The decision to change an existing medical billing model 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 extent of short-term income disruption and we won’t even bring up the worse case scenario.
A health care provider’s starting point is always to determine whether his/her current medical billing model is getting the desired financial result. Although financial analysis is beyond the scope of the discussion, the provider, accountant or any other financial professional must be able to compare actual financial data to revenue and operating budgets. Assuming the integrity of the practice’s financial details are intact though accurate and timely data entry, the provider’s medical billing software should hold the capability of generating actionable management reports.
Ultimately, basic financial analysis will shed light on the good and bad points in the provider’s medical billing model. Some points to consider when evaluating a medical billing model: the inherent strengths and weaknesses of in house and outsourced medical billing models; the provider’s practice management experience & management style; the neighborhood labor pool; and medical billing related operating costs.
In House versus Outsourced Models
No medical billing model is without unique advantages and pitfalls. Take into account the on-site medical billing model. Approximately one third of independent health care practices utilizing an on-site medical billing model experience cashflow issues starting from periodic to persistent. The degree of action required by a provider to resolve his/her cash flow issues may range from a basic adjustment (adding staffing hours) to your complete overhaul (replacing staff or switching to an outsourced medical billing model).
The provider having an under performing in house medical billing model features a clear edge over the provider with the under performing outsourced (also known as 3rd 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, assess the system’s weaknesses and strengths and address issues before they become full blown problems.
Consider the provider with an outsourced medical billing model. The relatively low entry barriers in the 3rd party medical billing industry have triggered a proliferation of medical billing services scattered throughout the usa. Odds 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 critical. A provider must regularly review charge entry, posting, write offs and account receivable balances to insure his/her income is correctly managed. A written report as basic as 30, 60, 90 days in receivables will quickly offer a provider a good idea of methods well their medical billing and account receivable processes are being managed by a 3rd party medical billing service.
A standard mistake for a lot of providers with an outsourced medical billing model is always to gauge the potency of the procedure within the very short-term, i.e. week to week or month to month. Providers have a vague and informal feeling of their cashflow position by keeping mental tabs on the checks they received in the week versus the prior week or if they deposited the maximum amount of money this month as recently. Unfortunately once a weakened income will get the provider’s attention a significantly larger problem may be looming.
What causes a decelerate in income within the outsourced medical billing model? By far the most commonly cited scenario is insufficient follow-up on the part of the medical billing service. Why? Like every other business, medical billing companies are concerned first and foremost with their own cash flow.
A billing company generates 99.99% of their revenues on the front-end in the billing process – the information entry process that generates claims. Billing businesses that devote nearly all of their manpower to data entry is going to be understaffed on the back end in the billing process – the followup on unpaid claims. Why? Every hour of web data entry generates yet another one or two hours of claim followup. Unfortunately for your provider, a billing company that ignores will not devote enough manpower to the diligent follow-up of 30, 60, 3 months in receivables often means the difference from a provider making a profit or suffering a loss during virtually any time.
Practice Management Experience & Management Style
Providers with practice management experience should be able to effectively manage or recognize and resolve a problem with his/her billing process prior to the income crunch gets out of control. On the contrary, providers with hardly any practice management experience will much more likely allow his/her cashflow to achieve a crucial stage before addressing or even recognizing a difficulty even exists.
Whether a provider with billing issues chooses to retain and repair their current model or implement an entirely different billing model will be based to some great extent on his/her management style – some providers cannot fathom having their billing staff away 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 associated with executing the medical billing process. On a side note, choosing office staff for an in house model is similar to choosing a third party billing company. No matter the model, a provider would want to interview the potential candidates or perhaps an account executive of the alternative party billing service for experience, motivation, team oriented personalities, highly developed communication skills, responsiveness, reliability, etc.
Providers with an on-site model must depend on their hr and management skills to draw in, train and retain qualified candidates through the local labor pool. Providers with practices based in areas lacking qualified candidates or with no want to get caught up with hr or management responsibilities may have not one other choice but to pick an outsourced model.
Medical Billing Related Costs
As a business person, the provider’s primary responsibility would be to maximize revenues. A responsible business owner will scrutinize expenditures, analyze returns on investments and reduce costs. Within an in-house model, expenses related to the billing process range on the web access employed to transmit states the office space occupied by the billing staff.
The most effective way to handle billing costs is made for the provider to think of the amount of those costs as being a amount of the practice’s revenues. The provider’s accounting software should allow for him/her to classify and track billing related costs. After the billing related expenses are identified, dividing the amount of the expense by total revenues will convert the expenses to some portion of revenues.
The exercise of converting billing related expenses to a amount of revenues accomplishes three things: 1) gets the provider, business manager or accountant in tune with all the billing related costs in the practice; 2) offers a basis for more comprehensive analysis of the practice’s cost and revenue components; and three) allows for easy comparison in between the cost impact from the on-site versus outsourced models.
The cost of an outsourced model is rather easy. Because the fees of the majority of outsourcing services appear to be a percentage of a provider’s revenues, the annualized expense of the medical billing service’s fees will be a fairly close approximation of the provider’s billing related costs for this model.
In the event that a provider is considering an outsourced model, he/she should keep in mind that this model is not really necessarily the silver bullet to ending all billing related costs and headaches these services fxbgil to market. True the billing company will acquire a number of the expenses associated with this process nevertheless the provider will still need staff to act as the intermediary in between the provider’s office and billing service, i.e. a person to transmit data towards the billing service.
Costs will further increase for your provider when the billing service charges additional fees for add-on services including online use of practice data, practice management software, management reports, handling patient inquiries, etc. The specific cost of the service will increase even more if claims 30, 60, 90 in receivable usually are not properly worked to facilitate adjudication.
In summary, the provider must carefully weigh the pros and cons of every 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 a cpa or some other financial professional. A provider must realize the expenses as well as the inherent benefits and drawbacks of each billing model.
Providers employing an in house model need to comprehend the true price of their process. Determining the real cost not just requires accurate financial data and accounting but an objective evaluation from the elements of his/her current process, i.e. technology and staff. Why? Outdated technology, under staffing, turnover, or unqualified staff may play a role in the look of an affordable of ownership but those shortcomings could eventually cause a lack of revenues.
In the event a provider is determined to utilize a 3rd party billing service, he/she should invest time to thoroughly familiarize him/herself using the outsourcing industry prior to interviewing prospective billing services. The provider must understand the hidden expenses related to the outsourced model to help make a knowledgeable decision.