The choice to change a current medical billing model must not be taken lightly. Even the very best case scenario including a change to/from an in-house or outsourced medical billing version will involve some degree of short-term cash flow disruption and we will not even raise the worse case scenario.

A healthcare company's initial step is to identify whether or not his/her current medical billing version is attaining the preferred monetary outcome. Although financial analysis is beyond the scope of this conversation, the supplier, accountant or other financial professional has to have the ability to compare real financial information to income and operating budgets. Presuming the honesty of the practice's monetary data is intact though accurate and timely information entry, the service provider's medical billing software ought to have the ability of generating actionable management reports.

In the end, fundamental monetary analysis will clarify the strengths and weak points of the provider's medical billing version. Some things to consider when assessing a medical billing model: the inherent strengths and weak points of in home and outsourced medical billing versions; the carrier's practice management experience & management style; the local labor pool; and medical billing related operating costs.

In House versus Outsourced Models

No medical billing version is without unique advantages and pitfalls. Consider the in house medical billing version. Around one 3rd of independent healthcare practices utilizing an in residence medical billing model experience cash flow concerns varying from periodic to consistent. The degree of action needed by a carrier to fix his/her cash flow problems may range from a simple modification (adding staffing hours) to a total overhaul (changing staff or switching over to an outsourced medical billing version).

The service provider with an under doing in house medical billing design has a clear benefit over the company with an under performing outsourced (likewise called third party) medical billing design: distance. An in residence medical billing version is within walking range. A supplier has the chance to observe, assess and address - observe the procedure, assess the system's strengths and weaknesses and address problems before they end up being full blown issues.

Think about the carrier with an outsourced medical billing version. The fairly low entry obstacles of the third party medical billing industry have led to a proliferation of medical billing services scattered throughout the United States. Chances are the company's medical billing service is found in another geographic area making very first hand observations and assessments impossible.

The function of management reporting in a 3rd party medical billing model is vital. A carrier should frequently review charge entry, uploading, cross out and account receivable balances to insure his/her capital is correctly managed. A report as basic as 30, 60, 90 days in receivables will rapidly give a company an excellent concept of exactly how well their medical billing and invoice procedures are being managed by a third party medical billing service.

A typical mistake for numerous providers with an outsourced medical billing model is to determine the effectiveness of the process in the very short-term, i.e. week to week or month to month. Carriers preserve an unclear and informal sense of their cash flow position by keeping mental tabs on the checks they received today against the prior week or if they deposited as much money this month as last month. Sadly by the time a weakened capital gets the provider's attention a much bigger problem might be looming.

Exactly what causes a slow down in capital in the outsourced medical billing version? The most commonly cited circumstance is absence of follow up on the part of the medical billing service. Why? Like any other home based business, medical billing business are concerned firstly with their own cash flow.

A billing company creates 99.99 % of their profits on the front end of the billing procedure - the information entry process that generates claims. Billing companies that commit nearly all of their workforce to information entry will be understaffed on the back end of the billing process - the follow up on unsettled claims. Why? Every hour of data entry generates an extra one to two hours of claim follow up. Sadly for the company, a billing company that disregards does not dedicate enough manpower to the diligent follow up of 30, 60, 90 days in receivables can mean the difference between a supplier earning a profit or suffering a loss during any offered time.

Practice Management Experience & Management Style

Service providers with practice management experience will be able to successfully manage or acknowledge and resolve an issue with his/her billing procedure prior to the cash flow crunch leaves hand. On the other hand, carriers with little to no practice management experience will more likely allow his/her cash flow to reach a critical stage prior to dealing with and even recognizing a problem even exists.

Whether a carrier with billing concerns decides to retain and repair their existing model or carry out a totally various billing version will depend to a great level on his/her management style - some providers can not fathom having their billing personnel out of sight or ear shot while other companies are totally comfy with turning their billing process to a 3rd party service.

Regional Labor Pool

Whether a company chooses an in residence or outsourced billing design, an effective medical billing procedure is still subject to individuals involved in carrying out the medical billing process. On a side note, selecting office staff for an in home model is similar to choosing a 3rd party billing business. Regardless of the version, a service provider will want to speak with the possible candidates or an account executive of the third party billing service for experience, motivation, team oriented characters, extremely developed communication abilities, responsiveness, reliability, and so on

Companies with an in house design will need to rely on their personnel and management skills to attract, train and keep qualified candidates from the local labor pool. Service providers with practices located in locations lacking competent candidates or without any desire to obtain bogged down with personnel or management duties will have no other selection however to select an outsourced design.

Medical Billing Related Costs

As a company owner, the provider's primary duty is to take full advantage of profits. A responsible entrepreneur will scrutinize expenditures, examine returns on investments and lessen costs. In an in home version, expenses associated with the billing procedure range from the Internet access utilized to send claims to the office occupied by the billing staff.

The most reliable way to manage billing costs is for the company to consider the sum of those expenses as a portion of the practice's revenues. The provider's accountancy software ought to enable him/her to identify and track billing related expenses. Once the billing related costs are identified, dividing the sum of the expenses by total profits will convert the expenses to a percentage of incomes.

The workout of transforming billing related expenses to a percentage of profits accomplishes three things: 1) gets the provider, business manager or accounting professional in tune with the billing related costs of the practice; 2) offers a basis for more in depth analysis of the practice's cost and revenue elements; and 3) enables simple contrast in between the expense impact of the in house against outsourced designs.

The cost of an outsourced design is relatively straight forward. Since the charges of the huge majority of outsourcing services appear to be a percentage of a provider's revenues, the annualized expense of the medical billing service's charges will be a fairly close approximation of the provider's billing related costs for this version.

In the event a supplier is thinking about an outsourced version, he/she should bear in mind that this version is not necessarily the silver bullet to ending all billing related costs and headaches that these services tend to advertise. True the billing business will obtain a few of the costs connected with the process however the company will still need personnel to function as the intermediary between the carrier's workplace and billing service, i.e. somebody to transmit information to the billing service.

Costs will further increase for the carrier if the billing service fee added costs for add-on services such as on line access to exercise data, practice management software, management reports, dealing with patient questions, and so on. The real expense of the service will enhance even more if claims 30, 60, 90 in receivable are not correctly worked to facilitate adjudication.


In summary, the company needs to carefully weigh the pros and cons of each model prior to deciding. If the provider is not comfortable or experienced analyzing monetary information he/she have to enlist the services of an accountant or other financial professional. A provider has to understand the costs in addition to the fundamental advantages and disadvantages of each billing design.

Carriers employing an in home design should comprehend the true expense of their process. Identifying the true cost not only needs exact financial information and accountancy but an objective examination of the elements of his/her existing procedure, i.e. innovation and personnel. Why? Out-of-date innovation, under staffing, turnover, or unqualified personnel may contribute to the look of a low cost of ownership however those imperfections will eventually cause a loss of incomes.

In case a provider is determined to make use of a 3rd party billing service, he/she should invest the time to thoroughly familiarize him/herself with the contracting out market prior to interviewing potential billing services. The provider needs to understand the covert costs associated with the outsourced model in order to make an informed choice.

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