Intermountain joins outsourcing trend for revenue-cycle management
As providers continue to look for ways to cut operating costs and boost their top lines, more are handing over their bill collection and claims processing business to the experts rather than managing it in-house.
The most recent example is Salt Lake City-based Intermountain Healthcare, which last week announced it will outsource 2,300 nonclinical employees to revenue-cycle management company R1 RCM, a move that is expected to save the integrated health system $70 million over the next three years.
The transition is part of a new 10-year partnership that will shift claims and payment management responsibilities along with nearly 6% of Intermountain’s workforce to Chicago-based R1. Intermountain has been working with R1 since 2011.
The affected registration clerks, billing specialists, scheduling staff and other administrative workers will keep their jobs and rate of pay, but will be employed by R1 beginning in April. In most cases, employees will continue to work at their current location, Intermountain said. The system currently has 39,000 employees at 22 hospitals and 180 clinics located primarily in Utah. Intermountain and RI did not address whether the transaction would eventually lead to any layoffs.
“R1 plans to invest in the Salt Lake market as it builds its Center of Excellence. This COE will help improve operations by optimizing support of Intermountain’s enterprise with expertise concentrated in a single geographic footprint and is expected to create hundreds of jobs in Utah over the next three years,” R1 said in a statement.
Providers across the country are shedding ancillary business segments amid softening inpatient admissions, lower reimbursement levels and rising labor, compliance and drug costs. Tenet Healthcare Corp. is one example as the investor-owned health system aims to sell its revenue-cycle management business Conifer Health Solutions.
Explaining what patients owe and improving the bill collection process has become a priority as providers look to offset some of those cost pressures and as patients pay for more of their care amid the proliferation of high-deductible health plans.
As patients become more conscious consumers, providers often find gaps in their customer service and technical proficiency in billing matters, said John Behn, president of Stroudwater Revenue Cycle Solutions. Outsourcing revenue-cycle services can help satisfy that demand and do so cost-effectively and efficiently, he said.
“I don’t think it’s a trend that is going to stop,” Behn said. “Outsourced groups that are taking these services on are becoming far more customer savvy and responsive to clients.” Intermountain is likely expecting costs per claim to drop and revenue per claim to rise, Behn added.
Michael Duke, principal of advisory firm Baker Tilly, which recently launched its Revenue Cycle Innovation Center, offered a different take. Providers have made significant investments in their electronic health records and don’t have the appetite to invest in additional software, he said. Eventually, revenue-cycle management will shift back to an internal service, Duke said.
A recent Black Book survey of staff from more than 4,000 hospitals across the country found that around 35% of small hospitals, 15% of large hospitals and 14% of community hospitals planned to outsource their revenue-cycle management. The survey also found that 94% of hospital chief financial officers listed revenue-cycle management as a top priority, given the growth in value-based reimbursement. More than 90% of survey respondents said they were also looking for revenue-cycle management solutions that helped them address population health and alternative payment models.
That was one of the goals of Quest Diagnostics’ 2016 move to outsource its revenue-cycle services to UnitedHealth Group subsidiary Optum. Just like with Intermountain, Optum hired Quest’s 2,400 revenue-cycle employees.
Shifting Intermountain’s employees to a large employer that specializes in these services will help slow the rise of medical costs and benefit patients, In-
termountain Chief Operating Officer Robert Allen said.
“The $70 million will help us bend the inflation curve in healthcare. The savings will allow us to manage rate increases going forward,” Allen said, adding that new jobs will be coming to Utah.
As part of the agreement, R1 and Intermountain will create a revenue-cycle management product-development and technology center (its Center of Excellence) in Salt Lake City, the system said. Intermountain currently has a regional focus for revenue-cycle management operations and consolidating them into a fully integrated model across its inpatient and preventive-care settings will help reduce costs while optimizing operational efficiency and quality, executives said.
“As we look toward providing the highest value at the lowest cost, transitioning our revenue-cycle operations to R1 is a critical part of this evolution,” Intermountain Chief Financial Officer Bert Zimmerli said in a news release.
In late 2015, R1 was given a lifeline by Ascension Health and private equity firm TowerBrook Capital Partners. Together they bought a 40% stake in what was then called Accretive, which was posting huge losses. The company had been cutting jobs as it posted net losses of $79.6 million and $84.3 million in 2014 and 2015, respectively. The organization made a significant turnaround in 2016 when it reported $177.1 million in net income. But through three quarters of 2017, R1 posted a net loss of $18.6 million as restructuring, technology and labor costs have bogged the company down as it prepares for future growth.
Ascension and Intermountain recently announced they were partnering with SSM Health and Trinity Health and working with the U.S. Veterans Affairs Department to create a generic-drug company—yet another move aimed at cutting costs. While the ultimate impact is uncertain, they look to combat the unexpected price hikes of long-standing generic drugs and mitigate shortages.
Intermountain is also reorganizing its management framework, replacing its geographically defined administrative regions with a systemwide structure made up of community- and specialty-care divisions to streamline communication, improve quality and cut costs, executives said.