The decision to change an existing medical billing model really should not be taken lightly. Even the best case scenario involving a change to/from an in-house or outsourced medical billing model will involve some degree of temporary cashflow disruption and we won’t even bring up the worse case scenario.
Any adverse health care provider’s initial step is to determine whether or not his/her current medical billing model is achieving the desired financial result. Although financial analysis is past the scope of the discussion, the provider, accountant or other financial professional must be able to compare actual financial data to revenue and operating budgets. Assuming the integrity in the practice’s financial data is intact though accurate and timely data entry, the provider’s medical billing software should have the capability of generating actionable management reports.
In the long run, basic financial analysis will shed light on the good and bad points of the provider’s medical billing model. Some things to consider when looking for a medical billing model: the inherent good and bad points of on-site and outsourced medical billing models; the provider’s practice management experience & management style; the regional labor pool; and medical billing related operating costs.
In-house versus Outsourced Models
No medical billing model is without unique advantages and pitfalls. Consider the on-site medical billing model. Approximately 1 / 3 of independent healthcare practices utilizing an on-site medical billing model experience income issues which range from periodic to persistent. The amount of action necessary for a provider to resolve his/her cashflow issues may vary from an easy adjustment (adding staffing hours) to your complete overhaul (replacing staff or switching for an outsourced medical billing model).
The provider with the under performing in house medical billing model includes a clear edge on the provider with an under performing outsourced (also known as third party) medical billing model: proximity. An in house medical billing model is within walking distance. A provider has the chance to observe, assess and address – observe the process, measure the system’s good and bad points and address issues before they become full blown problems.
Think about the provider with an outsourced medical billing model. The relatively low entry barriers in the alternative party medical billing industry have resulted in a proliferation of medical billing services scattered throughout the usa. Chances are the provider’s medical billing service is located in another geographic area making personally observations and assessments impossible.
The role of management reporting in a third party medical billing model is essential. A provider must regularly review charge entry, posting, write offs and account receivable balances to insure his/her cashflow is correctly managed. A study as basic as 30, 60, 90 days in receivables will quickly give a provider a good idea of methods well their medical billing and account receivable processes are managed by a third party medical billing service.
A common mistake for a lot of providers with an outsourced medical billing model is to gauge the potency of the process within the very short term, i.e. week to week or month to month. Providers maintain a vague and informal sense of their income position keeping mental tabs on the checks they received this week versus the prior week or if perhaps they deposited just as much money this month as recently. Unfortunately by the time a weakened cash flow will get the provider’s attention a lot larger problem may be looming.
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What can cause a decelerate in income within the outsourced medical billing model? By far the most commonly cited scenario is absence of followup on the area of the medical billing service. Why? As with any other business, medical billing companies are concerned first of all with their own cash flow.
A billing company generates 99.99% with their revenues on the front-end of the billing process – the data entry process that generates claims. Billing businesses that devote nearly all of their manpower to data entry will likely be understaffed on the back end of the billing process – the follow-up on unpaid claims. Why? Every hour of information entry generates yet another one or two hours of claim follow-up. Unfortunately for that provider, a billing company that ignores does not devote enough manpower towards the diligent follow up of 30, 60, 3 months in receivables often means the real difference between a provider making a profit or suffering a loss during virtually any time.
Practice Management Experience & Management Style
Providers with more experience management experience can effectively manage or recognize and resolve an issue with his/her billing process ahead of the cash flow crunch gets out of control. On the contrary, providers with hardly any practice management experience will very likely allow his/her cash flow to reach a critical stage before addressing as well as recognizing an issue even exists.
Whether a provider with billing issues chooses to retain and fix their current model or implement a completely different billing model depends to some great extent on his/her management style – some providers cannot fathom having their billing staff from sight or ear shot while other providers are completely comfortable with turning their billing process to a third party service.
Local Labor Pool
Whether a provider chooses an in house or outsourced billing model, an effective medical billing process continues to be contingent on the people involved in executing the medical billing process. On a side note, choosing office staff to have an in house model is a lot like choosing a 3rd party billing company. Regardless of the model, a provider would want to interview the possibility candidates or even an account executive of the 3rd party billing service for experience, motivation, team oriented personalities, highly developed communication skills, responsiveness, reliability, etc.
Providers having an in house model will have to depend on their human resource and management skills to bring in, train and retain qualified candidates from the local labor pool. Providers with practices situated in areas lacking qualified candidates or without want to get caught up with human resource or management responsibilities will have not one other choice but to select an outsourced model.
Medical Billing Related Costs
As a business owner, the provider’s primary responsibility would be to maximize revenues. A responsible business owner will scrutinize expenditures, analyze returns on investments and minimize costs. Inside an in-house model, expenses associated with the billing process range from the Internet access utilized to transmit states the workplace space occupied by the billing staff.
The simplest way to control billing costs is perfect for the provider to think of the sum of those costs as being a portion of the practice’s revenues. The provider’s accounting software should enable him/her to classify and track billing related costs. Once the billing related costs are identified, dividing the amount of the expense by total revenues will convert the costs to a percentage of revenues.
The exercise of converting billing related expenses to some percentage of revenues accomplishes three things: 1) gets the provider, business manager or accountant in tune with all the billing related costs from the practice; 2) offers a grounds for more in depth analysis of the practice’s cost and revenue components; and three) enables easy comparison involving the cost impact of the in-house versus outsourced models.
The cost of an outsourced model is fairly easy. Considering that the fees of the majority of outsourcing services look like a share of the provider’s revenues, the annualized price of the medical billing service’s fees will certainly be a fairly close approximation from the provider’s billing related costs with this model.
In the event a provider is considering an outsourced model, he/she should remember that this model will not be necessarily the silver bullet to ending all billing related costs and headaches that these services fxbgil to market. True the billing company will acquire some of the expenses associated with this process nevertheless the provider will still need staff to act because the intermediary in between the provider’s office and billing service, i.e. someone to transmit data for the billing service.
Costs will further increase for your provider in the event the billing service charges additional fees for add-on services like on line access to practice data, practice management software, management reports, handling patient inquiries, etc. The specific expense of the service will increase even more if claims 30, 60, 90 in receivable are certainly not properly worked to facilitate adjudication.
In summary, the provider must carefully weigh the advantages and disadvantages of each model before you make a decision. In the event the provider will not be comfortable or experienced analyzing financial data he/she must enlist the expertise of an accountant or some other financial professional. A provider must understand the expenses along with the inherent pros and cons of each billing model.
Providers employing an in-house model need to understand the actual expense of their process. Determining the true cost not just requires accurate financial data and accounting but an unbiased evaluation of the aspects of his/her current process, i.e. technology and staff. Why? Outdated technology, under staffing, turnover, or unqualified staff may bring about the look of a low cost of ownership but those shortcomings could eventually result in a loss in revenues.
In case a provider is decided to utilize a third party billing service, he/she should invest the time to thoroughly familiarize him/herself using the outsourcing industry prior to interviewing prospective billing services. The provider must realize the hidden costs associated with the outsourced model to make a knowledgeable decision.