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 involves some degree of temporary cashflow disruption and we won’t even bring up the worse case scenario.
A health care provider’s starting point is always to determine whether or not his/her current medical billing model is getting the desired financial result. Although financial analysis is past the scope with this discussion, the provider, accountant or other financial professional must be able 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 capability of generating actionable management reports.
Ultimately, 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.
In House versus Outsourced Models
No medical billing model is without unique advantages and pitfalls. Consider the in house medical billing model. Approximately one third of independent medical care practices utilizing an on-site medical billing model experience income issues starting from periodic to persistent. The amount of action required by a provider to settle his/her income issues may range 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 in house medical billing model includes a clear edge over the provider having an under performing outsourced (also known 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.
Take into account the provider with an outsourced medical billing model. The relatively low entry barriers from the alternative party medical billing industry have resulted in a proliferation of medical billing services scattered throughout the usa. Odds are the provider’s medical billing service is located in another geographic area making upfront 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 income is correctly managed. A study as basic as 30, 60, 3 months in receivables will quickly offer a provider a great idea of methods well their medical billing and account receivable processes are now being managed by a 3rd party medical billing service.
A standard mistake for a lot of providers with an outsourced medical billing model would be to gauge the strength of this process within the very short term, i.e. week to week or month to month. Providers have a vague and informal sensation of their cashflow position by maintaining 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 cashflow will get the provider’s attention a much larger problem could be looming.
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What causes a slow down in income inside the outsourced medical billing model? Probably the most commonly cited scenario is insufficient followup on the area of the medical billing service. Why? Like any other business, medical billing companies are involved first of all making use of their own income.
A billing company generates 99.99% with their revenues on the front end in the billing process – the data entry method that generates claims. Billing businesses that devote nearly all of their manpower to data entry is going to be understaffed on the back end in the billing process – the follow-up on unpaid claims. Why? Every hour of web data entry generates an extra one to two hours of claim follow up. Unfortunately for that provider, a billing company that ignores does not devote enough manpower to the diligent followup of 30, 60, 90 days in receivables could mean the main 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 can effectively manage or recognize and resolve a problem with his/her billing process prior to the cash flow crunch gets out of hand. On the other hand, providers with little to no practice management experience will very likely allow his/her cash flow to reach a vital stage before addressing or perhaps recognizing an issue 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 confident 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 a side note, choosing office staff to have an on-site model is comparable to choosing a 3rd party billing company. Regardless of the model, a provider may wish to interview the potential candidates or perhaps 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 on-site model will need to depend on their human resource and management techniques to bring in, train and retain qualified candidates through the local labor pool. Providers with practices located in areas lacking qualified candidates or without need to get caught up with hr or management responsibilities may have not one other choice but to choose an outsourced model.
Medical Billing Related Costs
As a business owner, the provider’s primary responsibility would be to maximize revenues. A responsible business owner will scrutinize expenditures, analyze returns on investments and reduce costs. Within an in-house model, expenses related to the billing process range from the web access used to transmit states the workplace space occupied from the billing staff.
The most effective way to control billing costs is made for the provider to think about 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. Once the billing related costs are identified, dividing the sum of the costs by total revenues will convert the costs to your percentage of revenues.
The exercise of converting billing related expenses to some percentage of revenues accomplishes three things: 1) will get the provider, business manager or accountant in tune with all the billing related costs from the practice; 2) offers a basis for more comprehensive research into the practice’s cost and revenue components; and three) allows for easy comparison involving the cost impact in the in house versus outsourced models.
The expense of an outsourced model is rather simple. Considering that the fees of the majority of outsourcing services appear to be a percentage of any provider’s revenues, the annualized expense of the medical billing service’s fees is a fairly close approximation of the provider’s billing related costs for this particular model.
In case 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 that these services fxbgil to market. True the billing company will acquire a few of the expenses associated with the process however the provider will still need staff to behave because the intermediary in between the provider’s office and billing service, i.e. someone to transmit data towards the billing service.
Costs will further increase for your provider when the billing service charges extra fees for add-on services like online usage of practice data, practice management software, management reports, handling patient inquiries, etc. The actual expense of the service increases much more if claims 30, 60, 90 in receivable are 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 comfortable or experienced analyzing financial data he/she must enlist the assistance of a cpa or any other financial professional. A provider must understand the expenses and also the inherent benefits and drawbacks of each billing model.
Providers employing an on-site model need to comprehend the actual cost of their process. Determining the true cost not only requires accurate financial data and accounting but an unbiased evaluation of the aspects of his/her current process, i.e. technology and staff. Why? Outdated technology, under staffing, turnover, or unqualified staff may contribute to the appearance of an affordable of ownership but those shortcomings could eventually produce a loss of revenues.
In the event a provider is decided to make use of a 3rd party billing service, he/she should invest enough time to thoroughly familiarize him/herself with the outsourcing industry just before interviewing prospective billing services. The provider must realize the hidden expenses related to the outsourced model to make a knowledgeable decision.