Why Adopt Third-Party RCM Automation When Your EHR Already Has Built-In Automation?

The question that has been put forward focuses on why a practice would invest in a third-party revenue cycle management (RCM) automation platform when electronic health records (EHRs) can already automate numerous tasks related to the revenue cycle. It is essential to understand the potential benefits that third-party RCM platforms can bring to practices and what advantages they have over the automation features of EHRs.

EHR automation mainly refers to automating processes within the clinical and practice-management system, whereas third-party RCM automation solutions are designed to optimize particular procedures connected to eligibility, billing, claims, denials, payments, and A/R. A third-party solution can be used alongside the EHR.

Given all of this built-in EHR automation, So, why would a practice invest in a third-party RCM automation solution?

The reason is straightforward, it is because EHR software is designed to serve the clinical and practice-management functions of the medical practice. Moreover, it may not be designed to provide end-to-end financial management of a healthcare billing cycle.

Why Do Organizations Need A Third Party RCM Automation Platform?

Organizations use third-party RCM automation when their EHR’s native revenue cycle capabilities do not offer the specialization, cross-system connectivity, depth, or financial intelligence needed to manage the entire revenue cycle efficiently.

A dedicated revenue cycle automation platform is designed specifically to manage and optimize revenue cycle workflows. It covers financial workflows from eligibility verification and charge capture through payment posting, accounts receivable, and collections activities.

For practices that:

Struggle with denials and follow-up with providers or patients,
Rely on lengthy, time-consuming manual contact with payers,
Find their processes are too complex,
Lack financial visibility or aren’t built for their specific specialty needs,

a third-party RCM automation solution can serve as a complementary layer to an existing EHR.

So rather than asking whether EHR-based RCM or a third-party solution is better, it is more meaningful to ask where our EHR’s RCM functions stop and how we can supplement this functionality with a dedicated revenue cycle automation platform.

EHR Automation Vs RCM Automation: What’s The Difference?

EHR Automation

EHR automation can include:

Tools and workflows that reduce administrative tasks
Tools that improve clinical documentation and charge capture
Automated appointment scheduling and reminders
Basic patient account balance management
Insurance claim submission
Basic accounts receivable (A/R) reporting

It’s not generally a complete end-to-end financial automation tool; it has some built-in processes for parts of the financial work as an administrative support function.

It offers a much more limited scope for financial workflow management compared to an RCM automation system.

RCM Automation

RCM Automation however, has a more end-to-end approach; to include:

Benefits eligibility verification
Patient account management
Claims scrubbing
Claims submission
Denial follow-up and appeals
Payment posting
Patient statements and collections

Advanced analytics, including denial and AR management, are often included in RCM software.

A Key Differentiator: The “Why”?

The “why’ is that while there can be financial automated processes or reporting integrated into the EHR “stack”, they tend not to offer the comprehensive and intelligent end-to-end financial cycle automation found on a specialized revenue cycle automation system.

While your EHR system may show you there has been a denial; the dedicated RCM tool will tell you exactly:

Why the denial occurred
What portion of the dollar amount was denied
Which provider and service line are involved
Which payer is involved
Whether the service was covered or non-covered
Where the claim currently stands
What action should be taken next

What are the Advantages of Using a Third-Party RCM Automation?

1. Automated EHR functionalities usually exist in a closed, single practice management system

Many EHR systems will offer some internal tools to support areas such as financial management, payment posting, and A/R management, but they are necessarily locked inside the EHR. In essence, built-in automated RCM features operate within the limited scope of the EHR’s functions.

Today, revenue systems are increasingly integrated and may not only operate within the practice EHRbut will likely be tied to a clearinghouse,an electronic billing service (EBS), a coder,a patient portal, a credit card processor ,or another ancillary RCM-related third-party. When interfaced appropriately, a third-part RCM automation platform can be used throughout these separate tools, providing an end-to-end solution to the practice and for practices with multi-site offices, multiple billing systems or EHRs used, a third-part solution will extend the benefit.

2. Not all EHR software has the capabilities needed for specialty practices

Many specialty practices struggle with challenges related to

Managing claim submission, including global payment processes for surgical procedures with modifiers and/or secondary procedures
Medical necessity and all associated requirements
Associated services and procedures
Workers’ compensation programs
Authorization-related claim denials
Payer-specific denials related to individual insurance providers
Other revenue-related processes that occur after the claim has been submitted to the payer

A specialized RCM system can handle these nuances better with a dedicated RCM scrubber module capable of applying payer- or specialty-specific rule logic, not to mention denying a claim based on denial reasons specific to individual payees, staff, or specialties.

3. Operational reporting is different from financial reporting or intelligence

Most EHRs have reporting and analytics tools for practices to track and evaluate financial data such as charges, payments, claims, and A/R. But these reports offer a general overview of the revenue cycle workflow.

Revenue cycle leaders will pull A/R aging, collections, denied claims, and reporting tools to get a clear idea of what will drive their collections and revenue.

Third-party RCM automation gives you the ability to run deeper reports and analyze Denial trends, A/R aging, clean claims, claims variance, appeals outcomes, and patient collection reports.

Huge difference: one of them tells you what happened – another, what should happen.

How Third Party RCM Automation Can Tackle the Entire Revenue Cycle?

One of the benefits of a third-party RCM automation is that it can tackle individual roadblocks throughout the entire revenue cycle rather than just claims submission. We can look at workflow process by workflow process:

Patient Registration and Eligibility Verification

EHR will capture a certain amount of demographic and insurance information; but there could still be downstream problems due to inaccurate patient selection of payers, invalid coverage, duplicates, incomplete subscriber information, etc. Third-party patient access and eligibility can screen for valid coverage, benefits, coordination of benefits and patients Responsibility prior to the encounter.

It's quite simple: stop problems early rather than processing a problematic claim.

Prior Authorization

Most EHRs will capture an authorization number and a status. But this alone won’t tell them if the authorization was needed, if the correct documents were captured, was the authorization submitted, is the payer waiting on it from the portals, or is the team just letting the status be pending while it remains unsolved.

Third-party authorization automation is the best decision where staff may not need to be the authority for required authorizations. Automation checks for whether an authorization is needed and assembles, submits and tracks authorization requests; escalating when necessary.

Coding & Charge Capture

Revenue is lost before a claim is even sent. Specialized coding and revenue integrity software identifies potential missed charges, inconsistent coding, missed modifiers, incomplete documentation or even specific payer requirements and will flag a potential revenue leakage problem.

Some specialties like orthopedics and podiatry require additional data analysis such as left/right laterality, global surgery rules, multiples, and medical necessity etc.

Claims & Claims Scrubbing

Converting from charge to claim generally happens in the EHR but incomplete claim information, invalid codes/combinations, mismatched attachments and specific payer coding requirements can create a denial. Third-party claim scrubbing and intelligence can apply additional edits, more robust than an EHR, along with patient payment data, historical denials patterns and other payer data.

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Denial Prevention and Management

This is one of the obvious opportunities for specialized RCM automation extending the EHR’s capability.

EHR data identifies an account as denied, but what caused the initial denial? Were there issues with registration, authorization, documentation, billing, or even a payer-centric rule?

The RCM platform will help classify denied accounts by type, prioritize work, uncover root causes of denial, make suggestions, and track success rates of claims appeals.

The goal is fewer denials and more prevention of denial issues, even making its entry into the workflow to begin with.

Payment Posting and Underpayment Identification

E-remittance posting combined with an automated payment posting system eliminates hours of manual effort.

But unmatched, duplicate, pull-back, and recoup credits as well as numerous payer-specific payment rules can create exceptions. Specialized payment-integrity tools use algorithms to identify underpayments or discrepancies with contract rates and create recovery work queues.

This feature is helpful for identifying accounts that need to be reconciled based on their contractual agreement with a payer rather than just accepting their paid amounts.

A/R Follow-Up

EHRs report based on outstanding balances, but not all outstanding balances warrant the same level of follow-up.

A $20 account should not necessarily receive the same level of follow-up as a $20,000 account with a high likelihood of recovery.

RCM automation stratifies your A/R so that your staff works based on dollar amount, acuity,payer characteristics, expected likelihood of successful collection, filling limits, payer behavior, and likelihood of the account to appeal.

Can Your Existing EHR Work With Third-Party RCM Automation?

Yes, many EHRs can integrate with third-party RCM platforms through APIs, interfaces, clearinghouses, or other connectivity methods. However, integration availability does not guarantee access to every data element or workflow.

Many ambulatory EHR and practice-management platforms publicize their APIs, marketplaces or financial integrations.

For instance, eClinicalWorks lists financial integrations and connectivity through HL7 DFT and 837 claim transactions; AdvancedMD highlights open-API architecture and an RCM integration marketplace, and NextGen offers an API marketplace where users can find third-party applications. DrChrono touts its connectivity with third-party healthcare systems via its API.

An API connection does not mean a third-party platform can access everything that a practice wants or requires; therefore, be prepared to pose the following questions:

What data can the system read?
What data can it write?
What type of connection is it (one-way or two-way)?
Can the platform exchange charges, claims, remittances, denials, and patient balances?
Does it support real-time updates?
Can it access historical data?
How does it handle failed transactions?
Is there an audit trail?
Are there additional interface fees?
Does it integrate with the practice’s clearinghouse and payer network?
How are HIPAA, security, and business associate responsibilities handled?

Claims of an integration from a vendor should be considered the first step in technical due diligence, not the last.

How do Third-Party RCM Automation Enhance Leading EHRs?

EHRs are not without RCM functionality; their billing and RCM capabilities are substantial, and each platform enables a variety of charge-capture, claim submission, and payment processes.

In each of these cases, the key is matching functionality to a practice’s real-world needs.

eClinicalWorks:

EHR allows eligibility verifications, claims, claim status, ERA, patient statements and financial integrations, and interoperability.

Additional features the third party rcm automation tool may bring to a practice, depending on specific requirements: advanced denial analytics, payer-specific workflow prioritization, contract variance analysis, cross-platform reporting, and high-volume patient AR follow-up.

Veradigm:

Offers customizable practice-management and RCM workflows, including eligibility, referral processing, claims, follow-up queues, and outsourced revenue cycle services.

Potential added capabilities of an additional RCM tool:

Independent denial intelligence; underpayment detection; cross-payer analysis; centralized control.

AdvancedMD:

Handles medical billing, claim scrubbing, electronic claims submission, remittance processing, and financial dashboards and RCM services.

Additional benefits of a third party RCM automation may become applicable when a practice manages multiple EHRs; extensive payer workflows; requires independent comparison.

NextGen Healthcare:

It offers practice and RCM workflows; has an API marketplace for third-party solutions. Additional value of a third-party RCM automation platform may be applied beyond billing, to enhance authorization, claims denials, payer follow-up workflows, payment variance, and reporting.

DrChrono:

Supports batch eligibility verification, integrated claim management and denial insights; provides integrated ERA processing and payment reconciliation and API support.

When Should a Practice Consider Third-Party RCM Automation?

Growing practices may find an additional third-party RCM automation useful for its A/R segmentation, specialty-specific billing controls, payer performance analytics, or centralized workflows.

If your practice:

Experiences recurring denials despite using EHR billing software
Manually checks claim status through payer portals
Experiences delays in payment posting and reconciliation
Lacks visibility into accounts receivable (A/R) and denials
Uses multiple systems that do not share financial data effectively
Relies heavily on manual processes and spreadsheets
Is planning to open additional locations
Wants to remain committed to its EHR

Nevertheless, it is not always the case that the third-party solution will be the best fit.

If a practice has a simple payer mix, low transaction volume, collections in place, and internal billing smooth enough, its EHR is well-suited and another solution may not be worth the cost.

How to Evaluate RCM Automation Software?

Do not merely choose an RCM automation platform based on a feature checklist.

Instead, ask for demonstrations from vendors using scenarios similar to your actual revenue cycle.

A meaningful vendor demonstration should include:

The entire claim life cycle, from charge creation to settlement
Eligibility exceptions and incorrect insurance coverage information
Reject classification and root-cause reporting
Payer-specific claim status follow-up
ERA posting and payment reconciliation
Underpayment and contract variability identification
Specialty-based billing revisions
Work queue allocation and escalation
Audit trails and user access controls

Most importantly, compare the results against your own performance indicators.

Track the following metrics:

Denial rate
Clean claim rate
Days in A/R
A/R older than 90 days
Post-transaction delay
Net collection percentage
Underpayment recovery
Appeal overturning ratio
Cost of collection

Be careful with unverified statements such as “50% less rejections” and “30% more collections.” Vendors must be ready to explain the methodology, starting point, timing, sample, and type of customer used for deriving such results.

Your EHR Automates Billing. But Who Automates the Gaps?

The dilemma does not have to be EHR automation versus third-party automation. For many healthcare organizations, the optimal combination consists of:

EHR automation to streamline clinical and billing processes + third-party automation for revenue cycle management.

The EHR can be used to capture clinical documentation, scheduling, patient management, charges, and standard billing processes.

Third-party software can further improve this foundation with specialized automation for:

Eligibility checks
Authorization checks
Coding validation
Claim reviews
Denial prevention
Denial management
Payment monitoring
Accounts receivable prioritization
Patient collections
Financial reporting

The goal is not to find some technology without a defined operational need. The purpose is to check where revenue losses took place, find out what process is responsible for these losses, and choose the right solution that would be compatible with your existing systems.

The best RCM automation strategy is not the one with the most features. It is the one that closes measurable gaps in your revenue cycle.