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 will involve some extent of temporary cashflow disruption and we won’t even bring up the worse case scenario.
A health care provider’s first step would be to determine if his/her current medical billing model is achieving the desired financial result. Although financial analysis is past the scope with this 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 in 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.
In the long run, basic financial analysis will shed light on the good and bad points of the provider’s medical billing model. Some things 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 local 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 on-site medical billing model. Approximately one third of independent medical care practices utilizing an in-house medical billing model experience cashflow issues which range from periodic to persistent. The degree of action required by a provider to resolve his/her cashflow issues may vary from a basic adjustment (adding staffing hours) to some complete overhaul (replacing staff or switching to an outsourced medical billing model).
The provider with the under performing in house medical billing model features a clear edge on the provider having an under performing outsourced (also known as 3rd party) medical billing model: proximity. An in-house medical billing model is within walking distance. A provider has the ability 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 of the alternative party medical billing industry have triggered a proliferation of medical billing services scattered throughout the usa. Odds are the provider’s medical billing service is found in another geographic area making personally observations and assessments impossible.
The role of management reporting in a 3rd party medical billing model is crucial. A provider must regularly review charge entry, posting, write offs and account receivable balances to insure his/her income is properly managed. A written report as basic as 30, 60, 90 days in receivables will quickly give a provider a wise idea of methods well their medical billing and account receivable processes are being managed by a third party medical billing service.
A standard mistake for a lot of providers with an outsourced medical billing model would be to gauge the potency of the procedure inside 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 keeping 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 by the time a weakened cashflow receives the provider’s attention a lot 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 lack of followup on the part of the medical billing service. Why? Like every other business, medical billing companies are concerned first and foremost with their own cash flow.
A billing company generates 99.99% of the revenues on the front-end in the billing process – the information entry process that generates claims. Billing companies that devote nearly all of their manpower to data entry is going to be understaffed on the back end in the billing process – the followup on unpaid claims. Why? Every hour of information entry generates an extra one or two hours of claim followup. Unfortunately for that provider, a billing company that ignores fails to devote enough manpower towards the diligent follow-up of 30, 60, 3 months in receivables often means the real difference from a provider creating 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 an issue with his/her billing process ahead of the cash flow crunch gets out of control. On the contrary, providers with virtually no practice management experience will much more likely allow his/her income to arrive at a crucial stage before addressing or perhaps recognizing a difficulty even exists.
Whether a provider with billing issues chooses to retain and fix 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 comfortable with turning their billing process to a 3rd party service.
Local Labor Pool
Whether a provider chooses an in house or outsourced billing model, a successful medical billing process is still contingent on the people involved with executing the medical billing process. On the side note, choosing office staff for an in-house model is a lot like choosing a 3rd party billing company. Whatever the model, a provider will want to interview the possibility candidates or an account executive of 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 have to depend on their hr 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 need to get caught up with human resource or management responsibilities could have not one other choice but to select an outsourced model.
Medical Billing Related Costs
As a business person, the provider’s primary responsibility is always to maximize revenues. A responsible company owner will scrutinize expenditures, analyze returns on investments and minimize costs. Within an on-site model, expenses related to the billing process range on the web access utilized to transmit states to the office space occupied by the billing staff.
The simplest way to manage billing costs is made for the provider to consider the sum of those costs as being a amount 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 expense by total revenues will convert the expenses to your portion of revenues.
The exercise of converting billing related expenses to your amount of revenues accomplishes three things: 1) gets the provider, business manager or accountant in tune using the billing related costs from the practice; 2) supplies a basis for more in depth 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 price of an outsourced model is pretty easy. Considering that the fees of the majority of outsourcing services appear to be a share of the provider’s revenues, the annualized cost of the medical billing service’s fees will certainly be a fairly close approximation from the provider’s billing related costs with 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 that these particular services fxbgil to market. True the billing company will acquire a number of the expenses associated with this process but the provider will still need staff to act because the intermediary between the provider’s office and billing service, i.e. someone to transmit data for the billing service.
Costs will further increase for the provider if the billing service charges additional fees for add-on services including online usage of practice data, practice management software, management reports, handling patient inquiries, etc. The specific cost of the service increases even more if claims 30, 60, 90 in receivable usually are not properly worked to facilitate adjudication.
In summary, the provider must carefully weigh the advantages and disadvantages of every model before making a choice. If the provider is not really comfortable or experienced analyzing financial data he/she must enlist the expertise of an accountant or some other financial professional. A provider must understand the expense as well as the inherent pros and cons of each billing model.
Providers employing an in-house model need to comprehend the real expense of their process. Determining the real cost not merely requires accurate financial data and accounting but an unbiased evaluation in the elements 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 a low cost of ownership but those shortcomings may ultimately cause a loss in revenues.
In the event that a provider is determined to make use of a third party billing service, he/she should invest the time to thoroughly familiarize him/herself with all the outsourcing industry before interviewing prospective billing services. The provider must realize the hidden expenses associated with the outsourced model to make a knowledgeable decision.