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 calls for some extent of short term cashflow disruption and we won’t even bring up the worse case scenario.
Any adverse health care provider’s initial step would be to determine whether or not his/her current medical billing model is having the desired financial result. Although financial analysis is beyond the scope of this discussion, the provider, accountant or other financial professional must have the capacity to compare actual financial data to revenue and operating budgets. Assuming the integrity of the practice’s financial information is 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 weaknesses and strengths 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. Think about the on-site medical billing model. Approximately one third of independent health care practices utilizing an in house medical billing model experience income issues starting from periodic to persistent. The degree of action required by a provider to resolve his/her income issues may range between an easy adjustment (adding staffing hours) to some complete overhaul (replacing staff or switching with an outsourced medical billing model).
The provider having an under performing in-house 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 opportunity to observe, assess and address – observe the process, measure the system’s strengths and weaknesses and address issues before they become full blown problems.
Think about the provider having an outsourced medical billing model. The relatively low entry barriers of the alternative party medical billing industry have led to a proliferation of medical billing services scattered throughout the usa. 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 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 cash flow is properly managed. A report as basic as 30, 60, 3 months in receivables will quickly offer a provider a great idea of how well their medical billing and account receivable processes are now being managed by a third party medical billing service.
A standard mistake for many providers with the outsourced medical billing model is always to gauge the effectiveness of the procedure within the very short-term, i.e. week to week or month to month. Providers have a vague and informal sensation of their income position by maintaining mental tabs on the checks they received this week versus the prior week or maybe they deposited as much money this month as recently. Unfortunately once a weakened cash flow gets the provider’s attention a lot larger problem could be looming.
What causes a decrease in cash flow within the outsourced medical billing model? Probably the most commonly cited scenario is absence of follow up on the part of the medical billing service. Why? Like every other business, medical billing companies are worried first and foremost using their own cash flow.
A billing company generates 99.99% of their revenues on the front-end in the billing process – the information entry procedure that generates claims. Billing firms that devote nearly all of their manpower to data entry will be understaffed on the back end of the billing process – the followup on unpaid claims. Why? Every hour of web data entry generates an extra one or two hours of claim follow-up. 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 can mean the main difference between a provider making a profit or suffering a loss during 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 ahead of the cashflow crunch gets out of hand. On the contrary, providers with virtually no practice management experience will much more likely allow his/her income to arrive at a crucial stage before addressing as well as recognizing a problem 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 out of sight or ear shot while other providers are completely comfortable with turning their billing process to a 3rd party service.
Local Labor Pool
Whether a provider chooses an on-site or outsourced billing model, an excellent medical billing process remains contingent on the people involved with executing the medical billing process. On the side note, choosing office staff for an on-site model is comparable to choosing a third party billing company. Whatever the model, a provider will want to interview the possibility candidates or an account executive in the alternative 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 rely on their hr and management skills to bring in, train and retain qualified candidates from the local labor pool. Providers with practices located in areas lacking qualified candidates or without want to get caught up with hr or management responsibilities will have no other choice but to select an outsourced model.
Medical Billing Related Costs
As a business person, the provider’s primary responsibility is to maximize revenues. A responsible business owner will scrutinize expenditures, analyze returns on investments and minimize costs. Within an in-house model, costs associated with the billing process range from the web access utilized to transmit states to the workplace space occupied by the billing staff.
The best way to manage billing costs is for the provider to consider the amount of those costs being a portion of the practice’s revenues. The provider’s accounting software should enable him/her to classify and track billing related costs. When the billing related expenses are identified, dividing the amount of the expense by total revenues will convert the expenses to some amount of revenues.
The exercise of converting billing related expenses to a portion of revenues accomplishes three things: 1) will get the provider, business manager or accountant in tune using the billing related costs from the practice; 2) supplies a grounds for more thorough research into the practice’s cost and revenue components; and 3) provides for easy comparison between the cost impact in the in-house versus outsourced models.
The price of an outsourced model is pretty simple. Because the fees of nearly all outsourcing services appear to be a portion of a provider’s revenues, the annualized expense of the medical billing service’s fees is a fairly close approximation in the provider’s billing related costs for 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 particular services fxbgil to advertise. True the billing company will acquire a number of the costs associated with the process however the provider will still need staff to do something as the intermediary between the provider’s office and billing service, i.e. someone to transmit data towards the billing service.
Costs will further increase for the provider if the billing service charges extra fees for add-on services including on the web access to practice data, practice management software, management reports, handling patient inquiries, etc. The particular cost of the service increases much more if claims 30, 60, 90 in receivable usually are not properly worked to facilitate adjudication.
To sum up, the provider must carefully weigh the advantages and disadvantages of each model before making a decision. If the provider is not comfortable or experienced analyzing financial data he/she must enlist the assistance of a cpa or some other financial professional. A provider must realize the expense and also the inherent advantages and disadvantages 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 unbiased 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 appearance of a low cost of ownership but those shortcomings could eventually produce a lack of revenues.
In the event a provider is set to utilize a third party billing service, he/she should invest enough time to thoroughly familiarize him/herself using the outsourcing industry before interviewing prospective billing services. The provider must understand the hidden expenses associated with the outsourced model in order to make an informed decision.