The decision to change an existing medical billing model must 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 degree of short-term cashflow disruption and we won’t even bring up the worse case scenario.
A health care provider’s starting point would be to determine if his/her current medical billing model is having the desired financial result. Although financial analysis is beyond the scope of the discussion, the provider, accountant or any 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 ability of generating actionable management reports.
In the long run, basic financial analysis will shed light on the strengths and weaknesses from the provider’s medical billing model. Some points to consider when looking for a medical billing model: the inherent good and bad points of in-house 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 on-site medical billing model. Approximately 1 / 3rd of independent health care practices utilizing an in-house medical billing model experience cashflow issues which range from periodic to persistent. The amount of action essental to a provider to settle his/her income issues may vary from a basic adjustment (adding staffing hours) to some complete overhaul (replacing staff or switching for an outsourced medical billing model).
The provider with an under performing on-site medical billing model includes a clear edge on the provider having an under performing outsourced (also called 3rd 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 – see the process, evaluate the system’s weaknesses and strengths and address issues before they become full blown problems.
Consider the provider with an outsourced medical billing model. The relatively low entry barriers in the alternative party medical billing industry have resulted in a proliferation of medical billing services scattered throughout the usa. Chances 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 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 income is correctly managed. A study as basic as 30, 60, 3 months in receivables will quickly give a provider a great idea of how well their medical billing and account receivable processes are managed by a 3rd party medical billing service.
A standard mistake for a lot of providers having an outsourced medical billing model is 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 sense of their cashflow position keeping mental tabs on the checks they received this week versus the prior week or if perhaps they deposited just as much money this month as recently. Unfortunately by the time a weakened cash flow receives the provider’s attention a much larger problem could be looming.
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What may cause a slow down 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? As with any other business, medical billing companies are concerned above all using their own income.
A billing company generates 99.99% with their revenues on the front end from the billing process – the information entry procedure that generates claims. Billing companies that devote most 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 information entry generates yet another 1 to 2 hours of claim follow-up. Unfortunately for that provider, a billing company that ignores does not devote enough manpower for the diligent followup of 30, 60, 90 days in receivables can mean the main difference from a provider building a profit or suffering a loss during virtually 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 cash flow crunch gets out of hand. On the other hand, providers with little to no practice management experience will much more likely allow his/her income to achieve a critical stage before addressing or perhaps 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 depend to some 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 on-site or outsourced billing model, an effective medical billing process remains contingent on the people associated with executing the medical billing process. On the 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 would want to interview the possibility candidates or even an account executive in the alternative party billing service for experience, motivation, team oriented personalities, highly developed communication skills, responsiveness, reliability, etc.
Providers with an on-site model must count on their hr and management skills to bring in, train and retain qualified candidates from your local labor pool. Providers with practices based in areas lacking qualified candidates or with no want to get bogged down with hr or management responsibilities could have no other choice but to pick an outsourced model.
Medical Billing Related Costs
As a business person, the provider’s primary responsibility would be to maximize revenues. A responsible company owner will scrutinize expenditures, analyze returns on investments and reduce costs. Inside an on-site model, expenses related to the billing process range from the Internet access utilized to transmit claims to the workplace space occupied through the billing staff.
The most effective way to manage billing costs is made for the provider to consider the sum of those costs being a percentage 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 amount of the expense 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 of the practice; 2) offers a basis for more comprehensive analysis of the practice’s cost and revenue components; and 3) enables easy comparison between the cost impact from the on-site versus outsourced models.
The expense of an outsourced model is rather easy. Considering that the fees of the vast majority of outsourcing services appear to be a percentage of any 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 with this model.
In case 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 market. True the billing company will acquire some of the costs associated with the process nevertheless the provider will still need staff to act because 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 including on line usage of practice data, practice management software, management reports, handling patient inquiries, etc. The specific expense of the service improves 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 every model before making a decision. In the event the provider will not be comfortable or experienced analyzing financial data he/she must enlist the assistance of an accountant or other financial professional. A provider must understand the expenses along with the inherent benefits and drawbacks of every billing model.
Providers employing an in-house model need to understand the real price of their process. Determining the true cost not just requires accurate financial data and accounting but an unbiased evaluation of the components of his/her current process, i.e. technology and staff. Why? Outdated technology, under staffing, turnover, or unqualified staff may bring about the appearance of an inexpensive of ownership but those shortcomings could eventually produce a loss of revenues.
In the event that a provider is decided to use a third 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 in order to make an informed decision.