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 involves 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 is always to determine whether or not his/her current medical billing model is achieving the desired financial result. Although financial analysis is past the scope of the 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 of the practice’s financial data is intact though accurate and timely data entry, the provider’s medical billing software should hold the capacity for generating actionable management reports.
In the end, 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 strengths and weaknesses of in-house and outsourced medical billing models; the provider’s practice management experience & management style; the regional 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 1 / 3 of independent health care practices utilizing an on-site medical billing model experience cash flow issues ranging from periodic to persistent. The level of action essental to a provider to resolve his/her cash flow issues may vary from an easy adjustment (adding staffing hours) to a complete overhaul (replacing staff or switching to an outsourced medical billing model).
The provider with the under performing on-site medical billing model has a clear advantage over the provider with 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 – observe 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 resulted in a proliferation of medical billing services scattered throughout the usa. Chances are the provider’s medical billing service is situated in another geographic area making personally observations and assessments impossible.
The role of management reporting in a third party medical billing model is essential. A provider must regularly review charge entry, posting, write offs and account receivable balances to insure his/her income is properly managed. A study as basic as 30, 60, 3 months in receivables will quickly offer a provider a good 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 is to gauge the potency of the procedure within the very short term, i.e. week to week or month to month. Providers keep a vague and informal sense of their income 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 once a weakened income receives the provider’s attention a significantly larger problem could be looming.
Datalink MS Medical Billing Solutions & Insurance Eligibility Verification
What causes a slow down in cash flow in the outsourced medical billing model? The most commonly cited scenario is absence of follow up on the part of the medical billing service. Why? As with any other business, medical billing companies are concerned first of all making use of their own cash flow.
A billing company generates 99.99% of the revenues on the front-end from the billing process – the data entry method 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 web data entry generates an additional 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 real difference between a provider making a profit or suffering a loss during any time.
Practice Management Experience & Management Style
Providers with more experience management experience should be able to effectively manage or recognize and resolve a problem with his/her billing process ahead of the income crunch gets out of hand. On the contrary, providers with virtually no practice management experience will much more likely allow his/her cashflow to achieve a critical stage before addressing as well as recognizing a difficulty even exists.
Whether a provider with billing issues chooses to retain and correct 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 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 in house or outsourced billing model, an effective medical billing process is still contingent on the people associated with executing the medical billing process. Over a side note, choosing office staff for an in-house model is similar to choosing a third party billing company. Regardless of the model, a provider may wish to interview the possible candidates or perhaps 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 rely on their hr and management techniques to draw in, train and retain qualified candidates from the local labor pool. Providers with practices situated in areas lacking qualified candidates or with no need to get bogged down with hr or management responsibilities may have hardly any other choice but to pick 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 reduce costs. Inside an in house model, costs associated with the billing process range from the Internet access utilized to transmit states to work space occupied from the billing staff.
The best way to handle billing costs is for the provider to consider the sum of those costs being a amount of the practice’s revenues. The provider’s accounting software should permit him/her to classify and track billing related costs. When the billing related costs are identified, dividing the sum of the costs by total revenues will convert the expenses to some portion of revenues.
The exercise of converting billing related expenses to a percentage of revenues accomplishes three things: 1) will get the provider, business manager or accountant in tune with all the billing related costs in the practice; 2) supplies a grounds for more comprehensive analysis of the practice’s cost and revenue components; and three) provides for easy comparison involving the cost impact of the in house versus outsourced models.
The price of an outsourced model is rather straight forward. Since the fees of nearly all outsourcing services seem to be a percentage of the provider’s revenues, the annualized cost of the medical billing service’s fees is a fairly close approximation of the provider’s billing related costs with this model.
In the event a provider is considering an outsourced model, he/she should keep in mind that this model is not really 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 related to the process nevertheless the provider will still need staff to behave as the intermediary involving the provider’s office and billing service, i.e. a person to transmit data towards the billing service.
Costs will further increase for your provider if the billing service charges additional fees for add-on services like on line use of practice data, practice management software, management reports, handling patient inquiries, etc. The actual price of the service increases even more if claims 30, 60, 90 in receivable are certainly not properly worked to facilitate adjudication.
In conclusion, the provider must carefully weigh the advantages and disadvantages of each model before you make a determination. 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 realize the expenses as well as the inherent advantages and disadvantages of each billing model.
Providers employing an in house model need to comprehend the actual price of their process. Determining the real cost not only requires accurate financial data and accounting but an unbiased evaluation from the aspects 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 a low cost of ownership but those shortcomings will ultimately result in a loss of revenues.
In the event a provider is determined to use a 3rd party billing service, he/she should invest enough time to thoroughly familiarize him/herself using the outsourcing industry before interviewing prospective billing services. The provider must understand the hidden expenses associated with the outsourced model to help make an educated decision.