Revenue Cycle BPO – Will Healthcare Providers Flourish Without It?

by Phil C. Solomon on June 18, 2012

in BPO,Business processing outsourcing

Revenue cycle executives have an opportunity to reinvent/rediscover the economics that BPO could bring to their organization.

Many hospitals today are considering outsourcing large segments or all of their business office functions. Most healthcare providers have outsourced a portion of the revenue cycle, such as those tasks, which are highly complicated or require advanced knowledge or certification to fulfill, such as collection agency activity. In addition, several routine revenue cycle or back-office functions, such as statement delivery, payroll processing, credit card authorizations, payment posting and many other functions are routinely outsourced. When areas of the business operations are outsourced, the terminology typically used to describe the activity is business process outsourcing (BPO).

Many facilities struggle with filling select internal positions, which are difficult to hire for because their local talent pool lacks the expertise or the facility cannot support the pay scale required for those positions. These business office issues just scratch the surface of the operational dilemmas faced by healthcare CFOs and revenue cycle executives all across the U.S. There is immense pressure to maintain operational excellence while reducing full-time equivalent headcount, keeping capital budgets in check and meeting new reduced budget targets. That said, BPO services offer attractive financial alternatives to help executives the costs vs. delivery of services.

Those who are contemplating outsourcing non-clinical areas such as self-pay collections or insurance follow-up have many outsourcing partners to choose. Since modular or partial revenue cycle outsourcing has become so prevalent, healthcare providers now are able to take advantage of advanced technology, which allows monitoring of the outsourcer’s work regardless of the locale. The aperture has opened, with more options available; providers no longer are concerned with the location of their partner, now they can select the partner who fits best culturally and provides the highest return on investment.

Those who are seriously considering outsourcing the entire revenue cycle are challenged by selecting a credible partner. The total revenue cycle outsourcing concept is seen as the “next frontier” in the operational evolution of the hospital. While not widespread in practice today, the possibility of outsourcing all or significant components of the revenue cycle is becoming a more common topic of discussion among revenue cycle executives.

A few pioneering organizations are now using their own central business office (CBO) operations to serve other hospitals, thereby monetizing their existing CBO infrastructure. One notable newcomer to this segment is HCA’s subsidiary, Parallon Business Solutions (Parallon). HCA has always been known throughout the industry as a leading healthcare provider. Now Parallon is making available its world-class revenue cycle operations to other hospitals as an alternative to the traditional operating business model. This trend is heating up.

Recently, the Nashville based LifePoint Hospitals; a 50-hospital system tapped Parallon to provide its nonclinical business functions for them. Companies such as Parallon are definitely in the minority, but others will emerge as the business concept becomes more widely known and proven.

For those thinking of outsourcing for the first time or those deciding to increase the scope of their current engagement, consideration must be given to the advice offered by Gartner’s fifth annual publication of “Gartner on Outsourcing”: “According to a study done by Gartner, to avoid unsatisfactory outsourcing relationships, organizations of all sizes must develop sourcing and vendor management competency and invest internal resources accordingly.” To ensure success, providers must prepare the entire organization for the upcoming impact of outsourcing key business functions. All stakeholders must clearly understand – when outsourcing, you can outsource responsibility, but you can never outsource accountability.

Here are 10 key points worth  considering before engaging in any BPO project:

  1. The first question that should be asked: Can your organization really “let go”?
  2. You must spend time to understand what makes you and your organization exceptional, and what your core competency is. Any other business function is a candidate for outsourcing
  3. Know why you are considering outsourcing.   Are you outsourcing for cost savings or for service improvement?
  4. Select your BPO service provider not just on cost, but on best fit for your organization
  5. Consider experience, culture and the BPO provider’s leadership team
  6. Invest sufficient time in getting the contract right and keep it simple. Clear contractual arrangements will create less disputes or misunderstandings
  7. Consider creating your performance and expectation model together with your BPO partner. This will ensure performance aligns to expectations
  8. Flexibility and the ability to rapidly adapt to changing environments is the key to success and longevity in BPO arrangements
  9. Consider aligning incentives to meet the desired outcomes
  10. Ensure a decision process is in place to enable quick changes in processes
  11. Ensure you can easily take action on your BPO engagement while satisfying your current business needs. Making a transition to a new operational model does not mean your business should stand still while you are making implementation decisions

Healthcare providers have an opportunity to reinvent/rediscover the economics that BPO could bring to their organization. The dire financial situation plaguing many healthcare providers today is only going to become more challenging in the coming years. The current stagnation of our economy and the impending implementation of healthcare reform will further complicate an already difficult scenario. The time has come when the survival of healthcare providers as we know today may rest on the decision “for or against” choosing outsourcing as an operational alternative.

For more information or consultation about the options of outsourcing operational functions through BPO, contact Phil C. Solomon at or call 404-849-8065.


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