Analyzing the Cost/Benefit of Outsourcing Healthcare Accounts Receivable Part 1

Analyzing the Cost/Benefit of Outsourcing Healthcare Accounts Receivable

A healthcare system has plenty to worry about these days. Medicaid and Medicare payments, the shift to value-based care, ICD-10, the continued shift from payer to patient payments … the list goes on and on.

However, options abound for outsourcing several layers of Accounts Receivable management.

Outsourcing with an excellent partner can relieve some of the administration burden, leaving financial officers valuable time and resources to spend on addressing their core functions and adapting to constant change.

Healthcare providers who currently conduct much of their AR process in-house should conduct a cost-benefit analysis to determine the right course for outsourcing their medical billing, early out collections, insurance follow-up or bad debt processes.

Some key costs to in-house processes to consider include:

  • Personnel (salary, benefits)
  • System purchases/system upgrades
  • Supplies
  • Facilities
  • Training
  • Current and projected ongoing costs of all of the above

Once the in-house analysis is complete, one needs to compare to the cost of outsourcing. For medical billing, the cost to outsource can be 5 to 10% of collections. Firms providing early out collections typically receive about 4 to 7%, while companies collecting on bad debt charge 15 to 25%, or more, depending on the age and other specifics related to the debt.

While comparing the cost of in-house processes versus outsourced processes, the provider will still have to commit staff time to managing the partnership. A good partnership usually requires little work on the provider’s end, but every system varies on how involved they would like to be in the day-to-day operations with its outsourcing partner.

Lastly, and this step requires more research, is consideration of how outsourcing will affect your collections performance. Hiring an expert in AR can result in decreased days in AR and/or total AR. Meeting with a respected healthcare AR outsourcer or Revenue Cycle Management consultant can provide insights into whether a provider is likely to see a boost in its collections performance.

Of course, what you do with any savings in your AR management or a boost in your collections performance is limitless … and would make for an excellent follow-up post.