Is end-to-end revenue cycle outsourcing on a slow march to doom?

Ahead of our 2026 Revenue Cycle Summit in Chicago, we've been chatting with many executives and board members about how their health systems are transforming their operations for 2026. Interestingly, a common ambition seems to be on everyone's radar: squeezing more out of existing vendor arrangements. The questions many are pondering are flavors of: "Should we demand more from our current vendors or make wholesale changes?" And, while all types of vendors roll into this consideration, it seems like health systems using end-to-end (E2E) revenue cycle outsourcing (with offshoring) are taking a particularly close re-look.

Coincidentally, in early Q4 Black Book issued a press release highlighting an emerging trend: providers intent on pivoting away from revenue cycle outsourcing—offshoring in particular—with a couple of interesting topline numbers:

• 34% of health systems plan not to renew at least one legacy RCM contract in the next 18 months.

• 88% want to see data residency and auditable AI pipelines on US soil as mandatory in any revenue cycle-related RFP.

Implicit in these conversations and releases (and accompanied by a supportive chorus of "We told you so" from outsourcing/offshoring naysayers) is the idea that health systems have been underwhelmed by RCM outsourcing and may be ready to take matters back into their own hands—particularly as the promise of AI-driven technical capabilities renews optimism for in-house RCM control.

On one hand, these musings make perfect sense. Revenue cycle performance hasn’t been knocking it out of the park as vendors have struggled to keep pace with payer efforts to slow the payment cycle. The criticisms are well known. Time zone challenges limiting speed of response; talent challenges, particularly around retention, limiting the development of institutional and payer knowledge and effective relationship-building (internally or with payers); and the list goes on. And let's face it, costly outsourcing options that aren't hitting their marks should be revisited. Heck, I even had one E2E outsourcing executive tell me they wouldn't use their own company's E2E offerings if they were running a health system's revenue cycle!

On the other hand, I've also spoken with several CROs and VPs of revenue cycle who not only use E2E outsourcing functions, but, as corroborated in some reports, they really like them. Professing that their partnership is pivotal to weathering a seemingly never-ending revenue cycle storm.

So, here's a thought exercise I'd like to go through: What’s the future of E2E outsourcing/offshoring? And is it really "on the ropes" as some may be suggesting? To unpack this, we’ll touch on what I think are a few important elements, and at the end, I’d love to hear thoughts and feedback from anyone with their own hot take. Or someone who just wants to check in on my wellbeing after 3,600+ words on E2E outsourcing.  (I’m okay…seriously)

Element # 1: End-to-end revenue cycle outsourcing has always grown when complexity and cost collide. Will that pattern continue?

To understand how E2E outsourcing might be under pressure as a business model, it helps to take a high-level look at why and when it has grown historically. Revenue cycle outsourcing gained significant steam in the late 1990s and early 2000s as hospitals and health systems began shifting discrete back-office functions like charge entry and payment posting offshore, many with operations based in India. This era of outsourcing was nudged forward by key events and market evolutions in the early migration to electronic environments. CMS's Administrative Simplification Compliance Act, new electronic transaction standards under HIPAA, and the mandate for electronic claims for Medicare encounters, combined with early adoption of Electronic Health Records (remember, under one quarter of hospitals had a fully implemented EHR as recently as 15 years ago!), drove billing complexity—although quaint by today's standards—along with rising labor costs.

E2E outsourcing had another big growth spurt in the 2010s, turbocharged by several market forces that dialed up the complexity and cost of revenue cycle operations. Seminal events in this era included mass adoption of electronic health records post-HITECH Act (growing from under 30% of hospitals to around 97% between 2011 and 2014); the transition from ICD-9 to ICD-10 (FY 2016) which cranked up coding complexity and temporarily freaked out a sizable portion of health systems; the emergence of payers dabbling with algorithmic denials and employing third-party vendors with “gen 1” AI capabilities in the mid-2010s; the post-ACA rise in high deductible plans, which saw a far greater focus on patient financial management; health system M&A which saw duplication of similar functions across sites; and the steady rise of labor costs as a share of hospital expenses, at least partly attributable to many of the factors listed above.

More recently, the pandemic spurred further growth in E2E, as operational challenges quickly got hairy in a weird operating environment, despite lower patient volumes. Companies like Ensemble and R1 reported strong growth around this time. Acceptance of remote work went from "Never enough" to "This is how we do it" and outsourcing companies had the infrastructure and processes in place to support systems who were rightfully preoccupied with clinical care. Additionally, given clinical labor costs skyrocketed (nursing especially) and talent pools were “pandemic-ified,” many health systems had fewer resources to throw at RCM labor, making outsourcing an attractive option.

The common thread in the detail above is this: E2E outsourcing has historically grown when the complexity and cost dials are turned up.  Both of those forces persist today, so that’s good for the E2E/offshoring business, right? Hold your horses. Prognosticating the future of E2E becomes far more difficult due to the proliferation of AI-based RCM tools that might enable health systems to achieve greater reach at greater speed, effectively responding to both the complexity and cost challenges of the past.  Given some encouraging early results from health systems at the relative “dawn” of this new era of more-intelligent automation, such optimism appears well-founded.  The key question: can all health systems adapt these tools so effectively that reliance on legacy E2E offshoring models will go away?  Many RCM AI companies are banking on it.  However, only time will tell.

Element # 2: Health system leaders often say they'll change vendors for negotiation purposes.

Here’s something I've noticed over the years in my discussions with CFOs: threatening to change vendors for underperformance is as common as someone at the gym promising "this is the year." It doesn't mean they're insincere—they genuinely believe it in the moment.

The Black Book survey we referenced earlier found that 34% of health systems plan not to renew at least one legacy RCM contract in the next 18 months. That sounds dramatic until you realize it means 66% aren't planning to make changes anytime soon. And of that 34%, how many will follow through? Switching vendors or bringing functions in-house is no small undertaking. It requires a whole host of complex “stuff,” from RFP processes; to implementation on a 12-24 month timeline; significant internal resources during transition; risks of operational disruption; upfront investment before seeing any ROI; and cultural change management across the organization.

I’m probably leaving out a ton of detail in the list above, but that’s not the point. The reality is that threatening to leave is often a negotiation tactic, and it can be an effective one. Nothing gets a vendor's attention quite like the prospect of losing a multi-million-dollar contract. But the gap between "we're unhappy with our vendor" and "we're actually making a change" is substantial. I've watched this movie before, and often the ending involves a renegotiated contract with better terms rather than a complete vendor divorce.

That's not to say no one ever switches—they do. But we should also bear in mind that recent HFMA data (which I can’t publish here but can point to) shows that health systems far prefer the idea of a single consolidated E2E vendor when they do outsource. One health system executive (whom I will not attribute this quote to because, well, you’ll see…) succinctly put that “E2E is more convenient, in part because it provides a single throat to choke."

Several well-known reasons how outsourcing can fall apart

Element # 3: Not all outsourcing companies are the same when it comes to the provider experience

This might be the most important point, and it's one that often gets lost in broad discussions about outsourcing. Lumping all E2E vendors together is like saying "all hospitals are the same". It's convenient shorthand that obscures massive variation in quality, capability, and performance.

I've spoken with health systems that rave about their outsourcing partner, crediting them with significant improvements in cash flow, denial rates, and days in A/R. And there are others who describe their experience as a cautionary tale of overpromises, underperformance, and expensive lessons learned. For the health systems who appreciate their E2E vendor, there are some consistent points of praise:

The organizational fit works. The E2E team work very collaboratively, “almost symbiotically” as one provider described it to me. That includes an acknowledgement of culture and priorities, and a delivery model aligned to prioritize the health system. This includes lines of communication between leadership of the two organizations to address any pain points that are not working and ameliorate them. Not to forget meeting regularly to review performance metrics, making timely operational changes when warranted, and effectively resolving problems.

The vendor’s talent is aligned to support the health system’s mission. This doesn’t mean that the vendor doesn’t use offshoring. However, it does mean that the setup of the organization uses that offshoring mechanism in a manner that balances its offshore operational advantages with onshore and expert presence. Tactics that ameliorate some of the other oft-cited critiques of offshoring include reducing employee churn through retention mechanisms, training, and emphasizing the offshore staff see themselves as an extension of the customer’s own team.

Problem solving is emphasized over transactional work. If you browse the fine-grained details of KLAS reports (yes, yes, I know how people feel about these...) it confirms something we’ve known for a long time: The most repeated differentiator of the best E2E vendors is that they move upstream to solve problems, rather than running back-end clean up. And it’s not only proactive operational excellence; the leading E2E offerings encompass a full range of advantageous strategic functions, including analytics, advice (and tactics) in contract negotiation or litigation if a situation turns sour. If they’re able to inject insights based on scale of payer interactions from other clients, all the better. However, what’s evident is that any E2E firm worth its salt is going to position itself as a strategic partner as opposed to a processing factory.

What isn’t emphasized in any of the aforementioned “cool parts” is offshoring or onshoring per se. It’s a series of operational commitments by vendors to do better by health systems. That’s not to say offshoring functions haven’t played a role in shortfalls in the past, but let’s be real, at least some of the health systems that turn to E2E previously managed to run some crappy in-house RCM operations on their own.  And, based on performance metrics we’ve seen, many still do. 

It’s important to remember that when health systems complain about outsourcing, they're often really complaining about their specific vendor or their specific implementation. That's fundamentally different from saying the E2E model itself is broken. It's like saying "restaurants don't work" because you had a bad meal. However, quality variation in the market creates an opportunity. Rather than abandoning outsourcing wholesale, health systems that are disappointed with their current partner might be better served by finding a better one. The market has matured enough that there are meaningful differences between vendors, and some have clearly pulled ahead in terms of technology, results, and partnership approach.

Partnership will be a critical feature of future outsourcing

Element # 4: E2E outsourcing itself is evolving

Here's where things get interesting. The vision of E2E outsourcing that's fading is the one centered purely on labor arbitrage. You know the picture: Take US-based FTEs, rebadge them (+/- offshore), cut costs, pocket the difference. That model worked when the primary value proposition was "we can do the same work cheaper." But it's increasingly inadequate when the challenge is "we need to do fundamentally different work better." What health systems needed in 2015 isn’t what’s required in the future. Just as some health systems are turning their focus to in-house AI-driven capabilities, outsourcing vendors have seen this and are evolving accordingly.

Vendors we’ve spoken with are stepping to the challenge of bringing more to the table than just cheaper labor, recognizing that any next-generation E2E offering will require some meaningful performance differentiators:

Better tech: AI-powered tools for denials prediction and response, autonomous coding capabilities, intelligent work queues, analytics (especially around payer behavior) and process automation. Many vendors are investing heavily in building or acquiring these capabilities.

More specialized expertise: Ideally deep knowledge of specific payer behaviors, regulatory requirements, and clinical documentation patterns is critical to operating the revenue cycle. This is one item on the wish-list of health system leaders who gripe about their vendors.  It’s hard to see a future for an E2E org not offering this, as payer tactics become more sophisticated and the policy gear-switches continue rapidly.

Data and insights: This is a big element that I'd argue becomes table stakes in future. Payer scorecards are one thing, but the ability of a vendor to aggregate what it has learned across multiple health systems, and then to apply those insights to drive change seems an obvious example of how scale can drive deeper insight. 

Risk/profit-sharing models: Willingness to put more skin in the game through gain-share arrangements, performance guarantees, and outcome-based pricing. This shifts the dynamic away from vendor-as-cost-center and closer to vendor-as-partner.

Hybrid approaches: Recognition that one-size-fits-all doesn't work. Some functions might be better outsourced, others better kept in-house. Progressive vendors are offering more flexible arrangements that allow health systems to customize their approach according to their level of comfort and desire for control.

If vendors can rise to meet these challenges, a lot of health systems will find their offerings compelling, especially in the near term.

2025 was a notable year for E2E organizations leaning into the dimensions above, investing broadly in diversifying their offerings with acquisitions and assembly of new platforms, or even going full-tech E2E. None of the legacy E2E firms are abandoning offshore operations, which makes sense because cost is still an issue for many systems, as is access to a reliable talent pool.  More than one vendor we’ve spoken with expressed intentions to double down on offshore efficacy by deploying A.I. broadly to enhance operations and outcomes. How this ultimately evolves, and is adopted by health systems, is TBD, but watch this space.

However, like so much in healthcare, an elephant in the room is imperfect incentive alignment, in this case between the E2E vendors and the health systems. Do the vendor financial models enable them to truly support health systems?  Or do we see a wave of next generation underperformance? Incentive alignment should be a far bigger concern than offshoring.

And that’s why one consultant we spoke with told us: “Automate everything you can in-house and outsource what you don’t do well.” Such a philosophy completely sidesteps a chunk of the E2E business model that historically hasn’t been fully aligned with provider goals.

Element # 5: Health systems might finally be getting savvier at contracting in a manner that gives them leverage, with outcomes as a focal point

Vendor contracting probably doesn’t get the doesn't spotlight it deserves.  I wouldn’t be surprised if half of you reading this fell asleep reading that last sentence. And yet, much of the disappointment with outsourcing vendors stems from poorly structured service level agreements (SLAs). Listen to anyone deep in the outsourcing world and you’ll hear stories about how health systems entered into E2E arrangements without any contractual guarantees for performance, insufficient transparency requirements, weak exit clauses, and payment structures that didn't align incentives. Why? Because cost was often a far greater focus than performance. (Side note, I can attest to being an active listener in discussions with numerous health systems that kicked the tires on Optum’s outsourcing deals when I was there and more commonly than not, the health system executive “why” was cost).  The result? Vendors collected fees while health systems absorbed operational and financial risk. There are signs this behavior is shifting.

As one RCM vendor candidly told me: "If I were running a revenue cycle, I'd be pushing for everything I can get in an agreement and then holding them in breach if they didn't live up to the arrangement." That wisdom—coming from a vendor—speaks volumes. The power dynamic is evolving. When contracts hold vendors accountable and give health systems meaningful leverage, the outsourcing relationship works better. The issue often isn't outsourcing itself but rather outsourcing under terms that don't adequately protect the health system's interests.

Expect more assertive redlines and health system legal teams who finally start to think like their corporate counterparts: gain-sharing arrangements where vendors only win if the health system wins, tougher breach and termination clauses with reasonable wind-down periods, insisting on process steps that transform the arrangement from “vendor” to “partner” (QBRs, granular performance data sharing, enhanced executive communication, strategic support, performance plateau resolution etc.), and requiring vendor investment in demonstrably effective technology capabilities as table stakes. And if you’re a vendor, expect to be passed on if you’re not willing to structure your offering in such a manner.

Many health systems limited their outsourcing wish lists to "let's get cost under control"

Verdict: When it comes to E2E, inertia is strong, but not as strong as the long-term forces assailing it

I’m going to paraphrase what a wise man once told me: “If I could predict the future with accuracy, I’d be lying on my 3,000-foot yacht in the Bahamas right now"… rather than sitting here writing blog posts about revenue cycle E2E outsourcing and offshoring. Let’s be real: The revenue cycle sits in a proverbial maelstrom of technology right now and as with all storms, there’s likely going to be some debris when the winds die down. Several forces work against E2E/offshoring as an offering. First, some leading health systems (italics are intentional, I’m not talking all health systems) we've spoken with are straight up expressing a desire to move away from E2E with offshoring as they look to equip their own teams with A.I. to do more, better and faster with a level of sophistication that could only be dreamed about a decade ago. Second, the economics of E2E mostly but not always favors the organization providing the offshoring solutions evidenced by the fact that such offerings have failed to broadly arrest a marked performance decline in AR over the last 5-7 years as many of those same companies have grown. Third, while some organizations openly love their E2E outsourcing firm, many more would leave their current vendor for an obvious better solution, whatever that may be. Finally, if health systems broadly start nailing down E2E companies with rigorous SLAs, it remains to be seen if the outsourcing economic model would work at scale favorably enough to keep all businesses viable.  It’s no surprise that E2E hasn’t knocked it out of the park for health systems. As my colleague (and Union CEO) Christopher Kerns likes to say: “That’s a feature, not a bug”. 

On the flipside, there really seems to only be one major force in the other direction and that’s change inertia.  And if the pain of short-term switching costs, both from a dollars and organizational disruption standpoint, represents the chief point of stickiness for E2E, then it’s not likely to play well for this industry longer term.

As highlighted earlier, revenue cycle complexity is the essence of outsourcing.  True breakthrough AI that makes revenue cycle trivially simple would fundamentally undermine the outsourcing model.  And while such technology may not fully exist today, the signs are there.  One CFO using outsourcing told me: “If I could cut my revenue cycle costs by 40% using AI, I’d be a hero”. On the flipside, a vendor who makes their own services obsolete doesn’t have a business anymore.

So, the uber read is this: E2E outsourcing as we currently know it could very well be on the verge of a decline. But rather than a cliff, it’ll probably take the form of a long tail decay, where tech-savvy health systems, looking to gain a significant strategic advantage (especially in payer relations) pull more capabilities in house, while the less technically sophisticated laggards, those in “talent deserts,” or systems that struggle with workflow disruption lean more heavily on the E2E model to prop themselves up and settle for cost reduction over any marked performance increases. 

Early signals of change to look out for will be increased health system uptake of any and all AI capabilities that offshoring may have helped with (coding, documentation, claims status inquiry and follow up, coding QA, DRG validations, denials work queues and the list goes on) as these will all reduce the need for dependence on the current E2E offshoring models. Based on current AI RCM uptake, there appears to be a ton of runway available, and that’s before any real agentic boom (geographically agnostic I might add) has broadly deployed, which some project could be within the next five years. 

At the same time, don’t expect E2E vendors to stand pat. The question isn't whether vendors adopt AI, but whether they adopt it fast enough and with a business model that can sustain profitability and survive. If they can use their scale to develop a competitive advantage and drive better outcomes for providers than they historically have, some can be expected to emerge on the other side of this transition period. Although my guess is they’ll look a little different—operationally skinnier and far more tech-centric—than currently constructed.

And on that note, as my kids would say, it's time to go “touch grass.”