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 calls for some extent of temporary cash flow disruption and we won’t even bring up the worse case scenario.
A health care provider’s initial step is to determine if his/her current medical billing model is getting the desired financial result. Although financial analysis is beyond the scope of the discussion, the provider, accountant or 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 details are intact though accurate and timely data entry, the provider’s medical billing software should hold the capability of generating actionable management reports.
Ultimately, basic financial analysis will shed light on the weaknesses and strengths in 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 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 1 / 3 of independent healthcare practices utilizing an in house medical billing model experience cashflow issues starting from periodic to persistent. The degree of action essental to a provider to resolve his/her cashflow issues may range between a basic adjustment (adding staffing hours) to a complete overhaul (replacing staff or switching with an outsourced medical billing model).
The provider with an under performing in house medical billing model includes a clear advantage over the provider with the under performing outsourced (also referred to as 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 – notice the process, measure 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 in the third 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 located in another geographic area making first hand observations and assessments impossible.
The role of management reporting in a 3rd 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 good idea of methods well their medical billing and account receivable processes are being managed by a third party medical billing service.
A common mistake for most providers having an outsourced medical billing model is to gauge the effectiveness of the process 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 keeping mental tabs on the checks they received in the week versus the prior week or maybe they deposited just as much money this month as last month. Unfortunately once a weakened cashflow receives the provider’s attention a lot larger problem may be looming.
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What can cause a slow down in cashflow within the outsourced medical billing model? Probably the most commonly cited scenario is insufficient follow-up on the portion of the medical billing service. Why? Like every other business, medical billing companies are involved above all with their own cashflow.
A billing company generates 99.99% of their revenues on the front-end from the billing process – the information entry process that generates claims. Billing firms that devote most 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 one or two hours of claim followup. Unfortunately for the provider, a billing company that ignores does not devote enough manpower towards the diligent follow up of 30, 60, 3 months in receivables often means the main difference between a provider building 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 a problem with his/her billing process before the cashflow crunch gets out of control. On the other hand, providers with hardly any practice management experience will more likely allow his/her income to reach a critical stage before addressing or perhaps recognizing a difficulty even exists.
Whether a provider with billing issues chooses to retain and fix their current model or implement a completely different billing model will depend to a great extent on his/her management style – some providers cannot fathom having their billing staff from sight or ear shot while other providers are completely confident with turning their billing process to a 3rd party service.
Local Labor Pool
Whether a provider chooses an on-site or outsourced billing model, an excellent medical billing process continues to be contingent on the people associated with executing the medical billing process. Over a side note, choosing office staff to have an in-house model is similar to choosing a third party billing company. Whatever the model, a provider will want to interview the possible candidates or even an account executive of the 3rd 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 count on their hr and management skills to attract, train and retain qualified candidates from your local labor pool. Providers with practices located in areas lacking qualified candidates or without any need to get bogged down with hr or management responsibilities will have not one 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 owner will scrutinize expenditures, analyze returns on investments and reduce costs. Within an on-site model, expenses related to the billing process range from the web access employed to transmit claims to work space occupied from the billing staff.
The most effective way to control billing costs is made for the provider to think about the amount of those costs as being a portion of the practice’s revenues. The provider’s accounting software should allow for him/her to classify and track billing related costs. Once the billing related pricing is identified, dividing the amount of the costs by total revenues will convert the costs to a portion of revenues.
The exercise of converting billing related expenses to your percentage of revenues accomplishes three things: 1) receives the provider, business manager or accountant in tune with all the billing related costs in the practice; 2) provides a grounds for more comprehensive research into the practice’s cost and revenue components; and three) enables easy comparison between the cost impact from the on-site versus outsourced models.
The expense of an outsourced model is fairly easy. Considering that the fees of the vast majority of outsourcing services seem to be a percentage of any provider’s revenues, the annualized cost of the medical billing service’s fees will certainly be a fairly close approximation of the provider’s billing related costs for this model.
In the event a provider is considering an outsourced model, he/she should remember that this model will not be necessarily the silver bullet to ending all billing related costs and headaches that these services fxbgil to promote. True the billing company will acquire a few of the expenses associated with the process but the provider will still need staff to do something because the intermediary between the provider’s office and billing service, i.e. somebody to transmit data for the billing service.
Costs will further increase for that provider if the billing service charges additional fees for add-on services like on line usage of practice data, practice management software, management reports, handling patient inquiries, etc. The specific expense of the service increases much 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 pros and cons of each and every model before you make a choice. 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 realize the expense along with the inherent pros and cons of each and every billing model.
Providers employing an on-site model need to comprehend the true expense of their process. Determining the real cost not merely requires accurate financial data and accounting but an objective evaluation from the components of his/her current process, i.e. technology and staff. Why? Outdated technology, under staffing, turnover, or unqualified staff may contribute to the appearance of an affordable of ownership but those shortcomings will ultimately cause a loss of revenues.
In case a provider is determined to make use of a third party billing service, he/she should invest enough time to thoroughly familiarize him/herself with the outsourcing industry before interviewing prospective billing services. The provider must realize the hidden costs associated with the outsourced model to help make a knowledgeable decision.