The Vital Role of Revenue Cycle Outsourcers in Helping Community Hospitals Thrive

by | Nov 18, 2021

Hospitals across the country face were facing unprecedented challenges even before COVID. Declining reimbursements, increased administrative burdens, and growing self-pay collections were already taking their toll. Community hospitals, especially, have found maintaining financial viability to be a significant challenge for a number of years. For one, community hospitals don’t benefit from economies of scale the way larger health systems do, so they have to work even harder to achieve cost efficiencies. Community hospitals can also find it more difficult to access capital, and they often don’t have the resources—human or technology—to offer higher-margin services.[1] It doesn’t help that many payers now incentivize patients to seek care at larger health systems in order to keep costs down, which means lower volumes and shorter hospital stays.[2]

The good news is that community hospitals know what it means to run lean. With limited resources, they’re used to finding ways to do more with less. Because of this, revenue cycle outsourcers have come to play such a crucial role in the financial health of community hospitals. This is especially true in the area of self-pay collections. Nearly $7.5 billion of patient responsibility goes unpaid each year.[3] It’s a loss that community hospitals simply cannot afford. While revenue cycle management vendors can help, it can be difficult to track and measure their performance. Lack of transparency, lack of data, and simply a lack of time to manage those relationships are part of the problem.

According to Healthfuse research, 64% of hospitals say they are dissatisfied or unsure about their vendors’ performance, and for good reason; more than 50% of vendors are not compliant with industry best practices, SLAs, or government regulations.

One community hospital has found the answer. Mercy Medical Center, located in Baltimore, Maryland, is a Catholic healthcare facility and a teaching hospital for the University of Maryland School of Medicine. Mercy is part of Mercy Health Services, Inc., which includes Stella Maris, Central Maryland’s largest long-term geriatric care facility located in Timonium, as well as a network of community health centers.

Mercy Medical Center worked with several outsourcing vendors, including collections agencies and Medicaid eligibility companies, but suspected they were not receiving an optimal return on investment from those relationships. Without reliable data, Mercy was unable to perform a thorough, objective analysis. In addition, each vendor reported outcomes based on different criteria, some claiming an eligibility rate as high as 95%, which Mercy believed to be improbable. The organization also found its internal self-pay procedures were inefficient and underperforming.

Mercy engaged Healthfuse to develop a new vendor management strategy based on uniform performance visibility. An initial revenue cycle assessment found Mercy’s suspicions to be true; each vendor measured success using different calculations, some very broad and ambiguous. Using its consolidated reporting solution, Healthfuse developed a vendor scorecard based on standardized calculation methodologies.

With Healthfuse, Mercy gained objective and clear visibility into vendor performance and was able to establish new performance goals based on established benchmarks. Vendors that had over-stated outcomes were replaced with new, top-performing vendors. Healthfuse managed the selection and contract negotiation to ensure the highest ROI possible. Healthfuse also sourced two new self-pay vendors, and managed the selection and implementation of five new technologies.

Additional achievements include:

  • $29.5M in annual self-pay collections yield
  • 3:1 return on investment to date
  • $1.2M total cost savings to date
  • $1.2M in negotiated savings
  • $62K in invoice recoveries

They’ve achieved everything they promised. Since our partnership began, we’ve gained over $21 million in cost savings and net collections improvements.” Justin Deibel, Chief Financial Officer, Mercy Medical Center

Greater transparency brings greater accountability and greater returns

It’s no small feat to care for a community. In so many smaller towns, the hospital has served as a pillar of stability for decades. But a mission to serve goes only as far as an organization’s ability to keep the doors open. Having optimally performing revenue cycle outsourcers in place can be the difference between surviving and thriving.