What You Need To Know When Choosing A Partner To Negotiate Revenue Cycle Vendor Contracts

by | Apr 30, 2021

Revenue cycle operations have become increasingly expensive and challenging to manage. According to the American Medical Association, 25 – 30% of the country’s total health care expenditures are direct transaction costs and inefficiencies associated with the “claims management revenue cycle.” [1] Outsourcing can be an effective way to mitigate the cost to collect while reducing the burden on limited hospital resources. But achieving a positive return on these relationships begins before the contract is signed.

64% of hospitals report being unsatisfied or unsure of their vendors’ performance.

Great vendor relationships play a vital role in helping hospitals reduce costs and maximize reimbursements while improving the patient financial experience. But identifying the best vendors upfront and negotiating the most favorable terms can be challenging. As hospitals are being asked to do more with less, many simply lack the technology or resources necessary to adequately evaluate and select the best vendors and negotiate the most favorable terms. Partnering with industry experts can streamline the entire process.

The best negotiation partners are those that understand the power of having a game plan and that have the expertise to help you build it. This starts with identifying what a win would look like for your organization. Anyone can negotiate a cheap contract, but that doesn’t guarantee you’ll end up with a best-fit revenue cycle vendor that stands the test of time. In fact, when a win is solely determined by price, you can almost guarantee you won’t receive the greatest return on that investment.

Another factor to look for in a sourcing and negotiations partner is industry knowledge that includes insight into things like vendor-specific SLAs, regulatory compliance capabilities, as well as each vendor’s full suite of offerings. This level of vendor intelligence is critical to negotiating from a place of strength and its information few hospitals have access to on their own.

You also want to look for a partner that values communication and not just with the negotiating team but with all stakeholders in your organization. This can be challenging in large health systems with many layers of management. A single ill-informed person can derail the entire negotiation process. The right negotiating partner understands this and will have proven methodologies that revenue cycle leaders can use to get everyone on the same page to help maintain compliance to the game plan.

Another important quality to look for in a negotiation partner is a high level of negotiation acumen. They should understand the importance of remaining cool, the power of silence, and how to react to a called bluff. These qualities can only be learned over time. While you may very well have experienced negotiators on staff, it’s unlikely they have the same level of expertise as a partner that has delivered hundreds of wins over the years. Finding the best revenue cycle outsourcer and ensuring the most favorable terms takes a level of finesse that can’t be learned from a handful of negotiation experiences.

Finally, one of the most critical capabilities to look for in a negotiation partner is integrity. That includes honesty. While it’s okay if the partner uses the board or comparisons as a way to get a better offer, you should avoid any partner that uses dishonest practices that create a win-lose scenario between you and the revenue cycle vendor. Outsourcing relationships are built on trust. Employing underhanded tactics during negotiations sets the relationship off on the wrong foot and will do little to build a strong, longstanding, trusting partnership.

Success Story

Monument Health, a part of the Mayo Clinic Care Network, is located in Rapid City, South Dakota. It is a community-based healthcare system serving 20 communities across western South Dakota and eastern Wyoming. Regional Health offers care in 33 medical specialties, has more than 4,500 physicians and caregivers, and is comprised of 5 hospitals, 8 specialty and surgical centers, and more than 40 medical clinics and healthcare service centers. Monument Health recently completed a conversion to EPIC and needed a way to maximize financial performance to offset conversion costs. They decided to outsource portions of their revenue cycle to help fill gaps in internal resources and to improve collections, but they needed a way to ensure they were getting the most out of those vendor relationships.

Monument Health chose to partner with Healthfuse, the industry leader in the management of revenue cycle vendors for hospitals and health systems. Healthfuse identified above-market vendor contracts, renegotiated fees, and updated service-level agreements reflective of today’s market. Healthfuse performed account-level audits on 100% of placed accounts and scrubbed 100% of vendor invoices to help ensure accounts were being worked appropriately and stop inappropriate or duplicative fees from occurring.

The results were impressive. Monument Health achieved:

  • $3.2M in collections improvement
  • $1.8M in savings from safeguard initiatives
  • $293K in invoice recoveries
  • $1.5M in contract savings

With Healthfuse, Monument Health realized a recurring P&L opportunity of $7.1M for a three-year impact of $15.9M.

As self-pay accounts continue to soar, the role of collections vendors becomes increasingly valuable to health systems of all sizes. Today, nearly a third of hospitals employ between ten and 15 vendors, with the largest majority spending between 21 – 30% of their revenue cycle budget on those partnerships.[2] Yet, all vendors aren’t created equal, and hospitals need to be extremely diligent in their evaluation and choice of collections partners.

With vast visibility into vendor pricing, SLAs, service and product summaries, and hospital-specific results, Healthfuse can match the right vendor to each hospital’s unique needs. In addition to negotiating new contracts, Healthfuse can identify noncompliance among current clients, as well as existing vendor contracts that should be renegotiated. Healthfuse helps clients increase net revenue, reduce costs and achieve optimal return on their outsourcing investments.


[2] https://www.healthcarebusinessinsights.com/wp-content/uploads/2017/10/HBI-Fall-2017-Member-Retreat-Vendor-Management-with-Healthfuse.pdf?x34219

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