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 cashflow disruption and we won’t even bring up the worse case scenario.

Any adverse health care provider’s initial step is always to determine whether his/her current medical billing model is having the desired financial result. Although financial analysis is beyond the scope with this 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 from 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 weaknesses and strengths of the provider’s medical billing model. Some points 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.

On-site versus Outsourced Models

No medical billing model is without unique advantages and pitfalls. Think about the on-site medical billing model. Approximately 1 / 3 of independent medical care practices utilizing an in-house medical billing model experience cash flow issues starting from periodic to persistent. The amount of action necessary for a provider to settle his/her cashflow issues may vary from a simple 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 features a clear edge over the provider with the 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 opportunity to observe, assess and address – observe the process, evaluate the system’s weaknesses and strengths and address issues before they become full blown problems.

Consider the provider with the outsourced medical billing model. The relatively low entry barriers from the alternative party medical billing industry have led to a proliferation of medical billing services scattered throughout the United States. 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 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 cashflow is properly managed. A study as basic as 30, 60, 90 days in receivables will quickly provide a provider a great idea of how well their medical billing and account receivable processes are now being managed by a third party medical billing service.

A standard mistake for many providers having an outsourced medical billing model is always to gauge the strength of the procedure inside the very short-term, i.e. week to week or month to month. Providers have a vague and informal sensation of their cashflow position keeping mental tabs on the checks they received in the week versus the prior week or if they deposited the maximum amount of money this month as recently. Unfortunately by the time a weakened cash flow gets the provider’s attention a lot larger problem might be looming. Datalink MS Medical Billing Solutions » Insurance Eligibility Verification

What causes a decelerate in cashflow inside the outsourced medical billing model? By far the most commonly cited scenario is lack of followup on the portion of the medical billing service. Why? Like every other business, medical billing companies are involved above all using their own cash flow.

A billing company generates 99.99% of the revenues on the front end in the billing process – the information entry method that generates claims. Billing firms that devote nearly all of their manpower to data entry will be understaffed on the back end from the billing process – the followup on unpaid claims. Why? Every hour of information entry generates an additional 1 to 2 hours of claim follow-up. Unfortunately for the provider, a billing company that ignores fails to devote enough manpower towards the diligent followup of 30, 60, 3 months in receivables often means the difference from a provider making a profit or suffering a loss during any given time.

Practice Management Experience & Management Style

Providers with practice management experience will be able to effectively manage or recognize and resolve an issue with his/her billing process before the cash flow crunch gets out of hand. On the other hand, providers with hardly any practice management experience will much more likely allow his/her cashflow to achieve a critical stage before addressing or even recognizing an issue even exists.

Whether a provider with billing issues chooses to retain and repair 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 away from 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 in house or outsourced billing model, an excellent medical billing process remains 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 3rd party billing company. Whatever the model, a provider would want to interview the potential candidates or an account executive in the third party billing service for experience, motivation, team oriented personalities, highly developed communication skills, responsiveness, reliability, etc.

Providers with the in house model must rely on their human resource and management skills to draw in, train and retain qualified candidates from your local labor pool. Providers with practices located in areas lacking qualified candidates or without desire to get caught up with hr or management responsibilities could have not one other choice but to choose 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 reduce costs. Within an in-house model, expenses related to the billing process range on the web access used to transmit states to the workplace space occupied from the billing staff.

The best way to manage billing costs is made for the provider to consider the sum of those costs as 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 costs by total revenues will convert the expense to a portion of revenues.

The exercise of converting billing related expenses to some percentage of revenues accomplishes three things: 1) receives the provider, business manager or accountant in tune using the billing related costs of the practice; 2) provides a basis for more thorough research into the practice’s cost and revenue components; and three) provides for easy comparison between the cost impact of the in house versus outsourced models.

The price of an outsourced model is pretty straight forward. Because the fees of the majority of outsourcing services seem to be a share of a provider’s revenues, the annualized cost of the medical billing service’s fees will certainly be a fairly close approximation from the provider’s billing related costs for this model.

In the event that a provider is considering an outsourced model, he/she should remember that this model is not necessarily the silver bullet to ending all billing related costs and headaches that these particular services fxbgil to advertise. True the billing company will acquire a few of the costs associated with the procedure but the provider will still need staff to act since the intermediary involving the provider’s office and billing service, i.e. somebody to transmit data to the billing service.

Costs will further increase for your provider when the billing service charges additional fees for add-on services including on the web access to practice data, practice management software, management reports, handling patient inquiries, etc. The specific expense of the service improves a lot more if claims 30, 60, 90 in receivable usually are not properly worked to facilitate adjudication.

In conclusion, the provider must carefully weigh the pros and cons of each and every model prior to making a choice. In the event the provider is not really comfortable or experienced analyzing financial data he/she must enlist the services of an accountant or any other financial professional. A provider must understand the expense along with the inherent advantages and disadvantages of each and every billing model.

Providers employing an on-site model need to understand the real price of their process. Determining the actual cost not only requires accurate financial data and accounting but an objective evaluation of 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 appearance of a low cost of ownership but those shortcomings will ultimately produce a loss of revenues.

In case a provider is decided to make use of a third party billing service, he/she should invest enough time to thoroughly familiarize him/herself with all the outsourcing industry prior to interviewing prospective billing services. The provider must understand the hidden expenses related to the outsourced model in order to make a knowledgeable decision.

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