Don’t Outsource Your Medical Billing! Partner with an Expert Instead. Let’s Have a Conversation.

OK, you got me! I know this headline was a bit facetious, but you must admit if I had said “Why You Should Outsource Your Billing” then you probably wouldn’t be reading this right now. Look - I realize that this topic has been talked to death in the medical RCM world, but the fact is: if you’re still on the fence or even opposed to the idea of contracted billing, it’s time to take a second look. And why is that? Because a lot has changed in the last few years in terms of cost structures and practice dynamics (and especially in 2020), that is driving practices to look at all their options when it comes to running a financially viable practice in today’s healthcare environment.

The reality is that independent practices (frankly, all outpatient practices for that matter) are beginning to understand that the old way of maintaining all the business functions of a practice ‘in-house’, just isn’t as economical or risk-averse as it used to be. And the reasons are not just economical – there are also management dynamics that practices can no longer ignore. Let’s talk about it…

To begin, it’s important to understand why practices prefer to keep their billing and coding in-house. Let’s discuss some of the most common reasons (in no particular order):

Cost Benchmarks

Medical billing and coding costs should generally range between 5%-6% of revenue. This is true. And if you just grabbed a calculator and estimated what your benchmark billing costs for the past twelve months should have been you probably thought – “oh good, that’s a nice big number and we easily kept our costs within that range.”

With all due respect… you’re estimating your costs wrong. If you are like me, you likely tallied the annual salaries of your billing staff in your head and considered that number as your ‘billing expense’ which would be only partially right. I could put on my ‘bean-counter’ hat and go into a very mind-numbing discussion about all the hidden costs that you are likely missing but that is not my intent right now. The point I want to make is that most practices don’t accurately estimate their true cost of billing because they fail to fully consider all the overlapping and opportunity costs of billing for things such as payroll taxes, employee benefits, employee perks, billing software, postage and mailing, additional overhead, etc., and most importantly – lost revenue due to unproductive collection practices. It’s been documented that contracted billing services in most cases average 10%-15% more in collections than traditional in-house billing (run that number on your calculator and then think about what your practice could do with that additional cash).

RECOMMENDATION: If you have any doubts about your actual billing costs, I would encourage you to reach out to a trusted financial advisor (accountant, analyst, myself) and request a detailed cost analysis to determine what your true billing expense is. I think it will surprise you.

Productivity

Perhaps your saying to yourself “our practice is the exception and runs like a well-oiled machine”. You manage your billing staff closely and perhaps several of them have been loyal, long-time employees who really know their jobs well. Maybe they are! – but in my experience working with dozens of practices over several decades – I can almost guarantee that you’re leaving money on the table. BUT, it’s not your billing staff’s fault!

There is a special dynamic that exists in healthcare and especially in independent practices that directly impacts billing and often goes unnoticed. That dynamic is a general attitude among medical practice owners of “are we collecting enough money to pay our bills, cover our expenses, and provide a modest return to our partners?” Historically, this has been an easy “Yes!” Historically, a practice could collect the ‘low hanging fruit’ and still have a little extra to go around. The primary incentive driving billing staff has been to 1) keep the money flowing 2) with a focus on quick payment and total dollar collections. So what’s wrong with that? Historically, nothing.

However, in today’s healthcare arena when costs are growing at record pace, and reimbursements are shrinking (or at best stagnating), a practice can no longer afford to leave money uncollected. I’ve seen many “thriving” practices whose Net Collection Rates were in the mid-80% range or less, and their Accounts Receivable Aging (over 120 days) upwards of 25% but nobody was concerned because Total Collections were adequate (BTW, benchmarks for NCR = 98%-99%, and AR>120 = less than 15%). Once more, (and this is the dirty little secret), when physicians question billing staff about why collections aren’t being maximized; their knee-jerk response is to blame the insurance companies and their many onerous rules and regulations that prevent reimbursement. This may be true in some instances, but the outcome is that the billing staff continue to do things the way they’ve always done them and physicians resign themselves to a position of helpless indifference and animosity toward the insurance companies. The question you should really be asking yourself is, “why can other practices collect at a high level, but mine can’t?” (pssttt…it’s not the insurance companies).

RECOMMENDATION: If you’re not yet convinced that Partnering (another word for ‘Outsourcing’) your billing, then at a minimum, you should be consistently looking at the Five Fundamental Revenue Cycle metrics monthly and take actions to address deficiencies. It pains me to say this, BUT…“More reports” are the answer. These metrics equal money. If you ignore them, then you’re ignoring the money. Ironically, many billing systems do not calculate these numbers for you and some even do it wrong! You may need to reach out to an expert or do some research on how to calculate and track these numbers effectively.

We’re a Family

“My billing staff are more productive because they are more accessible and able to answer questions and adapt quickly to changing needs within the practice.” I get it! It feels nice to have questions answered quickly and to feel like you have someone who is solely dedicated to your needs. However, billing has become increasingly more complex and specialized. No longer can your Office Manager be both your Lead Biller, and subject matter expert, while also managing every other task that an Office Manager must manage.

While it's normal for staff (especially in a smaller practice) to wear multiple hats, much like the illusion of multi-tasking, in many cases staff just end up doing many tasks poorly. In a recent survey of Certified Professional Coders, an overwhelming number reported that they felt most productive when they were isolated from daily clinic operations and behind closed doors away from the general staff. Despite this admission, this same survey revealed that it was not their preferred work environment due to the social isolation and acknowledged that clinicians preferred that they be more accessible to them.

RECOMMENDATION: Partner your billing to an outside company that can be solely focused on making sure every dime is accounted for. Or… Isolate your billing staff. Or at least give them dedicated time when they can work behind closed doors without distractions from staff or clinicians. 80% of billing tasks are routine and straightforward and can be done acceptably Medical Practice Management Services despite frequent interruption. 20% are complicated and require focus and minimal disruption to complete. Without this time to focus and work unencumbered, many of these complex tasks never get completed but are pushed-off, forgotten, and ignored. Also – let’s not forget that ugly word that nobody likes: Accountability. You need to hold your billers accountable, and the only way to do that is with unbiased data and metrics.

Team Synergy

“My billing staff knows our patients and our clinicians. This leads to greater rapport and efficient routines that in turn leads to greater team synergy.”

You’re not wrong. However – step back and take an honest look at this dynamic (I won’t be popular for pointing this out), is this mind-set driven more by the actual economic need of the practice OR is it more of a reflection of the feel-good needs of the owners to surround themselves with capable people who are there to serve them? This is an attitude of the past that is single-handedly killing practices who can no longer afford to have excess staff. If the current pandemic has taught us anything, it’s that people can work remotely and independently while still being a contributing member of the team.

RECOMMENDATION: Consider partnering with a trusted firm for your billing and coding.

Team Continuity

“My billing staff perform other tasks in the practice that go beyond billing and help provide coverage when other staff are out or we’re short-handed”.

Again, if billing staff are not performing at optimal levels, then the savings you get from this convenience may not match the kind of money you are losing every day.

RECOMMENDATION: Consider partnering with a trusted firm for your billing and coding and hire individuals specifically suited to those “other” tasks.

There are numerous other reasons why partnering your medical billing and coding makes sense, but the most important consideration that I hope you’ll take away from this discussion is the realization that 1) the “business of healthcare” is changing and adapting to these changes may require letting go of some of the traditional ways of doing things and embracing new alternatives, and 2) partnering your billing and coding doesn’t need to be painful. Many of our clients have told us how liberated they felt after outsourcing that allowed them to refocus their time and attention on more important issues such as patient care, clinician burnout, and practice growth.

To learn more about how to Partner your medical billing and coding or for simple questions about your revenue cycle management strategy, please contact me at contact@medpracmgmt.com or call 800-215-6224.