RCM Outsourcing: Why Keeping Revenue Cycle In-House is Better

 A recent Kaufman Hall survey revealed that 32% of healthcare systems and hospitals are pursuing RCM outsourcing. 

As that figure was just 27% the prior year, clearly, revenue cycle leaders are gaining interest in turning these tasks over to third parties. Market research firm Straits Research predicts that the RCM vendor market could grow from $342 billion this year to nearly $900B globally within the next decade. HTF Market Intelligence explains why:

"This market is expanding due to the increasing complexity of healthcare billing, a focus on reducing operational costs, and improving cash flow through specialized outsourcing partners."

Still, the drastic changes that come along with RCM outsourcing may not be right for all healthcare organizations. 

Consider the Change Healthcare data breach of 2024. This company provides outsourced revenue cycle management services to thousands of healthcare organizations and over 67,000 pharmacies nationwide. It holds the protected health information of millions of patients. 

Change’s size proved a tempting target for cyber criminals.

With the cyberattack, the healthcare organizations involved faced months-long claims processing delays and a revenue-freezing inability to verify patient eligibility. Physician groups were forced to return to manual processes, and completing these tasks with a post-outsourcing-trimmed staff proved nearly impossible. 

While there’s plenty of ink spent on how the breach will eventually cost Change Healthcare (and UnitedHealthGroup) around $2.5 billion, healthcare organizations suffered significant losses as well. 

The American Medical Association’s Change Healthcare Cyberattack Impact Report reveals that 80% of providers lost revenue from unpaid claims. Further, 55% used personal funds to cover expenses incurred as a result of the attack. Perhaps worst of all for patient-focused providers, 77% experienced disruptions to providing care. 

While outsourcing your RCM to an outside vendor may feel like a relief, unburdening your organization isn’t without its own problems. Here, you’ll review the potential pitfalls involved in RCM outsourcing as well as the sometimes-overlooked benefits of keeping revenue cycle management in-house. 

What is RCM outsourcing? 

RCM outsourcing is the practice of delegating all or the majority of healthcare revenue cycle management tasks—patient registration, insurance verification, coding, billing, claims submission, payment processing, and collections—to third-party experts or specialized external service providers. By entrusting these financial and administrative functions to outside professionals, healthcare organizations aim to streamline operations, reduce overhead costs, ensure compliance, and improve revenue collection, allowing internal teams to focus more on patient care.

RCM vendors like R1 RCM, Experian, and Waystar all promise end-to-end RCM services. They claim that when patient registration, eligibility verification, coding, claims submission, and payment processing exist in a single platform, processing patient services is faster, more accurate, and cost-effective. These companies also assert that the centrality they provide ensures organizations avoid duplicate efforts and the subsequent administrative burden. 

In-house RCM, on the other hand, is the practice of managing all revenue-related tasks using an organization’s own staff and internal systems rather than relying on external vendors or third-party service providers. This approach gives healthcare organizations full control, direct oversight, and immediate access to their revenue cycle processes.  

In-house and outsourced RCM are two ends of the spectrum. Some healthcare organizations choose a hybrid model where their own staff handles some steps in the revenue cycle and vendors execute others. 

Pros and cons of RCM outsourcing

Exploring the pros and cons below will help you match your organization’s needs and strengths with the best style of RCM vendor. 

Access to specialized expertise and advanced technology

PRO Outsourced RCM: Expertise

RCM outsourcing partners bring deep expertise in estimating, billing, coding, and claims management—skills that can be difficult and expensive to maintain in-house. These vendors stay current with evolving payer rules, regulatory changes, and industry best practices, which helps reduce errors, minimize denials, and ensure compliance. 

Additionally, outsourcing firms often leverage cutting-edge technology, such as artificial intelligence (AI) and machine learning, to automate claim scrubbing, denial management, and analytics, providing capabilities that many healthcare organizations may not be able to afford or implement internally.

CON: Expense

Using specialized consultants and staff gets expensive, especially for larger organizations or those with complex billing needs. A consultant bringing in multi-six-figures sends their charges down to you, the client. Onshore staff cost more than those sourced in India or the Philippines, but it often takes native English speakers to interact with clients. When healthcare provider margins are razor thin as they are today, turning over 25% or more of the revenue lift that the RCM vendor achieves cuts into the ROI.

Further, comprehensive RCM vendors may have hidden or unexpected expenses, such as charges for services not included in the initial contract, integration fees, or penalties for early termination.  

Finally, leveraging advanced technologies like AI and machine learning through an outsourcing partner means you’re paying not just for the software, but also for the vendor’s ongoing support, upgrades, and compliance measures. These costs can sometimes outweigh the savings from reduced internal staffing and training, especially if the vendor’s pricing model is not fully transparent or if your organization’s needs change over time.

RCM Costs

PRO Outsourced RCM: Fewer staff are necessary

Providers using outsourced RCM often seek cost savings through reduced staffing, training, and technology investments. Maintaining an in-house RCM department involves investment in hiring, training, salaries, benefits, and ongoing technology upgrades. Outsourcing eliminates some of these overhead costs, allowing organizations to pay a predictable service fee instead. This can result in savings.

CON:  Hidden costs

While outsourcing can reduce some direct overhead, it often introduces new, less visible costs and financial risks that can undermine the anticipated savings. Careful contract review, ongoing vendor management, and a clear understanding of your organization’s needs are essential to avoid these pitfalls. The percentage of collection fees sometimes surpasses the cost of maintaining an efficient in-house team, especially as your organization grows.

Consider, too, that most vendors include integration costs with your existing systems, as well as additional fees for custom reporting or urgent requests. 

Another threat to your revenue and ROI is the potential of outsourcing partners' underperformance. Falling short can lead to revenue leakage, increased denials, or delays in collections, which erode any projected savings and negatively impact cash flow.  If the outsourcing partner’s service quality declines or if they experience financial or operational instability, your organization could face disruptions. You may even need to rebuild in-house capabilities from scratch, as the providers using Change Healthcare did. 

Scalability and flexibility  

PRO outsourced RCM: Flexibility

Outsourcing RCM can bring the ability to quickly scale services up or down in response to fluctuating patient volumes, seasonal demand, or organizational growth. RCM vendors assert that they can adjust staffing and resources as needed, ensuring uninterrupted service and efficient handling of billing and collections without the burden of hiring or layoffs.

CON: Insufficient capacity

 Scalability has its own risks and limitations. 

While outsourcing RCM is often promoted for its ability to quickly scale, RCM vendors may not always be able to ramp up qualified staff as quickly as promised, especially during industry-wide surges or labor shortages. High turnover rates among vendor staff and the ongoing shortage of experienced RCM professionals can lead to inconsistent service quality and delays.

Additionally, scaling with an external partner can introduce variable costs and surprise fees, particularly if additional resources or urgent support are needed beyond the original contract terms. Communication barriers—such as time zone differences, language issues, or cultural misunderstandings—can further complicate rapid scaling, leading to miscommunication, workflow bottlenecks, and errors.

Core competency focus 

PRO outsourced RCM: Administrative burdens lifted

By delegating complex administrative and financial tasks to external experts, healthcare providers can redirect their time and resources toward their core mission—delivering high-quality patient care. This shift not only improves provider satisfaction but can also enhance patient experience and outcomes.

CON: Outsourcing can undermine control, quality, and communication

While outsourcing RCM allows providers to devote more energy to patient care by offloading administrative burdens, it also results in a loss of control. Delegating critical financial processes to an external partner means providers have less direct oversight of billing accuracy, claims follow-up, and compliance with regulations. This gap can lead to uncertainty about the quality of work and slower responses to issues or changes in payer requirements.

Communication challenges are another frequent issue. Working with an outside vendor, especially one in a different time zone or with a different organizational culture, can result in delays, misunderstandings, and frustration for both staff and patients. These barriers may slow down problem resolution and disrupt the smooth flow of information needed for timely billing and collections.

Consistency and Efficiency  

PRO outsourced RCM: Standardization

Outsourced RCM providers use standardized, streamlined workflows and advanced automation tools to ensure consistency, accuracy, and efficiency in billing, coding, and collections. This reduces human error, accelerates reimbursement cycles, and minimizes revenue leakage.

CON: Cookie-cutter approach limitations

While outsourced RCM providers often tout their standardized workflows and automation as drivers of consistency and efficiency, outsourcing partners typically operate with “one-size-fits-all” processes designed to serve a wide array of clients. 

As a result, their workflows may not be tailored to the unique needs, payer mix, or service lines of your organization.

This lack of customization can mean that important nuances—such as local payer requirements, specialty-specific billing codes, or unique organizational policies—are overlooked or mishandled. When exceptions or complex cases arise, outsourced teams may not have the flexibility or deep organizational knowledge to address them quickly and accurately, leading to errors, delays, or increased denials.

Additionally, communication gaps between the vendor and your internal teams can slow down the resolution of issues and make it harder to implement process improvements. If your organization wants to innovate or adapt its revenue cycle processes, you may find it difficult to get the vendor to adjust their standardized systems, resulting in missed opportunities for optimization and growth.

Don’t let an expensive partner undermine the very efficiency and financial performance that outsourcing is supposed to enhance. 

Risk sharing and security

PRO outsourced RCM: Shared compliance risk

Healthcare regulations and payer requirements are constantly evolving. RCM outsourcing partners claim to assume some of the risk associated with compliance, as they are contractually obligated to stay up-to-date with industry standards and implement necessary changes. This reduces the compliance burden on the provider and helps mitigate the risk of audits, fines, and penalties.

 CON: Outsourcing can increase security risks

While it’s true that RCM vendors are contractually obligated to maintain compliance with healthcare regulations, outsourcing may actually introduce new layers of risk and complexity for providers. Entrusting sensitive patient and financial data to a third party means relinquishing direct oversight of how that data is handled, stored, and protected. Even reputable vendors can suffer data breaches, cyberattacks, or lapses in compliance, as seen in high-profile incidents like the Change Healthcare ransomware attack. When a breach occurs at the vendor level, the provider is still ultimately responsible for regulatory violations and can face significant reputational damage, fines, and loss of patient trust.

Payer and legislative compliance

PRO outsourced RCM: compliance professionals and technology

Outsourced RCM vendors employ professionals trained to stay current with the latest payer rules, coding updates, and regulatory changes, such as HIPAA and other federal or state requirements. They also use advanced technology and automation tools to ensure that claims are processed accurately and efficiently, further supporting compliance efforts and helping providers adapt quickly to changes in payer policies.

Moreover, outsourcing shifts some of the accountability for compliance to the vendor. This means that the vendor is responsible for implementing updates, monitoring for regulatory changes, and maintaining secure, HIPAA-compliant technology platforms. As a result, healthcare organizations can mitigate their compliance risks and administrative burdens. Smaller practices or those without the resources to maintain in-house compliance teams may appreciate these functionalities. 

CON: Overconfidence in a flawed system

Keep in mind that a vendor’s assurances do not guarantee flawless execution. Providers must still invest time and resources in vendor management, auditing, and oversight to ensure that vendors meet compliance promises. If a vendor falls behind on updates or fails to implement new regulatory requirements promptly, providers can be left exposed to audits and penalties—often without the immediate ability to correct course.

Factors to consider when deciding between in-house and RCM outsourcing

Organizational size and complexity
The scale and intricacy of your healthcare organization should lead your decision to orchestrate RCM in-house or via an outside vendor.

Larger health systems and hospitals often have the resources—such as specialized staff and robust infrastructure—to manage revenue cycle functions internally. This allows for greater control, customization, and alignment with organizational goals. 

In contrast, smaller practices or clinics may find in-house RCM more challenging due to limited personnel, expertise, and budget. While outsourcing can offer these organizations access to specialized skills and technology, it also introduces risks such as loss of control and dependency on vendor performance, making careful evaluation essential. 

Financial resources
Cost is a critical consideration. In-house RCM typically involves higher fixed expenses, including salaries, benefits, ongoing staff training, and technology investments. These costs can be justified in larger organizations with established infrastructure. 

Outsourcing, on the other hand, replaces some of these fixed costs with variable, contract-based fees, potentially lowering overhead and offering predictable monthly expenses. However, organizations must assess not only the direct costs but also hidden fees and the potential for lost revenue due to vendor errors or inefficiencies. A thorough cost-benefit analysis is vital to determine which approach delivers the best return on investment.

Technological infrastructure
Efficient RCM increasingly depends on advanced billing software, automation, and analytics. Organizations with up-to-date, integrated technology platforms and IT support may be well-positioned to keep RCM in-house. 

Those lacking such infrastructure may benefit from outsourcing to vendors that offer state-of-the-art solutions without the need for significant internal investment. However, integrating external technology with existing systems can present its own challenges and should be factored into the decision-making process.

Data security and regulatory compliance needs
Protecting patient data and maintaining compliance with evolving healthcare regulations are non-negotiable priorities. In-house RCM allows organizations to directly oversee data security protocols and compliance measures, but requires dedicated resources and continuous vigilance. 

Outsourcing can transfer some compliance responsibilities to the vendor, who is expected to stay current with regulatory changes. However, sharing sensitive information with third parties introduces new risks, such as data breaches or compliance lapses, underscoring the importance of thorough vendor vetting and ongoing oversight.

Long-term strategic goals
The choice between in-house and outsourced RCM should align with your organization’s broader objectives. 

If your focus is on growth, innovation, and operational resilience, outsourcing may provide the scalability and expertise to support expansion. If maintaining control, ensuring a seamless patient experience, and building internal capabilities are top priorities, in-house RCM may be the better fit. Consider how each approach will impact patient satisfaction, adaptability to industry changes, and the ability to implement strategic initiatives over time.

Selecting the right RCM model requires a comprehensive assessment of organizational size, financial capacity, technology readiness, compliance needs, and long-term vision. As mentioned above, some organizations also consider a hybrid approach—outsourcing select functions while retaining control over critical or patient-facing processes—to balance efficiency with oversight.

MD Clarity helps you avoid RCM outsourcing 

Despite a perception that outsourcing your revenue cycle could solve problems and relieve staff, it won’t be entirely hands-free. Keeping your revenue cycle management in-house can be more cost-effective while keeping important financial aspects under your control. 

MD Clarity’s RevFind helps healthcare organizations avoid relying on an end-to-end RCM solution by empowering in-house teams with advanced, automated tools for contract management, underpayment detection, and revenue optimization. Rather than outsourcing the entire revenue cycle, RevFind digitizes and consolidates payer contracts, making it easy for organizations to benchmark against national standards, track underpayments at the procedure level, and distinguish between denials and true underpayments—all within their existing workflows.

With RevFind, staff no longer need to manually update fee schedules or spend hours in spreadsheets. The platform automatically identifies revenue leaks, corrects and appeals underpayments, and generates customizable, data-rich reports for ongoing performance monitoring and contract analysis. This automation and transparency allow healthcare organizations to maintain direct control over their revenue cycle, optimize payer negotiations, and maximize reimbursement, without handing over critical financial operations to a third party.

Want to improve your revenue cycle without losing control of it? Get a demo to see how RevFind helps you optimize your RCM system. 

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