How To Cut Cost-to-Collect In Hospital Revenue Cycle Management?

Over the last decade, automation has been taking over almost all segments of work. This technology creates easy operating moduli for the smooth and efficient functioning of any workplace. Hospitals also utilize automation tools for Revenue Cycle Management.

In the last year alone, i.e., 2021-2022 more than 12% of hospitals implemented automation tools. The medical billing companies in India are making rapid progress. This is making the Hospital Revenue Cycle Management accessible to a wide scale of medical practitioners and hospitals. 

The cost-to-collect is a primary protocol and should be kept as low as possible. Studies show that hospitals using automation tools have a cost-to-collect average of 3.51% against 3.74% for hospitals that did not use automation. This ratio has a direct impact on the overall functioning of the hospital. 

This ratio actually measures the cost it takes for the hospital to receive a settlement. The cost to collect is calculated as the sum total of all expenses of the patient and then divided the value with the cash collected in that month. The total cost of the patient will also include all 3rd party payments, as well as the outsourcing fees required for automation. 

Challenges in cutting cost-to-collect – 

Denial Rates –

As per the data of the Medical Group Management Association (MGMA), there is a wide disparity in the denial rates. In some scenarios, this is as high as 61% but suddenly falls to 2%. This inconsistency hampers the eligibility of the patient to get proper treatment. This results in a delay of settlements.  The study suggests that hospitals lose more than 8.4 % of their annual revenue due to claim denials.

POS collection rates –

It is found that more than half of the patients are not able to complete the cost of the treatment. In such situations, they make partial payments and expect the remaining to be covered by insurance providers. This causes a delay in receiving the funds by the hospitals, as the process of claims is started with a delay. 

Situations that arise out of emergency cause mismanagement in the settlement duration. There are times when the admission process cannot be completed and the treatment process starts early. In such a situation the settlement process takes more time than anticipated and leads to a large cost to collect. 

Manpower or machinery required

For having a small cost-to-collect, it is essential for the efficient functioning of the RCM from the first step. To achieve this, the primary step is automation. The process of automation can be fulfilled by outsourcing the codes to various companies. This lowers the burden on the hospital staff and results in better overall performance.


The cost-to-collect is a Key Performance Indicator (KPI) for the revenue cycle. The primary factors which influence this cost-to-collect are staff salaries and the cost of the technology itself. While using automation in RCM, a hospital could save thousands of rupees every month, apart from having a quicker settlement time. The automation tools provided by outsourced companies provide quicker settlement times and lower denial rates.

The cost-to-collect can be improved by implementing automation tools. This also provides accurate and efficient functioning of the RCM. Recent studies have shown that the stagnancy in cost-to-collect has been a crucial factor in implementing the new upgrades in RCM. There has been a decrease of just about 0.3% in the existing cost-to-collect even after bringing about a number of changes in the system. 


It can be observed that the cost-to-collect can be lowered by implementing automation. The tools for automation need a proper channel for working which includes proper maintenance of all data and keeping the denial rate as minimal as possible. Collecting the data of patients and analyzing them prior to the start of the treatment provides ample time for settlements.

The outsourced company which successfully works on all these steps would easily find itself among the top medical billing companies in India. The primary motive of all outsourced companies is to keep the cost-to-collect at the lowest. This can be achieved by focussing on 2 primary points:

Information –

Proper and full information should be provided to all patients before the start of the clinical process. This leads to a far better approach and leads to easy settlements. The insurance claim process can be initiated early which will result in quicker settlements.

Having previous records of the patients would provide for an easier appraisal at the time of admission. The old data provided by the hospital would give a better understanding of the expenditure. Maintaining all this data would minimize the denial rates. Denial reason codes are stored in the database and reports are provided with detailed summaries. This maps a denial pattern that can be worked upon to improve the cost-to-collect. 

Automation tools –

The hospital RCM is monitored and handled by a proper medical billing company. The data should be maintained properly and settlements should be settled at a quicker rate. The staff and machinery should be robust enough to handle multiple requests at the same time. This enables the hospital to keep a track of the RCM and collect revenue while ensuring the highest quality care for the patients. 

So overall it can be observed that the cost-to-collect can be lowered by adopting better standards of record maintenance. This in combination with efficient automation tools would provide for better cost-to-collect ratios. It is always better to have a realistic approach and therefore focus only on the factors which can be modified easily.