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 degree 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 if 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 of the practice’s financial information is intact though accurate and timely data entry, the provider’s medical billing software should possess the capacity for generating actionable management reports.
In the long run, basic financial analysis will shed light on the weaknesses and strengths from the provider’s medical billing model. Some points 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 in house medical billing model. Approximately 1 / 3rd of independent medical care practices utilizing an in-house medical billing model experience cashflow 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 a complete overhaul (replacing staff or switching for an outsourced medical billing model).
The provider having an under performing on-site medical billing model has a clear edge over the provider having an under performing outsourced (also referred to 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 good and bad points and address issues before they become full blown problems.
Think about the provider with an outsourced medical billing model. The relatively low entry barriers of the alternative party medical billing industry have resulted in 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 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 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 process inside the very temporary, i.e. week to week or month to month. Providers keep a vague and informal sensation of their cashflow position by keeping mental tabs on the checks they received in the week versus the prior week or maybe they deposited the maximum amount of money this month as last month. Unfortunately when a weakened cashflow gets the provider’s attention a much larger problem might be looming.
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What may cause a decrease in income inside the outsourced medical billing model? Probably the most commonly cited scenario is lack of follow up on the portion of the medical billing service. Why? Like any 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 from the billing process – the data entry procedure that generates claims. Billing firms that devote almost all of their manpower to data entry will be understaffed on the back end of the billing process – the follow-up on unpaid claims. Why? Every hour of data entry generates yet another one to two hours of claim follow-up. Unfortunately for your provider, a billing company that ignores does not devote enough manpower for the diligent follow up of 30, 60, 90 days in receivables could mean the real difference from a provider making 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 a problem with his/her billing process before the cash flow crunch gets out of hand. On the contrary, providers with virtually no practice management experience will more likely allow his/her cash flow to arrive at a crucial stage before addressing or even recognizing an issue even exists.
Whether a provider with billing issues chooses to retain and correct their current model or implement an entirely different billing model will depend 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 third party service.
Local Labor Pool
Whether a provider chooses an in-house or outsourced billing model, an effective medical billing process is still contingent on the people involved with executing the medical billing process. On the side note, choosing office staff to have an in-house model is similar to choosing a 3rd party billing company. Whatever the model, a provider will want to interview the potential candidates or even an account executive of the 3rd party billing service for experience, motivation, team oriented personalities, highly developed communication skills, responsiveness, reliability, etc.
Providers having an on-site model must depend on their human resource and management techniques to attract, train and retain qualified candidates from the local labor pool. Providers with practices located in areas lacking qualified candidates or with no need to get bogged down with human resource or management responsibilities may have not one other choice but to select an outsourced model.
Medical Billing Related Costs
As a business owner, the provider’s primary responsibility is to maximize revenues. A responsible business proprietor will scrutinize expenditures, analyze returns on investments and reduce costs. Within an in house model, costs associated with the billing process range on the web access employed to transmit states to work space occupied by the billing staff.
The simplest way to manage billing costs is perfect for the provider to think of the amount of those costs being a amount 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 sum of the costs by total revenues will convert the costs to your amount of revenues.
The exercise of converting billing related expenses to some percentage of revenues accomplishes three things: 1) receives the provider, business manager or accountant in tune with all the billing related costs of the practice; 2) supplies a basis for more thorough analysis of the practice’s cost and revenue components; and three) provides for easy comparison between the cost impact from the in-house versus outsourced models.
The cost of an outsourced model is rather straight forward. Since the fees of the vast majority of outsourcing services appear to be a percentage of the provider’s revenues, the annualized expense of the medical billing service’s fees is a fairly close approximation from the provider’s billing related costs for this particular model.
In the event a provider is considering an outsourced model, he/she should take into account that this model is not necessarily the silver bullet to ending all billing related costs and headaches that these particular services fxbgil to market. True the billing company will acquire a few of the costs associated with the process however the provider will still need staff to act since the intermediary between the provider’s office and billing service, i.e. someone to transmit data to the billing service.
Costs will further increase for your provider in the event the billing service charges extra fees for add-on services such as online use of practice data, practice management software, management reports, handling patient inquiries, etc. The particular price of the service improves a lot more if claims 30, 60, 90 in receivable are certainly not properly worked to facilitate adjudication.
To sum up, the provider must carefully weigh the pros and cons of each and every model before making a choice. In the event the provider is not really comfortable or experienced analyzing financial data he/she must enlist the expertise of a cpa or any other financial professional. A provider must understand the expenses and also the inherent pros and cons of each billing model.
Providers employing an in house model need to understand the true cost of their process. Determining the real cost not merely requires accurate financial data and accounting but an objective 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 will ultimately cause a loss of revenues.
In the event a provider is set to utilize 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 understand the hidden costs associated with the outsourced model to make an informed decision.