Your internal self-pay team can’t handle the increasing volume of calls. You’re aged insurance accounts receivable (AR) continues to increase. Or maybe your internal resources just don’t have the necessary expertise (or time) to work a specialty population like out-of-state Medicaid or third-party liability.
Any of these scenarios can cause you to start down the path of outsourcing a revenue cycle function or segment of your AR. This is a process that can deliver increased net revenue, but it can also be fraught with unmet expectations.
This blog series will address common challenges seen throughout the outsourcing process and provide strategies to create an effective partnership with your vendor – so that you achieve the outcomes you desire. In this series, we will cover the following topics:
- Part 1 – Determining the Need
- Part 2 – Vendor Selection
- Part 3 – Contracting
- Part 4 – Vendor Implementation
- Part 5 – Ongoing Vendor Management
But First – A $200,000 Overpayment Story
A few years back, I was working with a hospital that had a long-standing relationship with a vendor that had been contracted to work their early out self-pay population. At first glance, the terms seemed ideal, the rate was competitive, and the performance shown by the vendor’s monthly reports looked solid. But something did not feel quite right on the monthly invoice.
When we decided to do an in-depth review, we discovered that there was a material portion of the vendor invoice that was not warranted – to the tune of almost $200,000 over a two-year period.
Here’s where the process broke down. After many years of partnering with the vendor, the hospital had become lax on invoice reviews because the totals had stayed fairly consistent for quite some time. Hospital management admittedly only spot checked the invoices occasionally.
Due to the lack of invoice review, and in part to the way transaction files were set up, it turned out that the vendor was being compensated for insurance payments on accounts where the payer had simply taken back their money and repaid a slightly different amount based on post payment review.
Many were quick to blame the vendor for the oversight, but the reality is that there were numerous places this should have been caught, or prevented altogether, during the set-up.
Questions to Ask Yourself about Outsourcing
Outsourcing a revenue cycle function or segment of your AR to a vendor sounds simple, right? You take a segment of AR your internal staff cannot work or don’t have the expertise for, give it to a vendor, and just like that you are generating cash for your organization you otherwise wouldn’t have. While it sounds simple, for a variety of reasons that is not the experience many hospitals have when they engage an outsource vendor. Outsource arrangements fail to meet expectations for many reasons, and candidly, most are not simply due to poor performance on the part of the vendor, but come down to the combination of two primary shortfalls:
- Hospitals tend to follow the “out of sight, out of mind” philosophy when it comes to outsourcing, effectively relinquishing control and responsibility to the vendor
- Vendors typically read the silence from the hospital as positive reinforcement that they are meeting expectations
Going back to the example at the beginning, this is all to say that establishing controls and having frequent and consistent communication is necessary in creating an atmosphere of transparency and preventing issues from going unnoticed until it may be too late to rectify.
If you have had challenges in the past, or are planning to outsource all or parts of your AR, you should first……
Ask yourself the following questions:
- How do I know if I need a vendor in the first place?
- What criteria should I be using to determine which populations should be worked by in-house staff vs. outsourcing?
- How do I assess the return on investment (ROI) associated with the outsource?
- How do I know if the rate is appropriate for the scope of work?
- When evaluating a specific vendor, what questions should I be asking?
- What are the must haves in any outsource contract?
- How do I monitor performance post implementation?
If you answered “I’m not sure” or “I don’t know” to any of the questions above, you have come to the right place. This blog series will help you to avoid the many potential missteps along the way that can lead to a less than desirable outcome.
Our intent is not to place blame on outsource vendors, but rather establish what hospital revenue cycle management can do to best position the relationship for success and consequently the outcomes you are looking for.
At the end of the day, you should be looking for a business partner when engaging an outsource vendor. The more the relationship feels like a partnership, the higher likelihood of success – but hospital revenue cycle management should be in the driver seat.
Our next topic will cover Determining the Need – where we’ll discuss how to objectively establish the need for and benefits of outsourcing.
If you’d like to have a more detailed conversation about outsourcing, give us a call or send us a note.
