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 will involve some degree of short term income disruption and we won’t even bring up the worse case scenario.
Any adverse health care provider’s starting point would be to determine whether or not his/her current medical billing model is having the desired financial result. Although financial analysis is past the scope with this discussion, the provider, accountant or any 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 ability 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 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 neighborhood labor pool; and medical billing related operating costs.
In House versus Outsourced Models
No medical billing model is without unique advantages and pitfalls. Take into account the in house medical billing model. Approximately 1 / 3rd of independent health care practices utilizing an in-house medical billing model experience cash flow issues which range from periodic to persistent. The amount of action required by a provider to resolve his/her cashflow issues may vary from a simple adjustment (adding staffing hours) to some complete overhaul (replacing staff or switching to an outsourced medical billing model).
The provider with an under performing on-site medical billing model has a clear advantage over the provider having an under performing outsourced (also known as third 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 – notice the process, measure the system’s weaknesses and strengths 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 in the third party medical billing industry have triggered a proliferation of medical billing services scattered throughout the United States. Chances are the provider’s medical billing service is found in another geographic area making upfront 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 cashflow is properly managed. A written report as basic as 30, 60, 3 months in receivables will quickly offer 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 common mistake for many providers with the outsourced medical billing model would be to gauge the effectiveness of this process within the very short term, i.e. week to week or month to month. Providers keep a vague and informal sensation of their cash flow position by maintaining mental tabs on the checks they received in the week versus the prior week or if they deposited just as much money this month as recently. Unfortunately when a weakened income will get the provider’s attention a much larger problem could be looming.
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What may cause a decelerate in cash flow in the outsourced medical billing model? By far the most commonly cited scenario is absence of followup on the portion of the medical billing service. Why? As with any other business, medical billing companies are worried above all with their own cashflow.
A billing company generates 99.99% of the revenues on the front end from the billing process – the info entry procedure that generates claims. Billing firms 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 yet another one or 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, 3 months in receivables often means the real difference between a provider making a profit or suffering a loss during virtually any time.
Practice Management Experience & Management Style
Providers with practice management experience can effectively manage or recognize and resolve an issue with his/her billing process prior to the income crunch gets out of control. On the other hand, providers with little to no practice management experience will more likely allow his/her cashflow to reach a crucial stage before addressing as well as recognizing a difficulty even exists.
Whether a provider with billing issues chooses to retain and repair their current model or implement a completely different billing model will be based to some great extent on his/her management style – some providers cannot fathom having their billing staff from 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 in house or outsourced billing model, an excellent medical billing process is still contingent on the people associated with executing the medical billing process. Over a side note, choosing office staff for the on-site model is similar to choosing a third party billing company. No matter the model, a provider will want to interview the possible candidates or even an account executive in 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 rely on their human resource and management techniques to bring in, train and retain qualified candidates from your local labor pool. Providers with practices situated in areas lacking qualified candidates or without any desire to get bogged down with human resource or management responsibilities could have not one other choice but to pick an outsourced model.
Medical Billing Related Costs
As a business owner, the provider’s primary responsibility is always to maximize revenues. A responsible business owner will scrutinize expenditures, analyze returns on investments and minimize costs. Inside an in house model, costs associated with the billing process range on the web access used to transmit states the office space occupied through the billing staff.
The best way to control billing costs is perfect for the provider to consider the amount of those costs as a portion of the practice’s revenues. The provider’s accounting software should permit him/her to classify and track billing related costs. After the billing related costs are identified, dividing the sum of the expenses by total revenues will convert the expense to some portion of revenues.
The exercise of converting billing related expenses to your portion of revenues accomplishes three things: 1) receives the provider, business manager or accountant in tune with all the billing related costs from 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 of the in-house versus outsourced models.
The cost of an outsourced model is fairly straight forward. Considering that the fees of nearly all outsourcing services seem to be a portion of any provider’s revenues, the annualized expense of the medical billing service’s fees will be a fairly close approximation from the provider’s billing related costs for this 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 number of the expenses associated with the process nevertheless the provider will still need staff to act because the intermediary in between the provider’s office and billing service, i.e. a person to transmit data for the billing service.
Costs will further increase for the provider if the billing service charges extra fees for add-on services such as online usage of practice data, practice management software, management reports, handling patient inquiries, etc. The specific price of the service improves even more if claims 30, 60, 90 in receivable are not properly worked to facilitate adjudication.
In conclusion, the provider must carefully weigh the pros and cons of each model before you make a choice. If the provider is not comfortable or experienced analyzing financial data he/she must enlist the assistance of an accountant or any other financial professional. A provider must understand the expenses as well as the inherent benefits and drawbacks of each billing model.
Providers employing an in house model need to understand the actual expense of their process. Determining the actual cost not merely requires accurate financial data and accounting but an unbiased evaluation in the components of his/her current process, i.e. technology and staff. Why? Outdated technology, under staffing, turnover, or unqualified staff may contribute to the look of an affordable of ownership but those shortcomings could eventually produce a loss of revenues.
In the event that a provider is determined to utilize a 3rd party billing service, he/she should invest time to thoroughly familiarize him/herself with all the outsourcing industry prior to interviewing prospective billing services. The provider must understand the hidden expenses associated with the outsourced model to make an educated decision.