The International Journal of Medical Banking

AS THE BURDENS that weigh heavily on healthcare providers continually increase in number and complexity, no aspect of a healthcare organization’s operation is spared. The steady rise in costs, that drives the demand for tighter expense management and process efficiencies, has impacted all internal service areas, and the financial/accounting office is no exception.

For healthcare CFOs and financial managers, streamlining in-house financial processes to maximize efficiency and cost-effectiveness has never been more critical. But according to the results of a survey of large national healthcare providers conducted by The Bank of New York Mellon Treasury Services the industry still has far to go.¹ Responses from CEOs, CFOs, and patient financial services managers at 151 large U.S. healthcare facilities revealed that their organizations commonly overlook several key operating areas (such as contract management, eligibility verification, denial management, and Point-of-Service payment collection) where process automation or other improvements could easily increase patient satisfaction, reduce costs and/or increase revenues. The survey also showed these areas share two key commonalities – both areas impact organizational revenues and both are usually performed manually in-house.

Many industries have grown to realize and readily accept the benefits of outsourcing certain internal processes that are both integral to operations and significant to the bottom line. The time has come for healthcare providers to recognize the viability of outsourcing key financial processes as well. Given that in-house management of financial processes for healthcare providers can be costly, time-consuming and counterproductive to healthy bottom-line revenues, effectively managing these processes via outsourcing offers considerable benefits. The good news is that proven solutions already exist. The challenge for healthcare providers is to pinpoint the right ones.

Financial process outsourcing is defined as the full or partial carve-out of services via third-party tools and/or automating processes with the aim of functional improvement. For the healthcare industry, outsourcing offers solutions associated with a variety of financial operations including contract management, eligibility determination, claims processing, secondary/tertiary billing, denials management, debt collection, credit balance management/refunding, accounts payable, Web-based payments and account reconciliation.

Financial process outsourcing is designed to provide gains that benefit multiple areas of the organ
ization by:

• increasing cash flow by speeding patient account posting and identifying denied payments
• improving accuracy with tools developed to address a provider’s particular needs streamlining financial processing by reducing manual operations via services that enhance reporting capabilities, provide electronic document imaging and offer workflow tools to better manage a staff’s priorities
• better management of ongoing growth

While patient care remains the number one priority for the healthcare industry, the fast and accurate application and processing of payments is critical for maintaining a precise snapshot of a healthcare organization’s true financial condition, and thus, its longevity.

Overcoming the Roadblocks: Dispelling Some Common Outsourcing Myths

As with many industries that have not yet fully embraced the outsourcing concept, the idea of farming out financial processes conjures feelings of uncertainty and discomfort for many healthcare providers for a variety of reasons.

Myth 1 – The healthcare process is too complex to outsource.

Because the industry operates within the constraints of an intricate set of financial processes that are dictated by strict policy rules and regulations, providers may question an outside vendor’s ability to fully comply with the intricacies of those restrictions (e.g., the need to secure personal health information within a complex payment system). They may also question whether the cost to bring on a third-party is cost justified because of the perceived learning curve.

In reality, however, many healthcare providers already outsource various core financial processes (e.g., primary billing, collections and eligibility verification) with high levels of satisfaction and success. For example, a majority of respondents to the survey mentioned above, who outsource various financial processes indicated that they were unlikely to take the process back in house when their contracts expired and indicated a desire to use outsourcing to further automate or improve other labor-intensive, in-house processes as well.

Outsourcing can (and does) work within the industry’s tough constraints. And, it works well enough to justify exploring additional financial outsourcing solutions that may have not been previously considered. Outsourcing more standard financial processes (such as cash posting) that devour healthcare organizations’ time also frees them to focus on more complex processes in house (such as resolving denied claims) that have the potential to bring in additional revenue.

Myth 2 - Outsourcing is not cost-justifiable.

Cost justification is another issue for health care providers. They question if bringing in a third-party, especially to a large operation, is truly cost effective. For many providers, effectively performing the associated research to answer the question can be burdensome in and of itself. Yet the real question, given today’s escalating costs and regulatory minefield may be can today’s healthcare organizations afford not to work with a third-party specialist?

Regulatory forces alone are making it more and more imperative for the industry do the homework required to meet its standards. The Health Information Portability and Accountability Act (HIPAA), for example, requires adherence to strict standards to protect patient confidentiality. Experienced financial outsourcing vendors, however, offer proven, secure processing (i.e., advanced, HIPAA-compliant technology, systems and operations, etc.). Moreover, those departments that have historically relied upon outsourcing, such as IT and HR, have proven that outsourcing vendors are more than capable of successfully handling sensitive, confidential information.

Myth 3 – Healthcare providers lack the resources necessary to identify appropriate outsourcing opportunities.

Unearthing potential outsourcing opportunities takes time and resources in the healthcare organization. Vendors that have experience in targeted areas may help organizations pinpoint needs and identify areas with high outsourcing opportunity. They can assess existing workflows to help uncover hidden inefficiencies, such as manual operations that increase processing time and cost, unmanaged exception item processing/workflows, and reporting inefficiencies.

Myth 4 – The healthcare provider forfeits all control of an outsourced process.

Outsourcing rarely means a comprehensive ‘take over’ of an entire operation. Financial processing tools can be outsourced for select treasury services and even facets of these services. Even when an entire operation is outsourced, the healthcare provider should remain completely in charge of how the process is both implemented and carried out. Choosing an outsourcing partner who delivers on this key provision is one of the many guidelines for a successful third-party relationship.

Myth 5 – Finding the right outsourcing partner is next to impossible.

Healthcare providers can find the right partner by breaking down the process to define what’s important for their organization in such a relationship. Three overriding concerns are important to consider.

First, because of the unique requirements and perceived risks in outsourcing healthcare financial processes, selecting outsourcers with superior credentials is of the utmost importance to help ensure smooth transitions and implementations.

Next, recognizing outsourcing solutions that are based not only on efficiencies, but also arrangements that are sensitive to the delicate nature of patient care is imperative. An effective outsourcing partner recognizes both an organization’s particular needs and the macro needs of an industry that must always maintain the patients’ perspective.

Finally, choosing successful outsourcing partnerships is wholly possible when the search is based on a specific set of criteria that have been vetted as strategically important to your organization (see side column).

Pinpointing Benefits

Outsourcing addresses a multitude of issues that have long plagued back-office healthcare processes, including lengthy processing times, cash application delays, enormous paper trails and ineffective reporting systems that can slow the business side of patient services.

Through dedicated support provided by a vendor’s implementation and customer service team, outsourcing is designed to infuse an operation with additional expertise and resources without the need for providers to rebuild or expand their organizations. Outsourcing also allows healthcare providers to standardize processes across offices and operate under better controls and tracking with the goal of increasing service levels while lowering internal costs.

The following list identifies a few traditional, back-office healthcare financial processes that can be easily
outsourced:

• Claims processing to automate the billing process and provide upfront edits that improve the accuracy of the claim with the first submission.
• Payment collection via lockbox services to collect patient and commercial insurance payments; convert paper explanation of benefits (EOBs) to electronic posting files; re-associate electronic remittance advices (ERAs) and payment data; provide document imaging; and increase the number of electronic payments and remittances.
• Patient self-payments via the Web, phone, call center or recurring debit processing. Also, services to capture all patient/non-patient credit card, check and debit card payments at the time of service; issue automated receipts; reconcile deposits and generate audit and management reports.
• Eligibility services, such as online confirmation systems for patient identity and insurance eligibility that improve the accuracy of claim submissions and reduce the need for manual insurance verification.
• Credit balance/ refunds management automates the refunding of credit balances to patients and/or payers.

Bad debt collection allows use of a third party to assist with collecting debt that has been written off.

A New Way of Thinking

The healthcare industry is facing a watershed in its history – a bourgeoning need for services within a landscape of eroding profit margins and intensifying regulations. Cost-saving measures are imperative.

Successful outsourcing of other sensitive processes has been proved, suggesting that many labor-intensive, back-office functions can gain from outsourcing. Such solutions have the potential to increase the cost-effectiveness of entire platforms through the delivery of streamlined processes while also accounting for the unique risks and needs of the healthcare environment.

Whether assisting with revenue cycles, managing claims or improving and streamlining remittances, financial process outsourcing has a place in the future of healthcare. Healthcare providers willing to change the current financial paradigm of their industry can begin to take advantage of the proven benefits of outsourcing.

¹The Bank of New York Mellon Healthcare Financial Outsourcing Survey, conducted by Warabak Research, June 2007, of 151 large healthcare providers with hospital or affiliate groups with 300+ beds, physician practices or an affiliate with 100+ physicians or outpatient/cancer center.