When inflation soars and the stock market stumbles, recession worries rear their head, leading businesses to look for ways to survive the downturn. According to a Harvard Business Review article, “Recessions are a high-pressure exercise in change management, and to navigate one successfully, a company needs to be flexible and ready to adjust”. Outsourced solutions are a great way to stay afloat. Like most other industries, healthcare is not recession-proof. Outsourcing is a viable strategy for medical providers to deal with economic slowdowns. By outsourcing medical billing, coding, insurance verification and other tasks, practices can reduce overhead, cut spending, prevent losses due to claim denials, and survive a recession.
Impact of a Recession on Healthcare Providers
In a recent revenue cycle management (RCM) survey that Fierce Healthcare reported on, chief financial officers cited risk of recession, labor shortages, increasing costs and care delays due to insufficient capacity as their top concerns. Other challenges include shrinking margins and Centers for Medicare & Medicaid Services/payer reimbursements.
- Labor shortages: A survey by MorningConsult.com found that during the recession brought on by the COVID-19 pandemic recession, many hospital workers moved to another industry. The reasons cited included insufficient pay or opportunities, burnout, overwork, and COVID-19 safety concerns. During a downturn, it is very difficult or impossible to hire more staff or hire specialized workers such as medical coders and billers on a full-time basis. Over 90% of respondents in the 2022 RCM surgery said they are experiencing a labor shortage in their RCM department, and many said over half of those roles are currently unfilled (www.fiercehealthcare.com).
- Decline in cash flow: Reports cite increasing costs as the top concern when it comes to the financial health of medical practitioners. The main reason for this is decline in cash flow. Providers have to meet their overhead costs, pay their clinical and non-clinical staff, their leasing charges, for high-cost supplies and vaccines, and much more. What’s really challenging is the drop in bill payments during a recession, due to patients not paying their bills or delaying the payment, thereby increasing accounts receivable. Practices cannot pay their own bills when their cash flow is reduced. While larger groups may be able to weather the storm to some extent, small practices have no buffer.
- Reduced demand for services: During a recession, providers tend to see a fall in the number of employer-sponsored and privately-insured patients. Other reasons for the reduced demand for services include people delaying elective-surgical procedures and non-urgent care and less people seeking inpatient treatments. Increase in appointment cancellations by patients decreases overall revenue.
How Outsourcing Helps
A recession can make all of the problems that healthcare organization face worse. As small medical practices are more vulnerable, they tend to experience these challenges first and in greater intensity. Let’s see why outsourcing is makes sense for healthcare providers during an economic slowdown:
- Saves money: Outsourcing saves money on labor and other costs associated with running a practice. During a recession, outsourcing medical billing and coding enables physicians to deal with the shortage of highly skilled billing and coding experts. Setting up an in-house team can be expensive. Partnering with an experienced healthcare BPO company can reduce expenses on salaries and benefits, infrastructure, buying, upgrading and maintaining billing software and computer equipment. Outsourcing can ensure access to a team of experienced billers and coders at affordable rates. Partnering with a reliable company can ensure cost savings of 30-40%.
- Ensures access to billing and coding expertise: Experienced medical billing companies can ensure that your claims are submitted accurately and in a timely manner. With declining cash flow and reimbursements during a recession make this all the more important. Knowledgeable about the latest ICD-10 and CPT codes, skilled medical coders can help physicians report diagnoses and treatments correctly. These companies also have expert billers who can ensure proper claim submission. During a recession few things can be more important than efficient revenue cycle management to reduce denied and rejected claims due to billing errors. Reliable outsourcing companies can also scale to meet practices’ staffing requirements.
- Reduces/prevents coding and billing mistakes: During a recession, practices may have to lay off staff. This can ultimately put pressure on the in-house team and lead to even coding and billing errors, causing to denied claims and revenue loss or delay. During a recession, this can significantly impact the revenue cycle. A professional medical billing company can ensure clean claims and accurate billing statements. Fewer claim denials and requests for additional information will lead to timely reimbursement.
- Maintain compliance: Outsourcing allows practices to stay on top of relevant rules and regulations during a recession. Changes in industry rules and regulatory requirements could impact the billing process. Partnering with a reliable medical billing company can help practices reduce compliance risks during a recession.
While outsourcing is a valuable business strategy in normal circumstances, it has a critical role during a recession. During a recession, revenue is badly impacted and outsourcing offers the ability to reduce costs. Outsourcing medical billing and coding also provides flexibility and efficiencies, overcomes the challenge of labor shortages, and helps practices eliminate the overhead burden of hiring in-house staff. Outsourcing also helps physicians and their staff to save time and focus on care.