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 extent of short term cash flow disruption and we won’t even bring up the worse case scenario.
A health care provider’s starting point is always 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 other financial professional must be able to compare actual financial data to revenue and operating budgets. Assuming the integrity from the practice’s financial data is intact though accurate and timely data entry, the provider’s medical billing software should possess the capacity for 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 things to consider when looking for 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 neighborhood labor pool; and medical billing related operating costs.
In-house versus Outsourced Models
No medical billing model is without unique advantages and pitfalls. Think about the on-site medical billing model. Approximately 1 / 3rd of independent health care practices utilizing an in house medical billing model experience cash flow issues ranging from periodic to persistent. The degree of action necessary for a provider to solve his/her cash flow issues may range from a simple adjustment (adding staffing hours) to your complete overhaul (replacing staff or switching for an outsourced medical billing model).
The provider with the under performing on-site medical billing model features 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, assess the system’s good and bad points and address issues before they become full blown problems.
Take into account the provider having an outsourced medical billing model. The relatively low entry barriers from the 3rd 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 located 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 cashflow is correctly managed. A study as basic as 30, 60, 3 months in receivables will quickly offer a provider a great idea of methods well their medical billing and account receivable processes are being managed by a 3rd party medical billing service.
A common mistake for most providers with the outsourced medical billing model would be to gauge the strength of the procedure within the very temporary, i.e. week to week or month to month. Providers keep a vague and informal feeling of their cashflow position by maintaining mental tabs on the checks they received this week versus the prior week or maybe they deposited the maximum amount of money this month as recently. Unfortunately once a weakened cashflow will get the provider’s attention a significantly larger problem could be looming.
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What causes a slow down in cashflow in the outsourced medical billing model? Probably the most commonly cited scenario is insufficient followup on the area of the medical billing service. Why? Like every other business, medical billing companies are involved first of all with their own income.
A billing company generates 99.99% of their revenues on the front-end of the billing process – the information entry procedure that generates claims. Billing firms that devote nearly all of their manpower to data entry will likely be understaffed on the back end from the billing process – the follow up on unpaid claims. Why? Every hour of information entry generates an extra 1 to 2 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, 90 days in receivables often means the difference between a provider building a profit or suffering a loss during any time.
Practice Management Experience & Management Style
Providers with practice management experience will 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 hardly any practice management experience will more likely allow his/her income to reach a crucial stage before addressing or perhaps recognizing an issue 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 away from sight or ear shot while other providers are completely at ease with turning their billing process to a third party service.
Local Labor Pool
Whether a provider chooses an on-site or outsourced billing model, a successful medical billing process remains contingent on the people involved with executing the medical billing process. On the side note, choosing office staff for the on-site model is comparable to choosing a 3rd party billing company. Regardless of the model, a provider will want to interview the possible candidates or perhaps an account executive of the alternative 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 hr and management techniques to bring in, train and retain qualified candidates from your local labor pool. Providers with practices located in areas lacking qualified candidates or without desire to get caught up with human resource or management responsibilities will have no other choice but to choose an outsourced model.
Medical Billing Related Costs
As a business person, the provider’s primary responsibility would be 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 from the web access employed to transmit states to work space occupied through the billing staff.
The best way to control billing costs is perfect for the provider to think about the sum of those costs as a amount 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 pricing is identified, dividing the amount of the expenses by total revenues will convert the expenses to some percentage 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 with all the billing related costs from the practice; 2) supplies a basis for more thorough research into the practice’s cost and revenue components; and 3) allows for easy comparison between the cost impact of the in-house versus outsourced models.
The expense of an outsourced model is pretty simple. Because the fees of the majority of outsourcing services appear to be a share of any provider’s revenues, the annualized cost of the medical billing service’s fees is a fairly close approximation in the provider’s billing related costs for this particular model.
In case a provider is considering an outsourced model, he/she should keep in mind that this model will not be necessarily the silver bullet to ending all billing related costs and headaches that these services fxbgil to market. True the billing company will acquire some 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. a person to transmit data for the billing service.
Costs will further increase for your provider when the billing service charges additional fees for add-on services like on the web 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 conclusion, the provider must carefully weigh the advantages and disadvantages of every model prior to making a choice. When the provider is not really comfortable or experienced analyzing financial data he/she must enlist the assistance of an accountant or some other financial professional. A provider must understand the expenses and also the inherent advantages and disadvantages of each and every billing model.
Providers employing an in house model need to understand the true price of their process. Determining the actual cost not just 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 bring about the look of an affordable of ownership but those shortcomings will ultimately cause a lack of revenues.
In case a provider is decided to make use of a third party billing service, he/she should invest 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 to help make an educated decision.