Brian Niederhauser, Chief Operations Officer, Revecore
Revenue cycles always reflect broader healthcare pressures. When labor levels were more abundant and reimbursement rates were higher, a people-focused model made sense. Currently, neither such situation exists. What remains are structural problems that cannot be solved simply by hiring more people and tightening workflows.
Median operating margins for health systems will remain near 1% through 2025¹, with expenses growing at about 6% annually, while revenue growth is only 3%. ² For CFOs looking to protect cash flow in this environment, revenue cycle is no longer a back-office function to manage. This is a strategic measure that should be optimized.
This change requires a fundamentally different operating model.
Changes in staffing
For most health systems, the default response to revenue cycle volume has been to add staff. More denial? Hire additional follow-up claimants. More complex claims? Expand your team. The problem is that the model was already distorted by recent stresses before it reached its breaking point.
Workforce shortages are impacting 83% of healthcare leaders across the revenue cycle, and 90% of healthcare leaders report that labor issues in the revenue cycle are further deteriorating their operations. ⁴ Hiring for these roles is harder and more expensive than it was five years ago, and the job itself is more complex as payer behavior intensifies. The number of payer audits increased by 30% year over year, and the average amount at risk per audit increased by 18%. ⁵ That’s not the amount of work a hiring plan can absorb.
The strategic response for major health systems is to redesign where human judgment is actually required. The transactional, rules-based, high-volume work that has traditionally consumed the majority of revenue cycle staff time is precisely where technology works best and the case for ROI is clearest.
Automation goes from pilot to infrastructure
Organizations that see the best results are those that treat automation as infrastructure by connecting it across the revenue cycle.
The healthcare industry has been discussing AI and automation in the revenue cycle for years. What has changed is the scope and severity of the developments. 72% of healthcare executives report that technology, including automation and AI, is a top revenue cycle investment priority over the next 12 months, and 86% of healthcare systems report that they are already leveraging AI in some way. ⁴
Features covered include eligibility checks, pre-approvals, bill scrubbing, remittance posting, rejection routing, and more. These are pattern matching tasks that humans consistently perform, but are time consuming, but machines can perform them at scale with fewer errors.
More important to CFOs are the changes occurring further upstream. The claim denial rate for first-time claims in 2024 is 11.8%, ⁷ 65% of denied claims are never reprocessed, and ⁸ Revenue leaked on the backend is often lost forever. Machine learning models that flag risky applications before they are submitted address the root of the problem. The cost of blocking a denial is a fraction of the cost of filing an appeal after the fact.
Strategic outsourcing is part of the CFO’s strategy
There has been historical discomfort with outsourcing revenue cycle functions. It may feel like a concession or admission that your in-house team is not up to the task. This framework was a strategic mistake, and CFOs who have overcome it are building more resilient operating models.
A more productive way to frame decisions is to consider complexity. In other words, can a particular revenue cycle function be performed cost-effectively at scale by an in-house team? Complex claims, underpayments, and high-value denials all require deep payer-specific expertise that is difficult and expensive to maintain in-house. Specialist external partners absorb that complexity as their core competency, typically at a scale that internal teams cannot match.
Healthcare revenue cycle outsourcing represents a $50-$80 billion addressable market, and its growth is driven not by cost savings but by the realization that certain tasks are better performed by organizations built specifically for them. The CFO’s role is to assess where the boundaries lie for the organization and ensure that partnerships are governed by outcomes rather than activities.
Metrics to make this work: Balance between cost and capture
All of these structural changes, such as fewer people working on manual tasks, more extensive automation, and more strategic outsourcing, cannot be justified by a payback cost framework alone.
Collection costs answer the necessary question: how efficiently are you processing claims? But that ignores a critical issue. In other words, how much revenue are you missing out on?
In today’s environment, that gap is significant. With two-thirds of denied claims never processed and underpayments from commercial payers draining 1-3% of annual net revenue, the financial impact of missed revenue often outweighs the savings gained from incremental cost reductions.
If organizations do not address revenue leakage, they may suffer from financial underperformance even after optimizing collection costs.
To get a more complete perspective, you need to evaluate both sides of the equation: cost efficiency and revenue capture. ROI is the unifying metric here. ROI quantifies the benefits of prevention and recovery programs and provides a clear basis for evaluating technology investments as a margin protection strategy. In an environment where every unrealized dollar counts, ROI captures the full financial impact of revenue cycle performance and the total cost of inaction.
What will the next model look like?
The best-performing revenue cycle organizations over the next three to five years have a few common characteristics. Our in-house teams focus on highly complex and judgment-intensive tasks where expertise and accountability are key. Automation handles predictable transaction volumes that previously consumed staff bandwidth. Specialist partners absorb complex claims, underpayments, and escalating denials that require deep expertise to perform at a competitive level.
Governance will evolve with this model. Vendor relationships are measured by return on return per dollar invested, not cost containment or FTE productivity. Investments in technology are measured against their impact on the bottom line, not just efficiency gains.
Major health systems are currently building this model. And the CFOs driving it are doing so because their current models—built on headcount at scale, measured on collection costs, and ill-prepared for the complexities ahead—cannot sustain performance in the environments in which they already operate.
The structural evolution of the revenue cycle is not a trend to monitor. For CFOs who understand what is at stake, this is an imperative to act.
About Libecor
Revecore is a proven leader in complex revenue cycle management, trusted by more than 1,300 hospitals and health systems nationwide. Purpose-built to overcome complex revenue cycles, Revecore builds on decades of operational experience and combines an AI-enabled technology platform, proprietary claims scoring models, deep clinical and reimbursement expertise, and an outcome-aligned partnership model to deliver significant financial impact. A six-time Best in KLAS award winner for Complex Claims Services, the company has helped providers recover billions of dollars in revenue by resolving denials, underpayments, and complex claims at scale. For more information about Revecore’s partner program, please visit www.revecore.com.
source of information
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