Seek Outside Partners for Inside Problems

By: Elizabeth W. Woodcock, MBA, FACMPE, CPC

In today’s environment, medical practices pursue cost-effective ways to maximize reimbursements, improve collections, decrease costs and minimize their business risk.
 
Outsourcing — contracting with an outside firm to handle billing and collection, statement generation and processing, credentialing and other revenue cycle management (RCM) services — has the potential to improve revenue, reduce administrative costs, speed up collections and, ultimately, reduce the time and stress that practice leaders and managers must devote to the RCM services.
 
Before a crisis forces your hand, it’s an opportune time to consider the options for RCM services. Whether it be to fill a gap – or hand over the reins of your entire business office, there are four key considerations to weigh outsourcing some or all RCM services to an external partner.
 
Control – Physicians need to be engaged in oversight of the quality of outsourced RCM services because they are the ones with the ultimate legal responsibility for the integrity of the billing process.
 
Performance – As with control, monitoring performance is paramount to ensure the practice is in business to support the community on a long-term basis. Three of the most critical indicators of an outsourced RCM services solutions include accounts receivable (A/R) over 120 days, days in receivables outstanding, and adjusted collection rate. Delve into the details of rejections, denials, credits, adjustments and bad debt for more insight, and remember to adjust expectations – up or down - based on your payer mix. The various reimbursement tactics of payers will impact your performance, as well the effectiveness of the front-end workflow (often still under your purview) that formulates the basis of the revenue cycle. Are the challenges you’re experiencing a result of your payers – or perhaps you’re contributing to the problems at hand? Measure key performance indicators against industry standards; can a new or different relationship improve those areas of the practice or not?
 
Communication – Designating an internal point person is necessary to bridge any gaps between the practice and the RCM services partner. However, even with an internal resource serving as a liaison, it’s paramount to ensure transparency of information. Professional fee billing is complex; although challenges abound, keeping you in the dark for your so-called “own good” will only lead to long-term problems. A fruitful partnership depends on an honest narrative, with the flow of information vital to success.
 
Cost – The cost of the product or service should be equal to or less than the cost of managing the product or service in-house. To consider this opportunity for your practice, calculate the cost of your current in-house business office operation as a percentage of revenue. It’s important to consider your total investment in RCM services; incorporate software and related costs, employee salaries and benefits, space, equipment, training and management time. Costs within the industry range of 4 percent for surgery practices to 12-plus percent for emergency medicine practices; most primary care and medical specialists fall somewhere in the middle at around 6 to 8 percent of revenue. Comparing your own costs against these industry averages should indicate whether an RCM solution provides sufficient opportunities for improvement.
 
While fixed rate pricing based on factors such as payer mix, specialty, and geography may be available, most practices are better off with a collection-based fee in order to maintain the motivation of an external partner. This arrangement will help insulate against the many challenges of uncollectable debt, untimely filing, and various other problems that impact RCM performance.
 
Before selecting an outsourcing partner, identify the portions of your RCM operation that would benefit most from an external partner. These may include contracting, coding denial management, coding and patient collections – or every aspect of the RCM process.
 
Ultimately, the overall performance of outsourcing RCM services is of good value if the resulting performance is better, and the cost lower, than managing the process in-house. This is the ultimate test of a positive return on investment, recognizing that your practice must first understand its current investment and performance. Only then can a practice accurately assess the opportunity to solve inside problems with an outside partner.
 

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