Outsourcing Leads Health System to Reduction in Costs, Improved Revenue

Updated on January 12, 2023

Effective and supportive partnerships throughout the healthcare ecosystem can transform the revenue cycle and drive significant cost savings for health systems, as one of the largest providers of outsourced emergency and hospital medicine services in the U.S. recently found.

After completing two significant acquisitions in short order and more than doubling in size, with more than 7,500 providers treating about 8 million patients across 400 facilities each year, organizational leaders there told me that they encountered significant challenges ensuring its revenue cycle infrastructure could handle the increased volume from patient growth. 

Another significant challenge they face was how to select an agile partner that offered scalability, results, and reliability so it could meet ever-challenging revenue goals while managing outside impacts. Like most health systems that manage growth responsibilities with marketplace inhibitors, the organization needed to prioritize the RCM challenges even as it cut new ground.  

These leaders decided that increasing revenue was not the only tact to take. Cutting costs and reducing inefficiencies remained just as vital to programmatic and organizational success. The quickest and most cost-effective way forward was through improved claims processing, which has ultimately led to 28% savings.  

When selecting a claims partner

If you determine that an outside partner can help reduce costs and improve revenue, there are many things to consider. Primary among them is if they can handle the scope. Some partners won’t be able to do so. When the vendor list is narrowed down, I recommend establishing metrics to meet cost and service expectations. For example, a detailed review of shared processes and how to improve upon these was vital to the health system I work with. While each vendor has strengths, when seeking a partner, determine the best way to capture existing revenue, reduce any lost revenue, and eliminate revenue leakage while improving quality reporting, automating workflows, and integrating best practices for how the outsourced teams worked with internal stakeholders. 

Unfortunately, many hospitals miss opportunities for better alignment when they hand off to outsourcing partners. Instead, consider integrating processes and metrics into the agreement and letting these drive the partnerships. Start and work from the health system’s guidelines, not the vendors’, and lead toward making these guidelines a shared mindset, so that both organizations can work collaboratively to determine the most viable solution. For example, how are cash consolidations addressed following organizational acquisitions or other business partnership developments?

Prioritize partner communication

Additionally, health system leaders may wish to prioritize communication during times of uncertainty. Communication is necessary for any successful relationship, but it will not work long-term if without established respect, trust, and transparency. This is especially true during times of uncertainty, like during the early days of the COVID-19 pandemic. 

With proper trust and communication processes in place, disruptions to the revenue cycle can be minimal. For example, during the height of the pandemic, patient volumes were hard to predict. Despite staffing up for what health systems thought would be a boom in volume, patient volumes fell 20% as people made fewer visits to the emergency room. 

With the volume down, one health system I recently worked with faced cost pressures not previously expected. In tandem, we determined that by reassigning staff and other personnel and monitoring patient volumes and fluctuations in them, we were able to fill resource holes and meet appropriate staffing levels despite any drops in revenue. This approach helped the health system reduce costs during a tenuous revenue time and provide the best levels of service during peak times. 

Involve your partner in your long-term strategy

Today, health system leaders across the country continue to explore new ways to leverage automation and other technology to improve revenue cycles through computer-assisted coding and planning initiatives to create an environment where automation augments coding departments to maximize the use of technology and their skilled team. We’re continuing to explore robotic automation for basic front-end processes. 

Other priorities we continue to hear about are how to improve patient satisfaction throughout the billing process. In 2020, we worked alongside a health system to launch a patient engagement platform that allows consumers to perform more self-service functions on their mobile devices. A near-term goal of that program is to employ the platform to help patients set up payment plans independently without talking with an agent. While this tact may seem intuitive and serve as a cost reducer, letting go of managing some minutiae in the process caused some hesitancy. The solution to this problem was maintaining communication, delivering the scope as needed, and ultimately leading toward outcomes that were better than proposed at the beginning of the project. 

In a nutshell, success bred trust, leading us to achieve leadership’s long-term goals for a better patient experience. 

Lessons learned

Health system leaders are beginning to realize that one of the quickest returns on investment is working to improve revenue processes while reducing friction through outsourcing specific healthcare processes like claims management to reduce costs, improve quality, and drive trackable spikes in revenue.

In one instance, a health system we partnered with to outsource claims management had to develop a new way of thinking about business relationships and how outside partnerships could augment internal teams. For example, the internal RCM team we worked with determined that trust and long-term success were predicated on treating my team (the outsourced team) as an extension of its own. Doing so meant leveraging new people, processes, and technology to curb costs and grow revenue. 

Leadership at the hospital we worked with notes that hospitals often miss opportunities for goal alignment when they hand off work to an outsourcing partner because they don’t let these external teams operate as part of the internal team. Instead, most think consultants and vendor partners are entities to be managed rather than resources that can be allocated and directed based on their strengths while also reducing noise, friction, and repetitiveness. With a shared mindset, organizations can collaborate on solutions – seamlessly. 

By outsourcing and streamlining its electronic remittance advice and electronic funds transfer enrollments – moving from five banks to two and posting as much as possible electronically – obvious tedium and redundancies disappeared. The health system we partnered with also developed an arbitration process to appropriately challenge payers for reimbursement shortfalls. Because states differ in their arbitration requirements, having a partner that understands the nuances is beneficial, our health system leaders found. 

Additionally, these same leaders continue to credit our partnership for helping their internal revenue cycle leaders shift from best practices to leading practices. Together, our teams have a better understanding of the business and its priorities, as well as the continued evolution of a growing health organization. This helps us and our partners understand how to circumvent revenue cycle challenges while remaining ahead of the revenue challenge curve.

Debra Stall is SVP of A/R Services at AGS Health.