Quality Assurance of Outsourced Medical Record Reviews

Introduction

This month we discuss outsourcing, both onshore and offshore, and the associated considerations for risk adjustment data validation and other medical record review efforts. Outsourcing has become a more widely adopted strategy in many facets of healthcare operations as technology continues to make it increasingly possible to share data and information. However, for any company considering outsourcing or already doing so, it is important to make sure all partners are working towards expected standards – standards that can be dynamic, evolving, and complex. First, let us start with some background on outsourcing.

What is Outsourcing?

Outsourcing is a business agreement in which an organization contracts out the procurement of products or services to an external firm. Companies can benefit from outsourcing for many reasons. For example, as a company grows, it may find it easier and more cost-efficient to outsource certain services to a company specializing in those services, rather than hiring new or training in-house resources to perform the service. Outsourcing allows an organization to focus on its unique strengths and not use internal resources on tasks outside of its area(s) of expertise (e.g., data entry). Additionally, outsourcing enables access to robust computational resources, without a company having to heavily invest in their own hardware or cloud environments. Outsourcing arrangements can even enable innovation, in that they afford a level of flexibility and speed often difficult to accomplish internally, while providing opportunities to test strategies before committing to long-term processes or investments.

The practice of outsourcing made a name for itself with industries such as manufacturing, becoming part of the mainstream business lexicon by the late 1980s. Since then, outsourcing has become increasingly utilized in the health care industry as well, particularly in the 21st century. In 2017 alone, outsourcing grew by 36% in the US health care sector.

What is the difference between outsourcing and offshoring?

Outsourcing is not the same as the practice of offshoring, which is also becoming increasingly popular due to technology advances and general globalization efforts. Offshoring refers to having work done in a different country. It is possible to outsource work but not offshore it; for example, a US-based company may hire an outside law firm also in the US to review contracts instead of maintaining an in-house staff of lawyers. It is also possible to offshore work but not outsource it; for example, some large US companies may build a customer service center in India to serve American clients. In the offshore outsourcing case, a vendor is hired that does the work offshore. In these cases, lower labor costs can lead to significant cost savings over keeping work onshore.

To keep things simple, we will focus on the term outsourcing for this blog, recognizing that a lot of what is being outsourced is being offshored as well (particularly in relation to medical record reviews and other risk adjustment related activities). In the next section, we describe the types of services being outsourced by the healthcare industry.

What is being outsourced in healthcare?

Outsourcing is becoming pervasive in healthcare. For example, the percentage of hospitals outsourcing cybersecurity services increased from 16% in 2015 to 86% in 2020. The range of services outsourced can include clinical services, such as radiology reviews. However, non-clinical services, such as data entry (e.g., inputting new patient intake forms into a medical record system), data analytics, case management, customer support, and claims processing support, comprise most of the services outsourced.

What is being outsourced in relation to risk adjustment?

In addition to the activities described above, health plans may also outsource coding and medical record reviews for their risk adjustment auditing activities. The switch from the International Classification of Diseases-9 (ICD-9) to ICD-10 codes may have partially explained some of the increase in outsourcing, particularly offshoring, in recent years. Since the ICD is an international coding system, as organizations went through implementation of ICD-10, offshoring may have been looked to as a solution for domestic companies to extend their access to coders experienced with the new system.

Also, many healthcare organizations are still reliant on human coders for most, if not all, of their medical record reviews, as part of their risk adjustment data validation efforts aimed at ensuring encounters accurately capture the diagnoses of their members and that the diagnoses are supported in medical record documentation. As discussed in prior blogs, this can be a labor-intensive task. Therefore, it can be more efficient for plans to outsource these repetitive and voluminous activities to companies that specialize in such services.

What are potential challenges with outsourcing medical record review and coding?

Outsourcing has not always worked out in the ways companies have hoped. According to one survey of companies across industries, unmet expectations cause nearly half of companies to terminate their outsourcing contracts early. Research based on experience from companies in other industries shows that the success of outsourcing depends on addressing and safeguarding against the potential risks for data security issues (e.g., it has been reported to be harder to meet HIPAA requirements), poor quality, higher costs, and other unmet expectations.

There is little published data on the performance of companies that outsource offshore. One available study suggests that there can be more quality concerns with outsourcing internationally (i.e., offshoring) than domestically. The comparison was based on coding done for six hospitals with experience using both domestic and offshore outsourcing. In that case, the offshore coders were less productive and less accurate than the domestic coders. There was a higher denial rate and lower reimbursement resulting from a lower case mix index. Additionally, offshore coders required longer onboarding, partly due to language barriers, and appeared to have a harder time following established procedures for queries and missing documentation. The additional costs due to productivity issues and reduced revenues from lower case mixes offset savings from employing lower-wage offshore coders.

How can companies benefit from outsourcing their coding and medical record reviews without suffering reduced quality?

When health plans and other companies outsource, whether domestically or internationally, it is critical they have the capability to ensure expectations are being met, as ultimately people’s lives are at stake. In the case of coding and medical record review, to gain the full benefit, it is necessary to have an equally time- and cost-efficient process in place to verify outsourced coding findings for accuracy. The speed and low-cost of outsourcing (or offshoring) is only beneficial if the end result is correct. Rapid and accurate verification is possible with the aid of artificial Intelligence (AI) and, in particular, models trained to agree with most expert human coders. By adding one more step in the outsourcing process – e.g., human-trained AI validation – an organization gains improved (and intended) benefits of contracting outside coding resources.