Cost increases and labor issues have contributed to the rise of outsourcing as an option for senior living and health care providers. While outsourcing of all types is a growing trend — from the C-suite to food service, it is a decision that should be considered carefully, as lack of planning could result in significant long-lasting financial, public relations and personnel losses. Let’s examine the outsourcing of billing services and collections.
If you are concerned with efficiencies and focusing on your core business needs — nursing care and rehabilitation — then your facility owners and management may have or are currently considering outsourcing one or both end stages of the revenue cycle.
There are some compelling reasons to outsource.
When choosing to outsource, your facility can reduce or even eliminate the challenge of keeping up with increasing complexities of medical billing, staff development and retraining, software costs, and workforce challenges. Smaller facilities can mitigate billing office resource shortages caused by staff vacations, medical leaves and turnover via outsourcing portions of their revenue cycle processes.
Because of a variety of software options, extensive coding and evolving reimbursement policies, professional billing and collection companies may be more efficient, delivering a stronger cash flow by reducing the rate of denied or rejected claims and assuring accurate coding. As facilities normally pay either a “per claim” fee or a percentage of their patient service revenue for this service, the facility’s cost fluctuates with changes in census or payer mix. Facilities may serve their customers better by decreasing insurance denials and reducing balance transfers to patients.
Outsourcing may help organizations to focus on their core business: senior living services.
Your facility should assess your organization’s readiness, fit and contract limitations prior to outsourcing. Here are some things to consider.
1. Be accountable. It is your facility’s ultimate responsibility to comply with all applicable rules and regulations, including HIPAA. And while signing a business associate agreement is a step in right direction, it may not guarantee peace of mind.
|•||Ask a potential vendor about data transmission, storage, sharing, access and destruction policies, as well as processes designed to monitor compliance. Question any recent breaches or unauthorized access incidents — how were they handled? As HIPAA non-compliance and unauthorized access to protected health information (PHI) may result in financial penalties and bad publicity, you should evaluate the need to consult with an expert.|
|•||Ensure the vendor knows your state’s facility licensing regulations. For example, some states prohibit charging patients or residents any collection fees. Some states or payers require refunds for any overpayments to within certain defined periods. A good vendor will meet your state’s regulations. Ask to review their standard collection forms and collection procedures and protect your organization from unexpected non-compliance tags.|
2. Communicate. Discuss what information they require, when, in what format, and how they will make corrections. In-house billing staff can normally access a resident’s medical file, whether electronic or paper, or inquire with the facility operations team regarding a particular claim. This is not the case with an external vendor.
|•||To outsource effectively, you need to designate an in-house position to respond to missing information requests promptly. Facilities operating on web-based medical records software should evaluate the risks of granting a billing vendor even limited access to residents’ electronic medical files.|
|•||Review contract terms for any up charges assessed by the vendor if your facility can’t respond to information requests in a timely fashion.|
3. Understand and agree upon the scope of the contract. Contract scope misunderstanding can have long-lasting financial implications for the facility, and result in increased bad debt. Your management team should compile a list of assumptions and agreement terms not stated clearly in the contract, and address them in a meeting before accepting the terms. At a minimum, get answers to these questions:
|•||Is the vendor submitting bills for all types of payers, levels of care and billing forms, including private, private long-term care insurance, adult day and outpatient, or only certain electronic claims?|
|•||Is the vendor responsible for notifying your organization of any delays with claim processing, payer requests for supporting medical records and any other identified administrative requests and rejections? If so, how fast and in what format?|
|•||Is the vendor responsible for assisting with regulatory compliance reporting, such as required data for a cost report preparation, audit, etc.?|
|•||What minimum quality assurance steps does the vendor apply when generating and processing claims, and how do they remedy identified issues?|
|•||Is the vendor only submitting bills or are they also working on collections?|
|•||Is the facility or a vendor responding to resident requests for additional information or questions about the billing statements?|
4. Maintain alignment with the organization’s philosophy and vision. As with any other area of operations you consider outsourcing, outsourcing billing and collections requires careful examination of its impact on customer service and community relations. If a vendor produces co-pay and private pay invoices or statements, will you have control over the format and presentation of these mailings? If a vendor is engaged to perform collections follow up, your management team needs to understand collections procedures and methods used and ensure they are a good fit with your mission.
5. Set goals and benchmarks. Your management should analyze days in accounts receivable, accounts receivable aging trends, and cash as a percent of net revenue monthly, and then meet with the vendor promptly to understand the causes of any undesired trends and work on remedial plan.
6. Understand your organization’s reasons for outsourcing. If your facility struggles with completing resident pre-admission screening, obtaining prior authorizations, or staying on top of Medicaid applications and recertifications — stop. Outsourcing is very unlikely to remedy these situations and could even make them worse. We recommend seeking the assistance of an experienced revenue cycle or process improvement consultant before outsourcing any portion of the billing and collections process.
The BerryDunn Senior Living team welcomes your feedback, and is always one phone call or email away, should your organization need to take a deeper look at revenue cycle and process improvement opportunities.