RCM Solutions Guide: In-House vs Outsourced vs Software

Complete Comparison for Healthcare Practice Decision-Makers

Selecting a revenue cycle management solution is one of the most crucial decisions that medical practice owners and administrators must make today. The stakes were high as practices would lose an average of $125,000 a year because of inefficient RCM processes. Whether you are thinking about medical RCM software, outsourced RCM services, or optimizing your in-house operations, this comprehensive guide will enable you to make an informed decision that is going to optimize the profitability of your practice as much as possible.

The healthcare revenue cycle environment has changed in recent years in a drastic way. There are more complicated payer requirements, an increase in the volume of patient responsibility, and staffing issues that render the traditional RCM methods ineffective. It is crucial to comprehend what you have and the right RCM solutions for the healthcare practices of your size and specialty to achieve financial success in the long term.

Complete Solution Comparison Matrix

In-House Revenue Cycle Management

What It Involves: In-house RCM implies that all of the revenue cycle activities are managed by your practice, including patient registration and ultimate payment collection. This method enables you to have full control of the process, employees, and technology choices.

Advantages:

• Direct Control: Complete oversight of all RCM processes and staff

• Practice-Specific Customization: Workflows that are specifically made to match your requirements

• Staff Knowledge: Team is aware of your providers and your patient population

• Immediate Communication: Direct access to the billing staff for questions

• No Data Sharing: Patient data stays completely in your practice.

Disadvantages:

• High Staffing Costs: The average RCM staff cost is 45,000-65000 per FTE

• Technology Investment: EHR, practice management, and billing software prices

• Training Requirements: Ongoing education on coding updates and payer changes

• Scalability Challenges: Hard to handle volume fluctuations

• Compliance Responsibility: Full accountability for regulatory compliance

• Expertise Gaps: May lacks expertise in situations of complexity

Total Cost Considerations:

• Staff salaries and benefits: $150,000 -300,000 per year on mid-size practices

• Licensing and maintenance of technology: between $20,000-$50,000 in a year

• Training and education: $5,000-$15,000 yearly

• Office space and office equipment: $10,000-$25,000 per year

• Total Annual Investment: $185,000-$390,000

Medical RCM Software Solutions

What It Involves: The medical RCM software offers technology platforms that automate and simplify the processes of the revenue cycle and also retain in-house staff to administer the operations.

Popular Software Categories:

• All-in-One Practice Management Systems: Epic, Cerner, athenahealth

• Specialized RCM Platforms: AdvancedMD, Kareo, DrChrono

• Billing-Focused Solutions: CollaborateMD, NueMD, CureMD

• Enterprise Solutions: eClinicalWorks, NextGen, Allscripts

Advantages:

• Process Automation: Less manual data entry and errors

• Improved Efficiency: Workflow automation improves productivity

• Better Reporting: Live analytics, performance dashboard

• Scalability: Software can grow with your practice

• Regular Updates: Automatic compliance & feature updates

• Integration Capabilities: Connects with EHR and different systems

Disadvantages:

• Learning Curve: Staff training needed for new systems

• Ongoing Costs: Monthly subscriptions can be important

• Customization Limits: May not fit unique practice workflows

• Technical Support Dependency: Reliance on vendor support

• Data Migration Complexity: Challenging to switch systems later

• Still Requires Expertise: Software does not remove the need for skilled staff

Pricing Models and Costs:

• Per-Provider Monthly: $200-$600 per provider, per month

• Percentage of Collections: 2-6% of collected revenue

• Transaction-Based: $0.50-$2.00 per claim processed

• Implementation Costs: $10,000-$100,000 depending on complexity

• Training and Setup: $5,000-$25,000 initial investment

Outsourced RCM Services

What It Involves: Outsourced RCM services refer to the process in which you contract with a specialized firm that performs your complete or partial revenue cycle management with their employees, technology, and experience.

Service Levels Available:

• Full RCM Outsourcing: Complete RCM

• Billing Services Only: Claims processing and payment posting

• Denial Management: Denied claim management

• Patient Collections: Concentrate on patient responsibility amounts

• Coding Services: Professional medical coding support

Advantages:

• Expertise Access: Specialists in coding, billing, and collections

• Cost Predictability: Typically, a percentage-based pricing model

• Technology Included: Advanced RCM software and tools provided

• Scalability: Simple to scale services with practice requirements

• Compliance Support: Vendors maintain regulatory expertise

• Performance Guarantees: Most of them provide collection rate guarantees

• Reduced Staff Management: No hiring, training, or managing RCM staff

Disadvantages:

• Less Direct Control: Dependence on vendor performance

• Communication Challenges: May needs a better structured communication

• Data Security Concerns: Data disclosure to a third party

• Contract Terms: Long-term agreements can restrict flexibility

• Cultural Fit: Vendor staff may not understand the practice culture

• Transparency Issues: Less visibility into day-to-day operations

Typical Pricing Structure:

• Percentage of Collections:4-8 percent of the revenue collected

• Setup Fees: $5,000-$15,000 for implementation

• Monthly Minimums: $2,000-$10,000 depending on practice size

• Performance Incentives: Bonus payments for exceeding benchmarks

Cost-Benefit Analysis by Practice Size

• Small Practices (1-5 Providers)

• Annual Revenue Range: $500,000 - $3,000,000

• Recommended Solution: Cloud-based or outsourced RCM Services or Software

Analysis: Small practices are usually not high enough to warrant in-house RCM teams to the full extent. The skills and technology expenses are quite expensive in comparison to practice earnings.

Outsourced RCM Benefits for Small Practices:

• Access to enterprise-level technology at a fraction of the cost

• Skilled staff without hiring and training costs

• Immediate access to specialized knowledge

• Predictable monthly costs as a percentage of collections

• No technology maintenance or upgrade responsibilities

Cost Comparison for $1.5M Annual Revenue Practice:

• In-House: $120,000-$180,000 annually (8-12% of revenue)

• Software Solution: $60,000-$90,000 annually (4-6% of revenue)

• Outsourced: $75,000-$120,000 annually (5-8% of revenue)

ROI Considerations: Outsourced services are often associated with a 10-15% increase in collection rates of small practices, which can easily cover the cost of the services.

Medium Practices (6-15 Providers)

• Annual Revenue Range: $3,000,000 - $10,000,000

• Recommended Solution: Hybrid Approach or Full Outsourcing

Analysis: The needs of the medium practices are more complex and high in volume, which can support either an in-house sophisticated work or a fully outsourced solution

Hybrid Approach Benefits:

• Keep patient-facing functions in-house

• Outsource the complicated billing and denial management

• Maintain control while accessing expertise

• Flexible cost structure based on services used

Cost Comparison for $6M Annual Revenue Practice:

• In-House: $300,000-$450,000 annually (5-7.5% of revenue)

• Software + Staff: $200,000-$300,000 annually (3.3-5% of revenue)

• Outsourced: $240,000-$360,000 annually (4-6% of revenue)

• Hybrid: $180,000-$300,000 annually (3-5% of revenue)

Key Decision Factors:

• Specialty complexity and coding requirements

• Payer mix and contract complexity

• Current staff expertise and retention

• Technology infrastructure and integration needs

Large Practices (15+ Providers)

• Annual Revenue Range: $10,000,000+

• Recommended Solution: Outsourcing or an In-house team of specialists for Enterprise Software

Analysis: The large practices are also able to sustain extensive in-house operations due to their volume, but also enjoy the expertise and technology of the specialized RCM companies.

Enterprise Considerations:

• Complex multi-location management

• Sophisticated reporting and analytics needs

• Integration with multiple systems and specialties

• Regulatory compliance across different states/regions

Cost Comparison for $15M Annual Revenue Practice:

• In-House: $600,000-$900,000 annually (4-6% of revenue)

• Enterprise Software: $450,000-$750,000 annually (3-5% of revenue)

• Outsourced: $600,000-$900,000 annually (4-6% of revenue)

• Strategic Considerations: Large practices ought to consider the basis of core competency focus, growth plans, and technology infrastructure, as opposed to cost.

Implementation Timelines & Resource Requirements

Software Deployment Timeline

Phase 1: Planning and Preparation (30-60 days)

• Software selection and contract negotiation

• Technical requirements assessment

• Staff training schedule development

• Data migration planning

• Integration testing with existing systems

Phase 2: Implementation and Training (60-90 days)

• Software installation and configuration

• Data migration and validation

• Staff training and workflow development

• Similar testing with the current system

• Go-live preparation and help

Phase 3: Optimization and Monitoring (30-90 days)

• Performance monitoring and adjustment

• Additional staff training as required

• Workflow refinement based on initial outcomes

• Full system integration fulfillment

• Performance benchmark establishment

• Total Timeline: 4-8 months for complete implementation

Resource Requirements:

• Project manager (internal): 20-40 hours per week

• IT support: 10-20 hours per week during implementation

• Staff training time: 40-80 hours per employee

• Vendor support: Included in most implementations

Outsourcing Transition Process

Phase 1: Vendor Selection and Contracting (30-45 days)

• RFP process and vendor evaluation

• Contract negotiation and service level agreements

• Security and compliance reviews

• Implementation planning and timeline development

Phase 2: Data Transfer and Setup (30-60 days)

• Patient and payer data transfer

• Historical claims analysis and cleanup

• Vendor staff training on practice specifics

• Communication protocols establishment

• Workflow integration planning

Phase 3: Go-Live and Transition (30-45 days)

• Gradual service transition or full cutover

• Close monitoring of performance metrics

• Issue resolution and process refinement

• Staff communication and change management

• Performance baseline establishment

• Total Timeline: 3-5 months for complete transition

Resource Requirements:

• Practice liaison (internal): 10-20 hours per week

• Clinical staff input: 5-10 hours per week during setup

• Administrative coordination: 15-25 hours per week

• Minimal IT involvement required

In-House Optimization Implementation

Phase 1: Assessment and Planning (30-45 days)

• Current state analysis and gap identification

• Staff talents assessment and training needs

• Technology evaluation and advancement planning

• Workflow redesign and optimization

• Performance target setting

Phase 2: System and Staff Development (60-120 days)

• Technology implementation or upgrades

• Staff hiring and training programs

• New workflow implementation and testing

• Performance monitoring system setup

• Quality guarantee process development

Phase 3: Ongoing Optimization (Ongoing)

• Continuous performance monitoring

• Regular staff training and development

• Technology updates and maintenance

• Process refinement and improvement

• Benchmark tracking and reporting

• Total Timeline: 3-6 months for initial optimization, ongoing effort required

Resource Requirements:

• Practice manager oversight: 25-40% time allocation

• New staff hiring: 2-6 FTE depending on practice size

• Training investment: $10,000-$50,000 annually

• Technology upgrades: $20,000-$100,000 initial investment

Performance Metrics & Expected Outcomes Days in Accounts Receivable (A/R) Improvements Industry Benchmarks:

• Excellent Performance: 25-35 days  Good Performance: 35-45 days

• Average Performance: 45-55 days  Poor Performance: 55+ days

Expected Improvements by Solution Type:

• Software Implementation: 10-20% reduction in days A/R

• Outsourced Services: 15-25% reduction in days A/R

• In-House Optimization: 5-15% reduction in days A/R

Financial Impact Example: A practice with annual revenue of $3M and a 50-day A/R turning to 35 days would make a difference of about $123,000 in the cash flow.

Collection Rate Optimization

Industry Benchmarks:

• Top Performers: 97-99% collection rate

• Good Performers: 94-96% collection rate

• Average Performers: 90-93% collection rate

• Below Average: <90% collection rate

Expected Improvements:

• Current 85% Collection Rate: Improvement to 94-96% possible

• Current 90% Collection Rate: Improvement to 95-97% possible

• Current 95% Collection Rate: Improvement to 97-98% possible

Revenue Impact Calculation: For every 1% improvement in collection rate, a $2M revenue practice gains $20,000 in additional annual collections.

Denial Rate Reduction

Industry Benchmarks:

• Excellent: <5% denial rate  Good: 5-8% denial rate

• Average: 8-12% denial rate  Poor: >12% denial rate

Solution-Specific Results:

• Advanced Software: 20-40% reduction in denials

• Outsourced Expertise: 30-50% reduction in denials

• In-House Training: 10-25% reduction in denials

Cost Savings Impact: Each denied claim costs $25-$30 to rework. A practice with 1,000 monthly claims reducing denials from 10% to 5% saves $15,000-$18,000 annually.

Vendor Selection Criteria & Due Diligence Essential Questions for RCM Software Vendors Technology and Integration:

• What systems does your software integrate with natively?

• How do you handle software updates and maintenance?

• What is your system uptime guarantee and disaster recovery plan?

• Can you demonstrate the reporting and analytics capabilities?

• What mobile and remote access options are available?

Support and Training:

• What training is included with implementation?

• What ongoing support is provided and at what cost?

• What are your typical response times for support requests?

• Can you provide references from similar practices?

• How do you handle software issues that impact our revenue?

Pricing and Contracts:

• What are all the costs, including implementation, training, and ongoing fees? Are there any transaction limits or overage charges?

• What is the contract length, and what are the termination terms?

• How do price increases work over time?

• What happens to our data if we terminate the contract?

Outsourced RCM Services Evaluation Framework

Company Background and Stability:

• How long has the company been in business?

• What is their financial stability and growth trajectory?

• Who are their key clients, and can you provide references?

• What certifications and accreditations do they maintain?

• How do they handle staff turnover and training?

Service Capabilities:

• What specific services are included in your pricing?

• How do you handle complex billing situations?

• What is your approach to denial management?

• How do you manage patient collections and communication?

• What reporting do you provide and how often?

Technology and Security:

• What RCM software platforms do you use?

• How do you ensure data security and HIPAA compliance?

• What disaster recovery and business continuity plans are in place?

• How do you handle system integrations with our EHR?

• What transparency do you provide into daily operations?

Performance Guarantees:

• What collection rate do you guarantee?

• How do you handle performance below guaranteed levels?

• What metrics do you track and report regularly?

• How do you benchmark our performance against industry standards?

• What service level agreements do you offer?

Contract Negotiation Key Points

Service Level Agreements (SLAs):

• Specific performance metrics and targets

• Response time requirements for different issue types

• Escalation procedures for performance problems

• Regular review and adjustment mechanisms

Pricing Protection:

• Fixed pricing for specific contract periods

• Clear definition of what triggers price adjustments

• Volume discounts based on practice growth

• Penalties for service failures or performance gaps

Data Ownership and Security:

• Clear definition of data ownership rights

• Data export capabilities and formats

• Security standards and audit requirements

• Breach notification and response procedures

Contract Flexibility:

• Ability to adjust services based on practice changes

• Termination clauses and notice requirements

• Data transition support at contract end

• Non-compete and confidentiality provisions

Making Your Decision: Key Evaluation Criteria

Financial Considerations

Total Cost of Ownership Analysis: Look beyond initial costs to include:

• Implementation and training expenses

• Ongoing operational costs

• Technology maintenance and upgrades

• Staff time and productivity impacts

• Hidden fees and transaction costs

Return on Investment Calculation:

• Baseline current performance metrics

• Project realistic improvement targets

• Calculate net revenue improvement potential

• Factor in cost savings from efficiency gains

• Consider cash flow impact improvements

Operational Impact Assessment

Staff and Workflow Changes:

• Training requirements and time investment

• Workflow disruptions during implementation

• Long-term staffing needs and changes

• Impact on patient experience and satisfaction

• Integration with existing systems and processes

Risk Evaluation:

• Implementation risk and mitigation strategies

• Performance risk and guarantee structures

• Security and compliance risk factors

• Vendor stability and long-term viability

• Contract terms and exit strategy options

Strategic Alignment

Practice Goals and Priorities:

• Focus on patient care vs. administrative efficiency

• Growth plans and scalability requirements

• Technology advancement and innovation priorities

• Financial goals and profitability targets

• Competitive positioning and market differentiation

Conclusion: Choosing Your Optimal RCM Solution

The correct RCM solution for your practice will be determined by the circumstances, goals, and priorities. No single size fits all, but this framework will assist in informing your decision-making process:

Choose In-House RCM if:

•  You possess good leadership and expertise in RCM.

• Your culture of practice necessitates direct control.

• You can afford to invest in technology and personnel.

• Your specialty possesses its own special needs, which are hard to outsource.

Choose RCM Software if:

• You desire to have internal control and increase efficiency.

• You can afford to hire good employees and provide them with improved equipment.

• You seek a low-cost technology upgrade.

• You would like to be able to tailor workflows.

Choose Outsourced RCM if:

• You would like to pay full attention to the care of the patients

• You are not an internal RCM expert, nor do you have a staff retention problem

• You want predictable costs and guaranteed performance

• You require instant access to high-level technology and expertise

Being able to make a permanent decision is not something you need to remember. Most of the successful practices begin with a single approach and develop their RCM strategy as they mature and their requirements alter. It is all about making a wise choice, supported by facts, precise assessment parameters, and achievable hopes.

Take the Next Step: Get Expert Guidance

The selection of the appropriate RCM solution is not a matter that should be left to chance. The right and wrong decision may cost in annual revenue hundreds of thousands of dollars, which is the difference between the right and wrong choice.

Book an appointment with our RCM consultation to receive specific advice on the optimal solution to your practice. Our experts will:

Analyze your current RCM performance

• Compare all options based on your practice's unique needs

• Offer estimates of the ROI of each type of solution.

• Assist you in creating an implementation plan

• Introduce you to vendors who are pre-qualified under every category

Do not make this important choice on your own. Get the professional help you are required to have to maximize the profitability of your practice.

Are you willing to discover the best RCM solution? Book your free consultation now and see which modality will provide the most successful outcome for your practice.