Operating margins in hospitals have dipped to just 1% to 2%, a massive pain point for the healthcare sector. Typically, hospitals need a minimum 3% profit margin to sustain growth.
To bridge this gap, many are turning to outsourcing for self-pay collections to boost efficiencies and cut costs.
The global hospital outsourcing market underscores this trend: valued at $384B in 2024, it’s projected to reach $1092B by 2034, growing at a CAGR of 11% from 2024 to 2034.
Hospital Outsourcing Market Size
Nearly one-third of hospitals partner with 10 to 15 vendors, allocating 21–30% of their budgets to these relationships.
While outsourcing holds promise, research suggests most hospitals lack transparency to evaluate vendors effectively. They’re often stuck relying on biased, vendor-provided reports. Without standardized evaluation, enforcing best practices across partnerships becomes difficult.
Amid rising pressures from value-based care and self-pay accounts, tolerating underperformers can devastate the bottom-line.
Here are four key strategies to maximize vendor partnerships:
1. Hire the Right Vendor the First Time
With thousands of Revenue Cycle vendors, choosing the right vendor can be a daunting task. While word-of-mouth recommendations and industry rankings are helpful, they are often too generalized and fail to account for the unique needs of each hospital.
A Revenue Cycle Vendor performance management company can provide critical insights. With objective data on a full spectrum of vendors, including demographics, service levels, and pricing, they can help hospitals select the best vendor suited to their specific needs. This approach is more cost-effective than hiring and managing an underperforming vendor over time.
Partner with a vendor performance management company like Healthfuse, which analyzes data on more than 3,000 vendors—including demographics, service levels, and pricing—to match the perfect fit for your hospital. This upfront investment saves far more than fixing a poor hire later.
2. Negotiate Strong SLAs Upfront—and Re-evaluate Regularly
Once the right vendor is selected, negotiating clear terms and SLAs is crucial for securing a positive return on investment. Understanding where the vendor stands relative to competitors is essential. Vendors should be transparent about their performance and willing to share detailed information. If a vendor hesitates or refuses to provide this data, it may be best to walk away.
3. Leverage Technology to Evaluate Current Vendors
Maximizing your outsourcing investment requires full transparency into vendor processes and performance trends. The right technology can offer valuable insights. By reconciling invoices and payment files, hospitals can identify discrepancies such as accounts placed with multiple vendors or incorrect fee applications. This proactive approach allows hospitals to pinpoint issues early and resolve them quickly.
4. Increase the Value of Existing Vendor Relationships
Start with mutually agreed goals and foster regular communication. Address issues promptly; for systemic problems, insist on remediation. Engage an unbiased third party like Healthfuse to apply best practices and craft tailored improvement plans. Strengthening ties often beats starting over.
A Win-Win Approach
The strongest partnerships are transparent, open, and mutually beneficial. Top vendors embrace scrutiny and continuous improvement. By mastering vendor insights, hospitals boost long-term financial viability—while helping vendors deliver more value.
Partnering with a Revenue Cycle Vendor Management expert like Healthfuse to unlock the highest ROI on your outsourcing investments.
What’s your biggest vendor management challenge? Comment below—happy to share more insights
1 Healthcare Dive 2 MicroSourcing 3 Precedence Research