80% of Hospitals Vetting Full Revenue Cycle Management Outsourcing

May 14, 2018 - Approximately 80 percent of hospitals leaders in a new Black Book survey said they were vetting or considering outsourcing full revenue cycle management by 2019.

The demand for revenue cycle management outsourcing is also significantly up, revealed the survey of 709 C-suite executives, board members, and senior managers at hospitals and other inpatient organizations.

Just 18 percent of hospitals executed or implemented a full revenue cycle management outsourcing project in 2018, compared to only 11 percent three years prior.

But many more hospitals and inpatient organizations may partner with a third-party vendor to perform full revenue cycle management functions by 2019. Demand for full revenue cycle management outsourcing increased 86 percent between 2015 and 2019.

Demand for enterprise resource planning (ERP) outsourcing increased at a similar pace, the survey added. Ninety-four percent of hospital leaders are vetting or considering ERP outsourcing in 2019, accounting for an 85 percent boost in demand since 2015.

READ MORE: Top Revenue Cycle Management Vendors and How to Select One

The top vendor for outsourcing full revenue cycle management was Optum360, Black Book reported using data from the third quarter of 2017.

Conifer, Parallon RCM Point, and Relay Health also earned top spots according to large hospital chains and health systems, while small hospitals with fewer than 100 beds preferred Xtend Navient, TruBridge, and MediRevv.

Optum360 also nabbed a high-ranking spot for end-to-end revenue cycle management outsourcing among physician practices and groups, taking its place behind R1 Accretive and Cerner RevWorks, which took the top spot.

While more hospitals are seeking to outsource full revenue cycle management, the Black Book survey also showed that hospitals and inpatient organizations are looking to outsource key clinical functions to reduce costs and focus on value-based care initiatives.

The survey showed that the organizations are seeking to outsource a lot more in the near future to realize cost efficiencies. The average hospital costs must fall by 24 percent by 2022 for organizations to breakeven, the report stated. Nine out of ten hospitals are also considering partnering with a third-party vendor to allow hospital leaders and providers to prioritize value-based care implementation.

READ MORE: 5 Most Common Hospital Revenue Cycle Management Challenges

“[N]ow, hospitals have a cost structure that is not sustainable, and some hospitals are making the decision to actually enhance clinical product lines by outsourcing to power up volumes and improve health consumer satisfaction," said Doug Brown, President of Black Book Research LLC.

“Value-based care reforms have put pressure on hospitals to decrease inpatient volumes, achieve outcomes goals and provide cost-effective care. Clinical services outsourcing is the rage because it offers struggling hospitals with immediate alternatives,” he added.

Healthcare outsourcing has primarily been isolated to anesthesia and emergency medicine, the report noted. But hospitals and other inpatient organizations are now seeking to hire third-party vendors to manage their diagnostic imaging service lines, the survey showed.

The change in demand for teleradiology outsourcing grew 97 percent between 2015 and 2019, representing the most sought-after area for outsourcing. Diagnostic imaging equipment for cardiology and radiology was a close second, with the demand increasing 91 percent between 2015 and 2019.

Researchers posited that outsourcing for diagnostic imaging service lines is at an all-time high because hospitals do not have the capital to invest in replacement technologies and imaging centers.

READ MORE: 85% of Orgs Looking to Replace Revenue Cycle Management Systems

As hospitals consider outsourcing additional clinical and non-clinical functions, leaders anticipate the switch from in-house to improve financial performance. And for the most part, outsourcing does.

Service levels exceeded expectations in over 81 percent of hospitals that outsourced key clinical a and non-clinical functions in 2017, the survey found.

“Outsourcing in the healthcare industry doesn’t get the same bad rap other sectors experience such as banking, insurance, tech and call centers where negative stereotypes associated with offshoring and/or full function outsourcing were largely misinformed,” said Brown. “In hospitals, there is a developed understanding of the broad spectrum of outsourcing options and how to manage vendors.”

Very few hospital executives viewed outsourcing as an “unthinkable option.” About 2 percent of surveyed leaders said outsourcing was out of the question because of unexpected reactions from staff, providers, and the community.

“For hospitals in financial danger with margin pressures placing the entire hospital workforce at risk, attacking margin by outsourcing one or more areas can actually save jobs in other core departments,” countered Brown.

Hospitals and inpatient organizations can also create outsourcing agreements that do not impact staffing or stipulate the retention of existing staff, he added. Organizations can also improve their performance through outsourcing by partnering with the right vendor, the survey continued.

A related survey of almost 4,600 client users of hospital outsourcing products identified the following top vendors by service line based on customer satisfaction and experience:

• Anesthesia Department: Napa
• Biomedical & Clinical Engineering: Trimedx
• Credentialling & Privileging: Newport Credentialling
• Emergency Department: Ess Inc.
• ERP Support: Atos
• Facilities Management: Aramark
• Hospitalists: IPC, The Hospitalist Company
• Human Resources Department Services: Peoplestrategy
• Laboratory Support & RCM: Xifin
• Marketing Services: Influence Health
• Medical Imaging Systems: Philips Healthcare
• Pharmacy Department: CPS (Comprehensive Pharmacy Services)
• Physical Therapy & Rehab Services: Agility Health
• Recruitment Process Outsourcing: AMN Healthcare
• Supply Chain & Distribution: Owens & Minor
• Teleradiology: Argus Teleradiology

"As hospitals look for ways to reduce costs, outsourcing is a valid strategy to achieve a financially healthier organization. Caution should be given with the common pitfalls in healthcare when vetting or considering outsourcing," said Brown.

“It is a matter of finding the right company to partner with. Through research and background checks on the firms being considered including the vendor’s history of partnerships with other hospitals.”