outsourcing.
- Examine insurance balances. Go over payments and payer mix, starting with Medicare and Medicaid A/R to assess the percentage of payments made in less than 30 days. Because these payers are prompt when billing is handled correctly, timely collection is a good indicator of your hospital’s internal capabilities.
- Appeals. Will you handle the first appeal in-house? For a second appeal, could an outsourcing group provide services not offered locally, such as an attorney or clinical services support?
- Which categories of A/R might be the most appropriate to subcontract? Motor vehicle accidents (MVAs) for patients without a third-party payer, or workers’ compensation accounts with pending legal concerns are often outsourced due to legal filing and state compensation laws.
- How long will you need outsourcing services and why? Do staffing concerns or system conversions make outsourcing selected services a reasonable alternative for a specified period?
- Consider the responsibilities, which will remain at the hospital level. Some of the most common needs for outsourcing include support for customer service, financial counseling, scanning and managing correspondence, and coordination with other departments to resolve concerns.
Managing your vendor extends beyond relationship management. Measure the results. Is your outsourcing partner collecting the needed cash? They should be accountable for all accounts you’ve agreed on — not just the “easy” ones. — Follow up through tracking metrics, audits and surprise on-site visits.
Consider the Cost
For hospitals with strong internal resources, it’s key to weigh potential staff reduction savings against the loss of revenue the hospital will experience with outsourced collections. Compensation arrangements vary and may include:
- A percent of total collections. These are typically based on the age of the account and the effort needed to achieve collection.
- The number of accounts. A fee based on the number of accounts worked (not often preferred by vendors).
- Hourly rates. The challenge with this method is in assessing and evaluating effectiveness of collections vs. cost.
Choosing the “right” outsourcing partner is rooted in trust. Select a team who understands your needs – an organization committed to a shared relationship. Discuss the scope of the outsourcing and define specific Revenue Cycle metrics with your contractor. They must be able to meet or exceed the stated goals, including cash targets and A/R aging metrics.
Learn more about CHC Financial Improvement Services including assistance with outsourcing.