What Questions to Ask When Sourcing a Best-In-Class Vendor

by | Mar 16, 2021

Revenue cycle management outsourcing is on the rise. Between 2015 and 2019, demand for these services increased by 85%.[1] This comes at a time when hospitals report being increasingly dissatisfied with their revenue cycle outsourcing purchases. A recent report by KLAS suggests that many providers experience “buyer’s remorse” on those purchases.[2] According to Healthfuse research, hospitals are right to feel remorse.

Using its proprietary analytics technology, Healthfuse conducted a comprehensive study of more than two billion hospital accounts. The research, which included 8.31 million unique guarantors from 91 facilities in 29 states, found that 51% of self-pay accounts were not compliant with best practices, SLAs, or regulatory requirements. Thirty-six percent of accounts placed with vendors at 31 – 60 days were never worked. Nearly a fourth of accounts placed at 121 days were never worked. Finally, nearly one in five accounts with balances of $250 or less were never worked.

Why are hospitals putting up with underperforming vendors? Healthfuse believes a large part of the problem is a lack of transparency with which to accurately assess a vendor’s performance and, thus, hold them accountable. This means hospitals have to rely on each vendor to report their own performance metrics, which are often skewed in their own favor. This makes it nearly impossible for hospitals to calculate the true ROI from its outsourcing programs. At a time when margins are already razor-thin, this is unacceptable.

One of the best things hospitals can do to protect themselves and ensure a positive return on these partnerships is to be extra diligent when searching for revenue cycle outsourcers. Following are questions hospitals can ask prospective partners to help guide the process.

How do they reconcile accounts receivable?

Reducing aging A/R requires close and ongoing evaluation and should be emphasized as part of the vendor’s KPIs. Ask prospective vendors to provide a detailed overview of their inventory management process. Do they use reconciliation technology to automate inventory settlement? If not, they are likely relying on manual, error-prone processes that make complete reconciliation less likely. And without complete reconciliation, there’s no way to close the loop on all accounts and hold the vendor accountable.

Also, ask them if they:

  • Can capture in-depth data to support root-cause analysis down to the account level
  • Provide complete visibility into accounts after they’re received from the hospital
  • Have a process for managing account holds and billing disputes

Without full insight into vendor activity, payments can easily be misdirected and sent to the wrong vendor. This can lead to duplicate payments, something hospitals cannot afford and which negatively impact outsourcing ROI.

What is their approach to the patient financial experience?

Over the past decade, the rise of consumerism has put patients at the center of what was previously a provider-payer revenue cycle. More forward-thinking vendors understand that the patient financial experience is as important as the clinical experience. Ask prospective vendors how they align themselves with their clients’ approach to patient collections. Do they understand what it means to be “patient-centric”? Do they realize how their interactions with your patients impact your hospital’s brand reputation?

Also, ask them to demonstrate that they employ industry best practices for patient collections and how they measure themselves against those benchmarks. Do they regularly audit calls, and do they have a performance improvement process for their staff? What type of training do they provide, is it ongoing, and does it include front-line managers?

The best-performing vendors understand that each patient interaction should be met with the highest level of engagement, so patients feel they are being heard and that the hospital truly values their relationship.

Are they open to process improvement and remediation?

The best, most effective vendors are those that believe performance improvement should be an ongoing quest.[3] They should recognize that each hospital is unique and do all they can to align their own strategies with those of the hospital. One essential question to ask is about their approach to conflict resolution and performance issues. What steps do they take on their end when they fall short of meeting SLAs? With whom do they regularly meet? The answer should include leadership at all levels, from front-line RCM managers to VPs of revenue cycle to the CFO.

Also, ask how often they meet with their clients and what types of topics they bring to the table. When issues arise that cannot be quickly resolved, are they open to third-party remediation? Ask if they’ve ever worked through remediation with a client in the past. If so, ask how they used the experience to improve their own business processes.

The bottom line

The year 2020 has been one for the record books. As hospitals transition to a post-pandemic “new normal,” they will need to use every resource available to regain long-term financial viability. Outsourcing all or parts of the revenue cycle is a great opportunity to do just that, but finding high-performing vendors can be challenging. Look for vendors who leverage technology to automate and streamline reconciliation, who understand the importance of the patient financial experience, and who embrace continuous improvement as a core value. These will be the vendors who provide the best return on your outsourcing dollars and who will become trusted, long-standing partners.


[1] https://revcycleintelligence.com/news/80-of-hospitals-vetting-full-revenue-cycle-management-outsourcing

[2] https://revcycleintelligence.com/news/third-of-providers-regret-revenue-cycle-outsourcing-purchase

[3] https://cdn2.hubspot.net/hubfs/498900/RSM%20September%202018%20Whitepaper.pdf

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