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The 6 Benefits of
Outsourcing Medical Billing

Outsourcing your medical billing can seem like a daunting or complex decision for many providers. Although not every outsourcing company is created equal, outsourcing is a great decision for providers across the board.

As a provider, you’re almost guaranteed to have some issues with the billing process, whether it’s a matter of revenue or organization. Outsourcing is a solid way to approach these issues.

The 6 Universal Benefits of Outsourcing Medical Billing

There are a number of universal benefits providers report when they choose to outsource their billing. Everybody’s priorities are different, but these are some of the things providers seem to care about the most:

1. Increased Revenue

By cutting out the more expensive internal billing department you can leave collections and claims to an outsourced medical billing company. This will end up boosting your collections and claims volume resulting in increased revenue for your practice.

For most providers, the decision to outsource comes down to the fact you can earn more revenue. Although higher revenue is not guaranteed, it is reported by most providers who choose to outsource.

The reason for this is simple: outsourcing costs money but earns you more. Many providers aren’t aware of it, but most end up earning significantly less than they could, given the service they provide.

“outsourcing costs money but earns you more.”

Two main things contribute to higher revenue:

    1. You stop paying for your billing department, which can result in significant savings. (Even though you have to pay for the outsourcing service.)

    2. Even if your collections only improve by 10%, the volume of claims most providers bill means this 10% accounts for a very significant rise in collections. For many providers, this can push into the hundreds of thousands per year above what would be made at the original collections rate when not outsourcing.

Every practice should look at their own collections, and understand why those collections are not where they want them to be. The most common reasons for low revenue are most often solved by outsourcing. If your payment is delayed or your collections percentages are not where they should be, outsourcing is almost sure to bring them up.

An Example Cost Analysis

To hone in on how outsourcing raises your revenue, let’s look at a cost analysis showing what a medical practice could expect over the course of a year.

Most in-house billing teams will collect revenue on about 60% of their claims, as opposed to at least 70% when outsourcing. For the sake of this example, consider a case where your practice sends out $2,000,000 of billed claims in a year. This results in $1,200,000 in collections from your in-house team vs. $1,400,000 in collections you’d get from outsourcing.

However, there are other fees we need to consider in order to get a full cost analysis. If your outsourcing fees are higher than $200,000 plus any additional in-house fees, then outsourcing would not be worthwhile. So, let’s take a look at some of these additional numbers.

Aside from the percentage of collection, the main differences to consider when doing a cost analysis are:

  • The cost of the billing department itself (equipment, salaries)
  • Claim processing costs
  • Other miscellaneous overhead, like software, hardware, and office space

A dedicated outsourced billing service will usually charge a percentage of your collections as their claims processing cost, with around 7% being average.

In contrast to this, you can expect an in-house billing team bringing in $1,200,000 to cost at least $100,000 per year in technical costs and salaries, although there are also additional fees that we are glossing over in this simple breakdown. Given these numbers, we have the following values for our analysis:

Outsourced: $1,400,000 in collections, minus $100,000 in processing costs and other fees = $1,300,000 in net collections.

In-House: $1,200,000 in collections, minus $100,000 in billing department costs = 1,100,000 in in net collections.

In general, the overall cost for collecting payment, whether outsourced or in-house, will be fairly close, although outsourcing can easily end up costing more as your earnings increase. However, even then, your collections will tend to significantly increase when outsourcing, commonly around $200,000 per year for an average-sized practice. There are other costs to factor into a full cost analysis, but they make fairly small changes to the overall numbers.

2. Faster Revenue

Timely revenue ensures available and consistent funds which can be accomplished by outsourcing billing. In-house billing teams can result in inconvenience and wasted costs because of delays in payment and potential errors to billing.

For many providers, bringing in revenue on time is a serious problem, especially when you factor in timely filing limits. If your claims are billed with coding errors, or there is another payer-identified issue, your payment can be delayed by months, and sometimes not paid at all.

Attempting in-house medical billing is costly and problematic for two main reasons.

First, the time that you are paid can have an obvious effect on the functioning of your practice. Bringing in revenue in a timely manner can function as the heartbeat of your practice, always ensuring that funds are available and consistent.

Second, delayed payment results in further losses due to the fact the follow-up service costs money as well. If your claim was sent out with errors and payment will be delayed, you have to pay your follow up team to occupy themselves with tracking this payment down. Delays in payment are both inconvenient and costly.

As an example, Quest’s average amount of time in Accounts Receivable is 21 days, which is a much quicker turnaround than most in-house teams are able to achieve. It’s worth looking into this amount of time for your own practice because these delays can be costly.

Outsourcing fixes this problem by making your coding and follow-up more consistent. The main reason for difficulties with follow-up and clean claim filing is simply human error. Coding is complicated, and it can be hard for staff that aren’t properly trained to keep up.

Outsourcing generally fixes this problem by providing dedicated and well-trained staff to keep up with your billing and coding, as well as to follow up properly, effectively and knowledgeably depending on the payer type in question.

3. Improved Consistency

Human error, especially in non-specialists is a factor considered when focusing on accuracy and consistency with your medical billing.

It’s common for providers to have issues with the consistency of their revenue and performance of their staff. Consistency problems can come in many forms. Revenue may come in swiftly and properly for a period, then may be riddled with coding errors. Follow up may deal with one set of rejections from one payer fruitfully one month, but run into problems dealing with the same issue when another payer is involved. In the end, most of this comes down to human error.

Outsourcing helps to make your practice more consistent in a few different ways. At the surface level, your interactions with the coding process will become flattened, as you simply oversee the results that the company you outsource with provides. You won’t have to directly or indirectly deal with coding or revenue problems anymore, which both simplifies your business and makes your experience itself more consistent.

In addition to this, the majority of outsourcing teams will be fully dedicated to understanding the ins and outs of the coding, billing and follow up processes. There will also be a much larger amount of oversight on their part, which ensures that everything is up to date, and as comprehensive as possible.

Remember, their business depends on results, and no outsourcing company will stay in business long if their results are inconsistent. For this reason, you can usually expect high-quality work and less of an effect from coding updates and other processes that can trip up your local staff.

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4. More Robust Analytics

Analytics are important to monitoring your practice but can take up hours of your in-house team’s time. On the other hand, outsourcing medical billing usually includes analytics as part of their packages.

If your practice isn’t putting analytics to good use, you should be. There are many different types of analytics to employ, but they all give you an overall sense of what is going on with your practice financially. Analytics can help you see how different parts of your practice are functioning, what is working, what’s not, and why.

Most outsourcing companies will offer very robust and flexible analytic options. Because analytics are so complex and specific, your practice may need to employ one or more independent workers just to create your analytics in-house. In contrast to this, analytics are included in many outsourcing plans, and many companies will be able to tailor the analytics to your needs.

Analytics can help you with a wide variety of data categories. For example, you can use analytics to look into specific procedures that you perform at your practice. Within that specific procedure, you can then zero in on a wide variety of metrics for that procedure.

Analytics can help you ask the following:

  • Which payer(s) pay the most, per procedure?
  • Which payer(s) pay the most for this procedure overall?
  • Which payer(s) pay for this procedure the fastest or slowest?
  • Which payer(s) reject this procedure the most, and how soon afterward do you receive payment on average?

All of this can be tailored to specific timeframes, payers or payer types, or any combination of these metrics. This can help you zero in on why a payer isn’t paying on time, which payers are more worthwhile to pursue relationships with or renegotiate fee schedules with, and so on.

Although analytics are often thought of as an “extra perk”, they are really a fundamental tool that your business can use.

5. Simplified Documentation

When you consider all of the resources required to properly document medical billing, you’re wasting time and money on in-house medical billing. Outsourcing your medical billing enables you access to a simple, easy, and organized documentation process. Goodbye headaches.

As you probably know, there are many, many documents that come in and out of your billing department. Whether they are related to eligibility verification, payment posting, or follow-up, you’re likely cycling through paper and electronic documents in huge quantities.

Medical billing experts working

This causes problems for your practice on all fronts. From taking up space and costing money to store, to difficult retrieval by practitioners for review, to slowing down your follow-up process, documentation is a small thing that can make a huge difference. Add these effects up over time, and you can get a serious dent in your revenue.

Outsourcing your billing will almost always result in being able to take advantage of a robust filing and document management system that outsourcing companies use more often than not. This means that when your team (or, more likely, their team) needs to access these documents, the process will be simple, easy, and organized. This results in more revenue for you, and fewer headaches for anyone who needs access to those documents.

6. Easier Audits

Many providers will be audited at some point. By outsourcing, you effectively move that responsibility to a company that has experienced staff able to properly manage your records and handle an audit if it does happen.

An audit is simply the process of you or an outside source looking through your documentation to look for any irregularities. This can be done by the government, an external source, or even by yourself or someone you’ve hired. It ensures all your claims are being properly dealt with. Many providers will be audited at some point, and it’s always a good practice to audit yourself in order to make sure everything is in order before that day comes.

Outsourcing can make audits much easier for you to deal with. Your practice is no longer responsible for many of the procedures that are being audited, as these are completed fully by the outsourcing company. This means that when you are audited, the outsourcing company will be the ones that have to deal with processing and retrieving the relevant information; it’s no longer passing through your employees in the first place.

Furthermore, the organization and consistency that results from outsourcing will mean that your audit is more likely to proceed smoothly, with minimal hiccups along the way. Many practices don’t take audits as seriously as they should, but outsourcing companies are much more likely to keep clean and organized records.

The fact that outsourcing companies perform fewer billing errors also means that you’ll be much less likely to suffer an audit in the first place. This organization and consistency is useful on many fronts, as we’ve described, but audits deserve special mention.

Man using computer

How to Embrace the 6 Benefits of Medical Billing

As a provider, you alone will have to decide who to outsource to and what type of plan will work best for your practice. While this can be a challenging decision, the financial and organizational benefits make it well worth the consideration. Finance and organization are the most common difficulties billing departments within medical practices face making outsourcing a no-brainer for many practices.

It’s worth noting that every outsourcing company is different. There’s no one-size-fits-all solution to the difficulties your practice may be facing. Be careful and smart with your outsourcing, and make sure to thoroughly check out the companies you’re thinking of working with to make sure they are a good fit.

And remember, outsourcing isn’t location-dependent which gives you the opportunity to pick the medical billing company best for you.

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