A typical full-outsourcing engagement would encompass "cradle-to-grave" servicing of the client's accounts receivable. This arrangement usually involves a contractor who assumes responsibility for staffing and operating the business office function and manages the receivables from initial billing through collection.

The contractor typically uses existing hospital business office staff and supplements the operation with consultants and preparation systems from their own organizations. This full-service approach can encompass accountability for every aspect of the business office, from billing and patient collections to third-party resolutions and call center functions. This type of arrangement tends to be long term with a typical contract period of three to five years.

Although full outsourcing might be a way to bring in experts to run your operations, recent studies have shown that many of these outsourcing arrangements ultimately fail. Why?

It seems to be that more often than not that these full outsourcing firms do not move quickly enough in learning of their client's specific payer issues, billing systems, processes, procedures and account flow protocols. It is crucial to the success of full-outsourcing that the outsourcing firm conducts a through review of the provider's process flow and billing cycle contract prior to servicing the outsourced receivables.

The purpose of such an evaluation is to conduct a top-to-bottom operational review including an analysis of billing systems, billing practices, staffing methodologies, staffing levels, an a comprehensive accounts receivable analysis. This should be the first phase. Specific departments and areas of review should include:

Admitting/Registration: Organization, admitting/discharge/transfer systems, work flow, insurance verification, backlogs.

Medical Records: Organization, documentation, coding accuracy, communications.

Patient Accounting: Organization, billing systems, IP/OP claim flow, charge master, financial classes, insurance payer mix, monthly detail summary reports (accounts receivable, aged trial-balance report, revenue, payments, adjustments, credit balances, write-off totals, recovery totals).

Cashiers: Organization, cashier workflow, posting procedures, routing of remittance vouchers, refund policy, documentation, and controls.

Collection: Organization, follow-up procedures, collection parameters, write-off procedure, bad-debt policy.

Finance: General-ledger reconciliation, reporting. Upon initiating any outsourcing project, a kick-off meeting should be held. Key managers from the outsourcing company and hospital employees from all functional areas of the patient revenue cycle should be brought together to brainstorm on the project goals. This is a vital part of the overall outsourcing strategy process.

A goal that could be created by this core team might be for the contractor to recover 85 percent of the netted placement. It is also important, at the start of the design phase, to establish lines of communication and to establish agreed upon benchmarking goals. When using an outsourcing service for the first time, asking questions and developing account-processing protocols, along with a detailed master plan, are essential to ensure that the hospital's detailed expectations are in line with what the contractor can provide.

Another important factor to consider prior to the start-up phase is the criteria and procedures for writing off outsourced accounts such as uncollectibles and contractual allowances.

An additional crucially important ingredient is to include in the arrangement specific goals and performance metrics for measuring them. Status meetings also need to take place weekly, monthly or bimonthly.

What is emerging among the best practices for managing the outsourcing relationship is a model where hospital CFOs are hiring consultants to supervise the work personally and withhold invoices until agreed-upon metrics are met early. These consultants manage very specifically the type and degree of improvements you want to achieve. You don't want to micromanage but you want to make sure they're doing what you wanted, the way you wanted it done.

Full outsourcing has become an increasingly important topic over the past few years. If correctly established, strategic full outsourcing of receivables can be an exciting and effective option to address receivable concerns. Outsourcing companies have remarkable new technologies and software at their disposal that can ensure quick contacts. When the start-up phase is established correctly, outsourcing firms can become outstanding partners and true extensions of your own business office.

Copyright (c) 2008 Jim Yarsinsky