Hospital Business Office Outsourcing: Future or Fad?

During recent years, hospitals have achieved financial success with outsourcing departments like Emergency Physicians and Food Services. Richard Shedden explains that the hospital business office will be the next area to experience successful outsourcing.

Hospital Business Office Outsourcing: Future or Fad?

by Richard L. Shedden CPA, MBA, FHFMA
President & Chief Operating Officer
Healthcare Management Resources

What do the following hospital departments have in common: Dietary, Maintenance, Housekeeping and Pharmacy? The answer: a high percentage of these departments have traditionally been outsourced to companies who make their living providing expertise in these areas.

The latest hospital service to join this list of functions suitable for outsourcing is the Business Office. Heresy, you say. Why thats never been done before. How could you possibly outsource something as hands-on as the Business Office?"

With the reimbursement dollar shrinking to all time lows, the high degree of complexity in billing (compliance issues, APCs, HIPAA and a multitude of other hurdles), and the scarcity of qualified labor, why shouldnt consideration be given to placing such a critical component of a hospitals operations in the hands of a company that specializes in the conversion of receivables into cash?

There was a recent article by a healthcare consultant who hypothesized that in order to survive, hospitals would be forced to outsource virtually all non-patient functions, thus focusing precious resources (both monetary and human) on the mission-critical aspects of operations. In fact, it is projected that healthcare outsourcing will grow at an annual rate of fifteen percent over the next few years.

Business Office functions (or Primary Business Office-PBO for short) can be outsourced in the truest sense of the term, i.e. the majority of the work can be done off-site. With the exception of admitting/registration, the remaining functions can be performed from a remote location with the outsourcing company having real-time access to the hospitals information system.

This enables the PBO to bill and follow-up remotely, with no download delays or problems and at the same time freeing up critical space at the hospital. Hospitals as divergent as small rural hospitals (Bolivar Hospital in rural Bolivar,TN) and large inner-city hospitals (Michael Reese Medical Center in Chicago,IL) have made the leap to full outsourcing of their business offices. It is no overstatement to refer to this decision as a paradigm shift due to the radical departure from tradition.

What should a hospital look for in an outsourcing partner? Obviously a proven track record in receivables management is paramount, coupled with the human and technological resources to effectively handle the full spectrum of business office functions. Keep in mind that full outsourcing requires resources that go far beyond those required of traditional clean-up engagements. The company selected should be financially stable with solid leadership and sensitivity to the specific needs and objectives of the healthcare institution.

Full outsourcing is more than a client/vendor relationship. It is more like a marriage with both partners working toward the good of the relationship. Open, honest and frequent communications are a must to ensure success. It is not a panacea, but properly structured, it offers an excellent alternative to the traditional hospital business office structure.