In today’s business environment, the Healthcare industry has been slower to adopt outsourcing strategies than mainstream industries. There is an emerging shift towards industry-wide acceptance of outsourcing as a core operational strategy. Gartner Research Inc. estimates healthcare executives spend about twenty percent of their budget on external sourcing options, compared to the general mainstream industries, which typically invest about a third of their budget on external sourcing. Gartner also estimates that seventy percent of healthcare organizations who do choose to outsource meet or exceed their cost-savings expectations, and most see an improvement in services as they shift their non-core functions to experts.

For the healthcare revenue cycle, outsourcing spending is focused on several key areas, including but not limited to:

General IT
Operational Business Intelligence
Self-Pay Early Out
Eligibility Verification
Medical Necessity
Billing Follow-up
Bad Debt
Medical Records Storage
Patient Records Transcription
Diagnostic Services

Because of political pressure, in 2011 healthcare outsourcing will continue to see significant gains. Thanks to the American Recovery and Reinvestment Act of 2009 (ARRA, the economic stimulus package for the U.S. economy), healthcare reform, and the Health Information Technology for Economic and Clinical Health Act (HITECH), the next five years will see a rise in outsourcing of all segments in the healthcare industry. With new money in hand, executives will be held accountable for their decisions. They must ensure the money and resources spent will be leveraged fully, returning the expected ROI.

It is anticipated that spending outlays will vary by facility size and system affiliation. Historically, facilities with larger footprints and decentralized organizations tend to rely more on outsourced partners while smaller hospitals rely more on internal resources. This trend is changing. All sized facilities are jumping on the revenue cycle outsourcing bandwagon and are expected to leverage both IT and revenue cycle outsourcing cost reductions and economies of scale. The drivers for this shift in strategy are due in part to the margin pressure smaller facilities are under and the need to cut costs, improve operational efficiencies while maintaining superior patient satisfaction.

Healthcare revenue cycle executives have numerous sourcing strategies from which to choose. Utilizing a U.S. based local, regional or national revenue cycle outsourcer has been the typical choice for executives. With today’s technology, especially in the services sector, it is less important to contract with a local provider than choose the best-in-class provider regardless where their business operation is located.

The History of Healthcare Revenue Cycle Outsourcing

The term “Outsourcing” did not enter the English-speaking lexicon until the early 1980s. Since the 1980s, the first wave of outsourcing by transnational corporations increased subcontracting across national boundaries. In the U.S., outsourcing has become a popular political issue, driven by poor economic times and localized job losses. Even with local and national pressure to ban outsourcing, cost reduction and cost containment strategies have led executives to consider offshore and nearshore outsourcers as alternative sources of less-expensive labor.

This emerging outsourcing trend has experienced some challenges and PR issues over the past ten years. In the early 2000’s, many large mainstream companies chose to outsource customer service and IT help desk services to India and the Philippines. They experienced customer fall out due to the poor service and cultural misunderstanding of the offshore companies. They just did not know how to serve the American consumer in the style they had become accustomed to. In fact, companies like Dell Computers and Delta Airlines moved much of their call center operations from overseas locations back to the U.S. for this reason. Early on, some healthcare providers took the leap and jumped on the overseas or offshore outsourcing strategy. The leading driver for moving work offshore was a better economy of scale than in the U.S., reduced labor costs and large labor pools of educated and qualified personnel. Over the past ten years, some providers have utilized IT, technical, back office, billing, coding and other outsourcing services from Philippine, and India based companies. Those who have worked with overseas or offshore companies have experienced mixed results.

The decision to outsource revenue cycle management activities is a complex one, with many options. Learn more about learn more about the technology and services of near shore and U.S. based revenue cycle management outsourcing, or contact Phil C. Solomon at

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