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 involves some extent of temporary cash flow disruption and we won’t even bring up the worse case scenario.
A health care provider’s starting point is to determine whether or not his/her current medical billing model is achieving the desired financial result. Although financial analysis is beyond the scope of the discussion, the provider, accountant or some other financial professional must be able 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 hold the capacity for generating actionable management reports.
In the end, 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 good and bad points 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 one third of independent healthcare practices utilizing an on-site medical billing model experience income issues starting from periodic to persistent. The amount of action essental to a provider to resolve his/her cashflow 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 having an under performing in-house medical billing model includes a clear edge on the provider with an under performing outsourced (also referred to as third 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 – notice the process, measure the system’s strengths and weaknesses 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 third party medical billing industry have triggered a proliferation of medical billing services scattered throughout america. 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 third party medical billing model is critical. A provider must regularly review charge entry, posting, write offs and account receivable balances to insure his/her cash flow is properly managed. A report as basic as 30, 60, 3 months in receivables will quickly give a provider a wise idea of how well their medical billing and account receivable processes are managed by a third party medical billing service.
A standard mistake for a lot of providers with the outsourced medical billing model is always to gauge the potency 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 income position by keeping mental tabs on the checks they received in the week versus the prior week or if they deposited as much money this month as recently. Unfortunately when a weakened cashflow will get the provider’s attention a much larger problem might be looming.
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What causes a slow down in cashflow within the outsourced medical billing model? Probably the most commonly cited scenario is absence of followup on the portion of the medical billing service. Why? Like every other business, medical billing companies are concerned above all with their own cash flow.
A billing company generates 99.99% with their revenues on the front-end from the billing process – the info entry procedure that generates claims. Billing businesses that devote most of their manpower to data entry is going to 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 one or two hours of claim follow up. Unfortunately for the provider, a billing company that ignores will not devote enough manpower to the diligent follow-up of 30, 60, 3 months in receivables can mean the difference between a provider making a profit or suffering a loss during any given time.
Practice Management Experience & Management Style
Providers with more experience management experience will be able to effectively manage or recognize and resolve an issue with his/her billing process before the income crunch gets out of control. On the other hand, providers with virtually no practice management experience will very likely allow his/her cashflow to achieve a vital stage before addressing or even recognizing a difficulty even exists.
Whether a provider with billing issues chooses to retain and fix their current model or implement an entirely different billing model depends 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 at ease 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 associated with executing the medical billing process. Over a side note, choosing office staff to have an on-site model is comparable to choosing a third party billing company. Regardless of the model, a provider may wish to interview the possibility candidates or an account executive in the 3rd party billing service for experience, motivation, team oriented personalities, highly developed communication skills, responsiveness, reliability, etc.
Providers with the in house model will have to count on their hr and management skills to draw in, train and retain qualified candidates from your local labor pool. Providers with practices situated in areas lacking qualified candidates or without any desire to get bogged down with human resource or management responsibilities will have not one other choice but to pick an outsourced model.
Medical Billing Related Costs
As a business owner, the provider’s primary responsibility is always to maximize revenues. A responsible company owner will scrutinize expenditures, analyze returns on investments and reduce costs. Within an in house model, expenses related to the billing process range from the web access employed to transmit claims to the office space occupied by the billing staff.
The most effective way to control billing costs is perfect for the provider to think of the amount of those costs being a amount of the practice’s revenues. The provider’s accounting software should enable 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 expense to a portion of revenues.
The exercise of converting billing related expenses to your portion of revenues accomplishes three things: 1) receives the provider, business manager or accountant in tune with all the billing related costs from the practice; 2) offers a grounds for more comprehensive analysis of the practice’s cost and revenue components; and three) allows for easy comparison involving the cost impact from the in-house versus outsourced models.
The price of an outsourced model is pretty simple. Because the fees of the majority of outsourcing services seem to be a percentage 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 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 services fxbgil to promote. True the billing company will acquire some of the expenses associated with the procedure nevertheless the provider will still need staff to act since the intermediary involving the provider’s office and billing service, i.e. a person to transmit data for the billing service.
Costs will further increase for the provider in the event the billing service charges additional fees for add-on services including on line usage of practice data, practice management software, management reports, handling patient inquiries, etc. The particular price of the service will increase even more if claims 30, 60, 90 in receivable are not properly worked to facilitate adjudication.
In summary, the provider must carefully weigh the pros and cons of 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 services of an accountant or other financial professional. A provider must understand the costs and also the inherent benefits and drawbacks of each and every billing model.
Providers employing an on-site model need to understand the true price of their process. Determining the true cost not just requires accurate financial data and accounting but an objective evaluation from the elements 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 will ultimately cause a loss in revenues.
In the event a provider is decided to make use of 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 realize the hidden expenses associated with the outsourced model to make a knowledgeable decision.