Medical Billing Outsourcing Market

Market Overview

The global medical billing outsourcing market size was valued at USD 13.6 billion in 2023 and is projected to reach USD 38.5 billion by 2032, registering a CAGR of 12.2% during the forecast period (2024-2032). Increased desire in the medical sector to focus on core capabilities while outsourcing non-essential jobs are the primary market drivers driving Medical Billing Outsourcing market growth.

Medical billing outsourcing is shifting medical billing and coding tasks from healthcare providers to third-party service providers. This outsourcing arrangement enables healthcare providers, including hospitals, clinics, physician offices, and healthcare facilities, to optimize their revenue cycle management operations and concentrate more on patient care.

The increasing complexity of the healthcare industry, including various payment mechanisms, insurance plans, and coding rules, is beneficial to the market. Furthermore, the expansion of telemedicine services and the ongoing rise in distant consultations and billing complexities are helping to drive market growth. Aside from that, expanding preferences for preventative care measures are increasing the demand for specialist coding and billing methods. Outsourcing partners help correctly bill these services and promote a move toward preventive healthcare. Furthermore, the growing medical tourism industry is driving up demand for outsourcing, as it assists healthcare providers with international invoicing, currency conversion, and compliance with various healthcare regulations.

Highlights

• Outsourcing holds the major market share by component.
• Front-End Services led the market by service.
• Hospital accounts for the largest share of the market by end-user.

Market Dynamics

Global Medical Billing Outsourcing Market Drivers

Rising Demand for Electronic Health Records (EHRs)

Electronic health records (EHRs) have become essential to modern healthcare delivery, allowing for digitizing and centralizing patient health information. They provide various advantages, including greater patient care coordination, better clinical decision-making, and increased healthcare operations efficiency. As EHR use grows globally, healthcare organizations want seamless integration of EHR systems with medical billing procedures to improve revenue cycle management. 

Additionally, in 2023, many US hospitals and healthcare institutions will have installed Electronic Medical Records (EMR) software or switched to a new EHR system. EHRs give healthcare practitioners digital access to a patient's complete medical history, prescriptions, allergies, vaccines, and other vitals. According to IDC MarketScape, 39% of respondents invested in or improved their current EHR from 2022 to 2023. This points to an industry tendency to optimize existing systems rather than replace them. Vandalia Health, a West Virginia-based health system, inked a 10-year agreement in July 2023 to expand Oracle Health's electronic health records (EHR). This will help improve care team coordination and patient and caregiver experiences and ensure care continuity throughout the system.

Similarly, as of June 12, 2023, over 16,000 hospitals in China had implemented electronic health records (EHRs). This is 3.3 times the number of non-federal US hospitals implementing EHRs. Since 2009, China has been committed to developing the National Electronic Health Information System to assist service delivery reform. The global electronic health records (EHR) market is expanding rapidly due to healthcare providers' growing adoption of EHR systems worldwide. Integrated EHR and billing systems are increasingly important for enhancing healthcare enterprise revenue cycle management and operational operations. As a result, there is a growing demand for medical billing outsourcing services that focus on EHR integration, billing automation, and revenue cycle optimization.

Global Medical Billing Outsourcing Market Restraints

Data Security and Privacy Concerns

Medical billing outsourcing is providing sensitive patient health information to third-party service providers. Concerns regarding data security breaches, unauthorized access, and compliance with healthcare rules such as the Health Insurance Portability and Accountability Act (HIPAA) can all impede the use of outsourced services. Healthcare providers may hesitate to outsource billing operations because they risk exposing patient data to security concerns and the potential legal and financial penalties of noncompliance.

In addition, the HIPAA Journal reported that 2023 was a record-breaking year for healthcare data breaches, with 725 incidents affecting more than 124 million health records. This is more than double the number of violations in 2022 and 2017 combined. In 2023, the average hacking event compromised 215,269 records, with 73,623 as the median. 69% of the information was accessible via network servers. Medical billing outsourcing companies must demonstrate compliance with HIPAA and other regulatory standards by conducting rigorous security assessments, audits, and certifications to reassure healthcare providers about their commitment to data security and privacy.

In December 2023, the Department of Health and Human Services' Office for Civil Rights (OCR) received 74 allegations of healthcare data breaches involving 500 or more records. This is the most significant number of breaches reported to the OCR since they began releasing data breach reports on their "Wall of Shame."  The Nashville, Tennessee hack was the most significant data leak in 2023. The Anthem incident in 2015 remains the largest-ever health data breach, with hackers gaining access to the personal information of over 78 million people.

Furthermore, according to IBM Security and the Ponemon Institute, the average cost of a data breach in the healthcare business in 2023 is USD 10.93 million, the most among all industries. This represents an 8.22% increase from 2022, when the average cost was USD 10.10 million, and a 53.3% increase in the previous three years. Healthcare data breaches cost USD 408 per record, three times the global average of USD 148.

Global Medical Billing Outsourcing Market Opportunity

Technological Advancement and Automation

Medical billing outsourcing organizations increasingly rely on artificial intelligence (AI) and machine learning (ML) technology to automate coding and enhance accuracy. For example, Olive, a healthcare AI business, provides AI-powered coding systems that automatically evaluate medical paperwork, identify billable treatments, and generate appropriate codes. By automating coding procedures, healthcare practitioners can eliminate manual errors, speed up claim submission, and improve code efficiency.

Consequently, medical billing outsourcing providers use robotic process automation (RPA) to automate repetitive operations, including claim processing, eligibility verification, and payment posting. RPA technologies can help outsourced vendors enhance operational efficiency, shorten processing times, and optimize revenue cycle management for healthcare providers. According to Gartner, 50% of US healthcare providers plan to invest in RPA over the next three years. Furthermore, healthcare practitioners face a perfect storm of reduced compensation, improved outcomes, enhanced experience, and strengthened credentials. Any technology used to help these providers improve delivery and streamline operations must also be cost-effective.

Furthermore, medical billing outsourcing companies invest heavily in AI, ML, and RPA technologies to improve their service offerings and differentiate themselves in the market. AI-driven coding platforms, predictive analytics for claims management, and chatbot-driven customer care solutions are all emerging trends that aim to increase billing accuracy, efficiency, and customer satisfaction.

Regional Analysis

The global medical billing outsourcing market analysis is conducted in North America, Europe, Asia-Pacific, the Middle East and Africa, and Latin America.

North America Dominates the Global Market

North America is the most significant global medical billing outsourcing market shareholder and is estimated to grow at a CAGR of 11.9% over the forecast period. The healthcare industry is one of the most data-intensive in the United States. The sector is heavily involved in implementing innovative solutions to accelerate the development of advanced healthcare and support advances in patient care. Furthermore, the US federal government and other public stakeholders are making available vast amounts of healthcare knowledge, including data and information on individuals insured by public insurance programs. Thus, the demand for improvements in healthcare will enhance the total industry. 

Moreover, the presence of various healthcare providers in the United States and their trend toward end-to-end outsourcing solutions for managing billing procedures is expanding the market in North America. Because of the rising understanding of the benefits of outsourcing, providers prefer to use outsourced services to optimize earnings and manage high-value transactions.

Asia-Pacific is anticipated to exhibit a CAGR of 12.3% over the forecast period. Emerging countries such as Australia, India, and China are expected to rapidly expand due to rising patient populations and improved healthcare infrastructure. The market will grow as people become more aware of clinical billing software and adopt new technologies. Asia-Pacific will be the fastest-growing area for healthcare spending, accounting for more than 20% of worldwide expenditure by 2030. Access to care, affordability, and quality remain significant issues for healthcare systems. Furthermore, approximately 50% of all customers (58% of Gen Z) intend to spend more on healthcare in exchange for improved health outcomes, better experiences, and greater efficiency. 

Additionally, by 2025, Asia will have 456 million seniors aged 65 and over, accounting for 10% of its population. This represents a 14% increase over 2021—a significant demographic shift that increases prospective demand for health services while decreasing the available workforce to provide care. These factors are projected to propel the market in the area.

Europe accounted for a sizable market share in 2023 and is expected to grow at a significant CAGR over the forecast period. The changing healthcare rules and the growing need to manage medical plans are projected to fuel demand for billing outsourcing services. Furthermore, established market players are expected to drive regional market growth over the projection period.

Latin America, the Middle East and Africa are expected to grow during the predicted period. The growing proportion of the population suffering from chronic and infectious diseases, rising healthcare investments, and key players' increased focus on offering billing services in these regions are likely to drive market growth over the forecast period.

Segmental Analysis

The global medical billing outsourcing market is segmented based on component, service, and end-user.

The market is further segmented by components into in-house and outsourced.

The outsourced category had the most significant revenue share of 50% in 2023 and is predicted to grow the fastest during the projection period. Outsourcing services considerably cut expenses and are an effective solution for small and medium-sized businesses. Physician health operations in clinics and acute care hospitals face difficult times as reimbursements have fallen, costs have risen, and newly imposed regulations have complicated business. According to a Medical Group Management Association (MGMA) survey, billing errors cost a medical practice approximately 5-10% of its income. This is driving the segment's growth. 

Additionally, many firms are implementing or launching unique cloud-based medical billing technologies to improve patient data protection. For example, In 2024, Zentist, the premier cloud-based insurance Revenue Cycle Management (RCM) software for dental groups in the United States, proudly announced the release of Cavi AR, an additional innovative solution in their Remit AI product suite. Cavi AR improves operational efficiency for dental support organizations (DSOs). It demonstrates the company's ongoing dedication to technological progress and excellence in the dentistry business. Outsourcing also lowers labor expenses because it eliminates the need to hire an accounting team. Furthermore, the organization is not required to train or keep up with new technologies, saving money on training. 

In-house billing manages medical billing operations internally inside a healthcare institution or facility. Healthcare providers use their team of billing specialists, coders, and revenue cycle management personnel to handle billing responsibilities such as claim filing, coding, payment posting, and accounts receivable management. In-house billing enables healthcare companies to control and manage their billing operations, tailor processes to their specific requirements, and emphasize patient data protection and privacy. 

Based on service, the market is fragmented into Front-End Services, Middle-End Services, and Back-End Services.

Front-end services led the market, accounting for 40% of total revenue. Front-end services in medical billing outsourcing cover the early stages of the revenue cycle, emphasizing patient-facing activities and billing-related administrative operations. These services usually involve patient registration, insurance verification, eligibility verification, pre-authorization, and appointment scheduling. Managing front-end services well is critical for reducing repetitive work and increasing the patient experience through speedier service. As a result, there is a high desire to outsource these services. 

However, the segment's revenue share is expected to drop due to growing rivalry and market saturation. 

The middle-end services segment is expected to grow profitably in the coming years due to new entries into the sector and increased awareness of middle-end services by practitioners. Middle-end services in medical billing outsourcing include coding and documentation duties that connect front-end patient interactions to back-end claims processing. To ensure accurate and compliant billing, these services specialize in converting clinical documentation into standardized medical codes, such as the Current Procedural Terminology (CPT) and the International Classification of Diseases (ICD). These services have emerged as the most common function that healthcare institutions outsource due to the crucial importance of data and the major hurdles involved in handling the transfer internally efficiently and cost-effectively.

The market can be bifurcated based on end-users in the hospital and physician offices.

The hospital segment had the largest market share, accounting for 50%. Hospitals are a critical end-user group in the medical billing outsourcing market. Hospitals are major healthcare institutions that offer a wide range of medical services, such as inpatient and outpatient care, emergency services, surgical procedures, and diagnostic tests. Hospital billing systems are complex and multifaceted, requiring many patient interactions, several payer contracts, and specialized clinical services. Outsourcing medical billing services enables hospitals to simplify revenue cycle management, enhance billing accuracy, and speed up compensation for services given. 

Furthermore, the segment is likely to remain dominant during the projection period. This is primarily due to healthcare institutions' rising demand for financial services. In addition, hospital consolidation complicates the reimbursement and billing processes. This is increasing the demand for medical billing outsourcing services in the healthcare industry. The newly announced International Classification of Diseases-10th version (ICD-11) has complicated the medical billing industry even more. As a result, there is a significant growth in demand for Revenue Cycle Management (RCM) solutions. Furthermore, providers are selecting organizations with the appropriate combination of RCM and electronic medical records to improve patient outcomes.

The physician office segment is predicted to increase fastest during the projection period. Physician offices, including solo practices, group practices, and specialty clinics, are another essential end-user category in the medical billing outsourcing market. Patients in outpatient settings can receive ambulatory care services such as primary care, specialized care, preventative care, and diagnostic tests from physician offices. 

Moreover, rising spending on healthcare services supplied by small and medium-sized providers, driven by a growing emphasis on risk management and regulatory compliance, as well as complicated technology and staffing requirements, is likely to propel the market in the future. As the number of services physicians give and government requirements change, more physicians are utilizing RCM services in their medical facilities.

Recent Developments

• January 2024- R1RCM acquired Acclara, Providence's modular services business.
• April 2024- Veradigm® (OTCMKTS: MDRX), a leading provider of healthcare data and technology solutions, announced a strategic cooperation with Vim, a prominent middleware platform for U.S. healthcare, to improve point-of-care integration for EHR platforms and payers outside of the Veradigm EHR footprint. This cooperation and the introduction of Veradigm Payer Insights is a significant step toward bridging the gap between payers and providers, benefiting patients through enhanced care coordination and outcomes.
• May 2024- Pacific Islands Primary Care Association and HealthEfficient collaborated with eClinicalWorks to increase community access to comprehensive health center solutions.