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 short-term cashflow disruption and we won’t even bring up the worse case scenario.
Any adverse health care provider’s first step is always to determine whether or not his/her current medical billing model is achieving the desired financial result. Although financial analysis is beyond the scope of this discussion, the provider, accountant or other financial professional must have the ability 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 hold the capacity for generating actionable management reports.
In the long run, basic financial analysis will shed light on the weaknesses and strengths in the provider’s medical billing model. Some facts to consider when evaluating a medical billing model: the inherent weaknesses and strengths of on-site and outsourced medical billing models; the provider’s practice management experience & management style; the local labor pool; and medical billing related operating costs.
On-site versus Outsourced Models
No medical billing model is without unique advantages and pitfalls. Take into account the on-site medical billing model. Approximately 1 / 3 of independent medical care practices utilizing an on-site medical billing model experience income issues ranging from periodic to persistent. The degree of action required by a provider to settle his/her cashflow issues may range between a basic adjustment (adding staffing hours) to some complete overhaul (replacing staff or switching to an outsourced medical billing model).
The provider with the under performing on-site medical billing model features a clear edge over the provider with the under performing outsourced (also known as third party) medical billing model: proximity. An on-site medical billing model is within walking distance. A provider has the ability to observe, assess and address – see the process, measure the system’s weaknesses and strengths and address issues before they become full blown problems.
Take into account the provider having an outsourced medical billing model. The relatively low entry barriers of the 3rd party medical billing industry have led to 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 alternative 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 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 managed by a 3rd party medical billing service.
A standard mistake for many providers having an outsourced medical billing model would be to gauge the strength of the procedure in the very short-term, i.e. week to week or month to month. Providers keep a vague and informal sensation of their cashflow position by keeping mental tabs on the checks they received this week versus the prior week or if perhaps they deposited the maximum amount of money this month as last month. Unfortunately by the time a weakened income gets the provider’s attention a significantly larger problem might be looming.
What can cause a slow down in cashflow within the outsourced medical billing model? By far the most commonly cited scenario is lack of followup on the area of the medical billing service. Why? Like any other business, medical billing companies are worried first and foremost with their own cash flow.
A billing company generates 99.99% with their revenues on the front-end in the billing process – the data entry process that generates claims. Billing companies that devote almost all of their manpower to data entry is going to be understaffed on the back end from the billing process – the followup on unpaid claims. Why? Every hour of data entry generates an additional 1 to 2 hours of claim follow up. Unfortunately for the provider, a billing company that ignores does not devote enough manpower for the diligent follow-up of 30, 60, 90 days in receivables can mean the difference between a provider building a profit or suffering a loss during any given time.
Practice Management Experience & Management Style
Providers with more experience management experience will be able to effectively manage or recognize and resolve a problem with his/her billing process prior to the cash flow crunch gets out of control. On the contrary, providers with little to no practice management experience will much more likely allow his/her cashflow to reach a crucial stage before addressing as well as recognizing a difficulty even exists.
Whether a provider with billing issues chooses to retain and repair their current model or implement a completely different billing model will be based to some great extent on his/her management style – some providers cannot fathom having their billing staff out of sight or ear shot while other providers are completely at ease with turning their billing process to a 3rd 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. Over a side note, choosing office staff for the on-site model is similar to choosing a third party billing company. Regardless of the model, a provider may wish to interview the possibility candidates or perhaps an account executive from the alternative party billing service for experience, motivation, team oriented personalities, highly developed communication skills, responsiveness, reliability, etc.
Providers with an in house model must count on their human resource 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 without want to get bogged down with human resource or management responsibilities will have not one other choice but to choose an outsourced model.
Medical Billing Related Costs
As a business owner, the provider’s primary responsibility would be to maximize revenues. A responsible company owner will scrutinize expenditures, analyze returns on investments and reduce costs. In an in-house model, expenses related to the billing process range from the web access used to transmit claims to the workplace space occupied through the billing staff.
The simplest way to control billing costs is perfect for the provider to think about the amount of those costs 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. When the billing related costs are identified, dividing the sum of the expenses by total revenues will convert the costs to your amount of revenues.
The exercise of converting billing related expenses to your amount of revenues accomplishes three things: 1) will get the provider, business manager or accountant in tune with all the billing related costs of the practice; 2) provides a grounds for more in depth research into the practice’s cost and revenue components; and 3) provides for easy comparison between the cost impact from the in house versus outsourced models.
The price of an outsourced model is fairly simple. Since the fees of the majority of outsourcing services seem to be a percentage of a provider’s revenues, the annualized cost of the medical billing service’s fees will be a fairly close approximation in 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 is not really necessarily the silver bullet to ending all billing related costs and headaches that these services fxbgil to market. True the billing company will acquire a few of the costs associated with the process however the provider will still need staff to do something because the intermediary between the provider’s office and billing service, i.e. a person to transmit data to the billing service.
Costs will further increase for the provider when the billing service charges additional fees for add-on services like online use of practice data, practice management software, management reports, handling patient inquiries, etc. The particular cost of the service improves much more if claims 30, 60, 90 in receivable are certainly not properly worked to facilitate adjudication.
To sum up, the provider must carefully weigh the advantages and disadvantages of each model prior to making a choice. When the provider will not be comfortable or experienced analyzing financial data he/she must enlist the assistance of an accountant or any other financial professional. A provider must understand the expense and also the inherent benefits and drawbacks of each billing model.
Providers employing an in house model need to comprehend the true expense of their process. Determining the true cost not just requires accurate financial data and accounting but an objective evaluation of the components 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 an affordable of ownership but those shortcomings could eventually result in a loss of revenues.
In case a provider is decided to use a 3rd party billing service, he/she should invest enough time to thoroughly familiarize him/herself with the outsourcing industry prior to interviewing prospective billing services. The provider must realize the hidden expenses related to the outsourced model to make an educated decision.