Consultant Finds Hospital Could be Leaving Millions on the Table
A consulting firm hired by McDonough District Hospital has found that poor revenue cycle management is costing the hospital roughly $20 million a year—money that should be collected from insurance companies and patients but instead is being lost to manual processes, weak controls, and leadership that doesn’t understand the work.
The assessment, presented to the board Monday by RSM consultants Michael Brown and Brett Kleebauer, recommends outsourcing most billing and collections functions. The hospital currently collects only 36% of gross revenue when it should be collecting 43%, according to contract modeling done by RSM. But that 43% figure is conservative. The actual potential is likely higher.
“You’re writing off quite a bit more than you’re collecting in cash,” said Greg Bauer, the RSM consultant who conducted the assessment. “It’s costing you eight dollars and thirty-three cents for every hundred dollars you’re collecting. That’s very, very high. It should not be that.”
The gap between what the hospital collects now and what it should be collecting translates to $16–17 million annually in uncollected revenue, plus another $3–4 million in inflated collection costs.
The hospital’s revenue cycle department—the team responsible for billing patients and insurance companies, posting payments, and appealing denials—is a tangle of manual work, hidden problems, and weak oversight. Denials that should be tracked separately are lumped into “contractual allowances,” making it impossible to see where money is being lost. A charge master listing 24,000 billing codes (it should have about 6,000) confuses staff, leading them to select the wrong codes. Discharge paperwork sits unbilled for 10–12 days instead of the standard 3–4 days. And any biller can write off any dollar amount without approval limits.
“You can’t fix things if you’re not recording it,” Bauer said.
The assessment also found that the hospital’s revenue cycle leadership lacks what Bauer called “critical thinking” about basic functions. Staff meetings are rare. Meetings with major insurance companies happen only occasionally, not monthly. Improvements recommended in prior RSM engagements were abandoned. And a key metric—accounts receivable days—has been calculated incorrectly for 20 years using a 22-day month instead of 30, artificially inflating performance reports.
RSM’s recommendation is to outsource billing, collections, denial management, and coding to specialized vendors. Critically, the consultants urged the hospital to structure contracts with vendors on a contingency basis—paying them a percentage of collections rather than a flat fee.
“If it is a partner that will agree to a contingency- based contract where they are paid a percentage of what you are paid, then the motivation for them is to ensure you get paid the most amount possible,” said Michael Brown, an RSM consultant. “Because it’s the same level of work and they want to get that money just as much as you.”
Bauer was blunt about the necessity of this approach. “I wouldn’t engage a billing and collection vendor who wouldn’t go on a contingency,” he said.
The arrangement gives the vendor “skin in the game,” as Bauer put it. Unlike a hospital that pays staff salaries regardless of results, a vendor on contingency has a direct financial incentive to maximize collections. The consultants noted that some vendors may use fixed-fee contracts for specific roles like medical coding, but billing and collections should be contingency-based.
The consultants emphasized this would not necessarily mean job losses. “Many vendors that I’ve worked with will rebadge the teams that you have,” Bauer said, meaning existing staff could be hired by the vendor. But he added: “I do think that they need different leadership. I think they need to be held accountable.”
The hospital could see real improvements within 60–90 days of implementation, Bauer said. The vetting and selection process would take 2–3 months.
The board asked RSM to remain for an executive session following the presentation. No details of that discussion were disclosed when the board reconvened.
Bill Murdock, President & Chief Executive Officer, said work with RSM began in 2024 with a review of a segment of the hospital’s revenue cycle process.
“After reviewing the recent financials, we decided to bring RSM back for an in-depth look at everything related to revenue cycle,” Murdock said. “That additional work was presented during Monday night’s Board meeting.”
Murdock acknowledged the hospital’s challenges with insurance denials and underpayments.
“We have to do better with the challenges we face dealing with all insurance payors’ denials and underpayments, and build stronger relationships, to ensure we can get paid correctly for the patient care we provide,” he said.
The MDH Board of Directors issued a statement following the presentation: “The report from RSM was eye-opening. We will look into their findings and develop a plan to address concerns and pursue additional revenue opportunities. If those opportunities are as clear and attainable as the report indicates, that’s very positive news for MDH and its financial sustainability going forward.”
The $20 million figure is conservative, RSM said. It assumes the hospital can reach 43% collection rate—the low end of what it should achieve based on its insurance contracts—and reduce collection costs to 3.5–3.75% of collections. The hospital is currently spending 8.33%.
“These are real numbers,” Bauer said. “You should really be able to achieve that.”
