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Market research firm KLAS released a new report on June 25, 2019, titled “Outsourced Revenue Cycle Services 2019”.  The report details interviews with 140 healthcare provider organizations regarding their experience with outsourced billing, aka revenue cycle management (RCM) or as KLAS refers to this segment Revenue Cycle Outsourcing (RCO).

Following are some of the most concerning findings from the report:

  1. One third (33%) of all respondents have buyer’s remorse
  2. 70% of Cerner outsourced billing clients (RCO) would not use Cerner again

That fully one third of providers who outsourced had buyer’s remorse is extraordinary.  Equally disconcerting is that many billing service outsourcing companies have been declining in customer satisfaction in the last 2 years, including a 10% drop for Parallon, a 13% for nThrive, and a whopping 18% drop in customer satisfaction for Cerner RCM clients.

A staggering 70% of all Cerner interviewed clients said they would not use Cerner’s revenue cycle management services again.

A frequent issue identified and cited was that even if the vendor was found to be underperforming, there seemed to be little consequences.  There was also little or no billing / RCM strategy offered.  In other words, no one was helping the providers figure out what to do in order to improve results.  Many felt like vendors were only working the low hanging fruit and were insufficiently staffed.

On the positive side, the report notes billing companies that “partner with a flexible approach” and analytics tools from that drive satisfaction although there is limited data on this.  Others have strong pre-engagement planning or offer strategic guidance based on analytics insights.


While this may be extraordinary for a billing company to say, Ibex believes one of the main conclusions one should draw from this report is that a laboratory should not outsource at all unless it finds the right billing company.  We have even sometimes counseled laboratories to keep their billing inhouse.  An example recently was of a startup lab who didn’t have a lot of volume and it was going to be difficult to find a good laboratory billing company that was willing to take a lab that had such tiny volume since there are large fixed overhead costs like a billing manager. 

This also ties directly to one of the key reasons that is misused to justify outsourcing – cost savings.  If cost savings are the motivation, often the result is unsuccessful.  Given the value equation inherent in laboratory billing (see article here), the much greater opportunity for gain (or loss) is on the collections performance side, while only small gains can be made on reducing cost.

It is worth noting that all of the provider organizations polled by KLAS were hospitals and large systems, not independent laboratories or even hospital outreach labs.


How do you ensure you select the right billing company if you are going to do it at all?  How can a laboratory ensure their billing is managed well and worked aggressively? 


First, we suggest contractual requiring transparency in the billing.  In other words, the status of the claim, when it was last worked, and what was done must be visible to the client on every single claim.  This allows the lab to ensure the billing company is not just working the low hanging fruit. 


Consequences must be in place to ensure that you are protected against the issues in the report like the fact that the revenue cycle management companies faced little consequences even if it was shown that they were underperforming or not doing their jobs.  If you want to take it one step further, you might even require the laboratory billing company to contractually commit to working AR within a certain amount of time.  For example, you could require that all Medicare claims must be worked between 21 and 60 days, appeals filed, etc… 


We believe that the lack of strategy offered to providers from laboratory revenue cycle management companies is a result of a common outsourcing mindset – “task oriented”.  If you contract with a lab RCM company, you are often just getting data entry services and people doing rote functions (check claim status, resubmit, post payment), as opposed to a thoughtful analysis of what the primary issues are, diagnosing of problems, and detailed solution plans that are executed and maintained.  This is extremely uncommon in RCM.  We suggest testing the independent laboratory billing company prior to engagement with a strategy or analytical project that enables the lab to learn more about the capabilities of the lab billing company.


Outsourcing is like a hammer, neither good nor bad, it is just a tool.  Some carpenters build beautiful homes with that hammer, while hacks put holes in walls.  Would you hire a carpenter you had never worked with to build your entire new home?  References are meaningless, you would probably test them with building something smaller first and then if they understand your requirements, communicate well, and make a great product within budget and on time, then you would hire them for the larger project.  You should do the same for an independent laboratory billing company.  In this way, you can avoid the buyer’s remorse.

About Ibex RCM

Ibex Billing is the leading analytics-based laboratory revenue cycle management (RCM) company.  We only do laboratory and pathology billing. Ibex‘s management team has hundreds of years of revenue cycle management experience. Lab billing is different than physician billing and we only do laboratory revenue cycle management. Contact us to get a sample of how our analytics will improve your financial results.

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