If you are a medical practitioner or are managing a medical facility, you’ve likely dealt with several complications during the billing and collections process. Common problems healthcare practitioners experience in medical billing includes low or delayed payment, organizational complexity, and difficulty recruiting expert medical billers. Since billing processes are directly linked to your revenue, these problems add more weight to an already pressing issue.
Outsourcing your medical billing function is a great way to address such complications. You can delegate coding and billing to your third-party service provider by outsourcing. You simply send all the necessary information their way. They will manage the billing process and send claims to the payer, reducing the need for in-house employees and additional infrastructure.
In this article, we discuss the ins and outs of medical outsourcing, its benefits, costs, and how to research medical billing outsourcing companies.
How Much Does Medical Billing Outsourcing Cost?
The majority of healthcare facilities collect about 60% of their claims when performing this work themselves, compared to the 70% collected when medical billing is outsourced.
In this simple cost analysis, imagine a situation where your practice sends out $2,000,000 of billed claims within a year. This would mean you would have $1,200,000 in total from your in-house collections. Conversely, outsourced billing can obtain about $1,400,000 in collections. That’s $200,000 more than in-house billing.
The question then to consider is: does outsourced billing cost more than the amount of money you’re acquiring? To answer that, in conjunction with the percentage of collected claims, you also need to consider other factors when conducting a cost analysis. These include the cost of claim processing, total expenses of the billing department including labor costs and infrastructure, and other miscellaneous overhead such as office space and software.
Exclusive medical billing services usually charge a fee of 5% to 10% of the total claims collected as payment for processing your claims. Typically, 7% is the average cost of processing.
In a year, healthcare facilities can expect to bring in about $1,200,000 in billed claims with a total cost that reaches about $100,000. But keep in mind that there could be additional expenses we are skipping to simplify this analysis.
With those numbers, we will have the following amounts to consider for our breakdown:
- Outsourced: $1,400,00 in collections, minus $98,000 in claim processing cost leaves us with $1,302,000 in net collections.
- In-house: $1,200,000 in collections minus the $100,000 in billing department expenses which gives $1,100,000 in net collections.
Generally, the cost for collecting payments altogether, whether in-house or outsourced, is fairly similar. Of course, other factors should be considered in a full cost analysis but they make little difference in the total number.
You only start to see a major difference as your practice increases in size. The higher the billings are, the more expensive collecting claims in-house will be. So outsourcing makes more sense the larger the hiring company is.
Read more: 5 Ways Medical Billing Outsourcing Can Improve Your Hospital
Advantages of Outsourced Medical Billing
Apart from the saved costs, outsourcing medical bills brings other, more obvious benefits.
Quicker Processing of Revenue
Outsourcing medical billing results in fewer billing errors which means more paid claims, less insurance refusal, and faster payment. For larger practices, outsourcing boils down to revenue. Generally, outsourced billing leads to faster-realized claims.
On average, an outsourced medical billing firm will send claims more accurately and reliably than in-house billing departments because, unlike the latter, outsourced billers can focus on processing claims alone. They don’t have to divide time between patient care and collecting claims. This means that more claims are accepted faster.
Although in-house billing departments are quite functional, the nature of their workflow can jeopardize their accuracy and speed. This will definitely incur a cost to your business, from lost revenue, hours spent in training, and general office equipment expenditures.
Streamline Record-Keeping for Busy Medical Professionals
Billing departments are nearly always complicated and difficult to organize. An important and obvious benefit to outsourcing is the ease of record-keeping and filing. Many practices find it hard to establish a system for organizing all their files, financial records, requisition forms, and the like. Then there’s also the problem of digitization.
You will start having serious problems if your billing department has not been thoroughly trained in data organization. The same is true if file organization is not given proper priority. However, when you outsource, you place the burden of entering and managing patient information in the billing system on the external team.
Both External and Internal Audits are Made Easier
Outsourced medical billing firms function under stricter administrative regulations and guidelines than other offices in order to maintain competitiveness. Most of the time, you can guarantee that billing firms will be able to extract all the necessary information both for internal and external audits.
They can also simplify the process of report generation and data reviewing since all information is stored in one source.
Lastly, outsourcing medical billing decreases the likelihood of claims being incorrectly filed. As a result, physicians, doctors, and other healthcare workers will have access to more reliable patient information.
Decreased Office Management Expense
Billing departments need office resources that can complicate general facility functioning. Outsourcing medical billing removes this problem. More importantly, office management becomes significantly easier with outsourcing because less staff is needed. Required data for payroll processing is likewise reduced and office space can be employed for other activities.
The benefits we mention may seem marginal, however, they should not be overlooked since they often have a compounding effect on your practice’s efficiency.
Learn more: How Medical BPO Services Can Assist Customer Service Overall
Is Outsourcing Medical Billing Worth It?
As we mentioned, medical billing is complicated and time-sensitive. This brings several difficulties to medical practices, especially the ones with limited staff and resources.
It’s not common to see an independent practice open up and bring workers on board to manage revenue cycle management. So the staff usually end up devoting time to remain adherent to government regulation. As the facility grows larger this becomes a major negative issue. Keeping up with the nuances in revenue cycle management software is quite time-consuming. Then there’s the problem of constantly updating your computer system to remain compatible with RCM.
Adding to this is that the medical billing software where private patient information is stored is a favored target of hackers. So you need to constantly upgrade your security protocols to keep patient information safe. This, too, is very time-consuming but needs to always remain in the front of computer operations.
With all these factors to consider, it makes sense to choose outsourcing medical services for billing and collections, and perhaps other aspects as well, to third-party providers.
You might be interested in: How Health Partners Benefit from Healthcare BPO Services
The Bottom Line
Ultimately, when outsourcing, you need to consider the size of your billing department and its level of expertise in billing, your budget, and your average daily patient volume. How to research medical billing outsourcing will depend on the complexity of onsite billing. Often, in-house billing can cost you more time and energy than it’s worth when compared to outsourced RCM.