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 calls for some degree of short-term income disruption and we won’t even bring up the worse case scenario.

Any adverse health care provider’s initial step is to determine whether his/her current medical billing model is getting the desired financial result. Although financial analysis is past the scope with this discussion, the provider, accountant or any other financial professional must have the ability 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 capacity for generating actionable management reports.

In the long run, 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 strengths and weaknesses of on-site 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. Consider the on-site medical billing model. Approximately 1 / 3 of independent medical care practices utilizing an on-site medical billing model experience cashflow issues which range from periodic to persistent. The degree of action required by a provider to resolve his/her income issues may vary from a basic adjustment (adding staffing hours) to some complete overhaul (replacing staff or switching to an outsourced medical billing model).

The provider having an under performing on-site medical billing model includes a clear edge over the provider having 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 – notice the process, evaluate the system’s weaknesses and strengths and address issues before they become full blown problems.

Take into account the provider with the outsourced medical billing model. The relatively low entry barriers in the alternative party medical billing industry have triggered a proliferation of medical billing services scattered throughout the usa. Odds are the provider’s medical billing service is found in another geographic area making personally observations and assessments impossible.

The role of management reporting in a alternative party medical billing model is crucial. A provider must regularly review charge entry, posting, write offs and account receivable balances to insure his/her income is properly managed. A written report as basic as 30, 60, 90 days in receivables will quickly provide a provider a good idea of methods well their medical billing and account receivable processes are managed by a 3rd party medical billing service.

A standard mistake for a lot of providers with an outsourced medical billing model is to gauge the strength of the process within the very short term, i.e. week to week or month to month. Providers keep 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 if they deposited as much money this month as last month. Unfortunately once a weakened cashflow will get the provider’s attention a much larger problem might be looming.

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What causes a decrease in cashflow inside the outsourced medical billing model? By far the most commonly cited scenario is lack of followup on the part of the medical billing service. Why? Like any other business, medical billing companies are worried first and foremost making use of their own cashflow.

A billing company generates 99.99% of the revenues on the front end in the billing process – the info entry procedure that generates claims. Billing businesses that devote most 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 web data entry generates yet another one or two hours of claim follow-up. Unfortunately for your provider, a billing company that ignores will not devote enough manpower for the diligent followup of 30, 60, 3 months in receivables often means the main difference from a provider making a profit or suffering a loss during virtually any time.

Practice Management Experience & Management Style

Providers with practice management experience should 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 contrary, providers with little to no practice management experience will very likely allow his/her cashflow to reach a critical 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 a completely different billing model will depend 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 at ease with turning their billing process to a third party service.

Local Labor Pool

Whether a provider chooses an in-house or outsourced billing model, a successful medical billing process remains contingent on the people involved with executing the medical billing process. Over a side note, choosing office staff for the on-site model is a lot like choosing a 3rd party billing company. No matter the model, a provider may wish to interview the possibility candidates or perhaps an account executive in the third party billing service for experience, motivation, team oriented personalities, highly developed communication skills, responsiveness, reliability, etc.

Providers with an in-house model will have to count on their human resource and management skills to attract, train and retain qualified candidates from the local labor pool. Providers with practices based in areas lacking qualified candidates or with no need to get caught up with hr or management responsibilities could have hardly any other choice but to choose an outsourced model.

Medical Billing Related Costs

As a businessman, the provider’s primary responsibility would be to maximize revenues. A responsible business owner will scrutinize expenditures, analyze returns on investments and minimize costs. Within an on-site model, costs associated with the billing process range on the web access utilized to transmit states work space occupied through the billing staff.

The most effective way to control billing costs is made for the provider to consider the sum of those costs as a percentage of the practice’s revenues. The provider’s accounting software should enable him/her to classify and track billing related costs. When the billing related expenses are identified, dividing the amount of the costs by total revenues will convert the expenses to a percentage 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 the billing related costs from the practice; 2) provides a basis for more comprehensive research into the practice’s cost and revenue components; and 3) enables easy comparison involving the cost impact from the in-house versus outsourced models.

The cost of an outsourced model is rather simple. Considering that the fees of the majority of outsourcing services appear to be a percentage of the 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 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 these services fxbgil to market. True the billing company will acquire a few of the expenses associated with the process however the provider will still need staff to act because the intermediary in between the provider’s office and billing service, i.e. somebody to transmit data to the billing service.

Costs will further increase for that provider when the billing service charges extra fees for add-on services like on the web usage of practice data, practice management software, management reports, handling patient inquiries, etc. The particular price of the service improves even more if claims 30, 60, 90 in receivable usually are not properly worked to facilitate adjudication.

To sum up, the provider must carefully weigh the advantages and disadvantages of each and every model before making a determination. When the provider is not really comfortable or experienced analyzing financial data he/she must enlist the assistance of an accountant or any other financial professional. A provider must understand the expense and also the inherent benefits and drawbacks of every billing model.

Providers employing an in house model need to understand the real expense of their process. Determining the true cost not just requires accurate financial data and accounting but an objective evaluation in the aspects of his/her current process, i.e. technology and staff. Why? Outdated technology, under staffing, turnover, or unqualified staff may contribute to the look of an affordable of ownership but those shortcomings may ultimately result in a loss of revenues.

In the event that a provider is decided to use a 3rd party billing service, he/she should invest the time to thoroughly familiarize him/herself using the outsourcing industry prior to interviewing prospective billing services. The provider must realize the hidden expenses associated with the outsourced model to make an educated decision.

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