Home-based care providers are facing another year of financial pressure. While operating margins improved slightly in 2024, experts warn that health systems could see setbacks in 2025 without careful cost control. Additionally, labor costs are down, but they're still a pain point for many health care systems. Despite lower labor costs compared to 2022 peaks, Fitch Ratings analysts note that labor expenses still make up more than half of total spending for most health systems.
These inconsistent challenges, along with reimbursement complexities and administrative burdens, continue to challenge providers striving to deliver quality care. In response, many providers are turning to outsourced revenue cycle management (RCM) as a strategic move to maintain financial stability.
1. Reducing Administrative Burdens
RCM involves the management of billing, coding, and claims processing—tasks that require precision and expertise. For home health and hospice agencies, errors in these areas lead to denied claims, delayed reimbursements and increased overhead costs. Managing RCM in-house means devoting many internal resources that aren't always available to compliance, technology updates, and payer negotiations.
By outsourcing, agencies offload these administrative responsibilities to specialists who focus solely on revenue cycle processes. This allows clinical staff to spend more time on patient care while ensuring claims are handled accurately and efficiently. Reducing the time spent correcting errors or appealing denials translates into a more predictable revenue stream.
Additionally, outsourcing reduces staffing challenges. Recruiting, training, and retaining qualified RCM professionals can be costly and time-consuming. Turnover in billing departments can create inconsistencies that lead to revenue losses. Partnering with an RCM provider ensures access to an experienced workforce without the ongoing effort of maintaining an in-house team. It also gives health systems more resources to invest in critical areas.
2. Accelerating Reimbursements
Home-based care providers often operate with narrow margins, making cash flow management critical. Slow reimbursements can disrupt operations, forcing providers to cut costs in ways that may impact care delivery. A dedicated RCM partner can help accelerate revenue collection by reducing claim processing times and minimizing denials.
Outsourced RCM teams leverage automation and analytics to identify potential errors before submission, ensuring claims are clean and compliant. This proactive approach reduces the likelihood of rejections and expedites the reimbursement process. Faster, more reliable payments enable providers to allocate resources where they are needed most. For example, salaries and related costs (benefits, wages, etc.) account for a large portion (58.7%) of Mayo Clinic's total expenses. The health system attributed this increase to strategic hiring initiatives.
Outsourcing also allows providers to benefit from industry best practices. RCM partners handle billing for multiple organizations, giving them broad insight into payer trends, denial patterns and workflow efficiencies. They apply this knowledge to optimize claim processing and maximize reimbursements.
3. Decoding Regulatory Requirements
Cost management aside, the health care industry is also subject to frequent regulatory updates, and keeping up with changes in reimbursement policies requires constant monitoring. Home-based care agencies must navigate payer-specific requirements, Medicare and Medicaid regulations and evolving compliance standards.
An experienced RCM provider stays ahead of these changes, implementing necessary adjustments without disruption. This reduces the risk of noncompliance and ensures agencies receive the maximum allowable reimbursement for services provided. Providers can focus on delivering patient-centered care rather than scrambling to adapt to new policies.
RCM firms also invest in compliance monitoring and reporting, ensuring providers meet documentation and coding standards. This reduces the likelihood of audits, penalties and revenue clawbacks from payers.
4. Refining Operational Costs
Managing an in-house billing department comes with overhead costs, including salaries, training, software, and infrastructure. Smaller agencies may struggle to afford the necessary technology and expertise to keep RCM processes efficient. Outsourcing eliminates the need for ongoing investments in personnel and technology, shifting costs to a predictable service model.
Without effective RCM, hospitals are missing out on up to $22 million in additional revenue. GrandCare Health Services, a five-star agency serving over 500 patients and a popular post-acute provider with Southern California’s top hospitals, streamlined its RCM operations from a team of five to just one, leading to increased revenue. This reflects a broader industry trend, as many hospitals continue to overlook significant revenue opportunities due to inefficiencies in their RCM processes.
RCM partners offer scalable solutions that adapt to an agency's needs, whether handling increased claim volumes during peak seasons or addressing payer mix fluctuations. This flexibility allows home-based care providers to maintain financial health without overextending resources.
Another essential benefit of outsourcing an RCM is it can provide better financial visibility. Many RCM partners offer personalized data management with detailed reporting and analytics, helping providers and in-home caregivers understand their financial health, track key performance indicators and tailor their approach to each patient's unique needs. With enhanced transparency, agencies can identify areas of improvement and drive long-term financial sustainability while improving the quality of care delivered.
5. Enhancing Focus on Patient Care
Ultimately, outsourcing RCM is about redirecting focus. More than half (53%) of healthcare executives surveyed said that enhancing productivity and improving efficiencies were top priorities for 2025, allowing them to ensure providers can offer the best patient care. Home health and hospice agencies exist to provide compassionate, high-quality care—not to navigate the complexities of medical billing. By offloading revenue cycle tasks to dedicated experts, providers can spend more time with patients, improving outcomes and satisfaction.
Beyond financial stability, outsourcing RCM fosters operational efficiency. Administrative staff can shift their attention to improving patient experiences, managing staff schedules and enhancing service quality, which strengthens the alignment between operational priorities and patient care goals.
A Strategic Move for 2025
Why invest in infrastructure, training, and innovative technologies for home-based care? It's the path to a future where this model is the gold standard. This investment enables personalized, high-quality care while reducing costs. Home-based caregivers managing increasingly complex needs require compassion, empathy, advanced skills and they deserve the technological tools that bridge the gap between traditional healthcare and the home setting. Providers who adopt this strategy will be well-positioned for future success.