Before Hiring a Revenue Cycle Firm

Devika Kumar, for HealthLeaders Media , January 7, 2008

Imagine you are on a plane, seated in row 13F, and everything is going smoothly until the pilot makes an unexpected announcement. "Good afternoon, folks," he says. "We've reached our cruising altitude of 31,000 feet, but we have a situation. There's a problem with the wing, but not to worry. The passenger in 13F is going to take care of everything."

As a financial manager, you may sometimes feel like you are in a similar scenario. You are the person everyone expects to solve all of the revenue cycle problems, but you may not have the tools or background to fix all the problems. This is precisely when it's appropriate to take a hard look at your situation and ask if it's time to bring in outside resources. Before you do, you should consider these 10 variables:

No. 10. The who, what, when, where and why of hiring a revenue cycle consulting firm. Ask yourself the following questions: Whom will you hire? Do you need someone with a particular specialty? What will make your success sustainable? When will you need their help? What is the expected timeframe of the project? Will it be ongoing? Where will you meet to discuss the parameters of the project with potential vendors? How often will you meet before you make a decision? Why do you think you need to outsource?

No. 9. Take a hard look at your current situation. Before you begin the process, it's crucial to be honest with yourself and your team and ask the hard questions. Define the core problem and ask yourself if you have the people on your "airplane" to help you fix the problem. Use your internal resources to make some decisions about where you are and where you need to be.

No. 8. Know when a consulting firm is not necessary. Obviously, a consulting firm probably is not necessary if your cash is on target, you have 98 percent collection of your accounts receivables, and you have established a proactive revenue cycle team that is dedicated to continuous improvement of the revenue cycle process.

No. 7. Ensure revenue cycle engagement success. From the consulting firm's standpoint, an on-site champion--someone who will drive the process--is key. From an internal standpoint, you must identify all stakeholders and make sure you have their buy-in. Make sure appropriate levels of communication and collaboration between departments are in order.

No. 6. If you need help, decide what kind of firm you should hire. What kind of firm you hire depends on your specific needs. Do you have a tools-related issue or a process-related issue? Both? There are firms that specialize in each type of situation.

No. 5. Identify all of the pieces in your revenue cycle. Consider all of the segments involved in the revenue cycle. These could include:

  • Business office/accounts receivable performance
  • Admitting and registration
  • Finance and reimbursement
  • Case management
  • Health information management
  • Managed care contracting and administration
  • Coding and charge description master
  • Information technology
Additional pieces to consider that often fall into the clinical revenue cycle:
  • Clinical/nursing unit performance
  • Clinical documentation
  • Bed control and patient placement
  • Patient flow and levels of care monitoring
  • Resource management and denial prevention

No. 4. Consider which portions of the revenue cycle need to be outsourced. Examine all of the aspects of operations that point to revenue or cash flow. Pieces that may need to be managed by an outsourcing agency include Medicaid eligibility, bad debt, business office function, coding, chargemaster maintenance, and managed care contracting.

No. 3. Find a good fit. You have to be able to work closely with your consulting firm, so you should ensure that it will be a good fit for both parties. Before hiring a firm, take the time to fully investigate their experience in the specific areas that you are interested in. Do they have the background and hands-on achievement experience you need?

No. 2. Consider personalities. If the consulting firm breezes in with a condescending attitude, the stakeholders will quickly retreat. Conduct multiple face-to-face meetings to gauge the personalities of the consultants you will be working with. When checking references, find out whether the company has worked in a facility like yours with similar problems. What were the results? Would that facility bring the firm back again? Did the consultants provide a process to ensure sustainable results?

No. 1. Know what to expect. Based on the firm's experience, know what kinds of gains are possible as a way to set goals. For example, one consulting firm showed the following results in a medium-sized hospital in the Southeast:

  • Late charges fell from monthly high of 1,300 to less than 200
  • Accounts receivable days decreased from 75 to 35
  • Improved collections by 18 percent resulting in a $5.9 million cash infusion over 12 months
  • An increase in coding accuracy resulted in $1.2 million boost to the annual bottom line
Keeping all of these points in mind will help you ensure that hiring a revenue cycle consulting firm will be a successful engagement for both your staff and the hospital as a whole. Good luck, and remember, you are sitting in 13F, which means that it's up to you!
Devika Kumar is associate vice president of revenue cycle solutions for QHR Consulting Services in Brentwood, Tenn. Kumar may be reached at

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