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Is It Time To Outsource Your Practice Billing?


There is much more to billing than just billing; make sure your practice is getting it right.

For years, I refused to consider outsourcing my practice's billing. We outsourced transcription and payroll, we partnered to start infusion services and a sleep lab, but my ego got in the way when it came to billing. I felt my value would decrease markedly if I acknowledged someone else might do our billing better than we did. We did well, but we never attained the Medical Group Management Association's (MGMA) "Better Performing Group" status for our billing - something I very much wanted. 

For physicians and practice administrators alike, it is hard to give up control, especially of one's billing. For physicians, it is hard to entrust your cash inflow to a third party. For an administrator, there is a concern about losing your relevance and value in the practice. Both are legitimate concerns. However, now may be a good time to reconsider outsourcing your billing.

Billing aka RCM

Today, billing is commonly referred to as revenue cycle management (RCM), which more accurately reflects two things. First, there is much more to billing than just billing; getting a bill out the door does not mean you will get paid. Eligibility, payment, coding, charge posting, and other critical tasks are interdependent and necessary to get paid for the work you do. Second, billing has gotten much more difficult in the past 15 years. Now, there are many more hoops to jump through to get paid accurately and on time. Here are just a few reasons to consider outsourcing your billing:

Complexity. The business side of running a medical practice has gotten very complex. Practices must deal with multiple payers; each with its own contract and rules. While the "homegrown" talent in many practices has risen to the challenge, the complexity and speed of change have been too much for others. With ICD-10 on the near horizon, complexity in billing will only increase.

Employee turnover. The cash flow of medical practices is particularly vulnerable to turnover in the billing department. It can take weeks, if not months, to get back to peak efficiency if you lose one or more key members of your billing team, particularly for smaller practices. And employee turnover is much more common today than a generation ago. If your billing-department turnover rate was 20 percent or greater in the past year, now is a good time to consider RCM.

Do what you do best. Outsourcing your billing permits you and your management team to focus on other critical areas; it arguably permits you to spend more time practicing medicine. If an RCM company is a good and transparent partner, it will give you and your management team more time to devote to recruitment, new services and/or offices, quality measurement, and other matters.

As a practice administrator, I felt there was never enough time to do everything well; something always got shortchanged. Occasionally, it was billing when we were adding a new service line, negotiating with payers, or recruiting. Your revenue cycle management is too important to take second chair when other pressing matters require attention.

How to evaluate the need

I have four rules of thumb when evaluating whether to outsource any facet of a practice:

1. Is employee turnover 20 percent or greater?

2. Are we facing the retirement or loss of critical employees?

3. How are we doing? If we are not performing at the 50th percentile, perhaps someone outside the practice can do better. (For performance benchmarks, I use MGMA's extensive surveys, comparing performance to practices in the same specialty and/or region.)

4. Can a third party add "value" - be it experience, continuity, or results - that we cannot produce in-house?

How to evaluate an RCM partner

It is important to select the right RCM partner. You want a partner that looks after your money as carefully as if it were their own. Look for a partner that has an impeccable reputation for trustworthiness. Ask for their client list and "grill" at least three references. This is not a decision to make lightly. The following are a few questions to ask yourself and potential vendors:

Ask for performance metrics for existing clients. You want to know how well they do with regard to days in A/R, first-pass clean claim percent, and other measures. You want to look for a company that does it as well or better than you are doing in-house.

You want a partner and not just a vendor. Meet and spend time with the company and make sure there is a good fit regarding meeting frequency, report generation, bad debt write-offs, etc.

Consider their flexibility. Does the company permit you to decide what functions to outsource, or is it an all-or-nothing proposition? For example, if I have an experienced employee doing payment posting, I may want to keep this function in-house.

Make a cost-effective decision. The rates RCM companies charge vary widely according to practice specialty, payer mix, and the tasks they will be assuming. You know what your billing function costs today; make sure that outsourcing billing will be a good investment of your time and money.

Outsourced billing is not for every medical practice. There are many practices that do it well themselves. It never hurts to look, though, and grade your practice's performance. If your practice affirms that outsourcing billing will not improve operations or the bottom line, you can have peace of mind that you made the right decision. If not, perhaps now is time to consider a change.

Lucien W. Roberts, III, MHA, FACMPE, is vice president of Pulse Systems, Inc., and a former practice administrator. For the past 20 years, he has worked in and consulted with physician practices in areas such as compliance, physician compensation, negotiations, strategic planning, and billing/collections. He can be reached at lroberts@pulseinc.com.


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