revenue cycle review

Dispelling ASC Myths: Outsourcing revenue cycle management is more expensive

 

The Myth: Outsourcing our center’s revenue cycle management (RCM) will be more expensive than handling RCM internally.

The Truth: Outsourcing RCM can actually be more cost effective for ambulatory surgery centers (ASCs) after taking into consideration reductions in internal costs (salary, benefits, training, overhead) and potential increases in revenue from improved collections.

The Evidence: The myth that outsourcing RCM is less cost-effective often comes from the preconceived notion that ASC RCM charges are similar to physician RCM charges in the neighborhood of six to eight percent or higher. In reality, revenue cycle service fees average between three and five percent of monthly net revenue. Even at this more reasonable rate, some ASC’s may still argue that staff salaries for performing billing and collections internally would still be more cost effective. What gets obscured however are two important factors, the additional loaded costs of insourcing as well as the top line benefits of outsourcing.

As an example, let’s compare the cost of insourcing versus outsourcing for an ASC that produces 2 million dollars in revenue annually including two staff members handling billing and collections:

Insourcing costs would not only include this staff member’s salary, but would also include social security, Medicare, and unemployment contributions as well as employee healthcare costs. Overhead, IT costs, and training must also be factored in, along with succession planning costs including recruiting, interim coverage and potential revenue lag. Let’s not forget the intangibles that are even harder to measure, like the impact of employee time off, which could delay claim submissions for several days or burden other employees with shared responsibilities, directly impacting their primary job functions.

Solely based on reduction in costs, the center may be able to realize annual savings by outsourcing billing and collections. Once you factor in annual collection improvements from the RCM provider, which conservatively may average between two and five percent, the total annual financial improvement becomes even more compelling in the outsourcing scenario.

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