Business-office challenges of small and rural hospitals

Healthcare Financial Management, April, 2004

* Hales: I think everybody should consider outsourcing, and not necessarily only when you have a problem. You ought to look at it even when you think everything's hunky-dory. I think that administrators, presidents, CEOs, and CFOs have to stop feeling it's an admission of failure to outsource, or that it's a negative thing to even look at outsourcing. Outsourcing has been alive and well in information technology and in many other areas--food service, housekeeping--for a long time. Now we're starting to look at other opportunities for outsourcing. It can be a source of strength. You want expertise and continuity--qualities that sometimes someone from the outside can provide better than you can yourself. It's like a specialist versus a generalist. CFOs with whom I have discussed outsourcing said they realized they were leafing some money on the table by trying to do it all themselves.

* Massi: I would perform an investment/performance analysis. I would say, let me look at the total investment you're making in your revenue cycle in admissions and the business office. What are all the expenses in people, training, technology, and outside services? And second, what is your yield (performance)--that is, what are you getting out of this investment? I'll use this analogy: you may be getting 18 miles per gallon through your own efforts, and by outsourcing, you maybe able to get it up to 26 miles per gallon. Outsourcing the business office is a relatively new go to strategy, with fewer than 50 hospitals in the country doing it. It is often helpful to compare internal plans with those of an outsourcing firm regarding risk, speed-to-value, cost to collect, and sustainability. Then, it's important to assess which plan is more effective over the short and the long term.

* What are some of the keys to successful business-office outsourcing?

* Hales: When the business-office personnel become somebody else's employees, you should still consider them yours--"part of the family." You need to make sure there is open communication and frequent meetings and updates. You don't want to isolate the outsourcing company, as if it's an island, and have them make decisions on their own. There are some touchy subjects, such as collection methods and how to deal with people, that you need to be able to control.

* Diaz: There's nothing like having someone who has a proven track record in that particular discipline, such as billing. But at the same time, you have to understand what your goals or metrics will be for success; you have to understand your business internally, if you're going to outsource any of it. Often, people say, "We're just going to outsource the whole thing." Well, "the whole thing" is different in different organizations. Where are you spending your resources? I don't know of too many hospitals in California who just bill MediCal, Medicare, and self-pay. The average hospital probably has a minimum of 15 payers, and it can go up to 100 payers or more. Each has different requirements. That's a challenge whether you outsource or retain internal functions. If you can outsource a lot of your production, and can benchmark the process, then you should do it and focus your energies on the front end, so that your bills ultimately come out cleaner.