Outsourcing Billing at Your Practice: Is Now the Time?

January 6, 2015

Six factors to consider when determining whether outsourcing revenue cycle management is the best move for your medical practice.

The nuances involved with billing and collection processes may have, over time, become more than you bargained for when you initially decided to go into private practice. Or perhaps the upcoming conversion to ICD-10 has become the tipping point. Whatever the catalyst, at some point almost every practice faces the decision of whether revenue cycle management (RCM) should be handled in-house or outsourced to a third party.

As with most things, there are pros and cons to each option. And because each practice is unique, one practice's pro could be another practice's con. Here are a few items that every practice should consider when weighing the options:

• Accounts receivable (A/R) and denied claim rates. The time a claim typically spends in A/R and the number of denied claims a practice receives are two metrics that every practice should be monitoring continuously, with the goal of always improving those numbers. If either metric is at an unacceptable rate (more than 20 percent of claims with an A/R time of more than 120 days, for example, or a denial rate of 7 percent or more) and no improvements have been made over several months, then it's definitely time for a change. But whether that change should include remedial training for the current staff, a change in staffing, or outsourcing the practice's billing tasks is a question that each practice must answer for itself.

• Staffing. If billing is handled in-house, then the cost of keeping those employees on staff (salaries, benefits, etc.) is likely higher than the cost of hiring a third-party biller. Making the switch could be money well spent, but the return on investment should be part of your analysis when deciding whether to outsource. What financial benefits is the practice currently getting that it likely wouldn't get with a third-party biller? What benefits does the billing partner offer that the in-house staff cannot? How will your practice pay the third-party biller, and what hidden expenses could go up over time (such as postage or processing fees)? All of these questions need to be considered. In addition, many RCM companies are paid a percentage of collections, so you must keep in mind that as your practice grows the cost of billing services will also grow.

• Control. Let's face it: Some physicians go into private practice because they want to be in control of everything. Others simply want to provide patient care; the necessary financial tasks are a distraction for them. Keeping all aspects of the business in-house gives practice owners the ability to oversee operations on a daily basis. When it comes to the practice's finances, some physicians may not be comfortable with giving up that control, while others would gladly hand it over.

• Complexity. In recent years it's gotten much harder to handle a practice's billing due to new regulations, payer practices, and, soon, the conversion to ICD-10. A practice needs to assess how ready the staff members are to handle all of these changes - and if they aren't ready, whether the practice management has the time and ability to bring the staff up to speed.

• Consistency. Does your billing department have a high rate of turnover? If so, it may be suffering from inefficiencies and added expenses. It takes time for new employees to get up to speed. If the staff turnover rate is at 20 percent or more, it may be time to consider outsourcing - or at least get to the bottom of why turnover is so high.

• Technology. Many RCM companies have the latest technology for billing automation. Automation helps ensure prompt filing and fast follow-up, which leads to quicker payments and a reduction of lost revenue. Investing in that type of technology could be cost prohibitive for many practices.

When considering each of these six factors, it's clear that there are advantages and disadvantages to both the in-house and the outsourcing option. So practices must weigh which one will provide the most advantages and whether or not they can live with any disadvantages that may result from their choice.

David Doyleis the chief executive officer at CRT Medical Systems, a top 100 medical billing company serving clients throughout Michigan and the Midwest. He can be reached via ddoyle@crtmedical.com.

This article originally appeared in the January 2015 issue of Physicians Practice.