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 involves some extent of short-term cashflow disruption and we won’t even bring up the worse case scenario.
A health care provider’s initial step is always to determine whether or not 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 in the practice’s financial details are intact though accurate and timely data entry, the provider’s medical billing software should have the capability of generating actionable management reports.
In the long run, basic financial analysis will shed light on the strengths and weaknesses in the provider’s medical billing model. Some things to consider when looking for a medical billing model: the inherent weaknesses and strengths 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 / 3rd of independent healthcare practices utilizing an in-house medical billing model experience cashflow issues which range from periodic to persistent. The degree of action essental to a provider to solve his/her cashflow issues may range between a basic adjustment (adding staffing hours) to your complete overhaul (replacing staff or switching with an outsourced medical billing model).
The provider with an under performing in-house medical billing model includes a clear edge on the provider having 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 – see the process, measure 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 alternative party medical billing industry have led to a proliferation of medical billing services scattered throughout america. Odds are the provider’s medical billing service is found in another geographic area making first hand observations and assessments impossible.
The role of management reporting in a third 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 provide a provider a wise idea of how well their medical billing and account receivable processes are now being 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 inside the very temporary, i.e. week to week or month to month. Providers maintain a vague and informal sense 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 when a weakened cash flow gets the provider’s attention a significantly larger problem might be looming.
What can cause a decrease in cash flow in 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 concerned first of all using their own cashflow.
A billing company generates 99.99% with their revenues on the front-end in the billing process – the information entry procedure that generates claims. Billing companies that devote almost all of their manpower to data entry will likely be understaffed on the back end of the billing process – the follow up on unpaid claims. Why? Every hour of web data entry generates an extra 1 to 2 hours of claim follow-up. Unfortunately for that provider, a billing company that ignores does not devote enough manpower to the diligent follow up of 30, 60, 90 days in receivables often means the main difference from a provider building a profit or suffering a loss during any time.
Practice Management Experience & Management Style
Providers with practice management experience should be able to effectively manage or recognize and resolve an issue with his/her billing process prior to the income crunch gets out of hand. On the other hand, providers with hardly any practice management experience will very likely allow his/her cash flow to achieve a vital stage before addressing or even recognizing a problem even exists.
Whether a provider with billing issues chooses to retain and fix their current model or implement an entirely different billing model will be based to your 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 at ease with turning their billing process to a third party service.
Local Labor Pool
Whether a provider chooses an on-site or outsourced billing model, an effective medical billing process continues to be contingent on the people involved in executing the medical billing process. Over a side note, choosing office staff for an in-house model is a lot like choosing a third party billing company. Regardless of the model, a provider may wish to interview the possibility 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 the in-house model will have to count on their human resource and management techniques to attract, train and retain qualified candidates from your local labor pool. Providers with practices based in areas lacking qualified candidates or without any want to get caught up with human resource or management responsibilities could have not one other choice but to pick an outsourced model.
Medical Billing Related Costs
As a businessman, the provider’s primary responsibility would be to maximize revenues. A responsible business owner will scrutinize expenditures, analyze returns on investments and reduce costs. In an in house model, costs associated with the billing process range on the web access utilized to transmit claims to work space occupied through the billing staff.
The best way to manage billing costs is perfect for the provider to think about the amount of those costs as being a portion 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 expenses by total revenues will convert the costs to some amount of revenues.
The exercise of converting billing related expenses to your percentage of revenues accomplishes three things: 1) will get the provider, business manager or accountant in tune using the billing related costs in the practice; 2) provides a grounds for more comprehensive research into the practice’s cost and revenue components; and three) provides for easy comparison involving the cost impact of the on-site versus outsourced models.
The cost of an outsourced model is fairly easy. Because the fees of nearly all outsourcing services look like a percentage of the 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 for this model.
In the event that a provider is considering an outsourced model, he/she should keep in mind that this model is not necessarily the silver bullet to ending all billing related costs and headaches these services fxbgil to advertise. True the billing company will acquire some of the expenses associated with this process however the provider will still need staff to do something as the intermediary between the provider’s office and billing service, i.e. somebody to transmit data for 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 price of the service will increase much more if claims 30, 60, 90 in receivable are not properly worked to facilitate adjudication.
In summary, the provider must carefully weigh the advantages and disadvantages of every model prior to making a choice. When the provider is not comfortable or experienced analyzing financial data he/she must enlist the assistance of a cpa or any other financial professional. A provider must realize the expense as well as the inherent advantages and disadvantages of every billing model.
Providers employing an in-house model need to understand the actual price of their process. Determining the true 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 will ultimately cause a lack of revenues.
In case a provider is determined to make use of a third party billing service, he/she should invest enough time to thoroughly familiarize him/herself with the outsourcing industry before interviewing prospective billing services. The provider must realize the hidden costs associated with the outsourced model to make a knowledgeable decision.