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 temporary cashflow disruption and we won’t even bring up the worse case scenario.
Any adverse health care provider’s first step is to determine whether or not his/her current medical billing model is getting the desired financial result. Although financial analysis is past the scope with this discussion, the provider, accountant or some other financial professional must be able to compare actual financial data to revenue and operating budgets. Assuming the integrity from the practice’s financial data is intact though accurate and timely data entry, the provider’s medical billing software should hold the ability of generating actionable management reports.
Ultimately, basic financial analysis will shed light on the strengths and weaknesses from the provider’s medical billing model. Some facts 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. Consider the on-site medical billing model. Approximately one third of independent medical care practices utilizing an in house medical billing model experience cashflow issues starting from periodic to persistent. The amount of action required by a provider to settle his/her cash flow issues may range from a basic adjustment (adding staffing hours) to some complete overhaul (replacing staff or switching with an outsourced medical billing model).
The provider with the under performing in house medical billing model includes a clear edge over the provider having an under performing outsourced (also called third party) medical billing model: proximity. An in house medical billing model is within walking distance. A provider has the ability to observe, assess and address – see the process, evaluate the system’s strengths and weaknesses and address issues before they become full blown problems.
Take into account the provider with the outsourced medical billing model. The relatively low entry barriers in the alternative party medical billing industry have led to a proliferation of medical billing services scattered throughout america. Chances are the provider’s medical billing service is located in another geographic area making upfront observations and assessments impossible.
The role of management reporting in a alternative 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 written report as basic as 30, 60, 3 months in receivables will quickly give a provider a wise idea of how well their medical billing and account receivable processes are being managed by a third party medical billing service.
A standard mistake for many providers with the outsourced medical billing model is to gauge the potency of this process in the very short-term, i.e. week to week or month to month. Providers have a vague and informal sense of their cashflow position 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 cash flow receives the provider’s attention a lot larger problem could be looming.
What can cause a decelerate in income inside the outsourced medical billing model? The most commonly cited scenario is absence of follow-up on the area of the medical billing service. Why? Like any other business, medical billing companies are involved first and foremost with their own cashflow.
A billing company generates 99.99% of their revenues on the front-end from the billing process – the information entry process that generates claims. Billing businesses that devote most of their manpower to data entry will likely be understaffed on the back end of the billing process – the followup on unpaid claims. Why? Every hour of data entry generates an additional one to two hours of claim follow up. Unfortunately for the provider, a billing company that ignores will not devote enough manpower to the diligent followup of 30, 60, 3 months in receivables could mean the real difference from a provider building a profit or suffering a loss during virtually any time.
Practice Management Experience & Management Style
Providers with practice management experience will be able to effectively manage or recognize and resolve an issue with his/her billing process before the cashflow 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 or perhaps recognizing a difficulty even exists.
Whether a provider with billing issues chooses to retain and correct their current model or implement a completely different billing model will be based to a 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 confident with turning their billing process to a third party service.
Local Labor Pool
Whether a provider chooses an on-site or outsourced billing model, a successful 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 on-site model is similar to choosing a 3rd party billing company. Whatever the model, a provider would want to interview the possible candidates or an account executive from the third 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 hr and management skills to bring in, train and retain qualified candidates from your local labor pool. Providers with practices based in areas lacking qualified candidates or without need to get bogged down with hr or management responsibilities will have no 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 company owner will scrutinize expenditures, analyze returns on investments and minimize costs. Within an on-site model, expenses related to the billing process range from the web access utilized to transmit states to the office space occupied from the billing staff.
The simplest way to control billing costs is made for the provider to consider the sum of those costs being a percentage of the practice’s revenues. The provider’s accounting software should permit 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 expense to your amount of revenues.
The exercise of converting billing related expenses to your percentage of revenues accomplishes three things: 1) gets the provider, business manager or accountant in tune with the billing related costs from the practice; 2) offers a basis for more thorough analysis of the practice’s cost and revenue components; and three) enables easy comparison in between the cost impact from the on-site versus outsourced models.
The expense of an outsourced model is fairly simple. Because the fees of nearly all outsourcing services appear to be a share of the provider’s revenues, the annualized cost of the medical billing service’s fees is 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 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 a few of the costs associated with the procedure however the provider will still need staff to do something as the intermediary in between the provider’s office and billing service, i.e. someone to transmit data towards the billing service.
Costs will further increase for that provider in the event the billing service charges additional fees for add-on services such as on the web access to practice data, practice management software, management reports, handling patient inquiries, etc. The specific price of the service improves even more if claims 30, 60, 90 in receivable usually are not properly worked to facilitate adjudication.
In conclusion, the provider must carefully weigh the advantages and disadvantages of each and every model before you make a choice. If the provider will not be comfortable or experienced analyzing financial data he/she must enlist the assistance of a cpa or any other financial professional. A provider must understand the costs and also the inherent pros and cons of each and every billing model.
Providers employing an in-house model need to understand the real expense of their process. Determining the actual cost not only requires accurate financial data and accounting but an unbiased evaluation in 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 appearance of an affordable of ownership but those shortcomings will ultimately produce a loss of revenues.
In case a provider is decided to make use of a third party billing service, he/she should invest time to thoroughly familiarize him/herself with the outsourcing industry before interviewing prospective billing services. The provider must understand the hidden costs associated with the outsourced model to make an informed decision.