5 Questions To Ask Before Making a Revenue Cycle Technology Buy vs. Build Decision

by Phil C. Solomon on September 4, 2013

in Healthcare Technology,Revenue Cycle Management

Buy vs. Build – Is it possible to make a revenue cycle technology “no brainer” buy decision?

Revenue cycle

Should revenue cycle executives buy or build healthcare revenue cycle software? It is a question healthcare stakeholders often ask.

Are there “no brainer” revenue cycle technologies one should implement? Should a provider license a commercial application that will meet the provider’s needs or build one?

Industry experts have yielded a conclusion: Buy when you need to automate rapidly changing and complex processes, gain a speed to market and have limited access to capital budgets; build when you are dealing with a core process that doesn’t need rapid deployment and the business requirements won’t change much over time.

The reality of purchasing healthcare revenue cycle technology solutions doesn’t seem to match up with the build strategy very often. Today, hospital’s revenue cycle operations are more complex than ever. Often the rapidly changing environment in hospitals precludes developing in-house systems quickly and cost effectively. Build solutions are rapidly becoming obsolete unless the hospital has the resources to keep upgrading.

How are the best revenue cycle industry decision makers identifying the most cost-effective technologies? They perform a buy vs. build analysis.

Typically, there are five main questions revenue cycle decision makers should consider asking when making a buy vs. build decision.

1. Validate the need

Many organizations choose an enabling technology before identifying the legitimate business need. Sometimes this “cart before the horse” approach is due to current issues that require rapid deployment. To complete a successful analysis, stakeholders must confirm the business need before deciding upon the enabling technology.

2. Identify core business requirements

A core business requirement is one that is supported by the solution. If a requirement can only be partially met or not addressed by a solution, it is not a core requirement and making the decision to buy or build cannot be substantiated. IT leaders must look for the business benefit first, then a technology last.

3. Identify architectural requirements

To reduce the cost of operation and maintenance of a new technology, an organization must have established standards to which all solutions must adhere. It is extremely important to identify architectural requirements that a solution must meet before determining if an internal development project should be initiated.

4. Examine existing solutions

Once business needs are identified, ROI has been estimated, and both business and architectural design requirements are defined, leaders should now look at their existing systems.

Before deciding which new approach to take, a determination should be made if any existing system within the organization can be easily scaled or extended to meet the business need. Revenue cycle operational and IT stakeholders should determine the following prior to making any expansion or build decision:

  • Is there adequate design documentation for the internal systems?
  • Are the resources still available to support the technology?
  • Are there their adequate security measures in place to meet the new HIPAA and HITECH requirements?

5. Do you have in-house skills to support a custom solution?  Once restrictions have been identified, stakeholders should take a good look at existing systems to determine if it is cost justified to build, add on or buy a new solution. The major factor that significantly reduces the ROI of a custom-built solution (and in many cases, ultimately causes it to fail) is the lack of available personnel with proper skill sets to support it.

After reviewing the five questions of analysis listed above, and the decision to buy is made, what makes a revenue cycle technology purchase a “no brainer”?

There are several types of revenue cycle technologies that offer clear-cut reasons to buy instead of build. The current overarching clinical and business platform technologies don’t have all the needed technology modules seamlessly integrated into the platform. This leaves openings for companies who offer “bolt on” solutions.

There are many “bolt-on” revenue cycle technologies that fit perfectly into a platform and meet important revenue cycle requirements. For example; CPOE, registration quality systems, eligibility verification tools, bill estimation technologies, self-pay modeling, or POS collection tools are great examples of technologies, which solve many trickle-down workflow issues and are easy to install and maintain. Without technologies such as these and others, revenue leakage occurs that robs a hospital of the cash it needs to survive and thrive.

Those technologies that positively affect revenue cycle performance are typically easy to cost justify. For instance, a registration quality technology touches almost every downstream workflow process. If patient registration errors go unaddressed or ignored, they can have a negative impact on many revenue cycle performance metrics. Since approximately 70 percent of the data in a claim form comes from patient access registration, errors can negatively influence:

  • PFS staff time doing costly rework
  • Increased denials
  • Reduced POS collections

With registration quality solutions in place, it is not inconceivable to collect between 95% to 99% of net charges.

There are so many specialized technologies, which cannot be easily duplicated internally that it makes sense to buy from a vendor. When making a decision to buy a technology solution, consider contracting with an SaaS or cloud based platform solution. Those solutions do not require extra infrastructure products such as servers and the internal staff to support the hardware.

Many “plug and play” vendor technologies, such as registration quality, have an easily quantifiable and definable ROI. That makes those technologies attractive ways to spend capital budgets or operational cash to improve performance.

My recommendation is to go with the revenue cycle  “plug and play” vendor technology for most applications. Bolt on technology solutions offer the best “bang for the buck” and should be seriously considered. Purchasing any of the industry’s premier bolt on  solutions is truly money well spent.


Phil C. Solomon is a healthcare finance and revenue cycle B2B sales executive and marketing strategist with experience spanning two decades. Phil has expertise in the areas of healthcare technology and business process outsourcing (BPO). He is the publisher of Revenue Cycle News, a healthcare revenue cycle blog and is a featured speaker at many HFMANAHAM and AAHAM healthcare educational conferences.

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