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Should You Outsource Your Medical Billing or Work In-House?

Posted on October 01, 2013 in Medicare & Healthcare

As a doctor or practice manager, one of the biggest decisions you face is whether to outsource your medical billing or keep it in-house. There are several factors you need to consider before choosing who will do your billing, including the following:

  • Size of the local labor market

  • How long you have been in business

  • The typical state of your practice's finances
  • Assessment of your practice's costs, volume and staffing metrics

After carefully considering these factors, the next step is to consider the pros and cons associated with each type of medical billing.

Outsourced Medical Billing

Some of the most compelling reasons to transfer your medical billing to an outside company include:

  • Consistent performance: You don't have to deal with staff shortages since it's the outsourced company's responsibility to keep its operation fully staffed all year long. You can also depend on the company you hire to appeal denials on your behalf and perform other non-billing tasks as part of your business agreement. In order to sign you on as a customer, the outsource company will likely offer a certain percentage of guaranteed success with collecting on denied payments.

  • Cost-effective: Outsourcing your medical billing allows you to save money on employee salary and benefits. It can also be more efficient because you are paying by the job and not the hour.

  • Detailed Reporting: An outsourced medical billing company should provide you with a performance report any time you request one. This allows you to retain oversight of your practice's billing without having to supervise employees.

While these can be attractive reasons to move your billing operations off-site, you also need to consider the possible negative aspects of making such a move:

  • Possibility of hidden fees: It is important to read your outsourcing contract carefully to avoid unpleasant surprises when the bill arrives. Is there a statement fee, cancellation fee, reporting fee or anything else you feel should be included in the total cost of your package? If so, this method may not save you as much money as you would like.

  • Loss of control: This can be a negative aspect of medical billing if you take a more hands-on approach to management. You need to ensure that you are fully comfortable handing over control of your billing process to someone else.

  • Cost variations: Many outsourced medical billing companies charge a percentage of collections, which means that you pay more for billing when you bring in more business. This can make it harder for you to earn a profit or manage your budget if there are wide variations from one month to the next.

In-House Medical Billing

Keeping your medical billing on site also has advantages and disadvantages to consider. Some of the pros include:

  • Close proximity: If a billing issue comes up, you can walk to the billing department and observe the process first-hand. With an outsourced company, you must first get a hold of someone and then schedule an appointment to observe. The work will probably not be as authentic since there was time to prepare for your observation.

  • Greater control of the process: If you have long-term employees who you trust, keeping your medical billing on-site helps you to understand the big picture at any given time. It could cause dissatisfaction among your workers if you take some of their job functions away.

  • Return on previous investments: If you have already purchased medical billing software and training materials, it makes sense to try to get some or all of your investment back by keeping the process in-house.

You must also think about the possible cons:

  • Increased cost: You must pay employee salaries and benefits as well equipment for them to do their jobs when you keep your billing in-house. These costs are typically higher than the cost of retaining an outsourced medical billing company.

  • Staffing issues: If you operate with only a few medical billers, production decreases when someone is sick or on vacation. You can really take a long-term hit if someone resigns and you aren't able to replace him or her immediately.

  • Liability issues: It is more common for embezzlement and neglectful billing practices to happen with in-house operations than outsourced ones.

Do a Hypothetical Study of Your Own

Physician News Digest recently released the results of a study using the typical billing patterns of a three-physician office. The study compared the billing department costs, software and hardware costs, direct claim processing costs, revenue received and collection costs between in-house and outsourced billing. Completing a similar report can help you make a decision because it shows you the bottom-line prices of each method of medical billing.