The Proof Is in the Numbers: How to Achieve the Greatest ROI From Your Vendor Relationships

 In Revenue Cycle Vendor Management

The Proof Is in the Numbers: How to Achieve the Greatest ROI From Your Vendor Relationships

Vendors account for more than 30% of a typical hospital’s revenue cycle budget.1 Managing these relationships to ensure the best return on investment can be challenging, especially as hospitals are continually being asked to do more with less. How can you find the time to really evaluate the value your outsourcers are providing?

You can’t improve what you can’t measure, and you can’t measure what you can’t inspect. This is especially true for early-out and self-pay vendors.

A study of more than 2,000 revenue cycle executives found that 91% of hospitals depend on vendor-generated reporting as a way to evaluate those vendors’ performance.2 Unfortunately, vendors have their own methodologies for measuring results. And those results are often, not surprisingly, skewed in the vendor’s favor. This leaves hospitals to blindly trust that their vendors are actually achieving what they say they are achieving. In an age of value-based care and increasing self-pay, this is not an effective strategy.

Consider our recent research of more than two billion hospital accounts in 91 facilities across 29 states. We found that more than 50% of early-out and self-pay vendors were not compliant with best practices, service level agreements, or government regulations. So the results were alarming. Of all accounts places with vendors at 31 – 60 days, 36.1% were never worked. At 121+ days, nearly 23% were never worked. Even with those accounts with balances under $250—which should be low-hanging fruit—almost 19% were never worked.

How do vendors get away with such non-compliance? Simple: When hospitals have no way to audit processes, they have no way of truly measuring vendor performance. The following are four key elements hospitals should leverage to ensure a positive return on their vendor investments.

Review 100% of accounts. Taking just a sampling of your vendors’ processes isn’t effective as you can have the majority of your vendors performing great, but one that performs so poorly, they offset any benefit of the others. If you fail to audit each and every account, you may be overlooking a significant issue with non-compliance. Reviewing anything less than 100% puts your bottom line at risk.

Make audits weekly. A lot can change from week to week. This is especially true with vendors that follow no industry benchmarks or that aren’t abiding by contracted terms. By reviewing accounts weekly, you can identify problematic trends and ensure issues are caught quickly and resolutions put in place before too much damage is done.

Review all the way down to the account level. You can’t get at the root cause of an issue unless you have insight into the most granular details. This level of insight can reveal issues such as accounts that are being moved to bad-debt collections too soon, something you can’t identify with sporadic reporting.

Leverage auditing software. New tools are now available that automate the auditing process. This technology continually runs through a hospital’s system, scrubbing activity files produced by the vendor. The software then identifies and flags potential issues on accounts, and then segments them based on the rules violated. Armed with this data, hospitals can approach their vendors to discuss opportunities for improvement. It may actually be that the vendors themselves are surprised by the findings as well. In this way, hospitals not only improve their own processes, but they’re helping vendors to do the same. This can improve financial results for both the hospitals and the vendor while strengthening their relationship.

The proof is in the numbers

By automating the auditing process, hospitals can achieve significant revenue improvement. For example, Tift Regional Health System in Tifton, Georgia, implemented the Healthfuse AutoAudit tool. They were able to identify and release $7.6 million in unnecessary account holds. Process compliance improved from 32% to 76% in just 18 months. Tift was able to increase self-pay collections by 47%, equating to $5.6 million in just two years.

How much will you uncover?

Reliance on vendors will continue to grow over the foreseeable future, with investment in those relationships expected to triple by 2025. Without in-depth, continuous auditing of vendor processes, hospitals will continue to struggle to achieve optimal results from their outsourcing investments. Hospitals should take action now by leveraging automated auditing technology that can deliver full insight into vendor processes, problematic trends, and opportunities for improvement—for both hospitals and their vendors.

1,2 Healthfuse survey of 2,004 hospital revenue cycle executives 2010-2017

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