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June/July 2019

CFO Zone: Finding the Right Coding Vendor
By Beth Friedman, BSHA, RHIT
For The Record
Vol. 31 No. 6 P. 6

Typically, outsourced medical record coding services are used by health care provider organizations to supplement existing staff, clean up errors, provide coverage during backlogs, and lend coding expertise. According to research firm Black Book, 70% of hospitals, health systems, and physician groups plan to extend their outsourced medical record coding contracts into 2020.

However, not all outsourced coding engagements are created equal. Nor do they all yield the results expected by revenue cycle executives. The question is, what can organizations do to ensure they achieve the expected outcomes of outsourced coding services? What steps should they take and what mistakes should they avoid?

Matt Hoeger, director of revenue integrity at Penn State Health Milton S. Hershey Medical Center, and Bill Wagner, CHPS, CPCO, chief operating officer and cofounder of KIWI-TEK, weigh in on how to achieve revenue cycle goals by addressing common missteps organizations make when managing outsourced coding services.

Penn State Health is a large level 1 medical facility with more than 1,100 primary physicians, specialists, and advanced practice clinicians at 63 medical groups. Outsourced services are used to support both hospital and professional fee coding.

For The Record (FTR): How do you determine which outsourcing firm to use?
Matt Hoeger (MH): Selecting an outsourcing company that can meet diverse and complex needs is a critical decision. While there are many factors in choosing a vendor, the most important tenet for Penn State Health is to use several trusted partners vs one single outsourced coding vendor or revenue cycle company. This strategy has served us well over the years for several reasons.

Coverage. Working with a few select vendors provides the ability to flex up quickly when needed. For example, a recent EHR implementation required additional bandwidth and services to clean up backlogs and work queue errors. We were able to pull coders from two vendors instead of requesting 10 coders from one company.

Consistency. A limited group of outsourced coding vendors promotes consistency. Documented guidelines, processes, and procedures ensure everyone is on the same page regarding Hershey’s systems, how we operate, data integrity, security, and overall expectations.

Accountability. Vendors are held to a high level of accountability—the same quality and productivity expectations set for internal staff. For example, just as internal staff are audited, we randomly send out charts to other outside parties for review and assessment of vendors’ code assignments.

Expertise. To fully support Hershey’s professional fee coding team, specialty coding knowledge and experience are required. These qualifications are not always available within one coding company. By having several partners, we have access to multiple coding experts for each specialty. For example, we are currently looking for an outpatient endoscopy coder with anesthesia services expertise.

FTR: You mentioned accountability. What are some best practices you have established to ensure vendors remain accountable and committed to meeting or exceeding your revenue cycle goals?
MH: Revenue executives must never lose sight of daily goals and operational costs. First, we look for vendor partners with the same commitment to these metrics. Second, we maintain ongoing communication with our partners at multiple levels. The medical record coding process is too important for revenue cycle leaders to push aside.

While strong communication between revenue cycle and HIM is always important, it becomes particularly essential during times of EHR change and denial spikes. Communicating revenue cycle goals, prioritizing efforts, and overseeing expenditures must remain a critical leadership concern across internal teams and outsourced medical record coding vendors.

Be sure managers have each coder’s name and phone number in case questions arise. Also maintain open lines of communication with the vendor’s leadership team. Trying to resolve issues through e-mail doesn’t work. This includes feedback mechanisms for doctors when dollars are declined, for coders when cases come back from audits, and for leadership on both sides—outsourced coding company and internal management team. Relationship is the key to partnership and it begins with communication.

FTR: One of Penn State Health’s long-term outsourced coding partners, KIWI-TEK has served the organization since 2010 for both hospital and professional fee coding. From KIWI-TEK’s perspective, how important is executive communication to meeting a hospital’s revenue cycle goals?
Bill Wagner (BW): I completely agree with Matt. The best coding outcomes are achieved when revenue cycle executives reach out and communicate regularly. We need to know the organization’s revenue cycle goals—almost on a daily basis. If there are any changes to EHR systems or other IT applications, inform us well in advance so we can staff accordingly. From revenue leadership to specialty coding teams, healthy conversations drive better coding outcomes.

The need for consistent feedback is even greater when problems arise—even if they are small ones. Don’t hesitate to include the outsourced vendor’s senior management in the conversation. Vendors need to know about issues before they escalate into major obstacles that could harm the relationship.

One best practice is for outsourced coding vendors to have secure access to reporting and metrics on the key performance indicators so we can deliver what is expected. By seeing the day-to-day fluctuations in volume, outsourced vendors can effectively plan for coder staffing and deliver highly responsive coding support.

FTR: I’ve heard the onboarding process for an outsourced coding vendor requires additional time and resources. Have you found this to be true, and, if so, what advice do you give other revenue cycle leaders facing a new outsourced coding implementation?
MH: Bringing on a new vendor is a challenge. It takes at least a week to give new coders remote access, then test and monitor system connectivity and connections. New coders must be trained on our specific coding guidelines, processes, procedures, and workflows. This is one reason we remain committed to a small group of long-term coding partners. Changing out coding vendors places a tremendous strain on everyone involved, which can impact revenue cycle performance.

To be successful, we treat any outsourced coding endeavor as if we are bringing on new coders, but in a remote manner. We dedicate additional time and resources to help the outsourced coders get up to speed and we thoroughly explain everything important to our revenue cycle processes and procedures.

Another best practice at Penn State Health is to ensure all new outsourced staff and vendor managers own the performance agreement. This goes beyond daily productivity. We clearly communicate discharged not final coded, discharged not final billed, and new coding priorities as they arise or change, expecting our partners to cover their own workloads and management of coders.

BW: During the onboarding process, after all of the contractual agreements are in place, it is crucial to get secure remote access in place for all of our management and coding staff. This sometimes takes up to four weeks or more. After that is in place, we proceed with training on the client’s processes, procedures, and application requirements. We often find IT issues prevent us from accessing the applications we need to do our job. This causes unnecessary delays in meeting chart production goals.

Prior to onboarding, it is especially crucial to ensure vendors are fully informed of immediate chart production goals, existing coding backlogs, and upcoming vacation schedules, maternity leaves, or other staff vacancies.

Communicate with the outsourced vendor early and often regarding any factors that might change manpower needs.

FTR: According to the American College of Healthcare Executives’ recent survey of health care CEOs, financial challenges, including rising staffing costs, were the top concern. How do you keep outsourced coding services within budget?
MH: Outsourced medical record coding vendors that help with cost control—managing the margin—are especially valued. By using a per-chart fee broken into tiers by case type, we balance financial risk and keep costs under control.

We set our per-chart cost benchmarks by calculating how long it takes the internal team to code a specific type of case. We then use that metric as a guideline with our coding partners. Metrics are also incorporated into both internal and outsourced coder performance expectations.

Vendors that reimburse their coders based on this method—while maintaining an emphasis on quality assurance—help our organization reduce cost by taking full responsibility for productivity of outsourced coders, removing performance oversight burden from the management team, and minimizing cost management burden for revenue cycle executives.

BW: Again, I agree totally with Matt. We have charged our clients per chart and paid our coders per chart from day one. That is the only way to ensure clients are paying for the work we do. It also encourages our coders to work as efficiently as possible. We offset the potential of coders rushing through charts to maximize their earnings with an aggressive internal QA [quality assurance] program.

Another dynamic to consider is that many organizations have taken an “as-needed” approach to outsourced medical record coding—engaging outside support only during times of backlog or staff shortages. However, this strategy can be costly as vendors are able to demand higher prices during times of urgency or heightened regional demand. Maintaining a long-term coding partnership is a more comprehensive, cost-effective strategy.

— Beth Friedman, BSHA, RHIT, is president and founder of Agency Ten22.


Outsourced medical record coding services are most successful when revenue cycle executives remain aware and involved. The following are five mistakes frequently made in outsourced coding partnerships:

• Coding vendors are evaluated too quickly and without the proper due diligence.
• Revenue cycle executives take a hands-off approach to the partnership.
• Vendors are not held accountable for revenue cycle goals.
• Organizations don’t adequately budget for onboarding (time, staff, and resources).
• Leadership doesn’t monitor outsourced coding costs effectively.

— BF