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 short-term cashflow disruption and we won’t even bring up the worse case scenario.
Any adverse health care provider’s starting point is to determine if his/her current medical billing model is achieving the desired financial result. Although financial analysis is past the scope of the discussion, the provider, accountant or other financial professional must have the ability to compare actual financial data to revenue and operating budgets. Assuming the integrity from the practice’s financial details are intact though accurate and timely data entry, the provider’s medical billing software should possess the ability of generating actionable management reports.
Ultimately, basic financial analysis will shed light on the weaknesses and strengths of 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 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 medical care practices utilizing an in-house medical billing model experience income issues ranging from periodic to persistent. The amount of action required by a provider to resolve his/her income issues may vary from a basic adjustment (adding staffing hours) to a complete overhaul (replacing staff or switching to 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 called 3rd 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, assess the system’s weaknesses and strengths and address issues before they become full blown problems.
Think about the provider with the 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 america. Chances are the provider’s medical billing service is situated in another geographic area making first hand observations and assessments impossible.
The role of management reporting in a third party medical billing model is essential. A provider must regularly review charge entry, posting, write offs and account receivable balances to insure his/her cash flow is properly managed. A study as basic as 30, 60, 3 months in receivables will quickly offer a provider a wise 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 with the outsourced medical billing model is to gauge the potency of the process inside the very short-term, i.e. week to week or month to month. Providers maintain a vague and informal sensation of their cashflow 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 once a weakened income will get the provider’s attention a lot larger problem could be looming.
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What can cause a decrease in cash flow in the outsourced medical billing model? Probably the most commonly cited scenario is lack of followup on the portion of the medical billing service. Why? Like any other business, medical billing companies are involved above all making use of their own income.
A billing company generates 99.99% with their revenues on the front-end in the billing process – the info entry process that generates claims. Billing companies 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 web data entry generates an additional 1 to 2 hours of claim followup. Unfortunately for the provider, a billing company that ignores will not devote enough manpower towards the diligent followup of 30, 60, 3 months in receivables could mean the difference between a provider making a profit or suffering a loss during any time.
Practice Management Experience & Management Style
Providers with practice management experience can effectively manage or recognize and resolve an issue with his/her billing process ahead of the income crunch gets out of control. On the contrary, providers with hardly any practice management experience will more likely allow his/her cashflow to achieve a vital 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 an entirely different billing model will be based to your 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 comfortable with turning their billing process to a 3rd party service.
Local Labor Pool
Whether a provider chooses an in-house or outsourced billing model, an effective medical billing process is still contingent on the people involved with executing the medical billing process. On the side note, choosing office staff for the on-site model is a lot like choosing a 3rd party billing company. Regardless of the model, a provider may wish to interview the possible candidates or perhaps an account executive from the 3rd party billing service for experience, motivation, team oriented personalities, highly developed communication skills, responsiveness, reliability, etc.
Providers with an in house model will need to depend on their hr and management techniques to bring in, train and retain qualified candidates from your local labor pool. Providers with practices based in areas lacking qualified candidates or with no want to get bogged down with human resource or management responsibilities will have hardly any other choice but to pick an outsourced model.
Medical Billing Related Costs
As a businessman, the provider’s primary responsibility is always to maximize revenues. A responsible business owner will scrutinize expenditures, analyze returns on investments and minimize costs. Within an on-site model, expenses related to the billing process range from the Internet access employed to transmit states work space occupied from the billing staff.
The simplest way to handle billing costs is for the provider to consider the amount of those costs being a percentage 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 costs to your portion of revenues.
The exercise of converting billing related expenses to a amount of revenues accomplishes three things: 1) will get the provider, business manager or accountant in tune with all the billing related costs from the practice; 2) supplies a grounds for more comprehensive analysis of the practice’s cost and revenue components; and three) allows for easy comparison between the cost impact from the on-site versus outsourced models.
The cost of an outsourced model is fairly simple. Because the fees of the vast majority of outsourcing services appear to be a percentage of any provider’s revenues, the annualized cost of the medical billing service’s fees is a fairly close approximation of 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 will not be necessarily the silver bullet to ending all billing related costs and headaches that these particular services fxbgil to promote. True the billing company will acquire a number of the expenses related to the procedure nevertheless the provider will still need staff to do something as the intermediary in between the provider’s office and billing service, i.e. somebody to transmit data towards the billing service.
Costs will further increase for your provider if the billing service charges extra fees for add-on services including on the web 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 usually are not properly worked to facilitate adjudication.
In conclusion, the provider must carefully weigh the advantages and disadvantages of each and every model before you make a decision. If the provider is not really comfortable or experienced analyzing financial data he/she must enlist the expertise of a cpa or some other financial professional. A provider must understand the expenses along with the inherent benefits and drawbacks of each billing model.
Providers employing an on-site model need to comprehend the true expense of their process. Determining the true cost not just requires accurate financial data and accounting but an unbiased evaluation in the elements of his/her current process, i.e. technology and staff. Why? Outdated technology, under staffing, turnover, or unqualified staff may bring about the look of a low cost of ownership but those shortcomings will ultimately produce a loss in revenues.
In the event that a provider is decided to make use of a 3rd party billing service, he/she should invest the time to thoroughly familiarize him/herself using the outsourcing industry just before interviewing prospective billing services. The provider must realize the hidden expenses related to the outsourced model to make an educated decision.