The decision to change an existing medical billing model really 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 cash flow disruption and we won’t even bring up the worse case scenario.
Any adverse health care provider’s first step would be to determine if his/her current medical billing model is having the desired financial result. Although financial analysis is past the scope of 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 of the practice’s financial information is intact though accurate and timely data entry, the provider’s medical billing software should possess the ability of generating actionable management reports.
Ultimately, basic financial analysis will shed light on the weaknesses and strengths of the provider’s medical billing model. Some facts 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 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 on-site medical billing model. Approximately one third of independent medical care practices utilizing an in-house medical billing model experience cashflow issues ranging from periodic to persistent. The level of action necessary for a provider to settle his/her income issues may range between a basic adjustment (adding staffing hours) to some complete overhaul (replacing staff or switching with an outsourced medical billing model).
The provider with an under performing in-house medical billing model features a clear edge 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 chance to observe, assess and address – notice the process, measure the system’s strengths and weaknesses and address issues before they become full blown problems.
Think about the provider with the outsourced medical billing model. The relatively low entry barriers from the 3rd party medical billing industry have led to a proliferation of medical billing services scattered throughout america. Odds 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 essential. 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, 90 days in receivables will quickly give a provider a great idea of methods well their medical billing and account receivable processes are managed by a third 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 process in the very temporary, i.e. week to week or month to month. Providers have a vague and informal feeling of their cash flow position by keeping 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 last month. Unfortunately by the time a weakened cashflow gets the provider’s attention a much larger problem might be looming.
datalinkms.com: Datalink MS Medical Billing Solutions » Insurance Eligibility Verification
What causes a decrease in cash flow in the outsourced medical billing model? The most commonly cited scenario is lack of followup on the portion of the medical billing service. Why? Like any other business, medical billing companies are involved first of all making use of their own cashflow.
A billing company generates 99.99% of their revenues on the front end from the billing process – the data entry method that generates claims. Billing companies that devote almost all of their manpower to data entry will be understaffed on the back end from the billing process – the follow up on unpaid claims. Why? Every hour of web data entry generates an additional one or two hours of claim followup. Unfortunately for your provider, a billing company that ignores fails to devote enough manpower to the diligent follow up of 30, 60, 3 months in receivables often means the difference from a provider building a profit or suffering a loss during any 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 other hand, providers with virtually no practice management experience will very likely allow his/her income to achieve a crucial stage before addressing or even recognizing an issue even exists.
Whether a provider with billing issues chooses to retain and correct 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 away 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 with executing the medical billing process. Over a side note, choosing office staff for an in-house model is comparable to choosing a 3rd party billing company. Regardless of the model, a provider would want to interview the possibility candidates or even an account executive of 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 have 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 located in areas lacking qualified candidates or without want to get caught up with human resource or management responsibilities may have no 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 business proprietor will scrutinize expenditures, analyze returns on investments and minimize costs. Inside an on-site model, expenses related to the billing process range from the web access employed to transmit states the office space occupied by the billing staff.
The simplest way to manage billing costs is for the provider to think of the amount of those costs being 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 costs are identified, dividing the sum of the expenses by total revenues will convert the costs to a percentage of revenues.
The exercise of converting billing related expenses to some amount of revenues accomplishes three things: 1) gets the provider, business manager or accountant in tune using the billing related costs in the practice; 2) provides a basis for more thorough analysis of the practice’s cost and revenue components; and three) provides for easy comparison in between the cost impact from the in-house versus outsourced models.
The expense of an outsourced model is pretty straight forward. Since the fees of nearly all outsourcing services appear to be a share of a provider’s revenues, the annualized price of the medical billing service’s fees is a fairly close approximation from the provider’s billing related costs for this particular model.
In the event that a provider is considering an outsourced model, he/she should take into account that this model is not really necessarily the silver bullet to ending all billing related costs and headaches that these services fxbgil to advertise. True the billing company will acquire some of the expenses related to the procedure nevertheless the provider will still need staff to do something since 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 your provider if the billing service charges extra fees for add-on services including on the web use of practice data, practice management software, management reports, handling patient inquiries, etc. The particular cost of the service increases much more if claims 30, 60, 90 in receivable are not properly worked to facilitate adjudication.
In conclusion, the provider must carefully weigh the advantages and disadvantages of each and every model prior to making a decision. When the provider is not really comfortable or experienced analyzing financial data he/she must enlist the services of an accountant or other financial professional. A provider must understand the expenses as well as the inherent advantages and disadvantages of every billing model.
Providers employing an on-site model need to comprehend the true cost of their process. Determining the real cost not merely 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 look of an inexpensive of ownership but those shortcomings may ultimately cause a loss of revenues.
In the event that a provider is decided to use 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.