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 calls for some degree of short-term cashflow disruption and we won’t even bring up the worse case scenario.
Any adverse health care provider’s starting point is to determine whether his/her current medical billing model is getting the desired financial result. Although financial analysis is beyond the scope with this 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 from the practice’s financial information is intact though accurate and timely data entry, the provider’s medical billing software should have the capacity for generating actionable management reports.
In the long run, basic financial analysis will shed light on the strengths and weaknesses of the provider’s medical billing model. Some points to consider when evaluating a medical billing model: the inherent weaknesses and strengths 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 in-house medical billing model. Approximately 1 / 3 of independent healthcare practices utilizing an on-site medical billing model experience cashflow issues which range from periodic to persistent. The degree of action essental to a provider to solve his/her cash flow issues may range between a simple 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 includes a clear edge over the provider with the under performing outsourced (also referred to as alternative party) medical billing model: proximity. An on-site medical billing model is within walking distance. A provider has the chance to observe, assess and address – observe the process, measure the system’s weaknesses and strengths and address issues before they become full blown problems.
Take into account the provider with the outsourced medical billing model. The relatively low entry barriers in the third party medical billing industry have resulted in a proliferation of medical billing services scattered throughout america. 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 crucial. A provider must regularly review charge entry, posting, write offs and account receivable balances to insure his/her cashflow is correctly managed. A report as basic as 30, 60, 3 months in receivables will quickly provide a provider a good idea of how well their medical billing and account receivable processes are now being managed by a 3rd party medical billing service.
A typical mistake for a lot of providers having an outsourced medical billing model would be to gauge the effectiveness of the procedure within the very short-term, i.e. week to week or month to month. Providers keep a vague and informal sensation of their cashflow position by maintaining mental tabs on the checks they received in the week versus the prior week or if perhaps they deposited just as much money this month as last month. Unfortunately once a weakened income gets the provider’s attention a lot larger problem could be looming.
What may cause a decelerate in cash flow inside the outsourced medical billing model? Probably the most commonly cited scenario is insufficient followup on the part of the medical billing service. Why? Like any other business, medical billing companies are involved above all making use of their own cashflow.
A billing company generates 99.99% of the revenues on the front-end in the billing process – the info entry procedure that generates claims. Billing companies that devote almost all of their manpower to data entry will likely be understaffed on the back end in the billing process – the follow-up on unpaid claims. Why? Every hour of data entry generates an additional one or two hours of claim follow up. Unfortunately for that provider, a billing company that ignores fails to devote enough manpower for the diligent follow-up of 30, 60, 3 months in receivables can mean the real difference between a provider making a profit or suffering a loss during 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 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 cashflow to achieve a vital stage before addressing or perhaps recognizing a problem even exists.
Whether a provider with billing issues chooses to retain and repair their current model or implement an entirely 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 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, an excellent medical billing process continues to be contingent on the people involved in executing the medical billing process. On the side note, choosing office staff for the on-site model is comparable to choosing a third party billing company. Whatever the model, a provider will want to interview the possibility candidates or an account executive from the alternative party billing service for experience, motivation, team oriented personalities, highly developed communication skills, responsiveness, reliability, etc.
Providers having an in house model will need to count 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 without need to get caught up with human resource or management responsibilities will have not one other choice but to pick an outsourced model.
Medical Billing Related Costs
As a businessman, the provider’s primary responsibility is always to maximize revenues. A responsible business proprietor will scrutinize expenditures, analyze returns on investments and minimize costs. In an in-house model, expenses associated with the billing process range on the web access utilized to transmit states work space occupied by the billing staff.
The most effective way to handle billing costs is made for the provider to consider the sum of those costs as 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 expenses are identified, dividing the amount of the costs by total revenues will convert the costs to some amount of revenues.
The exercise of converting billing related expenses to some portion of revenues accomplishes three things: 1) receives the provider, business manager or accountant in tune using the billing related costs in the practice; 2) offers a grounds for more comprehensive research into the practice’s cost and revenue components; and 3) provides for easy comparison involving the cost impact in the in-house versus outsourced models.
The price of an outsourced model is fairly simple. Considering that the fees of nearly all outsourcing services appear to be a percentage of a provider’s revenues, the annualized price of the medical billing service’s fees is a fairly close approximation of the provider’s billing related costs for 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 services fxbgil to promote. True the billing company will acquire a number of the expenses related to the procedure but the provider will still need staff to do something as the intermediary between the provider’s office and billing service, i.e. somebody to transmit data towards the billing service.
Costs will further increase for that provider in the event the billing service charges extra fees for add-on services like online access to practice data, practice management software, management reports, handling patient inquiries, etc. The specific cost of the service will increase much more if claims 30, 60, 90 in receivable are not properly worked to facilitate adjudication.
In summary, the provider must carefully weigh the advantages and disadvantages of each and every model prior to making a determination. In the event the provider is not really comfortable or experienced analyzing financial data he/she must enlist the assistance of an accountant or other financial professional. A provider must realize the expense and also the inherent benefits and drawbacks of each billing model.
Providers employing an in house model need to comprehend the real 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 play a role in the appearance of an inexpensive of ownership but those shortcomings may ultimately result in a lack of revenues.
In case a provider is decided to make use of a third party billing service, he/she should invest enough time to thoroughly familiarize him/herself with the outsourcing industry prior to interviewing prospective billing services. The provider must understand the hidden costs associated with the outsourced model to make an educated decision.