Financial impact of hospital revenue cycle outsourcing

CHICAGO (Aug. 29, 2018) – Using data gathered by the Crowe Revenue Cycle Analytics (Crowe RCA) software, Crowe analyses revealed hospitals that fully outsource their revenue cycle function may not be getting much of a financial benefit.

The Crowe report, “Considering Revenue Cycle Outsourcing? Look (Here) Before You Leap,” provides supporting analyses of these findings. Crowe is a public accounting, consulting and technology firm in the U.S. with offices around the world. The Crowe RCA solution captures every patient financial transaction in more than 1,000 hospitals nationwide. In this report, Crowe analyzed a portfolio spanning 45 states comprising 553 hospitals within Medicaid expansion states and 378 hospitals in nonexpansion states.

According to Brian Sanderson, managing principal of Crowe healthcare services, outsourcing parts of revenue cycle management, such as bad debt accounts, self-pay collections and aged third-party receivables, has happened for many years, but full outsourcing of the entire revenue cycle has been slower to catch on. “Early adopters determined the benefits of outsourcing, including consistency of performance, ability to scale and access to technology, made the investment worthwhile,” he said. “However a lack of precise performance data has often inhibited other organizations from following suit – until now.”

The data showed hospitals that outsource their revenue cycles collect slightly higher patient balance payments, but it takes much longer to do so. For example, when measuring point-of-service collections from patients, insourced revenue cycles collected 16.5 percent of total patient collections, versus outsourced revenue cycles, which collected 19.7 percent. In addition, self-pay after insurance collection rates were two points higher for outsourced revenue cycles (38.7 percent) than for insourced (36.7 percent). However, the uninsured/self-pay collection cycle for outsourced revenue cycles is much longer – 109.4 days versus 76.3 for insourced.

The report also looked at denials as a metric. Accounts initially denied by payers require intervention or correction in order to secure full payment. Initially denied accounts that cannot be sufficiently corrected become final denial write-offs. Approximately 9 percent of patient accounts had an initial denial for insourced revenue cycles, whereas outsourced revenue cycles showed a 10 percent initial denial rate. For an average 400-bed hospital, this represents an additional $22.7 million of potential revenue. The analyses showed that hospitals with insourced revenue cycles had an average 1.7 percent final denial rate and those with outsourced revenue cycles exhibited a 2.6 percent final denial rate. Some of the final denial rate differential may be associated with inappropriate use of transaction codes.

“Looking at the financial data, the benefits of outsourcing the complete revenue cycle seem to be marginal on some metrics, and nonexistent on others. The decision to outsource any core function is complex, with considerations of access to talent, scalable technology and focused expertise – but performance should always be the key driver,” added Sanderson.

To download a copy of the report, please visit: www.crowe.com/benchmarking-nr.

About the Crowe RCA benchmarking
The Crowe RCA benchmarking data includes more than 1,000 distinct hospitals classified as acute, critical-access, rehabilitation, psychiatric or cardiovascular care facilities.

About Crowe
Crowe LLP (www.crowe.com) is a public accounting, consulting and technology firm with offices around the world. Crowe uses its deep industry expertise to provide audit services to public and private entities. The firm and its subsidiaries also help clients make smart decisions that lead to lasting value with its tax, advisory, risk and performance services. Crowe is recognized by many organizations as one of the best places to work in the U.S. As an independent member of Crowe Global, one of the largest global accounting networks in the world, Crowe serves clients worldwide. The network consists of more than 200 independent accounting and advisory services firms in more than 130 countries around the world.