Value based reimbursement drives more physicians to opt for outsourced RCM services

Despite widespread adoption of basic RCM solutions, most US physician practices still grapple with abysmal operating margins, resulting from poor A/R performance and high average denial volumes. Most, on the way to accountable care, largely attribute this inefficiency to their core incompetency   of implementing value-based RCM pathways. These pathways require heavy investments on RCM IT for efficient claims processing and mandate deployment of experienced RCM staffs for optimizing collection of risk-based revenue and improving patients’ payment experience.

Most hospital-owned large practices that embrace various alternate payment models also acknowledge the need to deploy next-generation RCM solutions capable of digitizing the entire billing ecosystem amid growing adoption of payer contracts with specific provisions for efficient claims management. There is also the need to bring on new capabilities to meet the increasing financial responsibility of patients with co-insurance and large deductibles.

Due to such complexities associated with payment reform, the US ambulatory RCM market is poised to embark upon comprehensive RCM outsourcing. Today, many ambulatory providers are showing a keen interest in a range of outsourced RCM services as they prepare to attribute more net patient revenue to care quality or outcomes. Top business objectives driving the adoption of next-generation RCM services include:

· Digitizing the value based revenue pathway

· Payer specific regulatory compliance and  centralized management of outcomes metrics

· Elimination of preventable operational expenses by streamlining result owners’ accountabilities

· Prioritized placement of RCM staff across the payment value chain for better collection

· Automation of financial pre-adjudication for reducing denial volume and

· Optimization of patient satisfaction through efficient management of financial coverage

As a result, the importance of external RCM services is gaining favor among certain ambulatory physicians. These providers are likely to prioritize procurement of outsourced RCM services based on implementation evidence and cost/benefit benchmarks. Hence, going forward, physician practices are expected to rely on RCM service vendors who provide proven expertise in optimizing financial performance through error-free clinical documentation, successful ICD-10 transition, automated payment preauthorization and robust RCM analytics.

Naturally, pricing for external RCM services is going to play a key role for ensuring value and profitability. The most widely accepted pricing model remains collection-based (monthly fee as % of net collection) as many practices are encountering higher gaps between total claims and net collection due to factors such as uncollectable debt, untimely filing, and various other non-contractual adjustments.

The best performing physician practices largely consider a pre-fixed rate (based on payer mix, specialty, and required level of RCM automation) through which all RCM services, necessary for improved net collection, can be procured. This is widely acknowledged as a pricing best practice for billing solutions but the adoption of this best practice is not prevalent due to the maturing service capability of US based RCM vendors who are not strategically prepared to enable this. Both providers and vendors need to devote strategic attention to procurement and pricing respectively in order to thrive in this market.


About the author:  Koustav has several years of experience working with global CXOs on forming growth strategies, product strategies and competitive assessment. In his current role as Senior Analyst for Frost & Sullivan’s Connected Health practice, Koustav advises healthcare ecosystem players including healthcare IT providers, hospitals, and ACOs on value based care and population health management strategies.