The decision to change an existing medical billing model must 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 income 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 having the desired financial result. Although financial analysis is past the scope of the discussion, the provider, accountant or some other financial professional must have the ability to compare actual financial data to revenue and operating budgets. Assuming the integrity from the practice’s financial information is intact though accurate and timely data entry, the provider’s medical billing software should possess the ability of generating actionable management reports.
In the end, basic financial analysis will shed light on the good and bad points from the provider’s medical billing model. Some points to consider when looking for 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. Think about the on-site medical billing model. Approximately one third of independent medical care practices utilizing an in-house medical billing model experience cash flow issues ranging from periodic to persistent. The level of action required by a provider to settle his/her income 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 an under performing in-house medical billing model features a clear edge on the provider with the under performing outsourced (also referred to as 3rd 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 – observe the process, measure the system’s good and bad points and address issues before they become full blown problems.
Consider the provider having an outsourced medical billing model. The relatively low entry barriers from the alternative party medical billing industry have triggered a proliferation of medical billing services scattered throughout america. Odds are the provider’s medical billing service is situated in another geographic area making upfront 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 properly managed. A written report as basic as 30, 60, 90 days in receivables will quickly provide a provider a good idea of methods well their medical billing and account receivable processes are now being managed by a third party medical billing service.
A common mistake for most providers with an outsourced medical billing model is to gauge the strength of this process in the very short term, i.e. week to week or month to month. Providers have a vague and informal feeling of their cashflow position 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 cashflow receives the provider’s attention a lot larger problem could be looming.
What causes a slow down in income within the outsourced medical billing model? By far the most commonly cited scenario is lack of followup on the part of the medical billing service. Why? Like every other business, medical billing companies are worried first of all using their own cashflow.
A billing company generates 99.99% of the revenues on the front-end from the billing process – the information entry process that generates claims. Billing companies that devote nearly all of their manpower to data entry is going to be understaffed on the back end of the billing process – the followup on unpaid claims. Why? Every hour of web data entry generates yet another 1 to 2 hours of claim followup. Unfortunately for your provider, a billing company that ignores does not devote enough manpower towards the diligent follow up of 30, 60, 90 days in receivables could mean the difference from a provider making a profit or suffering a loss during any 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 before the cashflow crunch gets out of hand. On the contrary, providers with little to no practice management experience will more likely allow his/her cash flow to arrive at a critical stage before addressing as well as 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 depends to your 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 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 remains contingent on the people involved with executing the medical billing process. Over a side note, choosing office staff to have an in-house model is comparable to choosing a 3rd party billing company. No matter the model, a provider would want to interview the possible candidates or even an account executive from the 3rd party billing service for experience, motivation, team oriented personalities, highly developed communication skills, responsiveness, reliability, etc.
Providers with an in house model must depend on their human resource and management skills to bring in, train and retain qualified candidates through the local labor pool. Providers with practices located in areas lacking qualified candidates or without desire to get caught up with hr or management responsibilities could have no other choice but to choose an outsourced model.
Medical Billing Related Costs
As a business person, the provider’s primary responsibility is always to maximize revenues. A responsible business 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 Internet access utilized to transmit states to work space occupied from the billing staff.
The simplest way to handle billing costs is for the provider to think about the amount of those costs as being a percentage of the practice’s revenues. The provider’s accounting software should permit him/her to classify and track billing related costs. Once the billing related costs are identified, dividing the amount of the expenses by total revenues will convert the costs to your percentage of revenues.
The exercise of converting billing related expenses to your amount of revenues accomplishes three things: 1) receives the provider, business manager or accountant in tune with all the billing related costs from the practice; 2) offers a basis for more thorough research into the practice’s cost and revenue components; and 3) enables easy comparison between the cost impact in the in house versus outsourced models.
The cost of an outsourced model is fairly simple. Because the fees of the majority of outsourcing services appear to be a percentage of a provider’s revenues, the annualized price of the medical billing service’s fees will be a fairly close approximation from the provider’s billing related costs for this particular model.
In the event that a provider is considering an outsourced model, he/she should take into account that this model is not really necessarily the silver bullet to ending all billing related costs and headaches that these particular services fxbgil to advertise. True the billing company will acquire a few of the expenses associated with this process however the provider will still need staff to act as the intermediary in between the provider’s office and billing service, i.e. someone to transmit data to the billing service.
Costs will further increase for that provider in the event the billing service charges extra fees for add-on services like on the web use of practice data, practice management software, management reports, handling patient inquiries, etc. The particular price 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 each model before you make a determination. In the event the provider is not comfortable or experienced analyzing financial data he/she must enlist the assistance of a cpa or other financial professional. A provider must understand the costs along with the inherent pros and cons of each and every billing model.
Providers employing an on-site model need to understand the real expense of their process. Determining the real cost not only requires accurate financial data and accounting but an unbiased evaluation in the aspects 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 inexpensive of ownership but those shortcomings could eventually produce a loss in revenues.
In case a provider is determined to use a 3rd party billing service, he/she should invest enough time to thoroughly familiarize him/herself with all the outsourcing industry before interviewing prospective billing services. The provider must realize the hidden expenses associated with the outsourced model in order to make a knowledgeable decision.