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 extent of temporary income disruption and we won’t even bring up the worse case scenario.
A health care provider’s initial step is 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 some other financial professional must have the capacity 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 have the capacity for generating actionable management reports.
In the end, basic financial analysis will shed light on the strengths and weaknesses of the provider’s medical billing model. Some things to consider when looking for 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 in house medical billing model. Approximately 1 / 3 of independent medical care practices utilizing an in house medical billing model experience cashflow issues which range from periodic to persistent. The amount of action necessary for a provider to settle his/her cashflow issues may vary from a simple adjustment (adding staffing hours) to a complete overhaul (replacing staff or switching with an outsourced medical billing model).
The provider with the under performing on-site medical billing model features a clear edge over the provider with an under performing outsourced (also known as alternative 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, evaluate the system’s strengths and weaknesses 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 3rd party medical billing industry have resulted in a proliferation of medical billing services scattered throughout the United States. Odds are the provider’s medical billing service is situated in another geographic area making first hand observations and assessments impossible.
The role of management reporting in a 3rd party medical billing model is critical. A provider must regularly review charge entry, posting, write offs and account receivable balances to insure his/her cash flow 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 3rd party medical billing service.
A common mistake for a lot of providers having an outsourced medical billing model would be to gauge the potency of the process in the very short term, i.e. week to week or month to month. Providers keep a vague and informal sensation of their cash flow position keeping mental tabs on the checks they received this week versus the prior week or if they deposited just as much money this month as recently. Unfortunately by the time a weakened cash flow gets the provider’s attention a significantly larger problem might be looming.
What causes a decelerate in cashflow inside the outsourced medical billing model? Probably the most commonly cited scenario is insufficient follow up on the area of the medical billing service. Why? Like every other business, medical billing companies are concerned above all with their own cashflow.
A billing company generates 99.99% of the revenues on the front-end in the billing process – the info entry process that generates claims. Billing companies that devote most 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 information entry generates an extra one or two hours of claim followup. Unfortunately for that 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 real difference from a provider creating 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 an issue with his/her billing process ahead of the cash flow crunch gets out of control. On the other hand, providers with virtually no practice management experience will much more likely allow his/her income to reach a crucial stage before addressing or perhaps recognizing a difficulty even exists.
Whether a provider with billing issues chooses to retain and fix 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 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 in house or outsourced billing model, a successful medical billing process continues to be contingent on the people involved with executing the medical billing process. Over a side note, choosing office staff for an in house model is similar to choosing a 3rd party billing company. Regardless of the model, a provider may wish to interview the potential 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 the on-site model will need to depend on their human resource and management techniques to attract, train and retain qualified candidates from your local labor pool. Providers with practices situated in areas lacking qualified candidates or with no need to get caught up with hr or management responsibilities could have hardly any 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 company owner will scrutinize expenditures, analyze returns on investments and minimize costs. Within an in house model, costs associated with the billing process range on the web access employed to transmit states to the workplace space occupied by the billing staff.
The simplest way to manage billing costs is 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. When the billing related pricing is identified, dividing the amount of the costs by total revenues will convert the costs to your amount of revenues.
The exercise of converting billing related expenses to a amount of revenues accomplishes three things: 1) receives the provider, business manager or accountant in tune with the billing related costs from the practice; 2) offers a basis for more comprehensive research into the practice’s cost and revenue components; and 3) enables easy comparison involving the cost impact of the in house versus outsourced models.
The cost of an outsourced model is fairly simple. Since the fees of the majority of outsourcing services look like a percentage of a provider’s revenues, the annualized price 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 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 promote. True the billing company will acquire a number of the expenses associated with the procedure nevertheless the provider will still need staff to act since the intermediary between the provider’s office and billing service, i.e. a person to transmit data for the billing service.
Costs will further increase for the provider if the billing service charges extra fees for add-on services like on line usage of practice data, practice management software, management reports, handling patient inquiries, etc. The specific expense of the service improves 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 prior to making a decision. When the provider is not comfortable or experienced analyzing financial data he/she must enlist the services of an accountant or other financial professional. A provider must understand the expense and also the inherent benefits and drawbacks of each and every billing model.
Providers employing an on-site model need to comprehend the actual cost of their process. Determining the real cost not only requires accurate financial data and accounting but an objective evaluation of 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 a low cost of ownership but those shortcomings may ultimately produce a loss of revenues.
In the event that a provider is set to make use of a 3rd party billing service, he/she should invest time to thoroughly familiarize him/herself with all the outsourcing industry before interviewing prospective billing services. The provider must understand the hidden expenses related to the outsourced model to help make an informed decision.