The Case for Outsourcing RCM at Your Medical Practice

April 23, 2013

Medical practices and the pros and cons of outsourcing revenue cycle management needs.

With so many regulatory changes and coding changes in progress, billing and collections is getting more challenging for physician practices of all sizes.

Until recently, this was very much the case at Muir Medical Group, a Walnut Creek, Calif.-based Independent Practice Association with nearly 600 physicians. Dealing with collections and denials, plus continually training staff and keeping up with changes, presented a huge resource strain. 

“Billing has gotten very complicated,” Breanna Krebs, manager of development at Muir Medical Group, told Physicians Practice. “Many times a biller needs to have several different realms of knowledge including coding claims, denial management, and medical expertise. It’s getting to be a lot.”

Since 2006, when the IPA shifted to outsourcing its revenue cycle management needs to NextGen RCM Services, one of a growing number of vendors that provides such services to healthcare organizations, the IPA has seen a significant cost and labor savings. Krebs equates utilizing the service with a normal taxpayer who opts to use H&R Block or a similar service because his taxes have become too time-consuming to manage.

Outsourcing also has benefits to the small practices that are part of the IPA and lack their own billing staff, said Krebs.

In solo or two-person physician offices, for examples, docs can focus on EHR adoption and achieving meaningful use rather than billing and ICD-10 preparations. And because fewer billing staff are needed to handle claims and keep up with changes, medical groups can devote existing resources to other revenue-generating activities.

“Many of these independent practices were using one person to do their billing,” said Krebs. “Economies of scale definitely come into it. As a physician practicing medicine it’s hard to be able to be aware of what’s going on in the billing side of things.”

Krebs’ group appears to be among a growing movement toward RCM outsourcing among medical groups and hospitals.

In July 2011, when EHR vendor Allscripts announced plans to launch a revenue cycle management service for physician practices, the number of larger organizations outsourcing RCM was quickly increasing, an InformationWeek story noted. Today, big practices see more reasons to outsource revenue-generation services, partly because of the increasing complexity of coding and the advent of ACOs.  

But while the advantages of outsourcing RCM seem to be increasing, health IT consultant Bruce Kleaveland cautions that practices should look at whether the expense of outsourcing to a service (the cost is usually calculated as a percent of revenue) truly outweighs the benefits of keeping an in-house staff.

“You lose the internal expertise for billing, which makes you more dependent on a third party,” said Kleaveland. “Practices that have competent, experienced, and stable billing staffs may find it more cost effective to handle the process in-house.”

Still, Krebs says the time savings has been a lifesaver for Muir physicians.

“With the service, you capture all the money that you’re entitled to,” says Krebs. “Working with the [NextGen] RCM saves us a ton of time. If we were going to do billing onsite, we would need a ton of people.”