In particular, there has been continued growth in the number of organizations that are seeking out revenue-cycle management services, Hill says. “There are vendors that have shown they can add value, and more hospitals are giving it a try.”
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According to Modern Healthcare's 32nd annual Outsourcing Survey, the number of facilities turning over their accounts receivable duties to an outside company climbed 13.7%, from 211 in 2008 to 240 in 2009. Forty-five companies voluntarily submitted data for this year's survey of outsourcing activity, compared with 51 respondents last year.
Conifer Health Solutions, for instance, reported a jump in the number of clients for its Frisco, Texas-based revenue-cycle services division (the company also has a patient communications division based in St. Petersburg, Fla.). Conifer secured the 20th spot on the list of the top 20 outsourcing firms for 2009, with 208 clients, up more than 25% from 166 in 2008.
Conifer's customers, which are mostly not-for-profit, faith-based organizations, are becoming more open to outsourcing for a number of reasons, says Stephen Mooney, president of Conifer Revenue Cycle Solutions. First, he says, the past few years have brought a “changing of the guard,” with younger talent moving into senior posts and executives joining healthcare organizations from other areas such as the financial sector. Those new leaders are often more used to outsourcing and can change organizations' attitudes toward contracting services.
Also, Mooney says, after tapping into every other possible area, including food service, emergency departments and environmental services, revenue-cycle services are the next logical choice. “They've squeezed most of the nickels and this is the area that's left to look at,” he says.
And for not-for-profit hospitals and healthcare systems, the potential revenue gains from outsourcing are especially attractive because they have had more difficulty accessing capital markets for cash, Mooney explains.
“They're trying to expand and do other projects and they have to pay for them,” he says. “They need to get that money from internal operations and one of the easiest ways to do that is through revenue cycle.”
Typically, a revenue-cycle outsourcing firm takes over some or all of a hospital's business office functions, which can include everything from patient registration, accounts receivable, billing and coding. They consolidate those functions into larger offices that serve many providers. The end result, outsourcing companies say, is a more efficient model that leaves more operating revenue for hospitals.
Those types of business arrangements will likely continue as cash-strapped hospitals see the potential for big savings, says Dean William Harvey, a partner at the law firm Vinson & Elkins in Dallas.
“In the last two years, I've certainly seen a big uptick in revenue-cycle outsourcing,” Harvey says. “Billing is so complex already and with specialized vendors, there is a real opportunity for economies of scale.”
But revenue management outsourcing has its share of pitfalls, most notably legal compliance, he adds. Providers need to be confident in a contractor's ability to manage the billing requirements of Medicare and other programs, while successfully complying with the Health Insurance Portability and Accountability Act of 1996.
The right outsourcing company can also help providers manage compliance, counters Mooney. Staying on top of ever-changing regulations can be difficult, especially for small, rural hospitals, and hiring someone whose job it is to pay attention to those things can be beneficial, he says.
“Revenue-cycle management is a very legally intensive business process to outsource, and I think the growth of this kind of business testifies to the expense of doing it yourself,” Harvey says. “For an individual hospital, it means they can save a lot of money and usually get better service.”