Few family physicians would argue that managing the business of medicine is more challenging now than ever before. Practice revenue is flat, or in some markets, declining; practice expenses, such as staff salaries and malpractice premiums, continue to grow; and the burden of government regulations, such as HIPAA, CLIA, and OSHA, are more onerous than ever.

Most physicians have a team of trusted advisers, such as an attorney, an accountant, and an investment counselor, who regularly assist them with personal and business issues. Yet when it comes to running the day-to-day aspects of their medical practices, physicians depend heavily on their own skills to make key decisions. But increasing business demands may well exceed the desire, available time, or the ability of many physicians in their part-time role as owner/manager of their practice, even with the assistance of an office manager or administrator.

To respond to this gap, more practices are electing to contract for
management services with outside organizations, such as management services organizations (MSOs) and local consulting firms. How can you decide if such an arrangement can benefit your practice?

What to outsource

Contracting for management and support services is not a new concept for the healthcare industry; hospitals have been doing it for years, for services that range from placement of the CEO to food service and janitorial management. Medical practices now have a growing menu of service options as well.

Not all practices can benefit from outsourcing, and not all services need to be outsourced. The first step is to decide what aspects of your practice, if any, are good candidates for outsourcing. The services mentioned below are not the only ones available for outsourcing, but they are the most common for physician practices. Use the following questions to help focus your thinking. If you answer "yes" to most of the questions, it will be worth considering outsourcing.

Billing
• Is your overall collection rate declining? 
• Are your accounts receivable (A/R) too high?
• Are you experiencing an increased number of denied claims?
• Are you facing a major investment in new hardware or software?
• Are you finding that the number of staff needed to get the job done is growing?
• Is turnover requiring too much time and attention?

Payroll
• Are you concerned that payroll information will be shared with staff members who don't need to know?
• Are you unable or unwilling to spend the time, or add the staff, to manage payroll internally?
• Are you routinely paying penalties associated with late tax deposits or periodic reports?
• Would you like to have access to more advanced payroll services, such as direct deposit?

Management
• Are you unable to find the right person to help manage the business?
• Do practice demands keep you from monitoring your manager's performance?
• Do you have the sense that the staff is running the practice - not you?
• Do you periodically need access to higher level advice than your current management can provide?
• Are you planning to expand or contract the practice?
• Do you have multiple people
performing tasks that could be handled by a single, more experienced manager?
• Do you feel that your practice's cost structure is too high, but you can't determine what to do to resolve those concerns?

Information technology (IT)
• Have your data needs exceeded your capabilities?
• Are you unaware of solutions that may improve practice performance?
• Are the growing costs and hassles associated with routine upgrades a growing concern?
• Are hardware problems causing disruption in practice operations?

How outsourced services work

Once you have decided to outsource part of your business, it's important to find the best possible contract. Costs and terms vary widely based on what you want done, but here are some general guidelines.

Billing — While some billing firms provide a "one-size-fits-all" approach, many are offering options that allow practice staff to perform some of the tasks and permit physicians to access data and reports online. This flexibility can be an important feature for more sophisticated practices.

Most billing service companies charge a percentage of the funds that they collect on behalf of the client practice. Fees are affected by the size of each claim, the number of monthly claims, the scope of tasks provided, and the payer mix.

Be sure to talk about performance standards in your contract with a billing service. Fees should be tied to collection percentages and days in accounts receivable. Processing electronic claims or providing patient statements may cost more. Some firms may offer additional services such as coding education, or provide you with access to their software for appointments and reporting.