- Revenue cycle management has grown into a $155 billion industry in the US, and managing it in-house can overwhelm most healthcare practices.
- About 61% of providers plan to use third-party RCM solutions, driven by the need to reduce administrative burdens, gain more predictable cash flow, and handle the growing complexity of medical billing and coding.
- A typical practice needs 2.7 billing staff per physician (with other sources citing 1-2 trained billers and coders per provider), so engaging an external RCM partner can be a better option for practices too small to support those needs.
- A 2021 MGMA survey found that external billing costs just 5.4% to collect a dollar, while in-house billing can cost up to 13.7%.
- When choosing an RCM partner, providers should prioritize healthcare specialization, technology and innovation, transparency and reporting, and compliance and security, including HIPAA adherence.
Financial stability in healthcare hinges on practices securing timely, accurate payments for their services. Without reliable revenue, the broader challenges around healthcare cost, quality, and access persist — yet getting paid isn’t as straightforward as it should be.
Why more practices are engaging external RCM partners
Revenue cycle management (RCM) encompasses a maze of processes, often depicted in multi-step charts that seem more suited to an engineering manual than a medical practice. RCM has evolved into a $155 billion industry in the US, with thousands of specialists dedicated to mastering it.
For most healthcare practices, managing RCM in-house can be overwhelming. With the promise of cost savings, enhanced efficiency, and access to specialized expertise, more providers are partnering with a specialist RCM team. The industry has shifted significantly in recent years, with 61% of providers planning to use third-party RCM solutions. This shift is driven by the need to reduce administrative burdens, the desire for more predictable cash flow, and the growing complexity of medical billing and coding.
Engaging an external RCM partner essentially brings in a team of experts who specialize in navigating healthcare revenue cycles, allowing your practice to increase profitability while focusing on what matters most: patient care. Before making the move, though, you should consider whether it is the right fit for your practice.
Factors to consider before engaging an external RCM partner
1. Current in-house abilities
Assess the strengths and weaknesses of your existing RCM processes. Do you have the technology, expertise, and personnel to manage RCM effectively, and can you stay current with frequent changes in coding, billing, and payer requirements? According to the book Benchmarking Success by the Medical Group Management Association, a typical practice needs 2.7 billing staff members per physician to run smoothly, while other sources suggest 1-2 trained in-house billers and coders per provider. Partnering externally is a better option if your practice is too small to support these needs.
2. Cost-benefit analysis
Engaging an external RCM partner often proves more cost-effective. A 2021 MGMA survey found that external billing costs just 5.4% to collect a dollar, while in-house billing can cost up to 13.7%. The higher in-house cost is especially pronounced for larger practices that need bigger billing and coding teams: each additional employee brings a significant financial commitment in salary, benefits, and training, on top of ongoing investment in billing software.
3. Vendor values, experience, and reputation
An external partner can affect patient interactions, particularly billing inquiries, so choosing a vendor that aligns with your practice’s values and prioritizes patient satisfaction is vital. Research each vendor’s background and experience, and look for a track record managing physician practices similar to yours. Testimonials, case studies, and client references offer valuable insight into a vendor’s reliability and effectiveness.
What to look for in an RCM partner
Not all vendors are created equal. Here is what to look for in a partner:
- Specialization in healthcare. Choose a partner with expertise in healthcare, particularly your specific practice area, so they understand the unique challenges of your revenue cycle.
- Technology and innovation. Look for vendors who use AI-driven analytics, automated billing, and other tools that streamline processes and reduce errors, and whose systems integrate seamlessly with your existing management software.
- Transparency and reporting. Your partner should provide regular, detailed reports on financial performance, with actionable insights for your practice.
- Compliance and security. Ensure your partner adheres to healthcare regulations such as HIPAA and employs robust data security measures to protect patient information.
How to plan for a smooth transition
1. Develop a transition plan
Moving from in-house to an external RCM partner is a significant change, so create a detailed roadmap outlining timelines, key milestones, and stakeholder roles. Engage stakeholders early to ensure buy-in and address concerns.
2. Training and support
Your staff will need training on new processes and systems. Work with your RCM partner to organize sessions covering the full workflow, and confirm the vendor offers ongoing support to ensure a seamless changeover during the transition phase.
3. Data migration
Secure, accurate data migration is a top priority. Collaborate closely with your partner to plan the transfer, and consider running parallel operations during the initial phase to mitigate risk and minimize disruption to your practice.
4. Continuous monitoring and evaluation
Once the transition is complete, the work doesn’t stop. Establish a system for ongoing monitoring and evaluation, and regularly review key metrics to ensure the arrangement continues to meet your needs and supports your financial goals.
Knack RCM’s revenue cycle support for physician practices
Choosing the right approach to RCM is crucial for your practice’s success. While keeping RCM in-house offers a certain level of control, partnering with experts like Knack RCM can deliver significant advantages in cost savings, efficiency, and accuracy. With over 15 years of experience, Knack RCM has been a trusted partner for healthcare providers, helping them streamline billing, accelerate payments, and maximize revenue. By leveraging Knack RCM’s comprehensive RCM solutions, you can focus on what matters most — providing excellent care — while the complexities of billing and collections are handled for you.
Frequently asked questions
Why are more physician practices partnering on RCM?
Revenue cycle management has grown into a $155 billion US industry, and managing its maze of processes in-house can overwhelm most practices. About 61% of providers plan to use third-party RCM solutions to reduce administrative burdens, gain more predictable cash flow, and handle the growing complexity of medical billing and coding.
Is an external RCM partner cheaper than in-house billing?
A 2021 MGMA survey found that external billing costs just 5.4% to collect a dollar, while in-house billing can cost up to 13.7%. The in-house cost gap is especially pronounced for larger practices that need bigger billing and coding teams and ongoing software investment.
How many billing staff does a typical practice need?
According to the Medical Group Management Association’s book Benchmarking Success, a typical practice needs 2.7 billing staff members per physician, while other sources suggest 1-2 trained billers and coders per provider. Practices too small to support these needs may benefit from an external RCM partner.
What should I look for in an RCM partner?
Prioritize healthcare specialization in your practice area, technology and innovation such as AI-driven analytics and automated billing, transparency with regular detailed financial reporting, and compliance and security including HIPAA adherence and robust data protection.
How do I plan a smooth transition to an external RCM partner?
Develop a detailed transition roadmap with timelines, milestones, and stakeholder roles; arrange staff training and confirm ongoing vendor support; plan secure data migration and consider parallel operations early on; and establish continuous monitoring of key metrics after go-live.