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 extent of short-term cashflow disruption and we won’t even bring up the worse case scenario.
A health care provider’s first step is always to determine whether his/her current medical billing model is getting the desired financial result. Although financial analysis is past the scope of this discussion, the provider, accountant or any other financial professional must be able 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 possess the ability of generating actionable management reports.
In the end, basic financial analysis will shed light on the weaknesses and strengths in the provider’s medical billing model. Some points to consider when evaluating a medical billing model: the inherent weaknesses and strengths of on-site 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 in-house medical billing model. Approximately 1 / 3rd of independent healthcare practices utilizing an in-house medical billing model experience cashflow issues ranging from periodic to persistent. The degree of action essental to a provider to solve his/her cash flow issues may range between a basic adjustment (adding staffing hours) to some complete overhaul (replacing staff or switching for an outsourced medical billing model).
The provider with the under performing in house medical billing model includes a clear advantage over the provider with an under performing outsourced (also called 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 – see the process, measure the system’s weaknesses and strengths 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 alternative party medical billing industry have triggered a proliferation of medical billing services scattered throughout the United States. Odds 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 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 great idea of how well their medical billing and account receivable processes are being managed by a 3rd party medical billing service.
A common mistake for most providers having an outsourced medical billing model would be to gauge the strength 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 perhaps they deposited just as much money this month as last month. Unfortunately when a weakened cash flow will get the provider’s attention a much larger problem may be looming.
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What can cause a decelerate in cash flow within the outsourced medical billing model? The most commonly cited scenario is absence of follow up on the area of the medical billing service. Why? As with any other business, medical billing companies are involved first of all using their own cashflow.
A billing company generates 99.99% with their revenues on the front end of the billing process – the information entry process that generates claims. Billing businesses that devote almost all of their manpower to data entry will be understaffed on the back end of the billing process – the follow up on unpaid claims. Why? Every hour of web data entry generates an extra 1 to 2 hours of claim follow up. Unfortunately for your provider, a billing company that ignores will not devote enough manpower to the diligent followup of 30, 60, 90 days in receivables often means the difference from a provider making a profit or suffering a loss during virtually any time.
Practice Management Experience & Management Style
Providers with more experience management experience should be able to effectively manage or recognize and resolve an issue with his/her billing process prior to the income crunch gets out of hand. On the contrary, providers with hardly any practice management experience will much more likely allow his/her income to achieve a crucial stage before addressing as well as recognizing a problem even exists.
Whether a provider with billing issues chooses to retain and fix their current model or implement a completely different billing model will be based to your 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 on-site or outsourced billing model, an excellent medical billing process is still contingent on the people involved with executing the medical billing process. Over a side note, choosing office staff for an on-site model is a lot like choosing a third party billing company. Whatever the model, a provider will want to interview the possible 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 must count on their human resource and management skills to draw in, train and retain qualified candidates from the local labor pool. Providers with practices situated in areas lacking qualified candidates or without any want to get caught up with human resource or management responsibilities could have no other choice but to select 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 minimize costs. Inside an in house model, costs associated with the billing process range from the Internet access utilized to transmit states to the office space occupied by the billing staff.
The best way to control billing costs is for the provider to consider the sum of those costs as being a portion of the practice’s revenues. The provider’s accounting software should permit him/her to classify and track billing related costs. After the billing related costs are identified, dividing the amount of the costs by total revenues will convert the expenses to some percentage of revenues.
The exercise of converting billing related expenses to a portion of revenues accomplishes three things: 1) gets the provider, business manager or accountant in tune using the billing related costs of the practice; 2) provides a basis for more comprehensive research into the practice’s cost and revenue components; and 3) enables easy comparison in between the cost impact in the in house versus outsourced models.
The cost of an outsourced model is pretty straight forward. Considering that the fees of the vast majority of outsourcing services seem to be a percentage of any provider’s revenues, the annualized expense of the medical billing service’s fees is a fairly close approximation in the provider’s billing related costs for this particular model.
In the event that 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 advertise. True the billing company will acquire a few of the expenses related to the procedure but the provider will still need staff to behave because 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 that provider in the event 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 specific cost of the service increases much more if claims 30, 60, 90 in receivable are certainly not properly worked to facilitate adjudication.
To sum up, the provider must carefully weigh the pros and cons of each and every model before making a decision. In the event the provider will not be comfortable or experienced analyzing financial data he/she must enlist the services of an accountant or some other financial professional. A provider must understand the expense along with the inherent advantages and disadvantages of each billing model.
Providers employing an in house model need to understand the real price of their process. Determining the real cost not just requires accurate financial data and accounting but an unbiased evaluation in 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 an inexpensive of ownership but those shortcomings will ultimately produce a lack of revenues.
In the event that a provider is decided to utilize a 3rd party billing service, he/she should invest the time to thoroughly familiarize him/herself with the outsourcing industry before interviewing prospective billing services. The provider must realize the hidden expenses associated with the outsourced model to help make an educated decision.