Deciding to Outsource Your Revenue Cycle Management (RCM) or Do it Yourself? Key Considerations

Achieving operational efficiency throughout a hospital, health system, independent laboratory, or independent diagnostic testing facility (IDTF) is an important criterion to ensure success. Diagnostic leaders know that by gaining efficiency and effectiveness in their revenue cycle management (RCM) processes and improving cash collections, they can significantly improve the profitability of the organization. This is especially important as diagnostic organizations are operating at ever-tightening margins.

As such, the decision on whether to manage the RCM process yourself or outsource it to an RCM provider is critical. There are advantages and disadvantages for both approaches and specific situations where the benefits of one approach tend to outweigh the advantages of the other. In reality, as with most service and technology decisions, it isn’t a binary equation.

With XiFin, whether you choose to manage the RCM process in-house or through outsourcing, you will get access to the same cloud-based technology and comprehensive RCM capabilities. As a diagnostic leader, you can be assured that the quality, functionality, maintenance, and support of the technology will be excellent, however you choose to implement and use the XiFin RPM solution.

In short, your diagnostic organization can gain control and visibility over financial operations, optimize revenue and maximize cash collections, whether you manage the process in-house or if you choose to outsource all or part of your billing operation.

Outsourcing

There are four distinct situations in which outsourcing can play an essential role in a diagnostic organization:

1. Hospital or health system laboratories that are currently using sub-optimal hospital – or health system-wide enterprise systems (e.g., EMR or EHR systems) for billing and RCM.
2. Independent diagnostic laboratories, molecular diagnostic providers, pathology practices, or IDTFs that are rapidly expanding – either organically or through an acquisition strategy.
3. Laboratories or IDTFs that are relatively new and need to focus on their core business.
4. Laboratories that have a niche focus or are relatively small and have resource constraints.
5. Laboratories that may have volatility in order volume.

Hospital or Health System Laboratories

Hospital outreach programs, outpatient labs, or health system ancillary services that are currently using the hospital- or health system-wide enterprise systems are likely not maximizing cash collections. The hospital-wide RCM staff are generally focused on large hospital-based claims, and as a result, smaller lab claims don’t get the attention they deserve. Because the average cost of a lab test is relatively low, particularly when compared to the average hospital charge, it is often written-off rather than worked, due to the capacity constraints of the hospital- or health system-wide RCM solution, workflow, and staffing. From a risk management perspective, the hospital or health system team also likely lacks the outreach lab-specific expertise on compliance and payor edits.

Many hospitals and health systems are leaving significant amounts of money uncollected for work performed by expensive and highly skilled professionals. Sometimes hospital and health system staffing constraints make it difficult to deal with fluctuating staffing needs.

The net result is that the hospital or health system’s laboratory leaders are not able to drive profitability and lack the data and visibility into their operational and financial performance that they need to make the best-informed decisions for their business.

Outreach lab and ancillary services executives know they are revenue and profit centers. Yet, it can be difficult for them to build a business case that enables them to get funding for a separate RCM team and acquire software technology designed specifically for their line of business. The health system RCM cost structure is largely fixed, so the leadership team may resist creating another such cost structure to support the labs. Likewise, the health system leaders will not want to shift resources, nor use different technology, nor fund new resources or new technology, the same way they will likely resist allocating space for a new team. Outsourcing removes all of these constraints.

This is a perfect scenario for putting forward an outsourced billing and RCM business case. RCM providers have the staff, technology, space, and expertise to successfully process claims on behalf of the hospital or health system laboratory — all without impacting existing RCM, IT, or compliance teams or resources.

Rapidly Growing Diagnostic Providers

We are seeing an uptick in laboratories and remote patient monitoring companies that are growing rapidly — either through organic growth or acquisition — choosing to outsource. Usually, It is because they are out of capacity to expand their current RCM team without significant expenditure for things such as building out space or growing their headcount. They may also lack sufficient management for proper oversight of a much larger group, or they may lack an appropriate talent pool. These scenarios make outsourcing a great option, even if in the future, the management team would like to make the capital investments required and bring the billing and RCM process in-house.

In the case of growth by acquisition, the situation is often compounded by bringing together two organizations with different approaches and technology. In this case, the organizations might agree to outsource RCM for one or both groups, in an effort to unify practices across the two organizations. This may be done as a transitionary measure, with plans to bring the process back in-house at some point, but it may be just as cost-effective to keep it outsourced.

Many of the large and growing laboratories also acknowledge that billing and RCM is not their core competence, nor do they want it to become a core competence. They are looking for a partner, where billing, RCM, and financial management is their core expertise.

Newer Labs or Remote Patient Monitoring Companies

Many early-stage labs, pathology practices, or IDTFs choose to outsource their RCM. As they get started, they may not want to divert resources to building an in-house team with the expertise required to manage the RCM process effectively. Outsourcing can also support getting new tests or devices to market more quickly. When a laboratory, pathology practice, IDTF, or lab is relatively new, they benefit from the shared personnel, shared infrastructure, speed, cost efficiencies, and expertise of outsourcing to the XiFin team.

Niche or Small Labs

Some laboratories choose to remain agile and nimble. Perhaps they focus on a small number of specialty tests. This is another circumstance in which outsourcing may be the best solution. A small billing and RCM team might have neither the expertise in compliance nor the experience with maximizing reimbursement in the face of changing payor edits.

Smaller labs may also want to save money by not having to invest in building their own teams, processes, expertise, and software tools.

Across the board, the advantages of outsourcing with XiFin include:

Labs That Experience Volume Volatility

If there is one thing lab leaders learned above all else during the beginning of the COVID-19 pandemic is that lab volumes can change rapidly. Between early March and mid-April, XiFin saw test volumes for some laboratories drop as much as 60%. This had very serious financial implication for labs who have the fixed costs associated with in-house RCM.

Performing revenue cycle management in-house means the cost structure is largely fixed. When testing volumes precipitously drop, as they initially did in the case of COVID-19, a fixed cost structure becomes a liability. For that reason alone, some diagnostic providers are moving to or are considering moving to an outsourcing structure. This means the cost will be variable and align with testing or device volume changes.

The same is true is volumes increase rapidly. As volume grows, it is hard to ramp up in a fixed cost model. With outsourcing, there is no ramp up and costs scale proportionally.

Outsourcing to the XiFin team ensures carefully developed best practices will be followed; as market or regulatory changes dictate, our practices also evolve. Any diagnostic provider can begin with fully outsourced billing services and later transition to in-house once the organization is ready with the team and processes to handle these critical functions. Likewise, some established labs that have been handling billing services in-house choose to outsource for the flexibility it provides in terms of staffing and related costs.

In-House

For many diagnostic providers, having RCM in-house delivers a level of direct control and access that is appealing and cost-effective, as long as the RCM solution is up to the task. As with their outsourcing counterparts, these organizations find cloud-based XiFin RPM uniquely suited to deliver:

Control

A key advantage of managing the RCM process in-house is control. For diagnostic providers with high claims volumes and existing teams dedicated to revenue cycle management, XiFin RPM delivers an optimized workflow and the ability to exploit their deep understanding of the specific nuances of their particular business. In situations where in-house RCM is the best answer for a particular organization, XiFin works with the client team to advise regarding process structure, staffing, and best practices.

Business Intelligence

More intensive use of Business Intelligence (BI) and reporting capabilities is another reason cited for in-house RCM. For XiFin, these are provided as part of the XiFin RPM solution, with additional advanced analytics visualizations options also available. The in-house RCM team that has accompanying resources has the opportunity to optimally leverage the extensive functionality and visibility available through XiFin RPM.

Technology Oriented Organizational Culture

Underlying the in-house vs. outsource question is the even more fundamental question of what technology solution will power your RCM efforts. That technology solution and how it was or will be selected may depend on if your organizational culture is RCM led or technology-led. For diagnostic providers that have invested and continue to want to invest in a technology team in building their own solution, or in customizing an RCM solution, an outsourcing option may not align with the organizational culture. Ultimately, not all solutions are created equal, and many potential benefits from one model or another are erased with a suboptimal solution platform. Regardless of the organizational culture, ensure that the needs of the RCM team are not overpowered by an organizational culture bias.

Customization and Complexity

Diagnostic technology leaders may underestimate the complexity of revenue cycle management and the magnitude of third-party driven changes. Because XiFin RPM is cloud-based, in-house and outsourced clients alike benefit from all the automated updates XiFin provides. From its inception, the XiFin RPM platform was built to ensure ongoing delivery of updates and edits and designed to optimally automate the complex process of diagnostic revenue cycle management. In actuality, SaaS-based providers should not be viewed as replacing IT, but rather as a mission-critical enabling partner. With a highly configurable cloud-based RCM solution, diagnostic technology leaders can be rest assured that the solution is adaptable for their internal customers.

Risk Mitigation

It cannot be understated that out-of-date systems introduce inconsistencies, significantly reduce efficiencies and revenue performance, and leave organizations exposed to compliance risk. Likewise, because XiFin handles RCM for a broad range of diagnostic providers, we are on the front lines in terms of identifying changes and trends and developing best practices, which in turn inform ongoing improvements and expansion of capabilities of XiFin RPM that in-house clients enjoy. Because the XiFin serves both in-house and outsource clients, we are uniquely positioned to ensure both the platform and the services are optimal, whatever the delivery mechanism.

What About Hybrid Options?

It doesn’t have to be all or nothing. With XiFin RPM, in-house and outsourced are not binary options. Clients can choose how much to retain in-house, passing off the portions for which they don’t have the bandwidth or a desire to manage. And with the same platform driving it all, clients can fluidly transition all or parts of the RCM effort with minimal disruption. As your business needs change, you can easily transition between the models.

In a perfect world, every diagnostic provider should complete an analysis of both options – in-house and outsource – and determine which approach provides the best overall ROI, aligns with current and future business objectives and aligns with their organizational culture. That said, the general guidelines provided above will help identify which approach is likely to be most appropriate based on the needs of the business.

At XiFin, revenue cy
cle and financial management is what we do every day. We have decades of experience and expertise around revenue cycle management, payor relations, compliance, IT infrastructure, and cybersecurity so that our clients can focus on their business while benefiting from the XiFin economies of scale.