Blog Post

Is Outsourcing Right for You? COVID-19 May Expose Gaps in Your Revenue Cycle

Rev Cycle Cv 19 Web

While COVID-19 is affecting nearly every healthcare organization in the US, the impacts on revenue cycle operations seem to vary. Many providers are seeing their revenue cycle key performance indicators (KPIs) trending lower than their baseline due to the disruptions in their business. In contrast, other providers are experiencing favorable KPI trends due to shrinking work volume prompted by the cancellation of elective procedures.

The immediate cause of these disruptions may be new, but the underlying issues are not. COVID-19 is exposing operational weaknesses in organizations that have historically struggled to adapt to changing business needs and environments, or whose revenue cycle functions have long been understaffed or not optimally productive. Addressing these problems requires the implementation of comprehensive, long-term solutions—a daunting prospect for any organization in the middle of a crisis with limited internal resources.

To get through the worst of the pandemic, many providers are considering the use of third-party revenue cycle management (RCM) vendors. To determine whether outsourcing is right for your organization, you must closely inspect your KPI trends by investigating their immediate causes, underlying issues, implications, and cost of resolving them.

Declining Revenue Cycle KPIs May Indicate Inability to Adapt

COVID-19 has introduced a host of new operational challenges for RCM:

  • Setting up work-from-home (WFH) infrastructure
  • Keeping up with rapidly changing COVID-19–related reimbursement rules
  • Dealing with increasing volumes of hospitalizations in COVID-19 hot spots
  • Managing fluctuating workforce availability due to the health of staff members

An appropriately staffed revenue cycle department may be able to overcome these obstacles in the short term. However, an overall decline in revenue cycle KPIs—as evidenced by increasing A/R and denial rates, decreasing clean claim rates and lower cash collections, and diminishing staff productivity—may be indicative of your organization’s inability to adapt swiftly to changing environments and work requirements.

Many US healthcare providers have long struggled to establish a flexible workforce in the market, even without COVID-19 further limiting the available resources. Supplementing your workforce with an outsourced partner may be an effective option if the third-party vendor meets the following criteria:

  • Has solid business continuity planning and disaster recovery plans in place
  • Has a pool of resources that can be quickly added to the team when needed
  • Supports remote workforces
  • Maintains up-to-the-minute knowledge of state, federal, and commercial payer requirements
  • Charges rates that are reasonably lower than the anticipated increase in revenue
  • Supports transparent reporting and reconciliation practices

Determine whether you can internally mitigate these risks quickly and sustain success in the long term. If not, consider a reasonably priced outsourcing option.

Improving Revenue Cycle KPIs May Signal Staffing Issues

As some organizations watch their revenue cycle KPIs plummet, others are seeing them improve. That may seem like good news, particularly in the middle of a crisis.

It’s probably not.

An overall improvement in revenue cycle KPIs, such as decreasing A/R and increasing cash collections, likely speaks to your organization’s inability to handle the normal work volume due to inappropriate staffing or low staff productivity. If your sudden improvement in KPIs is due to the cancellation of elective procedures, what will happen when elective visits resume? Staff will not be able to keep up with the increased work volume, and revenue cycle KPIs will quickly take backsteps when a strong cash flow is badly needed.

Increasing productivity requires investment, timely coaching, and feedback with staff. If your organization has historically struggled with this, the likelihood of turning it around quickly during crisis mode is even slimmer. In addition, if average staff productivity is low, hiring more FTEs will only be costly and inefficient.

Once again, outsourcing can be an attractive solution. Using a third-party vendor may seem more costly than hiring FTEs, but with an appropriate performance-based payment structure, you can turn the third-party RCM vendor option into a high return-on-investment (ROI) solution. Through the efficiencies gained by engaging an outsourcing partner, you can position your organization to utilize the internal resources for other high-demand areas, such as denials, and respond elastically to the increasing work volume while maximizing cash collections.

Short-Term Relief, Long-Term Vision

Revenue cycle leaders need to distinguish between short-term obstacles caused by COVID-19 and underlying inefficiencies exposed by the pandemic. Addressing operational instability means resolving many fundamental RCM challenges such as resource allocation, productivity improvement, prioritization, reimbursement compliance, and the adaptability of IT infrastructure.

Internally resolving the operational issues exposed by COVID-19 may be possible, but a timely response is key. Otherwise, KPIs will take another heavy toll in a possible second wave of COVID-19, staff productivity will remain low if WFH becomes the new norm, and denials will remain high due to noncompliance.

It is worth evaluating the cost and benefits of a flexible partnership with a third-party vendor. A strategic partnership with a third-party RCM vendor that provides flexible and proven business practices, supports your organization’s post–COVID-19 vision, and delivers high ROI can serve as a stepping stone to overcome the crisis.

For additional information on ECG’s position related to revenue cycle outsourcing, please see our article Revenue Cycle Outsourcing Requires Focus on Service Standards and Risk recently published in HFM magazine.